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2014 (5) TMI 77 - AT - Income TaxDisallowance of Expenditure - Disallowance u/s 40(a)(i) of Act - TDS not deducted on payment of royalty u/s 195(1) – Held that:- Following CIT v. Dynamic Vertical Software India (P.) Ltd. [2011 (2) TMI 77 - DELHI HIGH COURT] - in case of payment towards purchase and sale of software by an assessee who acted merely as a dealer cannot be termed as royalty so as to require deduction of tax at source u/s 40(a)(i) of the Act - the assessee is required to establish the fact on record by producing supporting evidence that it was merely a distributor of software to the Indian customer by procuring from the overseas associated enterprise - The assessee is required to prove that the payment made was not for 'royalty' as defined in explanation 2 to section 9(1)(vi) read with India-US DTAA - thus, the matter is remitted back to the AO for fresh adjudication - Decided in favour of Assessee.
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