CIT- International Taxation -3 Vs Xiocom (NZ) Ltd (Delhi High Court)
Delhi High Court held that consideration for the resale/use of computer software through EULAs/distribution agreement is not Royalty for the use of copyright of the computer software and hence doesn’t give rise to any taxable income in India. Hence, TDS u/s. 195 not deductible.
Facts- The assessee respondent company is involved in designing and providing fully tailored, off the shelf wireless broadband solutions throughout the USA and a few other countries in Africa. During the year under consideration, the assessee company sold “off the shelf” software through a non-exclusive license rights to Zylog Systems (India) Ltd. to utilize the technology in certain areas in India.
AO came to the conclusion that income of ₹19,24,80,000/- from licensed IMS software to Zylog Systems India Ltd. was taxable u/s. 9 (1) (vi) of the Act under Article 12 of Indo-NZ-Double Taxation Avoidance Agreement.
CIT(A) allowed the appeal. Tribunal dismissed the appeal of the revenue. Being aggrieved, the present writ is filed.
Conclusion- Held that the consideration for the resale/use of computer software through EULAs/distribution agreement is not Royalty for the use of copyright of the software and the same does not give rise to any taxable income in India and as a result, the persons referred to under Section 195 of the Act were not liable to be deduct any TDS under Section 195 of the Act. Thus, the appeal is dismissed against the appellant/the Revenue and in favour of the respondent.
