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Issues involved: Appeal against deletion of disallowance u/s 40(a)(ia) of the Income-tax Act for non-deduction of tax at source on royalty payments to a non-resident.
Summary: Issue 1: Disallowance u/s 40(a)(ia) - Royalty payments to non-resident The Revenue appealed against the deletion of a disallowance made by the Assessing Officer (A.O.) u/s 40(a)(ia) of the Income-tax Act for non-deduction of tax at source on payments to M/s Abaqus Inc., contending that the payments were royalty covered u/s 9(1)(vi) and tax should have been deducted u/s 195 since the recipient was a non-resident. Issue 2: Precedent and Tribunal's ruling The Appellant cited a precedent where a similar disallowance for the assessment year 2006-07 was deleted by the CIT(Appeals) and upheld by the Tribunal. The Departmental Representative (D.R.) acknowledged that the issue was in favor of the assessee based on the previous ruling. Issue 3: Tribunal's analysis and decision The Tribunal examined the nature of the payments to M/s Abaqus Inc. and found that they did not constitute royalty but were for the right to use copyrighted software, not the copyright itself. Despite the A.O.'s attempt to keep the disallowance alive, the Tribunal found no error in applying the previous ruling for the assessment year 2006-07 and ruled in favor of the assessee. As no higher authority order was presented to challenge the Tribunal's previous decision, the appeal filed by the Revenue was dismissed. The judgment was pronounced on January 22, 2013, in Chennai.
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