Case Law Details
Nokia India Sales Pvt. Ltd. Vs Add. CIT (ITAT Delhi)
Conclusion: Since there was no separate payment made for the purchase of software embedded in mobile phones, therefore, no TDS to be deducted under Section 195 for software embedded in mobile phones imported by assessee during the previous year.
Held: Assessee-company had paid an amount to Nokia Corporation Finland (‘Nokia Corp’) towards consideration for purchase of finished mobile phones. AO based on the assessment of NIPL for preceding years, proceeded with artificial splitting of the price of imported mobile phones into the price of embedded software and price of component in the ratio of 40:60. Thereafter, alleging that the artificial cost of embedded software such arrived was taxable as ‘royalty’ in India (both under the provisions of the Act and as well as India-Finland Tax Treaty), AO proceeded with making disallowance u/s 40(a)(i) of the impugned price of embedded software on the grounds that assessee was liable to withhold tax at source thereon. The software embedded in the hardware (which was not supplied separately) was a standard operating software that could be used to activate and operate/ run the specific mobile handset supplied by Nokia Corp and was incapable of being traded by the assessee on a standalone basis. It was held that CIT(A) had given a detailed finding as relates to non-deduction of tax at source under Section 195 for software embedded in mobile phones imported by the assessee during the previous year. The fact remains that the finished mobile phones were imported by assessee from Nokia Corp for the purposes of sale against a lump-sum consideration and there was no separate payment made by assessee towards the purchase of any software. Revenue could not point out the distinguishing fact that there was a separate payment made for the purchase of software embedded in mobile phones.
FULL TEXT OF THE ORDER OF ITAT DELHI
These two appeals are filed by the assessee and the Revenue against the order dated 22/2/2018 passed by CIT(A) -19, New Delhi For Assessment Year 2014-15.
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