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The Tax Publishers Principal CIT v. M. Tech India (P) Ltd. [ITA No. 890/2015, dt. 19-1-2016] : 2016 TaxPub(DT) 0828 (Del-HC) Sale of bought out software by a software reseller is not subject to TDS both within India or outside India *Facts:* Assessee was in the business of reselling off the shelf software. It had paid for purchase of software from various parties outside India and in India. No TDS was done on the same. Assessing officer read the assessee in default under section 40(a)(i) and thus disallowed the purchase of software. On appeal Commissioner (Appeals) upheld the views of the assessee that purchase of software was similar to buying of off the shelf copyrighted products thus was outside the scope of TDS which was also upheld by the ITAT. Aggreived the department went in appeal to high court. Held in favour of the assessee that there is no withholding tax implication on purchase of software meant for resale as a value added reseller. Distinction from copyright and copyrighted article was applied in the case of software in this decision. The court distinguished right to use a software and the outright sale of a copyrighted software holding that TDS is applicable only on a right to use but not a purchase of software meant for resale. Software is a saleable product was read in from *Dissented:* Tata Consultancy Services v. State of Andhra Pradesh: (2004) 271 ITR 401 (SC), CIT v. Samsung Electronics Co. Ltd.: (2012) 345 ITR 494 (Kar.) *Applied:* CIT v. Dynamic Vertical Software India P. Ltd. : (2011) 332 ITR 222 (Del), Director of Income Tax v. Infrasoft Ltd. : (2014) 220 Taxman 273 (Del)

The Tax Publishers

Principal CIT v. M. Tech India (P) Ltd. [ITA No. 890/2015, dt. 19-1-2016] : 2016 TaxPub(DT) 0828 (Del-HC)

Sale of bought out software by a software reseller is not subject to TDS both within India or outside India

Facts:

Assessee was in the business of reselling off the shelf software. It had paid for purchase of software from various parties outside India and in India. No TDS was done on the same. Assessing officer read the assessee in default under section 40(a)(i) and thus disallowed the purchase of software. On appeal Commissioner (Appeals) upheld the views of the assessee that purchase of software was similar to buying of off the shelf copyrighted products thus was outside the scope of TDS which was also upheld by the ITAT. Aggreived the department went in appeal to high court.

Held in favour of the assessee that there is no withholding tax implication on purchase of software meant for resale as a value added reseller.

Distinction from copyright and copyrighted article was applied in the case of software in this decision.

The court distinguished right to use a software and the outright sale of a copyrighted software holding that TDS is applicable only on a right to use but not a purchase of software meant for resale.

Software is a saleable product was read in from

Dissented: Tata Consultancy Services v. State of Andhra Pradesh: (2004) 271 ITR 401 (SC), CIT v. Samsung Electronics Co. Ltd.: (2012) 345 ITR 494 (Kar.)

Applied: CIT v. Dynamic Vertical Software India P. Ltd. : (2011) 332 ITR 222 (Del), Director of Income Tax v. Infrasoft Ltd. : (2014) 220 Taxman 273 (Del)