COURT: | ITAT Mumbai |
CORAM: | Ashwani Taneja (AM), Sanjay Garg (JM) |
SECTION(S): | 195, 9(1)(vi) |
GENRE: | Domestic Tax, International Tax |
CATCH WORDS: | royalty, software licensing, TDS deduction |
COUNSEL: | Sunil Moti Lala |
DATE: | May 18, 2016 (Date of pronouncement) |
DATE: | May 26, 2016 (Date of publication) |
AY: | - |
FILE: | Click here to view full post with file download link |
CITATION: | |
(i) Purchase of a license to use shelf/shrink-wrapped software is purchase of a “product” and not a “copyright”, (ii) The retrospective insertion of Explanation 4 to s. 9(1)(vi) to include “software” in the definition of “royalty” does not apply to DTAAs, (iii) In view of the conflict of views amongst the High Courts, the view in favour of the assessee should be followed, (iv) An obligation to deduct TDS u/s 195 cannot be imposed by the retrospective insertion of Explanation 4 to s. 9(1)(vi), (v) As payments for software were not “royalty” at the time of payment, the assessee cannot be held to be in default for not deducting TDS |
The assessee cannot be said to have paid the consideration for use of or the right to use copyright but has simply purchased the copyrighted work embedded in the CD- ROM which can be said to be sale of “good” by the owner. The consideration paid by the assessee thus as per the clauses of DTAA cannot be said to be royalty and the same will be outside the scope of the definition of “royalty” as provided in DTAA and would be taxable as business income of the recipient. The assessee is entitled to the fair use of the work/product including making copies for temporary purpose for protection against damage or loss even without a license provided by the owner in this respect and the same would not constitute infringement of any copyright of the owner of the work even as per the provisions of section 52 of the Copyright Act,1957
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