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TMI Blog2021 (7) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... ware was in the nature of royalty and that assessee was required to deduct TDS while making such payment. 3. The Ld. AO following the decision of Hon'ble Karnataka High Court in case of CIT vs Samsung Electronics Co. Ltd., reported in (2011) 16 Taxmann.com 141, held that, payment made by assessee to the non-resident company would amount to royalty within the meaning of Article 12 of Indo Israel DTAA and there was an obligation on the part of assessee to deduct tax at source under section 195 of the Act. 4. At the outset both sides submitted that the issue raised on merits in the present appeal now stands squarely covered by the decision of Hon'ble Supreme Court in case of Engineering Analysis Centre for Excellent Pvt. Ltd. vs CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phs 27, 47, 52, 168 & 169 as under: "27. The machinery provision contained in Section 195 of the Income Tax Act is inextricably linked with the charging provision contained in Section 9 read with Section 4 of the Income Tax Act, as a result of which, a person resident in India, responsible for paying a sum of money, "chargeable under the provisions of [the] Act", to a nonresident, shall at the time of credit of such amount to the account of the payee in any mode, deduct tax at source at the rate in force which, under Section (37A)(iii) of the Income. Tax Act, is the rate in force prescribed by the DTAA. Importantly, such deduction is only to be made if 'the nonresident is liable to pay tax under the charging provision contained in Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or interest, least of all, a right or interest to reproduce the computer software. In point of fact, such reproduction is expressly interdicted, and it is also expressly stated that no vestige of copyright is at all transferred, either to the distributor or to the end-user. A simple illustration to explain the aforesaid position will suffice. If an English publisher sells 2000 copies of a particular book to an Indian distributor, who then resells the same at a profit, no copyright in the aforesaid book is transferred to the Indian distributor, either by way of licence or otherwise, inasmuch as the Indian distributor only makes a profit on the sale of each hook. Importantly, there is no right in the Indian distributor to reproduce the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or right in such distributors/end-users, which would amount o the use of or right to use any copyright. The provisions contained in the Income Tax Act (S. 9(1) (vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. 169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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