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TMI Blog2022 (1) TMI 1089X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 deduct any TDS under section 195. As rightly pointed out by Ld D.R, we are of the view that the issues contested in all these appeals require fresh examination at the end of Ld CIT(A) applying the ratio of the decision rendered by Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence P Ltd (supra). Accordingly, we set aside the orders passed by Ld CIT(A) in all these appeals and restore all the issues to his file for examining them afresh - Grounds raised by assessee stands allowed for statistical purposes. - ITA No. 3066/Bang/2018 - - - Dated:- 14-12-2021 - Shri. Chandra Poojari, Accountant Member And Smt. Beena Pillai, Judicial Member For the Assessee : Shri Padamchand Khincha, CA For the Revenue : Shri Sankar Ganesh .K, JCIT (DR) ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idents amounting to ₹ 1,16,00,535 was not liable for TDS under section 195 and consequently disallowance confirmed under section 40(a)(1) should be deleted. The Appellant prays accordingly. Additional ground 1. Assuming without admitting that the credits/payments to nonresidents was liable for disallowance under section 40(a)(i), the said disallowance, if any, should be restricted to 30% of the expenditure as per the Non Discrimination Article in the Double Taxation Avoidance Agreements. The appellant prays accordingly. Brief facts of the case are as under: 2. The assessee is an Indian Company engaged in the business of developing, marketing and operating games and gaming infrastructure for mobile phones. For the relevant Assessment Year, the assessee filed the return of income on 29.09.2015, returning a loss of Rs.(2,15,32,462/-) and claiming a refund of ₹ 5,39,168/-. 2.1 Notice u/s. 143(2) and 142(1) was issued. The Ld.AO called for the details of advertising expenses with name and address of the person to whom the payment was made. The assessee submitted the details vide letter filed on 28.11.2017. The Ld.AO noticed that advertisem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the delivery of the advertisements, the amount and type of adverting inventory being purchased (e.g., impressions, clicks, duration or other desired actions or metrics), fees and rates, maximum amount of money to be spent, the start and end dates of the advertisement etc. 4.2 He submitted that Facebook and other entities deliver the digital advertisement in accordance with the scope agreed with the client. He submitted that they are responsible for the design, layout, look, feel and maintenance of any and all aspects of the advertisement including with respect of the display and performance of any Client Ads. Facebook may in its sole discretion redesign, delete or replace any pages, groups or other areas on which Client Ads will be displayed, even if such redesign, deletion or replacement results in the removal of Client Ads, and that the role of the assessee is limited to the extent of providing the content to be advertised. 4.3 The Ld.AR thus submitted that the assessee does not have any control or possession over the way in which these advertisements are digitally advertised by the Facebook and other entities. No access to the technology behind the airing of the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ware is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or endusers. 5.2 After analysing the provisions of Income tax Act, provisions of DTAA, the relevant agreements entered by the assessees with non-resident software suppliers, provisions of Copy right Acts, the circulars issued by CBDT, various case laws relied upon by the parties, the Hon'ble Supreme Court concluded as under:- CONCLUSION 168 . Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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