INCOME TAX ACT, 1961

Section 195

Tax deduction at source - Under section 195 - Payment made to computer software supplier, whether can be taxed as royalty -

Assessee was engaged in the business of manufacturing of export of Readymade Garments. He remitted a sum to M/s. T for the purpose of Software and the amount was remitted through normal banking channels after obtaining certificate from Chartered Accountants and no tax was deducted while remitting the amount on the purchase of software. A query was raised as to why withholding tax was not deducted when the remittance made is for payment of royalty covered under section 9(1)(vi). Thereafter, AO passed order under section 201(1)/201(1A) read with section 195 holding that TDS on remittance should have been deducted and demand was created against the assessee.Held: Apex Court decision in case of Engineering Analysis Center of Excellence Private Limited v. CIT & Anr. [Civil Appeal Nos. 8733-8734 of 2018] : 2021 TaxPub(DT) 1208 (SC) had categorically given the findings thereby observing that payment made to computer software cannot be held taxable as royalty and there was no element of royalty in these types of transactions. Thus, appeal of assessee was allowed.

Followed:Engineering Analysis Center of Excellence Private Limited v. CIT & Anr. [Civil Appeal Nos. 8733-8734 of 2018] : 2021 TaxPub(DT) 1208 (SC), Dir. CIT v. Infrasoft Ltd. (2014) 264 CTR 329 (Del) : 2014 TaxPub(DT) 79 (Del-HC) and CIT v. Samsung Electronics Co. Ltd. & Ors. (2011) 345 ITR 494 (Karn-HC) : 2011 TaxPub(DT) 2175 (Karn-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

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