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The parliament by Finance Act, 2010 has substituted the explanation to section 9 which gives a clear intention of the legislature insofar as the liability of tax under this provision is concerned. A perusal of the said explanation makes it clear that as there was a doubt earlier, they want to remove the doubts by introducing this explanation. By the explanation they have declared that for the purpose of section 9 which deals with income deemed to accrue or arise in India, under clauses (v), (vi) and (vii) of subsection (1), such income shall be included in the total income of the non-resident, whether or not (i) the non-resident has a residence or place of business or business connection in India, (ii) the non-resident has rendered services in India. Therefore, the object is to levy tax on the income of a non-resident, if it has accrued or arisen in India and one such income is the income from royalty.

Shanti Prime Publication Pvt. Ltd.

Sec. 9 & 195 of Income Tax Act, 1961—Income—Payment towards software was for the purpose of obtaining licence and would therefore constitute royalty under section 9 (1)(vi).

Facts: The grounds of appeal raised by Revenue that CIT(A) erred in deleting the disallowance of deduction u/s 40(a)(i) and CIT(A) ought to have appreciated that payment towards software was for the purpose of obtaining licence and would therefore constitute royalty.

Held, that assessee sold copy righted software and not copyright in the software. It is trite law that an assessee can fall back on the DTA when it is more advantageous to it. The right to use the intellectual property in respect of which the owner or the licensor possess a copyright is also a right in respect of a copyright, though not in the copyright itself. Therefore, the words used in the provision that transfer of all or any of the rights includes the right to grant license in respect of copyright includes such right to use the intellectual property in respect of which the owner or the licensor possess copyright. It falls within the mischief of the word 'royalty' as defined under section 9(l)(vi). In the result, the appeal filed by Revenue is allowed. SAIPEM INDIA PROJECTS (P.) LTD. [2020] 181 ITD 724 (ITAT-CHENNAI)

The parliament by Finance Act, 2010 has substituted the explanation to section 9 which gives a clear intention of the legislature insofar as the liability of tax under this provision is concerned. A perusal of the said explanation makes it clear that as there was a doubt earlier, they want to remove the doubts by introducing this explanation. By the explanation they have declared that for the purpose of section 9 which deals with income deemed to accrue or arise in India, under clauses (v), (vi) and (vii) of subsection (1), such income shall be included in the total income of the non-resident, whether or not (i) the non-resident has a residence or place of business or business connection in India, (ii) the non-resident has rendered services in India. Therefore, the object is to levy tax on the income of a non-resident, if it has accrued or arisen in India and one such income is the income from royalty.

Shanti Prime Publication Pvt. Ltd.

Sec. 9 & 195 of Income Tax Act, 1961—Income—Payment towards software was for the purpose of obtaining licence and would therefore constitute royalty under section 9 (1)(vi).