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2017 (5) TMI 916 - AT - Income TaxTDS u/s 195 - payment made to M/s. Minitab Inc., USA for acquisition of software by treating the same as ‘royalty’ - DTAA between India and USA. - whether purchase of computer software does not amount to business receipts? - Held that:- There is a direct Hon’ble Delhi High Court decision in the case of DIT vs Ericsson [2011 (12) TMI 91 - Delhi High Court ] which is in favour of the assessee. From the above case laws it is amply clear that it has been held that the software sold by M/s. Minitab Inc USA to the assessee fell into the category of “copyrighted article” against acquisition of “copyright” which qualified as royalty payment. Furthermore Hon’ble Delhi High Court had held that even if the item was regarded as royalty payment as defined in explanation to Section 9(1)(vi) nevertheless the DTAA would prevail where royalty is dependent upon the use of the copyrights and not a lump sum as was in the present case. That once the payment in question was not royalty which would, within the mischief of clause (vi) the explanation to section 9 (1) would have no application. As against this there are decisions of Hon’ble Karnataka High Court which are in favour of revenue. In this regard we note that Hon’ble Apex Court in the case of vegetable products [1973 (1) TMI 1 - SUPREME Court] had held that if two constructions are possible one in favour of the assessee should be adopted. Accordingly respectfully following the precedent we follow the Hon’ble Delhi High Court decision. Accordingly we set aside the order of authority below. We hold that the transfer / sale of software in this case is not taxable as royalty. Hence the assessee was not liable to deduct tax at source u/s 195 of the Income-tax Act, before remitting the money to the US supplier. - Decided in favour of assessee.
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