Case Law Details
S&P Capital IQ (India) Private Limited Vs DCIT (ITAT Hyderabad)
ITAT Hyderabad held that payments made for making use of shrink wrap computer software wherein there is no transfer of any copyright nor grant of any commercial right to exploit it doesn’t fall within the definition of royalty and hence TDS not deductible.
Facts- The assessee Company is engaged in the business of providing Information Technology Enabled Services (ITES) to its parent company S&P Global Market Intelligence LLC, USA (earlier known as Capital IQ Inc., USA). During the year under consideration, the assessee had made certain remittances aggregating to 14,95,53,994/- to S& P Global Inc. (formerly known as McGraw Hill Financial Inc.) towards reimbursement for software licenses. On completion of proceedings, AO passed an order u/s. 201(1)/(1A) of the Act on June 15, 2018, treating the said remittances liable to tax deduction as ‘Royalty payments’ and thereby raising a demand of Rs.4,66,60,846/-. AO made addition of Rs. 2,99,10,799/- towards the 20% of TDS on the software license payment in the nature of royalty and also charged interest of Rs. 1,67,50,047/- u/s. 201(1A) of the Act.
Conclusion- In view of the fact that the payments made by the assessee were essentially for making use of the shrink wrap computer software wherein the assessee has non-exclusive and non-transferrable license enabling use of the programme in the copyrighted product, there is no transfer of any copyright in the product nor the assessee was granted any commercial right to exploit it other than for permissible usage. The matter is covered by the decision of the Engineering Analysis Centre of Excellence Private Limited, respectfully following the same, we hold that the impugned payments made by the assessee do not fall in the definition of royalty and consequently, do not attract any addition on that score.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
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