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2016 (4) TMI 1444 - AT - Income TaxTDS u/s 195 - payment of web hosting charges to US company - addition under section 40(a)(ia) - CIT-A deleted addition - CIT-A deleted addition - As per DR clause (iva) to Explanation-2 to Section 9(1)(vi) the use or right to use any industrial, commercial or scientific instrument would fall within the definition of "royalty", therefore, ld. CIT(Appeals) should not have deleted the addition - HELD THAT:- The word 'use' or 'right to use' in clause (iva) of Explanation-2 below Section 9(1)(iva) of of the Act is regarding use of equipment in actual sense. In the present case, it was found that assessee had nothing to do with the equipments and had only made use of facilities created by the service provider who were the owners of entire infrastructure and related equipments. The assessee company is neither in possession of equipments nor it uses the equipment solely for its own purpose. The equipments are used by the Non Resident Inc to provide service to the assessee and others, therefore, assessee has no control over the equipments as well as operating system. When the payments are not in the nature of 'Royalty" as per Explanation-II (via) of Section 9(1)(vi) of the Act, then recipient of the said payments, being non resident, having no PE in India, is not liable to tax in India. Therefore, payments in the hands of M/s Pugmarks Inc & Others are not taxable in India and consequently, no tax required to be deducted under section 195 on such payment/remittance by the assessee. Such payments, therefore, cannot be termed as 'royalty' - as found that services are rendered outside India by non-resident and paid outside India, then the provisions of Section 195 do not apply in case of such payments. As the company who had provided web hosting services, was located outside India and the server was also located outside India, income that had arisen is not taxable in India. We find that the issue is also covered in favour of the assessee by judgements in the case of People Interactive (I) Pvt.Ltd. [2012 (2) TMI 534 - ITAT MUMBAI], Yahoo India Pvt. Ltd. [2011 (6) TMI 162 - ITAT, MUMBAI] and decision in the case of Dell International Services (India) Pvt. Ltd. [2008 (7) TMI 9 - AUTHORITY FOR ADVANCE RULINGS] No infirmity in the order of the ld. CI T(Appeal s) have been pointed out. - Decided agaianst revenue.
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