TMI Blog2013 (10) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... payments were made was purely on account of services and there is no transfer of right to use the goods - Assessing Officer was not justified in treating the payment as royalty and invoking the provisions of sec. 195 – Reliance has been placed upon the judgment in the case of Hon'ble Bombay High Court in CIT Vs. Godavari Devi Saraf [Smt] [1977 (9) TMI 24 - BOMBAY High Court] – Decided against the Revenue. - I.T.A. No. 851/Mds/2013 - - - Dated:- 4-10-2013 - Shri Abraham P. George And Shri V. Durga Rao,JJ. For the Appellant : Shri Guru Bashyam, JCIT For the Respondent : Shri Saroj Kumar Parida, Advocate ORDER Per Abraham P. George, Accountant Member :- In this appeal filed by the Revenue, it has raised four grounds in total, out of which, grounds 1 and 4 are general needing no adjudication. 2. Vide its ground No.2, Revenue assails order dated 25.1.2013 of Commissioner of Income Tax (Appeals)-V, Chennai, deleting the addition of Rs. 11,10,17,000/- made by the Assessing Officer for invoices raised but not shown as income. 3. When the matter came up, Adv. Saroj Kumar Parida, appearing for assessee, pointed out that ld. CIT(Appeals) had followed the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments received from the customer, the assessee can book the same as sales returns. Hence, the system adopted by the assessee cannot be accepted and so the unrecognized income of Rs. 39,68,208 is now treated as income." 33. The CIT(A) deleted the addition and his order has been challenged by the department in the present appeal. 34. We have considered the rival submissions in the light of material on record it was explained by the learned A.R. that the software development was the major source of income. In the written submission filed by the AR before the CIT(A) the break- up of receipts was shown as under: S.No. Particulars Amount (Rs. in lacs) c The major service income are as under- Income from software development (IDC) LMNK 1175 Income from software development non LMNK 162 Income from IT training 48 Income from software services - LMS 3 Income from - LL 2 Miscellaneous others 4 Total 1394 35. The CIT(A) has deleted the addition for the reasons given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by the assessee is liable to TDS provisions as comprised in Chapter XVII B of the "Act" which the assessee is disputing. We notice that the Coordinate Bench in I.T.A. No. 1277 and 1283/Mds/2008 (supra) decided on 02.02.2012 [in which one of us N.S. Saini, A.M. Member of the Bench) has held as under: 4. We have heard the rival submissions and perused the orders of the lower authorities as well as the cited decisions. We find that the Ld. CIT(A) has decided this issue by observing as under: "6. I have carefully considered the facts of the case and the rival submissions and also examined the issues carefully with reference to applicability of sec. 195, which has been denied by the appellant. The appellant company is engaged in the business of providing networking and e-commerce services by way of internet. In order to carry out its business of providing broadband internet connectivity the appellant company has entered into agreements with certain non-resident companies. The assessee therefore made certain remittances in foreign currency towards connectivity charges and bandwidth charges which are called telecommunication charges without deduction of tax at source. The Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the equipment is not exclusively with the appellant. Further, the right to use equipment mainly arises if there is physical equipment and since the equipments used by the appellant are not under its control. Therefore, the payments made do not have the character of royalty. 6.3 On the above facts and in the circumstances of the case, only one question arises for decision whether the remittances made by the appellant company to the foreign parties would fall within the purview of sec. 195(1) which requires deduction of tax at source. Bandwidth is bought and sold to consumers and it acts as a conduit only. In the appellant's case there are no equipments installed in its premises and the contract entered with the foreign parties is only for the services. Mere use of equipment in providing bandwidth services would not amount to transfer of right to use. As a matter of fact there are no goods involved in the transaction and the payments are made only for the use of services. The word "royalty" and its meaning was introduced vide Finance Act, 1976 and was defined under explanation 2 to sec. 9(1)(i) which was further expanded to include 'the right to use any industrial commercial or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03-2006 for A.Ys. 2002-03 and - 2003-04 is cancelled." 6. On a query from the Bench from the ld. D.R. as to whether there is any contrary decision of any other High Court, the ld. D.R. replied that the Hon'ble Delhi High Court decision is a lone decision on the issue. 7. On the above facts, when there is only one decision of the High Court, then the same requires to be followed by us. Our view finds support from the decision of the Hon'ble Bombay High Court in CIT Vs. Godavari Devi Saraf [Smt] [1978] 113 ITR 589 [Bom] We, therefore, confirm the order of the ld. CIT(A) and dismiss the grounds of appeals of the Revenue. 8. In the result, both the appeals of the Revenue are dismissed." After going through the operative portion above said, there is no iota of doubt that the payments in question made by the assessee cannot be subjected to the applicability of TDS provisions contained in the "Act". Therefore, in view of the same and in order to maintain consistency, we rely on the above said order of the ITAT and decide the grounds against the Revenue." The fact situation being the same, we are of the opinion that that CIT(Appeals) was justified in deleting the disallowance for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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