Purchase of copyrighted software cannot be considered as royalty, No TDS Applicable
11. We, further noted that the Tribunal had also considered the issue of non-deduction of TDS at source on payment made to its parent company Aveva Solutions Ltd., England, in light of provisions of section 201(1) and 201(1A) of the Act, and held that the assessee was not liable to deduct tax at source and also it cannot be treated as assessee in default for the impugned year in respect of payment made for purchase of copyrighted software. Therefore, considering the facts and circumstances of the case and also consistent with view taken by the Co-ordinate Bench in assessee’s owns case, we are of the considered view that payment made by the assessee to its parent company for purchase of copyrighted software to be distributed in India for end users cannot be considered as royalty within the definition of royalty as defined u/s 9(1)(vi) of the Act, consequently, the assessee is not required to deduct tax at source u/s 195 of the Act and hence, no disallowance could be made u/s 40(a)(ia) of the Act. Therefore, we direct the Assessing Officer to delete additions made towards disallowance u/s 40(a)(ia) of the Act.
12. The next issue that came up for our consideration from ground no. 4 of assessee’s appeal is short credit of TDS of Rs.6,81,907/-. The Ld. AR for the assessee submitted that the issue may be set- aside to the file of the Assessing Officer to verify the facts to ascertain whether is there any credit for TDS and also to grant credit, therefore, we set-aside the issue to the file of the Assessing Officer and directed the Assessing Officer to call necessary enquiries in light of evidence filed by the assessee including TDS certificate if, any and grant relief accordingly.
13. The next issue that came up for our consideration from ground no.5 and 6 of assessee’s appeal is levy of interest u/s 234B and 234C of the Act. Levy of interest u/s 234B and 234C is mandatory and consequential in nature, therefore, we direct the Assessing Officer to verify the facts in light of provisions of section 234B and compute interest as applicable on the basis of total income computed for the year under consideration. We further direct the Assessing Officer to compute 234C interest on returned income.
14. The next issue that came up for our consideration from ground no.7 of assessee’s appeal is initiation of penalty proceedings u/s 271(1)(c) of the Act. We find that ground taken by the assessee is premature, which does not require adjudication at this point of time and hence, the same is dismissed as in fructuous.
15. In the result, appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on this 26/07/2019
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