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2017 (8) TMI 740 - AT - Income TaxTDS u/s. 194J - non deduction of tds on payments made to M/s. Avery Dennisson Hong Kong BV - payment made is for technical services or software, hence, royalty - payment made for Purchase of thermal transfer printers, Purchase of barcodes and Software charges for onsite installation and operator training - assessee in default u/s. 201(1) and 201(1A) - Held that:- The payments have been made towards purchase of thermal transfer printer which is nothing but capital goods. Therefore, such payment cannot be treated as fees for technical service/royalty so as to bring them within the sweep of section 194J. The barcode stickers are nothing but stationery items purchased by the assessee. Therefore, payment made for purchase of barcode cannot be treated as fees for technical services or royalty, so as to apply the provisions of section 194J. Payments made towards software charges, onsite installation and operator training - as far as software charges are concerned, it is required to be seen whether the software supplied are in the nature of copy right or copy righted article. The afore-said factual aspect has not been examined by any departmental authorities. To put it in proper perspective, the departmental authorities have failed to properly examine the nature of payments. While A.O. has treated the entire payment as internet charges paid to M/s. Sify Ltd. The ld. CIT(A), though, has called for breakup of payment made, however, he has wrongly assumed that entire payment made to M/s. Avery Dennison was for barcode. In our view, without properly examining the facts, A.O. and CIT(A) have wrongly concluded that payment made is for technical services or software, hence, royalty. Therefore, there was no liability on the assessee to deduct tax u/s. 194J. - Decided in favour of assessee TDS u/s 194I or 194J - payment made by the assessee to M/s. Sify Ltd. towards internet charges - effect of amendment - Held that:- As could be seen, in a number of judicial precedents, it has been held that payment made towards broadband/lease line charges is not in the nature of royalty so as to attract the provisions of section 194J. Since, the services rendered are not in the nature of technical service as envisaged u/s. 194J, the ld. CIT(A) has attempted to rope in the payment u/s. 194I by referring to the definition of ‘process’ as provided under Explanation (6) to section 9(1)(vi). However, the said amendment was made by Finance Act, 2012 w.r.e.f. 01.6.1976. Thus, as per existing provision, when the assessee made the payment there was no liability to deduct tax at source by treating it as royalty. The amendment made with retrospective effect cannot fasten liability on the assessee. That being the case assessee cannot be treated as assessee in default. - Decided in favour of assessee Payment made to Tracom Network Ltd. for internet/lease line charges do not attract provision of section 194J. - Decided in favour of assessee Applicability of TDS provision to service tax component in the payment made to M/s. Sify Ltd. - Held that:- Having perused the CBDT Circular no. 1/2014 dated 13.1.2014 saying service tax cannot be subject to TDS provision, we find merit in the submissions of the assessee. In any case of the matter, while deciding ground nos. 5 to 7, we have held that the payment made to M/s. Sify Ltd. do not attract the provisions of section 194J. In that view of the matter, there is no liability on the assessee to deduct tax under the said provision. Therefore, the demand raised by the A.O. u/s. 201(1) and 201(1A) have to be deleted. - Decided in favour of assessee
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