TaxTMI 
TaxTMI 
2021 (8) TMI 996
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.... respect of interest charged u/s 234B of the Act. 4. The assessee is a Singapore based company engaged in the business of dealing in software & hardware products. Under the provisions of Indian Income tax Act, the assessee is a non-resident. During the year under consideration, the assessee has sold software licenses to its Associated Enterprise (AE) and also to other Indian customers. The assessee did not offer any income on such sale for taxation in India. The Ld A.R submitted that the AE of the assessee, viz., M/s IBM India Pvt Ltd is the authorized distributor of software licenses sold by the assessee. In respect of sales made to Non-Associated enterprises, the Ld A.R submitted that majority of sales were made to "other distributors" and in few cases, it was sold to End users also. The details of sales effected by the assessee during the year under consideration in India are tabulated as under by the A.O. Sl.No. Name of the Party Sale value (in Rs.) Offered for taxation or not 1. IBM India Pvt. Ltd. 416,00,24,726 No 2. Non Associated Enterprises 25,94,40,459 No Total 441,94,65,185 5. The A.O. took the view that....
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....Supreme Court. (b) The agreement entered by the assessee with IBM India (re-marketeer) has been extracted in paragraph 44(ii)a of its order by Hon'ble Supreme Court and (c) The agreement entered by IBM India (r-marketeer) with the end users has been extracted in paragraph 44(ii)b of the order. The Ld A.R submitted that the very same terms and conditions of granting license to use software continue during this year also. The Hon'ble Supreme Court has concluded that the payments made by the distributors and end-users to the non-resident software supplier placed in Singapore, is not "royalty" within the meaning of the provisions of DTAA and hence the distributors/end users are not liable to deduct tax at source u/s 195 of the Act from the payments made to the non-resident software supplier located in Singapore on the reasoning that the distributor's agreement and end-user's license agreement in the facts of cases before Hon'ble Supreme Court do not create any interest or right in such distributors/end-users, which would amount to use or right to use any copy right. 9. The Ld A.R submitted that the assessee herein is a Singapore resident governed by the DTAA ent....
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....ategories and gave the following finding:- "45. A reading of the aforesaid distribution agreement would show that what is granted to the distributor is only a non-exclusive, nontransferable license to resell computer software, it being expressly stipulated that no copyright in the computer programme is transferred either to the distributor or to the ultimate end-user. This is further amplified by stating that apart from a right to use the computer programme by the end-user himself, there is no further right to sublicense or transfer, nor is there any right to reverse-engineer, modify, reproduce in any manner otherwise than permitted by the license to the end-user. What is paid by way of consideration, therefore, by the distributor in India to the foreign, non-resident manufacturer or supplier, is the price of the computer programme as goods, either in a medium which stores the software or in a medium by which software is embedded in hardware, which may be then further resold by the distributor to the end-user in India, the distributor making a profit on such resale. Importantly, the distributor does not get the right to use the product at all. 46. When it comes to....
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....dent software suppliers, provisions of Copy right Acts, the circulars issued by CBDT, various case laws relied upon by the parties, the Hon'ble Supreme Court concluded as under:- "CONCLUSION 168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. 169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for....
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....te that the deduction of tax at source u/s 195, and payment of advance tax u/s 210 are not mutually exclusive. 5. The Hon'ble CIT(A) has failed to appreciate that Sec. 209 is a computation section of advance tax on assessment of future tax liability and these words would not have been construed to mean that neither the advance tax provisions are applicable to the cases covered u/s 195 nor the assessee are at liberty to evade their tax liability even though TDS is effected. 6. The Hon'ble CIT(A) has erred in holding that the assessee is not liable for levy of interest u/s 234 even though charging of interest is mandatory and consequential as per the Status. 7. The CIT(A) failed to consider the fact that the decision of the ITAT has not been accepted and appeals u/s 260A has already been filed and the same is pending before the Hon'ble High Court of Karnataka. 8. For these and such other grounds that may be urged at the time of hearing it is prayed that the order of the CIT(A) may be annulled and that of the AO be restored. 16. Ground Nos.1 & 2 relate to taxability of receipts on sale of software licenses as royalty income. We have a....