Relief to Shell India: No TDS on consideration received from Resale / Use of Computer Software through EULAs/Distribution Agreements: ITAT [Read Order]

TDS - Shell India - ITAT - Computer Software - Taxscan

The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that Shell India not taxable in India for consideration received from resale/use of the computer software through EULAs/distribution agreements since the amount does not constitute ‘royalty’ within the meaning of section 195 of the Income Tax Act, 1961.

During the assessment proceedings, the Assessing Officer held that the payments made by the assessee in respect of the payments made to M/s. Shell International B.V. (SIBV) under the (1) Terms of agreement of the Service Order 1 for availing the HR helpdesk support services and ongoing support services are subject to TDS under section 195 of the Income Tax Act, 1961.

Judicial member Pavan Kumar Gadale and Accountant Member Shamim Yahya found that assessee’s plea that issue is squarely covered in favour of the assessee by the decision of Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited v. CIT is acceptable where the Court has elaborately examined the issue and has decided the issue in favour of the assessee. While relying on the above decision, the Tribunal held in favour of the assessee and observed that “Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment.”

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