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2021 (9) TMI 78 - AT - Income TaxTDS u/s 195 - non deduction of tax at source on payment made towards purchase of software - whether the assessee had made the payment towards purchase of a copyrighted article for resale in India or a copyright for use according to its own will and convenience? - HELD THAT:- Payment made is not towards royalty for use of the copyright in the computer software. Therefore, there is no requirement for deducting tax at source under section 195 of the Act, keeping in view Article 12 of India–USA DTAA. A reading of the case of ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED [2021 (3) TMI 138 - SUPREME COURT] would make it clear that the view expressed by the Hon’ble Karnataka High Court in case of Samsung Electronics Co. Ltd [2011 (10) TMI 195 - KARNA TAKA HIGH COURT] have not been accepted. If the ratio laid down in Engineering Analysis Centre of Excellence (P) Ltd vs CIT (supra) is applied to the facts of the present case, it will definitely lead to the conclusion that the assessee having paid the amount of ₹ 23,50,466/- towards purchase of a copyrighted article for distribution in India without having any right to use the copyright, the payment made is not in the nature of royalty as per Article 12 of India–USA DTAA. Therefore, there is no requirement for deduction of tax at source under section 195 - disallowance made by the assessing officer and sustained by the learned Commissioner (Appeals) is hereby deleted. These grounds are allowed. Deduction u/s 10B - Disallowance of loss - apportioned the employee related expenses / benefits in proportion of turnover relating to EOU and non EOU unit - claim of the assessee that separate books of account are maintained for EOU and non EOU units - HELD THAT:- Departmental authorities have not properly examined the issue factually - direct the assessing officer to verify the books of account maintained, both, for EOU and non EOU units and if the salary paid to the employees of both the EOU and non EOU units, is found to be on actual basis as per the separately maintained books of account, no disallowance can be made. Thus, the issue is restored back to the assessing officer for the limited purpose of verifying the salary expenditure as per the separately maintained books of account and computing the deduction under section 10B of the Act. These grounds are allowed for statistical purpose.
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