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Rajasree Motors Pvt Ltd. Versus The Asst Commr of Income Tax Circle 4 (1) , Kochi

2015 (9) TMI 710 - ITAT COCHIN

Disallowance under section 40(a)(ia) - non deduction of TDS - assessee has paid a sum as licence fee in respect of two softwares named MBIL Star Diagnostics and MBIL E-Deale - retrospectivity of amendment - Held that:- The view entertained by the assessee is supported by the decision of the hon'ble Delhi High Court in the case of Infrasoft Ltd. [2013 (11) TMI 1382 - DELHI HIGH COURT]. Since the assessee was held to be liable to deduct tax on the basis of subsequent amendment brought in with retr .....

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RAO & B. R. BASKARAN, JJ. For the Appellant : Shri A S Narayanamoorthy For the Respondent : Shri K K John, Sr DR ORDER B. R. Baskaran (Accountant Member).- The appeal filed by the assessee is directed against the order dated September 30, 2014 passed by the learned Commissioner of Income-tax (Appeals)-II, Kochi and it relates to the assessment year 2009-10. 2. The assessee is aggrieved by the decision of the learned Commissioner of Income-tax (Appeals) in confirming the disallowance of S .....

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. Mercedes-Benz India P. Ltd. for the non-exclusive use by the assessee. Since the assessee did not deduct tax at source from the above said payments under section 194J of the Act, the Assessing Officer disallowed the same by invoking provisions of section 40(a)(ia) of the Act. The learned Commissioner of Income-tax (Appeals) also confirmed the order of the Assessing Officer and hence, the assessee has filed this appeal before us. 4. The learned authorised representative submitted that the asses .....

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alty as given in Explanation 2 under section 9(1)(vi) of the Act. In this regard the learned authorised representative invited our attention to Explanation 3 given under section 9(1)(vi) wherein the expression computer software is defined. The learned authorised representative also invited our attention to the agreement entered into between the assessee and M/s. Mercedes-Benz India P. Ltd. to substantiate his contentions that the assessee was only given licence to use the software and not the ow .....

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to use of any copyrighted article will not amount to transfer of any rights over the same and hence, it cannot be considered as royalty. 4.1. The learned Departmental representative however submitted that the assessee has made the payment for use of software and hence it will squarely fall under the definition of royalty as given under Explanation 2 to section 9(1)(vi) of the Income-tax Act. The learned Departmental representative invited our attention to Explanation 4 wherein it has clarified .....

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cordingly he submitted that the payment made by the assessee is liable for deduction of tax at source under section 194J of the Act. Further the agreement between the parties itself clearly states that the applicable tax should be deducted at source. Accordingly, he submitted that the learned Commissioner of Income-tax (Appeals) was justified in confirming the disallowance made under section 40(a)(ia) of the Act. 5. We have heard the rival contentions and carefully perused the record. Admittedly .....

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computer software and for the sake of convenience ; we extract Explanation 4 as under : "Explanation 4.-For the removal of doubts, it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred." A combined reading of definition of &qu .....

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required to pay rent or charges for use of the software. Since the right to use the softwares has been transferred to the assessee under the agreement, we are of the view that the licence fee/service charges paid by the assessee to M/s. Mercedes-Benz India P. Ltd. would fall under the definition of royalty and hence the assessee is liable to deduct tax at source. 6. The decision in the case of Infrasoft Ltd. [2013] 96 DTR 113 (Delhi) has been rendered by the hon'ble Delhi High Court in the c .....

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the co-ordinate Benches of the Tribunal has taken the view that the disallowance under section 40(a)(ia) should not be made on the basis of subsequent amendment brought into the Act with retrospective effect. (a) Sonata Information Technology Ltd. v. Deputy CIT (LTU) [2012] 19 ITR (Trib) 408 (Mumbai) ; (b) Infotech Enterprises Ltd. v. Addl. CIT [2014] 30 ITR (Trib) 542 (Hyd) ; and (c) Channel Guide India Ltd. v. Asst. CIT [2012] 20 ITR (Trib) 438 (Mumbai). 8. In the case of Infrasoft Ltd. (supra .....

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issue in the case of Kerala Vision Ltd. v. Asst. CIT (I. T. A. No.794/Coch/2013 dated June 6, 2014). In this case, M/s. Kerala Vision Ltd. was engaged in the business of distribution of cable signals. The activity of transmission of signals by satellite was included in the expression "Process", vide Explanation 6 inserted by the Finance Act, 2012, with retrospective effect from June 1, 1976 and hence it fell within the ambit of "royalty". Hence, the assessee was liable to de .....

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eferred to above) have held that the assessee cannot be held to be liable to deduct tax at source on the basis of subsequent amendment brought in with retrospective effect. Further the Tribunal held as under : "7. In the instant case, the view entertained by the assessee that the pay channel charges cannot be considered as royalty, which in fact gets support from the decision rendered by the hon'ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd.v. DIT [2011] .....

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