Case Law Details
Opus Software Solutions Pvt. Ltd. Vs ACIT (ITAT Pune)
The issue which arises in the present appeal is whether the deduction claimed by assessee on purchase of licensed software is to be allowed as deduction in the hands of assessee or not. The Revenue authorities were of the view that purchase of licensed software by the assessee is akin to royalty and the assessee was duty bound to deduct tax at source. Since the assessee has failed to deduct tax at source, expenditure was disallowed in the hands of assessee. In this regard, the CIT(A) had placed reliance on the ratio laid down by Pune Bench of Tribunal in the case of Cummins Inc (supra) and Mumbai Bench of Tribunal in DDIT Vs. Reliance Infocom (supra). The case of assessee on the other hand, before us is that the issue now stands covered by latest decision of Pune Bench of Tribunal in John Deere India Pvt. Ltd. Vs. DDIT (supra). The Tribunal while deciding the issue of deduction of tax at source out of payments made for purchase of software had in turn, referred to the orders passed in Miscellaneous Application in the case of both Cummins Inc (supra) and Reliance Infocom (supra), wherein the respective Benches of Tribunal had recalled their earlier orders and hence, reliance placed upon by the CIT(A) do not stand. The issue was considered at length and it was held that where the software is purchased across the counter as shrink proof software, then it is not akin to royalty both under the Income Tax Act or the DTAA. The Tribunal held that since the definition of ‘royalty’ has not been amended under DTAA, then the said definition would be paramount and would have to be applied for deciding the issue. It also held that amendment to section 9(1)(vi) of the Act by insertion of Explanations 4 to 6 would not change the scenario and make the assessee liable for deduction of tax at source in the relevant year.
FULL TEXT OF THE ITAT JUDGMENT
The appeal filed by assessee is against order of CIT(A)-13, Pune, dated 25.06.2015 relating to assessment year 2010-11 against order passed under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
2. The assessee has raised the following ground of appeal:-
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