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2022 (9) TMI 525 - AT - Income TaxTDS u/s 195 - payment for purchase of software products was made without deduction of tax at source - royalty payment - International Distribution Agreement between Assessee and Foreign entity - Assessee claimed that the MGI has appointed the Assessee as distributor with non-exclusive rights to market its products and no transfer of rights in respect of any copyright (section 9(1)(vi)) is extended under the distribution agreement - HELD THAT:- From the clauses of agreement, it appears that the Assessee was appointed as a distributor/licensee only by the MGI for the sale of its products manufactured, while reserving all rights including ownership of material with it and without assigning or giving any copyright to the Assessee and without giving rights of modifications to the ‘user agreements’ as well. Considering the Assessee was granted a distributorship/license to sell the products manufactured by the MGI, with a condition not to make or assign any copyright therein and while reserving all rights including ownership of material with it, goes to show that the transaction between the Assessee and the MGI cannot be termed as ‘ROYALTY’ but in fact the same amounts to sale of goods only on the basis of distributorship/license. Applicability of provisions of the Act u/s 195 qua payments made by the Assessee to the MGI (foreign company) having no ‘PE” in India and therefore not assessable to income tax in India - In the instant case admittedly the Assessee dealt with the MGI which is admittedly a foreign company and having no ‘PE’ in India and thus the case of the Assessee falls under 2nd category of cases ‘which deals with resident Indian companies that act as distributors or resellers, by purchasing computer software from foreign, non-resident suppliers or manufacturers and then reselling the same to resident Indian end-users’ and as per dictum of the Hon’ble Apex Court, the Assessee was not liable to deduct any TD Sunder Section 195 of the Income Tax Act, hence respectfully following the dictum of the Hon’ble Apex Court in Engineering Analysis Centre for Excellence Private Limited [2021 (3) TMI 138 - SUPREME COURT], we are inclined to delete the addition made by the Ld. AO and sustained by the Ld. Commissioner, hence the same stands deleted. Consequently appeal of the Assessee stands allowed.
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