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Ameriacan Chemical Society, Gurgaon vs The Deputy Commissioner Of Income Tax, ... on 31 March, 2023
cites
Section 234A in The Income Tax Act, 1961 [Entire Act]
Section 234B in The Income Tax Act, 1961 [Entire Act]
The Income Tax Act, 1961
Section 14 in The Copyright Act, 1957 [Entire Act]
Commissioner Of Income Tax vs Heg Ltd. on 5 May, 2003
In this context, we also think it apposite to refer to the judgment rendered by the
Hon'ble Madhya Pradesh High Court in the case of CIT vs. HEG Limited [2003] 263 ITR
230 (MP). In the aforesaid case, the assessee paid certain amount to a firm of USA for
purchase of some information. The Assessing Officer held that the said transaction
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Ämerican Chemical Society
ITA no.735/Mum./2023
involved imparting of information concerning technical, industrial, commercial or
scientific knowledge, experience or skill, and, therefore, the payment was royalty for
purchase of data of confidential nature and the assessee was liable to deduct TDS
thereon. The matter travelled to the High Court and it held that purchase of any and
every type of commercial information cannot earn the status of royalty. To have the
status of royalty, the information transacted should have some special features, which
is hitherto not available in public domain. The relevant extract of the said ruling is as
follows:
The Copyright Act, 1957
Tata Consultancy Services vs State Of Andhra Pradesh on 5 November, 2004
12. In the present context, we may also examine the issue from another angle as
follows. The transfer of a copyrighted right means that the recipient has a right to
commercially exploit the database/software, eg. reproduce, duplicate or sub-license the
same; such payments may be classified as royalty, but factually speaking in the
present no such rights in database or search tools (SciFinder or STN) are acquired by
the customers, as is evident from the terms of the sample agreement of CAS customers
in our considered view, transfer of any right in a copyrighted article is analogous to the
rights acquired by the purchaser of a book. In the case of a book, the publisher of the
book grants the purchaser certain rights with respect to the use of the content of the
book, which is copyrighted, but the purchaser of the book does not acquire the right to
exploit the underlying copyright. When the purchaser reads the book, he only enjoys its
contents. Similarly, the user of the copyrighted software does not receive the right to
exploit the copyright in the software; he only enjoys the product/benefits of the product
in the normal course of his business. Similarly, in the instant case, customers of the
assessee only enjoy the benefits of using SciFinder and STN and do not acquire the
right to exploit any copyright in these software. The difference between a copyright and
a copyrighted article in context of software has been brought out very clearly by the
Hon'ble Supreme Court of India in the case of Tata Consultancy Services vs. State of
Andhra Pradesh (supra).
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