S. 195 / 201 liability cannot be avoided on ground of non-taxability of recipient

The assessee made payments to a foreign company for purchase of ‘shrink-wrapped’/ready-made software without deduction of tax at source u/s 195 (1). The AO held that the payments were chargeable to tax in the hands of the foreign company as “royalty” u/s 9 (1) (vi) and that the assessee was liable u/s 201 for non-deduction of tax and interest thereon. On appeal, this view was confirmed by the CIT (A) though the Tribunal (94 ITD 91) held that the payments for software, being a purchase of a ‘copyrighted article’ and ‘goods’ as held by in Tata Consultancy Services 271 ITR 401 (SC...