Amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers is not the payment of royalty
Amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers is not the payment of royalty
The payment for use of computer software manufacturers/suppliers is not the payment of royalty & it is also not for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India. This was held in the case as under:
ITAT DELHI
GE INTELLIGENT PLATFORMS ASIA PACIFIC PTE LTD. VERSUS THE A.C.I.T CIRCLE – 1 (3) 1, NEW DELHI
ITA No. 630/DEL/2017 And ITA No. 5814/DEL/2017
Short Overview of the case:
The issue was with regard to TDS / Withholding tax u/s 195
The crux involved was with regard to Income accrued or taxable in India or not and whether it is a Royalty income or not in respect of off-shore supply of standardised/shrink wrapped software
The issue was also concerning the taxation under the provisions of section 9(1)(vi) of the Act r.w Article 12 of the India- Singapore DTAA
It was held as under:
As decided in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED [2021 (3) TMI 138 – SUPREME COURT] 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.
Thus amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/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 deduct any TDS under section 195 of the Income Tax Act.
With this, the issue was decided in favour of the assessor.
