TMI Blog2023 (6) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... omputer 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 deduct any TDS u/s 195. Decided in favour of assessee. - ITA No. 527/Del/2021 - - - Dated:- 21-6-2023 - Sh. N. K. Billaiya, Accountant Member And Sh. C.N. Prasad, Judicial Member For the Appellant : Sh. Tarandeep Singh, Advocate, Sh. Sandeep Yadav, Advocate For the Respondent : Sh. Vizay B. Vasanta, CIT DR ORDER PER N. K. BILLAIYA, AM: This appeal by the assessee is preferred against the order dated 18.03.2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts, and in the circumstances of the case, and in law, the AO has erred in not following the principles laid down by the ruling of Supreme Court (SC) of India in the case of Engineering Analysis Centre of Excellence Private Limited wherein it has been held that the amount received by the non-resident from the India distributors/resellers towards supply/sale of software is not taxable in India as Royalty as per the provisions of the Act and AADT. 5. That, on the facts, and in the circumstances of the case, and in law, lower authorities have erred in not following judicial precedents cited by the Appellant, including the decisions pronounced by the Jurisdictional High Court and as also upheld by the SC (supra). 6. That, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y incorporated in Ireland. As per Section 90 of the Income Tax Act, 1961 taxability of a non-resident is to be governed by the provisions of the Act or the DTAA whichever is more beneficial to the assessee. Payments for software are anyways taxable under Section 9(1)(vi) of the Act. The intention of the legislature to tax software payments was made clear by way of amendments brought in by the Finance Act 2012 by way of insertion of Explanation 4 to Section 9(1)(vi) through which it was clarified that transfer of all or any rights in respect of any right property or information includes and has always included transfer of all or any rights for use or right to use a computer software. The assessee being a resident of Ireland is eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinition of royalty under the India Ireland DTAA covers not only the payment made for the right to use any copyright but also the payment made for the right to use any copyright which is embedded in the software supplied by the assessee. Therefore, consideration received from distributors is to be treated as royalty even under the DTAA as the definition covers the consideration received for the use of copyright. Karnataka High Court in the case of Samsung Electronics Co. Ltd. (345 ITR 494) held that payments made for software would be taxable as royalty even under the DTAA. The Hon ble High Court held as under: If is also clear from the abovesaid analysis of the DTAA, Income-tax Act, Copyright Act that the payment would constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or manufacturer. ii) The second category of cases deals with resident Indian companies that' act as distributors or resellers, by purchasing computer software from foreign, non-resident suppliers or manufacturers and then reselling the same to resident Indian end-users. iii) The third category concerns cases Wherein the distributor happens to be a foreign, non-resident vendor, who, after purchasing software from a foreign, non-resident seller, resells the same to resident Indian distributors or end-users. iv) The-fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or end-users. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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