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2021 (4) TMI 420 - MADRAS HIGH COURTTDS u/s 195 - Royalty income as taxable in terms of Section 9(1)(vi) - whether the Tribunal was right in holding that the disallowance made under Section 40(a)(ia) for non deduction of tax at source on payments effected by the assessee is not taxable under Section 9(1)(vi) of the Income Tax Act?” - HELD THAT:- The questions of law involved in the above appeals were already decided by the Hon'ble Supreme Court of India against the revenue and in favour of the assessee in the judgment reported in Engineering Analysis Centre of Excellence Private Limited [2021 (3) TMI 138 - SUPREME COURT] wherein as held given the definition of royalties contained in Article 12 of the DTAAs 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 assessee, have no application in the facts of these cases. Our answer to the question posed before us, is that the amounts paid by resident Indian endusers/ 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 the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act. - Decided in favour of assessee.
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