TMI Blog2006 (1) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... in the media for transfer and both cannot be split up. The facts in the instant case are similar to the facts of Samsung Electronics (P.) Ltd. s case [ 2005 (2) TMI 438 - ITAT BANGALORE-A] , ruled that a readymade off the shelf computer programme does not grant any right to utilise the copyright of the computer programme and accordingly, the payments for its import would not constitute royalty income in India and no tax needs to be deducted u/s 195 of the Act. The Special Bench also held that software supplied is goods. Though an information technology product is normally regarded as an intangible asset, once technology is put on a media, then it becomes goods liable to custom duty. Finally, the Special Bench held that the payments for hardware and software were lump-sum payments and no separate consideration should be attributed towards software as royalty . Thus, it is held that payments made for import of software is not royalty and tax was not required to be deducted at source. Hence the demand raised u/s 201 for non-deduction of tax at source is cancelled. In the result, the appeals are allowed. - GOPAL CHOWDHURY AND N. L. KALRA, JJ. K.R. Girish for the Appellant. Sibichen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess. The high powered committee set up by the Government of India was of the view that payments made for software or other digital products bought off the shelf conferring the right of transfer or copying should also be characterized as royalty. The learned Assessing Officer was of the view that holding of software as goodwill have no effect as section 195 does not say that it will not be applicable in respect of import of goods. The Assessing Officer further held that source of income of the non-resident person is the activity which the assessee-company is carrying in India and hence such income is originating in India. For this proposition, the Assessing Officer relied on the decision of Supreme Court in Performing Right Society Ltd. v. CIT [1977] 106 ITR 11 in which it was held that source of income of broadcasting of musical works belonging to non-resident was the broadcasting of music, in India. The Assessing Officer, therefore, held that payments are royalty and assessee was liable to deduct tax at source. 3.2 The learned CIT(A) observed that granting of licence involves granting of right to use of copyright and consideration for use of copyright is covered in both I.T. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. has filed a paper book containing 249 pages. Page Nos. 12 to 249 contains the copies of various judgments on which the appellant has relied. Submissions as contained in the paper book are summarised as under : ( i )Section 195 is applicable to those sums which are chargeable under sections 4 and 5 of the I.T. Act. ( ii )Reliance is placed on the following decisions : Hyderabad Industries Ltd. v. ITO [1991] 188 ITR 749 1 (Kar.). Andrey Yule Co. Ltd. v. CIT [1994] 207 ITR 899 (Cal.). The learned A.R. drew our attention to the following observations of the jurisdictional High Court in Hyderabad Industries Ltd. s case ( supra ) : "It is not understandable as to why a benefit which will not be included in the total income of a person, should be considered as income for the purpose of deduction of tax at source at all. The purpose of deduction of tax at source is not to collect a sum which is not a tax levied under the Act, it is to facilitate the collection of the tax lawfully leviable under the Act. The interpretation put on those provisions by the respondents would result in collection of certain amounts by the State which is not a tax qualitatively. Such an interpretation of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4] 82 TTJ (Bang.) 163 3 . ( c ) Ericsson Radio System v. DCIT [Special Bench IT Appeal Nos. 815 and 1798 (Delhi) of 2001]. In the above referred decision, it has been held that the appellant has got a right to use the programme and not right to use copyright. ( v )It was further submitted that though the appellant carries on business in India, its source of income is characterised by its customers. The appellant s source of income is its customers, who in the instant case are situated outside India. Hence any payments made by it for the import of software would be payments made for the purpose of making or earning any income from a source outside India. 4.1 Learned D.R. drew our attention to the detailed order passed by the learned CIT(A). It was argued that learned CIT(A) has rightly held that the assessee was liable to deduct tax at source as the payment was royalty because sale of computer programme is covered under the definition of copyright as contained in section 14( b )( ii ) of the Copyright Act. The appellant has used a process embedded in software programme and hence is royalty as defined in Explanation to section 9(1)( vi ) of I.T. Act. 5. We have heard both the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X
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