TMI Blog2017 (6) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... ards software purchase is not royalty within the meaning of non-taxable u/s.9(1)(vi) of Income Tax Act and not liable for deduction of tax at source, accordingly, we set-aside the orders of the lower authorities allow the appeal of the assessee. - ITA No.3143/Mds/2016 - - - Dated:- 28-2-2017 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER, AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Mr.N.V.Balaji, Adv. For The Respondent : Mr.Shiva Srinivas, JCIT ORDER PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against the Order dated 09.09.2016 of Commissioner of Income Tax (Appeals)-16, Chennai, in ITA No.89/CIT(A)-16/14-15 for the AY 2014-15. 2.0 All the grounds of appeal are related to treating the assessee in default for non-deduction of tax at source and imposing tax and interest amounting to ₹ 21,93,128/- u/s.201(1)/(1A) of Income Tax Act. During the FY 2013-14 from the Form-15CA/CB filed by the assessee, the Assessing Officer (hereinafter referred to as AO ) noticed that the assessee has remitted a sum of ₹ 1,75,54,741/- to M/s.Vector Software Inc., USA( Vector ) but not deducted TDS on remittan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Term royalties as used in this Article means payments of any kind received as a consideration for the use of, or right to use, any copyright of a literary, artistic or scientific work including cinematograph films or recordings on any means or reproduction for use in connection with television or radio broadcasting, any patent, trade mark, design or model, plan, know-how computer software programme, secret formula or process, or any industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience .. . 3.0 The AO from the Invoices raised by the Vector noticed that the assessee acquired the license to use the software for a particular tenure subject to certain terms and conditions and held that the payment made to M/s.Vector Software Inc., USA, was in the nature of royalty and taxable u/s.9(1)(vi) of Income Tax Act. Accordingly, the AO treated the assessee as the assessee in default and charged interest of ₹ 21,93,128/- u/s.201(1)/(1A) for non-deduction of tax at source. 4.0 Aggrieved by the Order of the AO, the assessee went on appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced upon or contained in any Vector Software. * Modify or adapt the Vector Software or create a derivative work based on or incorporate the Vector Software into or with other software. * Distribute externally, sublicense, share, display, or demonstrate or in any manner make the Vector Software available to any third party, with or without compensation. * Use the Vector Software to develop other software for distribution, sale or license to third parties if such software is interoperable, or is intended to be used, the Vector Software. * Use all or any part of the Vector Software to create other software a principal purpose of which is to perform the same or similar functions as, or to replace any component of, the Vector Software. (d) Not a Sale. Customer agrees that Customer does not have, and does not hereby acquire, any title or rights of ownership in any Vector Software or, except for the license rights hereby granted, any right to use, copy, transfer or disclose all or any portion of any Vector Software. The Vector Software is protected by copyright laws and international treaties. The assessee also relied on the decision of Jurisdictional High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts mentioned in the Copyrights Act. The Indo US treaty also excluded the computer soft ware from the definition of Royalty in the treaty. Thus we are of the considered opinion that The Company has merely been provided the access to the copyrighted software and not right to use the copyright embedded in the software. In other words, the Company is not permitted to make copies or make alternations to the software. 8.0 From the above facts, it is clear that the assessee has purchased software for the purpose of internal use and the same cannot be held as payments towards royalty. The payment made towards the purchase of software is squarely covered by the decision of Hon ble jurisdictional High court in the case law cited supra. The Jurisdictional High court in CIT Vs M/s.Vinzas Solutions India Pvt. Ltd. in ITA No.861/2016 dated 04.01.2017 held as under: 4. We are of the view that the provisions of Section 9[1][vi] dealing with and defining Royalty cannot be made applicable to a situation of outright purchase and sale of a product. The Corpus Juris Secundum understands Royalty thus: The word royalty means a share of the product or profit reserved by the owner for perm ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
