9911796707
TMI Blog2021 (7) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... re manufacture/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in Section 195 of the Income Tax Act were not liable to deduce any TDS u/s 195. We are of the view that Ld. CIT(A) erred in treating the receipts from sale of software as royalty. Accordingly grounds raised by assessee stands allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... t in assessee's own case are similar to the present facts before us. The question of law considered by the Hon'ble jurisdictional High Court in assessee's own case was as under: "Whether the Tribunal was justified in confirming the order of assessment where under it came to be held that amount received by the assessee for sale of software amounting to royalty as defined under Explanation 2 to Section 9(1)(vi) of the Income tax Act, 1961 and under Section 12 of the Indi-Israel (DTAA) and thereby giving rise to an income chargeable to tax in India?" 8. Hon'ble Karnataka High Court observed and held as under: "The controversy involved in the present case, as informed by the learned Counsel for the parties st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, follow, by virtue of which the resident-payee is deemed an "assessee in default", and thus, is made liable to pay tax, interest and penalty thereon. This position is also made amply clear by the referral order in the concerned appeals from the High Court of Karnataka, namely, the judgment of this Court in GE Technology (supra). 47. In all these cases, the "licence" that is granted vide the EULA, is riot a licence in terms of Section 30 of the Copyright Act, which transfers an interest in all or any of the rights contained in Sections 14(a) and 14(b) of the Copyright Act, but s a "licence" which imposes restrictions or conditions for the use of computer software. Thus it cannot be said tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then be characterized as royalty for the exclusive right to reproduce the book in the territory mentioned by the licence. 52. There can be no doubt as to the real nature of the transactions in the appeals before us. What is "licensed" by the foreign, non-resident supplier to the distributor and resold to the resident end-user, or directly supplied to the resident end-user, is in fact the sale of a physical object which contains an embedded computer programme, and is therefore, a sale of goods, which, as has been correctly pointed out by the learned counsel for the assessees, the law declared by this Court in the context of sales tax statute in Tata Consultancy Services v. State of A.P., 2005(1) SCC 308 (see paragraph 27). 168 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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