2021 (5) TMI 877

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....g out of the order dated 31.08.2018 passed by the Income Tax Appellate Tribunal (ITAT) in IT(IT)A.No.1501/Bang/2016 for the assessment year 2011-12. 2. The facts of the case reveal that the appellant is a nonresident company incorporated under the laws of Israel and is a tax resident of Israel. The appellant-company is engaged in the business of developing, manufacturing, marketing and selling communication products. It has been further stated that during the previous year relevant to the assessment year 2011-12 and in the usual course of business, the appellant-company sold commercial off-the-shelf software to its customers in India who were of the following two types, (a) business partners; and (b) end-users. The business partners are au....

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....that the consideration received for sale of the aforesaid software to its customers in India is not taxable in India as royalty under Section 9 of the Act as well as under Article 12 of the India - Israel Double Taxation Avoidance Agreement, did not offer to tax the receipts from the sale of software in its return of income for the assessment year 2011-12. 4. The return of the assessee was taken up for assessment by the Assistant Commissioner of Income-tax (International Taxation), Circle-1, under Section 143(3) of the Income-tax Act and an assessment order was passed on 15.4.2014. In the assessment order it was held that the amount received by the appellant from the sale of software was in the nature of royalty in terms of Section 9(1)(vi....

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....ith the charging provision contained in Section 9 read with Section 4 of the Income Tax Act, as a result of which, a person resident in India, responsible for paying a sum of money, "chargeable under the provisions of [the] Act", to a non-resident, shall at the time of credit of such amount to the account of the payee in any mode, deduct tax at source at the rate in force which, under Section 2(37A)(iii) of the Income Tax Act, is the rate in force prescribed by the DTAA. Importantly, such deduction is only to be made if the non-resident is liable to pay tax under the charging provision contained in Section 9 read with Section 4 of the Income Tax Act, read with the DTAA. Thus, it is only when the non-resident is liable to pay income tax in I....

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....cted, and it is also expressly stated that no vestige of copyright is at all transferred, either to the distributor or to the end-user. A simple illustration to explain the aforesaid position will suffice. If an English publisher sells 2000 copies of a particular book to an Indian distributor, who then resells the same at a profit, no copyright in the aforesaid book is transferred to the Indian distributor, either by way of licence or otherwise, inasmuch as the Indian distributor only makes a profit on the sale of each book. Importantly, there is no right in the Indian distributor to reproduce the aforesaid book and then sell copies of the same. On the other hand, if an English publisher were to sell the same book to an Indian publisher, th....