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2019 (8) TMI 61 - HC - Income TaxTDS u/s 195 - payment made for supply of designs, drawings and specifications was in the nature of royalty or not - case of the assessee that the payment of 3 million Austrian Schilling was for the supply of material and their use would arise when the vehicles would be started to be produced - main plank on which the Tribunal passed its decision was its interpretation of the word 'supply and it held that 'supply' includes 'use' - HELD THAT:- To our mind 'royalty is a payment to an owner for the ongoing use of its assets or property such as patents or natural resources for business purposes.' Word 'royalty' has been defined by the Supreme Court in the case titled as Entertainment Network (I) Ltd. v. Super Cassette Inds. Ltd [2008 (5) TMI 671 - SUPREME COURT] as 'the remuneration paid to an author in respect of the exploitation of a work, usually referring to payment on a continuing basis (i.e. 10 percent of the sale price) rather than a payment consisting of a lump sum in consideration of acquisition of rights. Word 'Royalty' has been defined in Oxford Advanced Learner's Dictionary (New 9th Edition) as 'a sum of money that is paid by an oil or mining company to the owner of the land that they are working on' Thus understood, the assessee would have to pay a certain amount of money to PUCH for every vehicle which is sold using its designs. Tribunal has given an unnatural and strained meaning to the expression 'supply'. Yes, by entering into the agreement and by supplying the material PUCH authorized its use but its actual use would start only when production and sale commenced and that would be the stage at which royalty would be payable. - Decided in favour of assessee.
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