SAMSUNG ELECTRONICS COMPANY LTD. VS INCOME TAX OFFICER

1. The assesses has filed the appeals against the common order gone the CIT(A), for the asst. yrs. 1999-2000 to 2001-02, by that the learned CIT(A) has confirmed the orders passed beneath Section 201(1) of the Act and resultant levy of interest beneath Section 201(1A) of the Act. 2. the actual fact concerned within the gift case is that the assesses could be a branch of Samsung company Ltd., Korea, engaged within the development, manufacture and export of computer code to be used by its parent company, i.e., Samsung natural philosophy Co. Ltd., Korea. The assesses develops varied sorts of computer code for telecom equipment, for workplace appliances, for laptop systems and for mobile devices, etc.

2. The computer code developed by the assesses is for in-house use by the parent company. within the asst. yr. 1999-2000, the assesses foreign computer code product of Rs. 2,28,960 from Tektronix Iraqi National Congress., USA. Similarly, throughout the opposite 2 years, its foreign computer code product from USA, France and Sweden. in step with the assesses, the foreign wares, namely, Teleologic letter of the alphabet TTCN Suite, art pronto out their computer code within the market. Hence, payment created to the foreign corporations can’t be treated as royalty, as per the availability of Section 9(1)(vi) r/w Double Taxation turning away Agreements (DTAA for short) between Asian country and USA, Asian country and France severally. The rivalry of the assesses wasn’t accepted by the ITO (TDS). it absolutely was control by the AO that the assesses was a defaulter by not deducting tax from the remitment created by the assesses for purchase of those software.

3. The reply of the assesses wasn’t accepted by the AO and it absolutely was control that as per the availability of Section 9(1)(vi) of the Act, the payment created by the assesses is royalty. Hence, the assesses was certain to deduct the tax. The ITO conjointly placed reliance on the definition of the term ‘Royalty’, as mentioned in DTAA (supra). consequently, it absolutely was control by the ITO that the assesses was a defaulter among the that means of Section 201(1) of the Act, for non-deduction of tax.

4. Further, the interest beneath Section 201(1A) was conjointly levied for the 3 years, as follows: Also, the relevant terms and conditions of the computer code license agreement between the appellant and M/s OSS Noklava Iraqi National Congress., are reproduced below: Software License Agreement License No. 7903 OSS Nokalva, Inc. (OSS), One govt Drive, Somerset, New Jersey 08873, grants to: Samsung natural philosophy Level seven. status Meridian II. 30, M.G. Road.

5. Bangalore 560001, Asian country (Customer) and client accepts a private, non-transferable and nonexclusive license to use the commissioned computer code program(s) [program(s)] on the subsequent terms and conditions. commissioned program(s) shall embody any error corrections, enhancements, or documentation updates connected to it that they be stocked with by OSS to client hereinafter or beneath any Maintenance Agreement that OSS and client could enter into from time to time with relation to any Program(s) (‘Revisions’).

6. License client could (a) If the program(s) embody the ASN. 1 Compiler, use only for customer’s internal business purpose on the only selected computer hardware at the selected web site by no over the most range of users (maximum users) the OSS ASN, 1C-Compilor [currently tagged A5N1CPP.EXE); (b) use, copy and distribute to be used by client the OSS runtime libraries [currently tagged *.DLL and *.LIB: (c)] distribute and sublicense the OSS runtime dynamic link libraries (currently tagged *.DLL) as a part of the customer’s complete application wherever the applying adds vital perform to the runtime libraries and could be a final manufacture that the tip user would use while not relinking, rebuilding, or modification and (d) link the BER, PER and DER runtime static libraries (currently tagged *.LIB) into customer’s complete application wherever the applying adds vital perform to the runtime libraries and could be a final product that the tip user would use while not relinking, reconstruction or modification.

7. All right, title and interest in and to the program(s) and everyone connected material art and shall in the least times stay the only property of OSS. Neither the program(s) nor this agreement is also appointed, sublicensed or otherwise transferred by client while not previous written consent from OSS.