The Tax Publishers021 TaxPub(DT) 6458 (Mad-HC) Financial Software & Systems (P) Ltd. v. CIT In Favour of Assessee, Mad-HC, Tax Case Appeal No. 409 of 2015, 03-Sep-2021

INCOME TAX ACT, 1961

Section 147

Amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for resale/use of the computer software through EULAs/distribution agreements is not payment of royalty for 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 were not liable to deduct any tax at source under section 195. Thus, the basis for reopening of assessment was invalid and accordingly, the reopening of the assessment would not be sustainable.

Reassessment - Validity - AO reopened assessment under section 147 in case of assessee-company for non-deduction of tax at source under section 195 -

AO reopened assessment under section 147 in case of assessee-company for non-deduction of tax at source under section 195 in respect of payment made to a non-resident for procurement of computer software. On appeal, CIT(A) upheld the order of the AO, which was subsequently, upheld by Tribunal. Aggrieved, the assessee filed an instant appeal challenging validity of reopening of the assessment. Held: In view of decision of Supreme Court in case of Engineering Analysis Centre of Excellence Private Limited v. CIT & Anr. (Civil Appeal Nos. 8733-8734/2018, dated 2-3-2021) (2021) SCC Online SC 159 : 2021 TaxPub(DT) 1208 (SC), amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for resale/use of the computer software through EULAs/distribution agreements is not payment of royalty for 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 were not liable to deduct any tax at source under section 195. Thus, the basis for reopening of assessment was invalid and accordingly, the reopening of the assessment would not be sustainable.

Followed:Engineering Analysis Centre of Excellence Private Limited v. The CIT & Anr. (2021) SCC Online SC 159 : 2021 TaxPub(DT) 1208 (SC)(/i>

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2003-04



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