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2020 (11) TMI 642 - AT - Income TaxTDS u/s 195 - addition u/s 40(a)(i) - computer maintenance expenses - Royalty - nature of service rendered by the Singapore entity to the assessee pursuant to the system support and maintenance agreement - assessee’s case falls under Article 12(4)(a) of Indo-Singapore Treaty - characterization of income in the hands of Singapore entity - AO observed that the rights of software acquired by the assessee along with computers are very much ancillary to the application or enjoyment of the software rights and therefore, the requirement of “make available” as contested by the assessee is not required in the instant case - HELD THAT:- From the scope of services rendered by the Singapore entity to the assessee, it could be safely concluded that the said case does not fall within the ambit of purchase of any copyrighted article by the assessee so as to constitute the same to be in the nature of royalty. The Singapore entity buys various licenses from third party manufacturers and in turn sells the same to the Indian assessee. The Singapore entity is not the owner of any copyright. This is a clear case of providing services by the Singapore entity to the assessee company. Hence, the same cannot fall within the ambit of royalty. Whether the subject mentioned incurrence of expenditure by the assessee could be characterized as royalty in the facts and circumstances of the case? - We have already held hereinabove that the subject mentioned expenditure cannot fall within the ambit of royalty. Hence, the disallowance made u/s.40(a)(i) of the Act cannot be made in the facts of the instant case. Since, the relief is granted to the assessee on first principle, the other argument advanced by the ld. AR that money is actually not paid by the assessee during the year under consideration and hence, the same would not be liable for deduction of tax at source, is not adjudicated herein and the same is hereby left open. Accordingly, the ground Nos. 1 & 2 raised by the assessee are allowed.
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