TMI Blog2012 (10) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... had defaulted in deducting the tax at source from such payments, the non-resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. This would be clear from the reading of s. 191 along with s. 209(1)(d). For this reason, it would not be permissible for the Revenue to charge any interest under s. 234B. Levy of interest u/s. 234B of the Act cannot be sustained. Ground raised by the assessee is accordingly allowed. - ITA No.550/Bang/2011 - - - Dated:- 31-10-2012 - SHRI N.V. VASUDEVAN AND SHRI JASON P. BOAZ, JJ. For the Appellant : Shri K.P. Kumar, Sr. Counsel For the Respondent : Shri Farahat Hussain Qureshi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving such a right to use partakes the character of royalty within the meaning of section 9(1)(v)(a) of the Act as well as Article 12 of the DTAA between India Ireland. 6. It is not in dispute before us that an identical issue has been considered by the Hon ble Karnataka High Court in the case of CIT Vs. Samsung Electronics co. Ltd. others 245 CTR (Kar) 481 has held that Payment to non-resident foreign software suppliers for purchase of shrink wrapped software was in the nature of royalty. The Hon ble Court held that what is granted under the licence is only a licence to use the software for internal business without having any right for making any alteration or reverse engineering or creating sub-licences while the copyright con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the price of CD alone or software alone or the licence but a combination of all. Therefore, the payments constitute 'royalty' within the meaning of art. 12(3) of the Indo-US DTAA and also as per the provisions of s. 9(1)(vi) as the definition of 'royalty' under s. 9(1)(vi) is broader than that under the DTAA. Consequently, assessee was under obligation to deduct tax at source under s. 195 from the amount paid to the foreign software suppliers. 7. In view of the aforesaid decision of the Hon ble High Court of Karnataka, we are of the view that the grievance projected by the assessee in ground No.3 cannot be accepted. Ground No.3 is therefore dismissed. 8. Ground No.4 raised by the assessee relates to levying interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. DR, however, submitted that levy of interest u/s. 234B is mandatory and relied on the order of the ld. CIT(Appeals). 10. We have considered the rival submissions. In view of the clear judicial pronouncements by the various High Courts on the issue, levy of interest u/s. 234A cannot be sustained. We may, in this regard, refer to the decision of the Hon ble Delhi High Court in the case of Jacabs Civil Inc. (2011) 330 ITR 578, wherein the Hon ble Delhi High Court has explained the legal position as follows:- The liability to deduct or collect the tax at source is that of the payer. Therefore, for the purposes of s. 234B, the question would be as to whether the payee, i.e. the assessee in this case, had any role in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non-resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. This would be clear from the reading of s. 191 along with s. 209(1)(d). For this reason, it would not be permissible for the Revenue to charge any interest under s. 234B. The Tribunal has rightly held that the assessee was not liable to pay any interest under s. 234B. 11. In view of the above, we hold that levy of interest u/s. 234B of the Act cannot be sustained. Ground No.4 raised by the assessee is accordingly allowed. 12. In the result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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