AI Drafter 
TaxTMI 
TaxTMI 
2021 (4) TMI 628
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....851/Chny/2019: 2. The brief facts of the case are that the assessee is a company i.e., Ambika Cotton Mills Ltd., manufacturing of cotton yarn. The company imports long staple cotton from America known as "PIMA" cotton. In the assessment order, the AO has noted that as per data available with the Department, it is found that the company has paid an amount of Rs. 2,25,300/- on 15.12.2010 and Rs. 2,53,450/- on 15.11.2011 for the assessment years 2011-12 and 2012-13 respectively to SUPIMA, USA as license fee without deducting TDS. The AO has issued proceedings u/s. 201(1)/(1A) of the Income Tax Act, 1961 (herein after "the Act") and issued notice to the assessee on 08.02.2018 and asked the assessee to explain the reason for non deduction of ....
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.... further contention is that they are making payment in every year to SUPIMA(r) and therefore, it cannot be said that it is a license fee. Hence, the use of the mark SUPIMA(r) on its product by the assessee is akin to use of Trade Mark. The AO has examined the license agreement entered by the assessee with SUPIMA dated 01.01.2015 and observed that as per Article-I of the agreement defines the word Mark as "SUPIMA(r)" or section 1 of the Article-II clearly specifies that SUPIMA is granting license to use mark i.e., SUPIMA(r) to the assessee therefore, the payment made by the assessee company to SUPIMA, USA is in the nature of royalty as per the Explanation-2(1) to Section 9(1)(vi) of the Act and hence, liable for deduction of TDS u/s. 195 of ....
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....rademark, within the ambit of Royalty. 5. Section 206AA of the I.T.Act stipulates higher rate Of deduction of tax in case, the PAN is not produced The TRC has not been produced by the nonresident company. Hence the AC has correctly adopted 20% instead of 15% stating that the benefit of DTAA cannot be availed. 3.2 On the basis of above facts and law, I hold that the AC has correctly held the appellant company as assessee in default u/s.201(1) of the Act and levied tax u/s.206AA and interest u/s.201(1A). I am in agreement with the conclusion of the AO as he has systematically analyzed the issue after going through the License Agreement, DTAA and the provisions of the Act. Hence the order of the AO is upheld." On ....
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....MA." 7. From the above Article I & II, it is very clear that the SUPIMA is the owner of the trade mark. This Logo for using in connection with apparel, home furnishing, fabrics, yarn, threads and the like further SUPIMA has granted license to the assessee to use trade mark SUPIMA(r) for the goods produced by the assessee. The payment made by the assessee in connection with the license obtained from the SUPIMA(r) at USA. Therefore, the payment made by the assessee is in the nature of royalty as defined under Explanation 2(1) to Section 9(1)(vi) of the Act and the assessee is liable for TDS u/s. 195 of the Act. The assessee without deducting the TDS payment made therefore, the AO has rightly invoked Section 195 of the Act for non deduct....
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....without deducting the TDS. Therefore, the AO called the assessee for non deduction of TDS u/s. 195 of the Act and the assessee has submitted detailed letter dated 17.09.2018 by stating that the "amount paid Rs. 2,85,000/- to Cotton Egyptian Association (CEA) is for non-transferable right to use the Egyptian Cotton Trade Mark owned by Egyptian Ministry of Industry & Foreign Trade and hence not liable for withholding tax". The AO considered the explanation of the assessee and he gave a finding that the payment made by the assessee is in the nature of royalty for use of Trade Mark and it attracts the Explanation 2 to Section 9(1)(vi) of the Act and held accordingly, liable for tax u/s. 195 of the Act and the Ld. CIT(A) confirmed the order of t....