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TMI Blog2016 (7) TMI 1432X X X X Extracts X X X X X X X X Extracts X X X X ..... x would be @ 40%. Accordingly, Ground No. 1 is dismissed. Disallowance of software charges paid by the Bank - non-deduction of tax at source under section 40(a)(i) - Held that:- We hold that the assessee was not liable to deduct TDS on such payment. Therefore, no disallowance u/s. 40(a)(i) is called for in the present case. See Infrasoft Ltd. [2013 (11) TMI 1382 - DELHI HIGH COURT ] - IT Appeal No. 1936 (Mum.) of 2014 - - - Dated:- 4-7-2016 - G.S. Pannu, Accountant Member And Amit Shukla, Judicial Member Dhanesh Bafna and Ms. Hirali Desai for the Appellant. Jasbir Chauhan for the Respondent. ORDER Amit Shukla, Judicial Member The aforesaid appeal has been filed by the assessee against final assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years 1997-98 to 2006-07. Thus, this issue will be decided against the assessee. The ld. DR also admitted the same. 3. After considering the aforesaid statement of the assessee's counsel and on perusal of the Tribunal order in assessee's own case, for the earlier years, find that this issue has been consistently decided against the assessee wherein it has been held that assessee's income would be taxed at the rate of 40% plus surcharge and education cess, instead of at the rate applicable to resident taxpayers. The Tribunal discussed the entire issue in detail after considering the assessee's submissions on Article 25 of the DTAA between India and Korea and held that rate of tax would be @ 40%. Accordingly, Ground No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature and not for provision of services of technical nature. Further, the remittance has been made on account of licence software sold by the non-resident company and is not in the nature of Royalty , also therefore, no TDS was deductible. The AO, after detailed discussion and considering the Explanation 4 to sub-section 9(1)(vi) of the Act which has been brought in the statute by the Finance Act, 2012 with retrospective effect from 1.6.1976, held that the said payment falls within the ambit and scope of Royalty as defined u/s. 9(1)(vi) and accordingly, the assessee was obliged to deduct tax at source at the time of payment and therefore, non-deduction of tax at source will entail the disallowance u/s. 40(a)(i). 6. Before us, the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13] 39 taxmann.com 88/[2014] 220 Taxman 273. 7. The ld. DR strongly relied upon the orders of the AO and DRP and submitted that the amendment brought in the statute by which Explanation 4 has been added to section 9(1)(vi), only clarifies the intention of the legislature and that is why, it has been brought with retrospective effect from 1.6.1976. Moreover, here in this case, the assessee has been providing license to use the software for which the payment has been made, therefore, it clearly falls within the ambit of Royalty . He further relied upon the decision of the Hon'ble Karnataka High Court in the case of CIT v. Samsung Electronics Co. Ltd. [2012] 17 taxmann.com 250/204 Taxman 166 (Kar.) (Mag.). 8. We have heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out by the ld. CIT (A), the decision of Special Bench in the case of Motorola Inc (supra) was there wherein it was held that if the licensees is not allowed to exploit the computer software commercially which they had acquired required under the license agreement and only the copyrighted software which by itself was an article and not any copyright therein, then, the payment made for copyrighted article which represented the purchase price cannot be considered as Royalty under the provisions of section 9(1)(vi) of the Act. Once that is so, then it is very difficult to hold that the assessee should have deducted TDS on such payment when there was no clear-cut law that such a payment would be taxable in India. Here, the maxim of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. The finding of the Hon'ble Delhi High Court in the case of Infrasoft Ltd. (supra) are reproduced below: 97. What is transferred is neither the copyright in the software nor the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article which is clearly distinct from the rights in a copyright. The right that is transferred is not a right to use the copyright but is only limited to the right to use the copyrighted material and the same does not give rise to any royalty income and would be business income. 98. We are not in agreement with the decision of the Karnataka High Court in the case of Samsung Electronics Co. Ltd. (supra) that right to make a copy of the softwa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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