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TMI Blog2010 (10) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961 and within the meaning of the term "Royalty" under Indo USA DTAA. 2. On the facts and in the circumstances of the case and in law, the ld CIT (A) erred in holding that the payment of Rs. 2,36,84,400/- towards import of software is not chargeable to tax and hence where income is not chargeable to tax section 195(1) of the Income tax Act 1961 does not require deduction of tax at source. 3. On the facts and in the circumstances of the case and in law, the ld CIT (A) erred in deleting the interest amounting to Rs. 11,31,238/- charged under section 201(1A) of the income tax Act, 1961." 2. The issue in appeal lies in narrow compass of facts. There is no dispute that the assessee has made a payment of US$ 5,40,000 towards purchase of sof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case and given the fact that purchase is made only of the copyright software and not copyright per se, the amount has not been treated as royalty in the hands of the US based company. The Assessing Officer was of the view that in the light of the Hon'ble Supreme Court judgment in the case of Transmission Corporation of A.P. Ltd v. CIT, 239 ITR 587 (SC), it is not open to the assessee to take any unilateral decisions on whether the amounts paid by the assessee are chargeable to income tax or not, and, therefore, the assessee could not have made the payments without deduction of tax at source, without the concurrence of the Assessing Officer under section 195(2) of the Income tax Act. The Assessing Officer further noted that "provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of the provisions of the Act as also applicable tax treaty. The demand raised by the Assessing Officer u/s.201(1A) r.w.s. 195 was, accordingly, quashed. The Assessing Officer being aggrieved is in appeal before us. 4. Having heard the rival contentions and having perused the material on record, we find that, as rightly noted by the CIT(A), this issue is covered in favour of the assessee by a large number of decisions of this Tribunal. In the landmark case of Motorala Inc(supra), the Tribunal has taken note of the fact that copyright article is distinct from copyright per se and payment for copyright article, therefore, cannot be treated as payment of copyright, which could be brought to tax. While payment for use of copyright in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a demand u/s.201(1A) cannot be raised on the assessee merely because he had not obtained prior approval of the Assessing Officer u/s.195(2) of the Act. 5. In the recent case of GE India Technology Centre Pvt Ltd v. CIT, 327 ITR 456 (SC), Hon'ble Supreme Court has, inter alia, observed as follows:- "In Transmission Corporation's case (1999) 239 ITR 587 (SC) a nonresident had entered into a composite contract with the resident party making the payments. The said composite contract not only comprised supply of plant, machinery and equipment in India, but also comprised the installation and commissioning of the same in India. It was admitted that the erection and commissioning of plant and machinery in India gave rise to income taxable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext that the Supreme Court stated, "If no such application is filed, income-tax on such sum is to be deducted and it is the statutory obligation of the person responsible for paying such 'sum' to deduct tax thereon before making payment. He has to discharge the obligation to TDS". If one reads the observation of the Supreme Court, the words "such sum" clearly indicate that the observation refers to a case of composite payment where the payer has a doubt regarding the inclusion of an amount in such payment which is exigible to tax in India. In our view, the above observations of this Court in Transmission Corporation case (supra) which is put in italics has been completely, with respect, misunderstood by the Karnataka High Court to mean that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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