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2016 (4) TMI 589 - AT - Income TaxTDS u/s 195 - Royalty receipt - nature of the payment made by the assessee to M/s. GX Technology Corporation, USA and M/s. GGS Spectrum Limited, UK - tds liability - Indo-US DTAA - Held that - All that is provided by the licensor is the Data relating to the geophysical and geological information about the east and west coast of India and is not responsible for the accuracy or usefulness of such Data. Thus, it is clear that licensors have only made available the data acquired by them and available with them but are not making available any technology available for use of such data by the assessee herein. The decisions relied upon by the Ld. Counsel for the assessee, for the cases discussed above are clearly applicable to the facts of the case before us and the payments made by the assessee to GTX and GGS is not in the nature of Royalty as per the respective DTAA s and therefore, the provisions of Section 195 are not applicable. - Decided in favour of assessee
Issues Involved:
1. Whether the payment to M/s. GGS Spectrum Limited, UK, for purchase of dataset is in the nature of royalty and hence taxable under the Act and India UK Double Tax Avoidance Agreement (DTAA). 2. Whether the payment to GX Technology Corporation, USA, for purchase of dataset is in the nature of royalty and hence taxable under the Act and India US DTAA. 3. Whether the assessee is an "assessee in default" for not withholding taxes on payments made to GGS and GXT. Issue-wise Detailed Analysis: Issue 1: Nature of Payment to GGS Spectrum Limited, UK The Ld. CIT(A) held that the payment to GGS for the purchase of dataset is in the nature of royalty and hence taxable under the Act and India UK DTAA. The assessee argued that the payment was for data acquisition and not for the transfer of any rights or know-how. The dataset was not customized for the assessee and was available to other customers as well. The tribunal examined the clauses of the agreement and found that the data provided by GGS was not transferred with any proprietary rights or know-how. The payment was for the use of data and not for any industrial, commercial, or scientific experience. Therefore, the tribunal concluded that the payment did not constitute royalty under the India UK DTAA. Issue 2: Nature of Payment to GX Technology Corporation, USA Similar to the first issue, the Ld. CIT(A) held that the payment to GXT for the purchase of dataset is in the nature of royalty and hence taxable under the Act and India US DTAA. The assessee contended that the dataset IndiaSPAN provided by GXT was not customized for the assessee and did not involve the transfer of any know-how or proprietary rights. The tribunal reviewed the agreement and found that the data provided by GXT was for general use and did not transfer any proprietary rights or know-how to the assessee. The data was not exclusive to the assessee and could be used by other customers. The tribunal concluded that the payment did not constitute royalty under the India US DTAA. Issue 3: Assessee in Default for Not Withholding Taxes The A.O. and Ld. CIT(A) held the assessee as an "assessee in default" for not withholding taxes on payments made to GGS and GXT. The tribunal examined the nature of the payments and concluded that they did not constitute royalty under the respective DTAAs. Therefore, the provisions of Section 195 of the Income Tax Act, which require withholding of taxes on payments constituting royalty, were not applicable. Consequently, the assessee could not be held as an "assessee in default" for not withholding taxes on these payments. Conclusion: The tribunal allowed the appeals of the assessee, concluding that the payments made to GGS and GXT did not constitute royalty under the respective DTAAs and hence, the provisions of Section 195 were not applicable. The assessee was not an "assessee in default" for not withholding taxes on these payments. The tribunal's decision was based on a detailed examination of the agreements and the nature of the payments, finding that they were for the use of data and not for the transfer of any proprietary rights or know-how.
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