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2019 (5) TMI 681 - AT - Income TaxTDS u/s 195 - Disallowance of expenditure u/s 40(a)(i) - payment to GFG Gorup Ltd., New Zealand for purchase of software - AO notes this to be licensed software and hence, was of the view that payment was in the nature of royalty and the assessee ought to have deducted tax at source - whether the deduction claimed by assessee on purchase of licensed software is to be allowed as deduction in the hands of assessee or not? - HELD THAT:- As decided in JOHN DEERE INDIA PVT. LTD., (JOHN DEERE EQUIPMENT MERGED WITH JOHN DEERE INDIA PVT. LTD.) VERSUS THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) –1, PUNE [2019 (3) TMI 458 - ITAT PUNE] where the software is purchased across the counter as shrink proof software, then it is not akin to royalty both under the Income Tax Act or the DTAA. The Tribunal held that since the definition of ‘royalty’ has not been amended under DTAA, then the said definition would be paramount and would have to be applied for deciding the issue. It also held that amendment to section 9(1)(vi) of the Act by insertion of Explanations 4 to 6 would not change the scenario and make the assessee liable for deduction of tax at source in the relevant year. Thus no merit in the orders of authorities below in having held the assessee to be in default for non deduction of tax at source out of aforesaid payments. We reverse the order of CIT(A) in this regard and direct the Assessing Officer to allow the claim of expenditure - Decided in favour of assessee.
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