9911796707
TMI Blog2021 (7) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by assessee in both these appeals relate to treating the receipts of assessee's on account of sale of software to the Indian customers, as royalty. 2. It was submitted that during the relevant years under consideration assessee was also engaged in sale of tangible hardware is like routers, switches, optical network, storage area networking and home networking hardware. Assessee has also submitted that it has provided necessary support services to its customers in relation to the products supplied. 3. The Ld.AO treated the amount received by assessee as under section 9(1)(vi) of the Act, and under the DTAA between India and Netherlands as royalty on which TDs is liable to be deducted section 195 of the Act. The Ld.AO relied on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nked with the charging provision contained in Section 9 read with Section 4 o the Income Tax Act, as a result of which, a person resident in India, responsible for paying a sum of money, "chargeable under the provisions of [the] Act", to a non- resident, shall at the time of credit of such amount to the account of the payee in any mode, deduct tax at source at the rate in force which, under Section (37A)(iii) of the Income. Tax Act, is the rate in force prescribed by the DTAA. Importantly, such deduction is only to be made if 'the non- resident is liable to pay tax under the charging provision contained in Section 9 read with Section 4 of the Income Tax Act, ,read with the DTAA. Thus, it is only when the non-resident is liable to pay in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssly interdicted, and it is also expressly stated that no vestige of copyright is at all transferred, either to the distributor or to the end-user. A simple illustration to explain the aforesaid position will suffice. If an English publisher sells 2000 copies of a particular book to an Indian distributor, who then resells the same at a profit, no copyright in the aforesaid book is transferred to the Indian distributor, either by way of licence or otherwise, inasmuch as the Indian distributor only makes a profit on the sale of each hook. Importantly, there is no right in the Indian distributor to reproduce the aforesaid book and then sell copies of the same. On the other hand, if an English publisher were to sell the same book to an Indian p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the Income Tax Act (S. 9(1) (vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the asessees, have no application in the facts of these cases. 169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacture/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty' for the use of copyright in the computer software and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in Section 195 of the Income Tax Act were not liable to deduce any TDS under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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