TMI Blog2015 (8) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... iv) and Explanation (v) by the Finance Act, 2012 with retrospective effect from 01.06.1976 and the benefit of this amendment made subsequently with retrospective effect was not available to the Ld. CIT(A) while passing the impugned orders. As contended by assessee in this regard, it is also relevant to see whether there is any amendment in the relevant articles of the DTAAs widening the scope of the term Royalty as done in the domestic Law. Keeping in view all these relevant aspects of the matter which have a direct bearing on the issue under consideration, consider it fair and proper and in the interest of justice to remit the matter back to the Ld. CIT(A) for deciding the same afresh on merit in accordance with law, after giving the assessee proper and sufficient opportunity of being heard. - Decided in favour of assessee for statistical purposes. - Shri P.M. Jagtap, J. For the Petitioner : Mr. K.A. Sai Prasad For the Respondent : Mr. Prabhat Kumar Gupta ORDER These six appeals filed by the assessee involving four assessment years i.e., A.Y. 2007-08 to 2010-11 are directed against the six separate orders passed by the Ld. CIT(A)-V, Hyderabad dated 02.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the company on the basis of a suitable hardware cum software lock provided on payment, whereby access to the said software by a user is provided by the supplier. 5. All the software is copyrighted by the supplier and no rights in this regard accrue to the company. It merely has a right to use the same on payment. From the above the following are transparent: a) The-sum paid or payable to a non resident or a foreign company should be a sum chargeable under the provisions of the Income Tax Act, 1961. b) TDS is deductible on any portion of the income arising out of the payment/s made if any part or the whole of such payment is considered to be a sum chargeable to tax under the provisions of the Act. It is humbly submitted in the light of the above submissions that the above mentioned transactions do not, therefore come under the purview of any withholding tax/TDS per section 195, and no default u/s 201 should normally arise . 2.1. The above explanation of the assessee was not found acceptable by the A.O. for the following reasons given in paragraph No.3.1.4 of his orders passed under section 201(1). 3.1.4. As can be seen, what has been acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2. For the reasons given above and relying, inter alia, on the decision of Hon ble Karnataka High Court in the case of Samsung Electronics Company Limited dated 24.09.2009, the A.O. held that the assessee company was liable to deduct tax at source from the amounts in question paid by the assessee company to M/s. Tekla and M/s. DDC as consideration for the right to use the copy of the computer programme being in the nature of royalty and since there was failure on the part of the assessee to deduct such tax, he treated it as assessee in default under section 201(1) and also charged interest under section 201(1A) as under: A.Y. Sec.201(1) Sec.201(1A) Payee 2007-08 224,615 87,642 Design Data Corpn. USA 2008-09 769,485 241,403 2009-10 706,687 120,389 2010-11 403,024 27,637 2007-08 289,451 115,005 Tekla Corpn Ltd., Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... softwares were purchased for its use in its export business and not for reproduction. resale, rental or any other such use. The said CD's are installation CD's and accompanied by a hardware lock which allows it to be used by a single user, i.e., it can be installed on only one computer. The hardware lock provided ensures this and access to the said software is prevented if not accompanied by the hardware lock for each installation. This lock is an anti piracy device. As a result only one computer can be loaded with and access the software installed by way of the CD purchased by the company. If the assessee wants an additional installation of the said software on another computer. it has to remit the fees for the installation separately and the suppliers will provide additional hardware locks. being anti piracy devices. The assessee has then to install the software. which it already has on a CD format and owns, and activate the same by means of a hardware lock. In case the computer crashes or is rendered dysfunctional, the assessee can reload the installation from the CD and activate the same with the hardware lock provided to them previously. 4. It may be submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India. 3.1. The Ld. CIT(A) did not find merit in the submissions made on behalf of the assessee company. According to him, there was a basic distinction between royalties and consideration of sale paid to a non-resident. In this regard, he referred to the definition of the term royalty as given in Explanation (2) to Section 9(1)(vi) of the Act as well as in the relevant clause of the treaty to discuss the nature of payments that come within the ambit of the said definition. He also relied inter alia, on the decision of Authority for Advanced Rulings in the case of Del International Services (India) P. Ltd., 305 ITR 37 (AAR). He finally referred to the definition of Copy Right given in Section 14 of the Copy Right Act and observed that the rights in computer programmes were in the form of intellectual property. He held that what is taxed as a royalty is the amount paid as consideration for the use or the right to use and not outright purchase of the right to use as an asset. He held that the payments made by the assessee company to M/s. Tekla and M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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