These appeals by assessee are directed against orders of learned CIT(A)-IV, Bangalore. appeals were filed before CIT(A) against order under s. 201(1) for failure to deduct tax as required under s. 195 of Act. assessee had imported software packages for purpose of distributing it to ultimate users. imports had been made from certain non-residents of USA, UK, Singapore, Taiwan and Hongkong. imports were made in terms of agreement of most cases) entered into with these non-residents. AO has considered payments to be in nature of royalty payments. appellants however considered incomes represented by these payments to be business profits of non-resident taxable only under Art. 7 of respective Double Taxation Avoidance Agreement (DTAA) if there was permanent establishment in India of non-residents in India, Since this was not case (this fact is undisputed) appellant considered payments as not chargeable to tax in India and, therefore, outside purview of tax deduction under s. 195. AO has discussed in detail in assessment order as to why payments are in nature of royalty and therefore, taxable as per Art. 12 of DTAA which does not contain any conditionality regarding existence of permanent establishment. Further, according to AO payments are also covered by royalty definition under s. 9(1)(vi) and therefore, s. 195 applies is this case. company had sold software bought in fully packed condition as received from overseas vendor to various customers in India without opening package. appellant did not deduct any tax at source at time of payment or credit in respect of above software on premise that transactions constitute purchase of software products and in respect of above payment/credit no income is deemed to accrue or arise to non-resident vendors in India. It was submitted before ITO that imported software is in nature of shrink wrapped software and hence, no tax is required to be deducted at source. Learned counsel for assessee submitted that CIT(A) erred in confirming that payments made for purchase of software from outside India as royalty. Software is treated as goods under various sales-tax enactments. In case of Tata Consultancy Services wherein Hon ble Andhra Pradesh High Court held that "software that was standardized and marketed for use of certain classes of clients" would constitute goods. decision has since been approved by Hon ble Supreme Court in recent decision [Refer Tata Consultancy Services vs. State of Andhra Pradesh (2004) 192 CTR (SC) 257: (2004) 271 ITR 401 (SC)]. characteristics of royalty as defined by Authority for Advance Rulings in ABC, In re (1999) 154 CTR (AAR) 246: (1999) 238 ITR 296 (AAR) is not satisfied in present case with reference to determination of payment on amount of use. In revised OECD Commentaries wherein it has been held that payments made for acquisition of rights in relation to copyright which are limited to rights which are necessary to enable user to operate programs would classify as business income and not royalty. Learned Departmental Representative, on other hand, supported orders of authorities below. We have considered relevant facts and arguments advanced. This Tribunal in case of Samsung Electronics Co. Ltd. vs. ITO (2005) 93 TTJ (Bang) 658 [ITA Nos. 264 to 266/Bang/2002, dt. 18th Feb., 2005] has recently held that where software imported which is shrink wrapped software or off shelf software, same amounts to purchase of goods and not payment of royalties. payment is for use of copy rights article and not for acquiring any copy right. This view has been arrived at after considering various decisions on subject as well as decision of Hon ble Supreme Court in Tata Consultancy Services case (supra). We, accordingly, hold that payments for import of software do not amount to payment of royalty chargeable under s. 9(1)(vi) of Act. payments partakes character of purchase and sale of goods. Actually, payee has no permanent establishment in India. Hence, it can be concluded that no income is deemed to accrue or arise in India. Accordingly, provision of s. 195 is not applicable to such payment. assessee therefore cannot be fastened with liability by treating it as in default under s. 201 of Act. We, accordingly, set aside order under s. 201(1) as well as charging of interest under s. 201(1A) of Act. In result all appeals are allowed. *** SONATA SOFTWARE LTD. v. INCOME TAX OFFICER