{"id":4009,"date":"2011-12-04T06:55:09","date_gmt":"2011-12-04T06:55:09","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=4009"},"modified":"2011-12-04T07:24:36","modified_gmt":"2011-12-04T07:24:36","slug":"cit-vs-samsung-electronics-co-ltd-karnataka-high-court-s-91vi-income-from-licence-of-software-assessable-as-royalty","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/cit-vs-samsung-electronics-co-ltd-karnataka-high-court-s-91vi-income-from-licence-of-software-assessable-as-royalty\/","title":{"rendered":"CIT vs. Samsung Electronics Co Ltd (Karnataka High Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (samsung_software_royalty_reduced.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nS. 9(1)(vi): Income from licence of software assessable as “royalty”
\n<\/strong><\/p>\n

The assessee imported “shrink-wrapped”\/ “off-the-shelf” software from suppliers in foreign countries and made payment for the same without deducting tax at source u\/s 195. The AO & CIT (A) held that the payments were assessable to tax as “royalty” u\/s 9(1)(vi)\/ Article 12<\/em> and that the assessee was liable to pay the tax u\/s 201. On appeal, the Tribunal relied on the judgement of the Supreme Court in Tata Consultancy Services vs. State of AP<\/a><\/strong> 271 ITR 401 (SC) and held that the assessee had acquired a “copyrighted article<\/em>” but not the “copyright<\/em>” itself and so the amount paid was not assessable as “royalty<\/em>“. On appeal by the department, HELD reversing the Tribunal:<\/p>\n

(i) U\/s 9(1)(vi) of the Act & Article 12 of the DTAA, “payments of any kind in consideration for the use of, or the right to use, any copyright of a literary, artistic or scientific work<\/em>” is deemed to be “royalty<\/em>“. Under the Copyright Act, 1957, a software programme constitutes a “copyright”. A right to make a copy of the software and use it for internal business by making copy of the same and storing it on the hard disk amounts to a use of the copyright u\/s 14 (1) of that Act because in the absence of such a licence, there would have been an infringement of the copyright<\/em><\/strong>. Accordingly, the argument that there is no transfer of any part of the copyright and the transaction involves only a sale of a copyrighted article is not acceptable<\/strong>. The amount paid to the supplier for supply of the “shrink-wrapped” software is not the price of the CD alone nor software alone nor the price of licence granted. It is a combination of all. In substance unless a licence was granted permitting the end user to copy and download the software, the CD would not be helpful to the end user;<\/p>\n

(ii) There is a difference between a purchase of a book or a music CD because while these can be used once they are purchased, software stored in a dumb CD requires a license to enable the user to download it upon his hard disk, in the absence of which there would be an infringement of the owner’s copyright<\/strong>. (TCS vs. State of AP<\/a><\/strong> distinguished as being in the context of sales-tax);<\/p>\n

\nNote<\/strong>: The same view has been taken in Microsoft\/ Gracemac<\/a><\/strong> 42 SOT 550 (Del), Millennium IT Software Ltd<\/a><\/strong> 338 ITR 391(AAR) & ING Vysya Bank Ltd<\/a><\/strong> 61 DTR 401( Bang) while a contrary view has been taken in Motorola Inc<\/strong> 96 TTJ 1 (Del) (SB) & TII Team Telecom International<\/a><\/strong> 60 DTR 177. See also Is Income From Software Taxable As \u201cRoyalty\u201d?<\/a><\/strong>\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

U\/s 9(1)(vi) of the Act & Article 12 of the DTAA, “payments of any kind in consideration for the use of, or the right to use, any copyright of a literary, artistic or scientific work<\/em>” is deemed to be “royalty<\/em>“. Under the Copyright Act, 1957, a software programme constitutes a “copyright”. A right to make a copy of the software and use it for internal business by making copy of the same and storing it on the hard disk amounts to a use of the copyright u\/s 14 (1) of that Act because in the absence of such a licence, there would have been an infringement of the copyright<\/em><\/strong>. Accordingly, the argument that there is no transfer of any part of the copyright and the transaction involves only a sale of a copyrighted article is not acceptable<\/strong>. The amount paid to the supplier for supply of the “shrink-wrapped” software is not the price of the CD alone nor software alone nor the price of licence granted. It is a combination of all. In substance unless a licence was granted permitting the end user to copy and download the software, the CD would not be helpful to the end user<\/p>\n

Read more ›<\/a><\/div>\n

<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[4,5],"tags":[],"class_list":["post-4009","post","type-post","status-publish","format-standard","hentry","category-all-judgements","category-high-court"],"acf":[],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/posts\/4009","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/comments?post=4009"}],"version-history":[{"count":0,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/posts\/4009\/revisions"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/media?parent=4009"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/categories?post=4009"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/tags?post=4009"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}