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2021 (7) TMI 615 - AT - Income TaxTDS u/s 195 - Payments received for sale of software to Indian resellers/distributors/customers - 'Royalty' chargeable to tax under Section 9(1)(vi) - Article 12 of the India-USA Double Taxation Avoidance Agreement (DTAA')- HELD THAT:- In view of the provisions of section 90, agreements with foreign countries (DTAA) would override the provisions of the Act. Once it is held that payment made by the assessee to the non-resident companies would amount to 'royalty' within the meaning of article 12 of the DTAA with the respective country, it is clear that the payment made by the assessee to the non-resident supplier would amount to royalty. In view of the said finding, it is clear that there is obligation on the part of the assessee to deduct tax at source under section 195 and consequences would follow. On facts and circumstances of the case, the Tribunal was not justified in holding that the amount(s) paid by the assessee to the foreign software suppliers was not 'royalty' and that the same did not give rise to any 'income' taxable in India and, wherefore, the assessee was not liable to deduct any tax at source. See SAMSUNG ELECTRONICS CO. LTD. & OTHERS [2011 (10) TMI 195 - KARNATAKA HIGH COURT]. - Also see NICE LTD. [2021 (5) TMI 877 - KARNATAKA HIGH COURT] amounts paid by resident Indian end-users/distributors to non-resident computer software manufacture/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in Section 195 of the Income Tax Act were not liable to deduct any TDS under Section 195 - Decided in favour of assessee.
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