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2012 (8) TMI 87 - HC - Income TaxMischief of royalty - Held that - Consideration paid by the Indian customers or end users to the assessee - a foreign supplier for transfer of the right to use the software/computer programme in respect of the copyrights falls within the mischief of royalty as defined under sub-clause v to Explanation 2 to Clause vi of section 9 1 of the Income-tax Act 1961 - in favour of the revenue and against the assessee.
Issues: Appeal challenging Income Tax Tribunal's orders on 'royalty' consideration under section 9(1) of the Income-tax Act, 1961.
Analysis: 1. The High Court heard an appeal where the Revenue challenged the Income Tax Tribunal's decision regarding the classification of consideration paid by the assessee as 'royalty' under section 9(1) of the Income-tax Act, 1961. 2. The court noted that a similar issue was previously considered in the case of CIT v. Synopsys International Old Ltd. The question revolved around whether the consideration paid by Indian customers to a foreign supplier for the right to use software falls under the definition of 'royalty' as per the Income-tax Act. 3. Additionally, the court referred to another case, CIT v. Samsung Electronics (P.) Ltd., where it was questioned whether the amount paid by appellants to foreign software suppliers constituted 'royalty' and should be subject to taxation in India. 4. The court observed that in both previous cases, it was established that consideration paid by Indian customers to foreign suppliers for software use did indeed qualify as 'royalty' under section 9(1) of the Income-tax Act, 1961. 5. Based on the precedents set by the earlier judgments, the court ruled in favor of the Revenue, concluding that the substantial questions of law framed in the present case are answered in favor of the revenue and against the assessee. 6. Consequently, the court issued an order in favor of the Revenue, allowing the appeal and upholding the classification of the consideration as 'royalty' under the Income-tax Act, 1961.
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