9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (11) TMI 992 - AT - Income TaxTDS u/s 195 - whether the payments made for acquiring the shrink-wrap Software amounts to royalty u/s 9(1)(vi) and also Indo-Ireland DTAA and, therefore, tax at source required to be deducted as per the provision of sec. 195? - Held that - Respectfully following the decision of the Hon ble Karnataka High Court in the case of Samsung Electronics Co. Ltd., (2011 (10) TMI 195 - KARNATAKA HIGH COURT ) and also decision of the Co-ordinate Bench of this Tribunal in the assessee s own case 2015 (11) TMI 923 - ITAT BANGALORE we are of the opinion that the contentions raised by the assessee are not acceptable for the reason that the payment in question was consideration for the right to use copy right shrink-wrap software amounts to royalty within the meaning of sec. 9(1)(vi) of the Act and also Art 12 of the Indo- Ireland DTAA, therefore, grounds raised by the assessee are dismissed. In any view of the matter, in view of the provisions of section 90 of the Act, agreements with foreign countries DTAA would override the provisions of the Act. Once it is held that payment made by the respondents to the nonresident companies would amount to royalty within the meaning of article 12 of the DTAA with the respective country, it is clear that the payment made by the respondents to the non-resident supplier would amount to royalty. In view of the said finding, it is clear that there is obligation on the part of the respondents to deduct tax at source under section 195 of the Act and consequences would follow - Decided against assessee.
Issues Involved:
1. Whether the payment for acquiring shrink-wrap software amounts to royalty under section 9(1)(vi) of the Income-tax Act and the Indo-Ireland DTAA. 2. Whether the assessee was liable to deduct tax at source under section 195 of the Income-tax Act for the payments made to Cadence Designs Systems Ireland. Issue-wise Detailed Analysis: 1. Whether the payment for acquiring shrink-wrap software amounts to royalty under section 9(1)(vi) of the Income-tax Act and the Indo-Ireland DTAA: The primary issue revolves around whether the payments made by the assessee to Cadence Designs Systems Ireland for shrink-wrap software constitute royalty. The Assessing Officer (AO) determined that these payments were indeed royalty under section 9(1)(vi) of the Income-tax Act and the Indo-Ireland DTAA, thereby necessitating tax deduction at source. The AO's decision was based on the interpretation that the payments were for the use of or the right to use copyright-protected software. This view was supported by the Commissioner of Income-tax (Appeals) [CIT(A)], who referenced the Karnataka High Court's decision in CIT Vs. Samsung Electronics Co. Ltd., which held that payments for the use of copyrighted software amounted to royalty. 2. Whether the assessee was liable to deduct tax at source under section 195 of the Income-tax Act for the payments made to Cadence Designs Systems Ireland: The AO initiated proceedings under sections 201 and 201(1A) for the assessee's failure to deduct tax at source on the payments made to Cadence Designs Systems Ireland. The AO issued a show-cause notice, and despite the assessee's contention that the payments were not chargeable to tax in India, the AO held the assessee to be in default. The CIT(A) upheld this decision, following the precedent set by the Karnataka High Court in the Samsung Electronics case, which mandated tax deduction at source on payments for software licenses. Tribunal's Judgment: The Tribunal, after hearing both parties, noted that the issue had already been decided against the assessee in its own case in ITA No.31/Bang/2015 dated 5/6/2015. The Tribunal referenced the Karnataka High Court's detailed analysis in the Samsung Electronics case, which concluded that payments for software licenses constitute royalty. The High Court's interpretation of "royalty" under the Income-tax Act and the DTAA was pivotal, emphasizing that the right to use copyrighted software amounts to royalty, thereby necessitating tax deduction at source. Conclusion: Respecting the Karnataka High Court's decision in the Samsung Electronics case and the Tribunal's earlier ruling in the assessee's own case, the Tribunal dismissed the assessee's appeals for the assessment years 2010-11 and 2011-12. The Tribunal held that the payments in question were indeed for the right to use copyrighted software, qualifying as royalty under section 9(1)(vi) of the Income-tax Act and Article 12 of the Indo-Ireland DTAA, thus requiring tax deduction at source under section 195. Result: The assessee's appeals for the assessment years 2010-11 and 2011-12 were dismissed. Order Pronouncement: The order was pronounced in the open court on 16th October 2015.
|
