INCOME TAX ACT, 1961

Section 195

Tax deduction at source - Under section 195 - Payment to non-resident - Royalty/fee for technical services--Software maintenance charges paid to entity based at France

Assessee claimed deduction of software maintenance charges paid to CMA, CGM, France, AO held the same to be in the nature of royalty/fee for technical services within meaning of section 9(1)(vi)/(vii) and accordingly denied deduction for want of TDS under section 195. Held: CMA, CTM, France did not make available any technical knowledge, experience or skill, etc., to assessee, therefore, clauses (a) and (b) of article 12(4) of Indo-Portuguese did not get attracted and software maintenance charges paid by assessee could not be held as fee for technical services. Further, payment for use of software made by assessee to CMA, CGM, France did not satisfy requirement of 'use of or the right to use, any copyright of software and, therefore, article 12(3) did not get attracted and impugned payment could not be treated as royalty and going by the beneficial provision in DTAA vis-a-vis the Act, there was no requirement on the part of assessee to deduct tax at source which should have called for any disallowance under section 40(a)(i).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

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