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2016 (1) TMI 177 - ITAT HYDERABAD

2016 (1) TMI 177 - ITAT HYDERABAD - TMI - Tds u/s 194J - band width charges - non deduction of TDS - Held that:- The band width charges are not liable for TDS under section 194J and dismiss the departmental appeal on this issue. - Decided in favour of assessee.

TDS on Sodexo coupons given by an employer to the employee - Held that:- As regards the applicability of TDS provisions to Sodexo Coupons is concerned, we find that this issue is covered in favour of the assessee by the decisio .....

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’ Bench of this Tribunal in the case of ADIT (Int. Taxation) vs. M/s. Batronics India Ltd., Hyderabad [2014 (4) TMI 569 - ITAT HYDERABAD] the assessee has acquired a readymade off – the shelf computer programme to be used in their business and no right was granted to the assessee to utilize the copy right of the programme and, therefore, consideration cannot be treated as royalty. As held by the CIT(A), the payments made by the assessee company cannot be held as ‘royalties’ coming into the ambit .....

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als of both Assessee as well as Revenue for the A.Ys. 2011-12 and 2012-13. 2. Brief facts of the case are as under:- The assessee, is engaged in the business of software development for US based Insurance companies; during the F.Y. 2011-12, a survey action under section 133A of the Act was carried out at the assessee s business premises on 21.02.2012 to verify the TDS compliance by the assessee. Thereafter, in the light of revelations of the survey and examination of the material furnished in th .....

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alty and the TDS ought to have been made under section 194J(1)(c) of the I.T. Act. (ii) SODEXO COUPONS : 2.1. It was noticed that the assessee had given every employee free lunch coupons of ₹ 700 irrespective of their cadre and such expenditure has been borne by the company and is not included in the salary of the employees. He held that the Sodexo Coupons are in the nature of a pre-determination contract undertaken by Sodexo to honor the contract which is a fiduciary obligation and theref .....

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on 201(1) and 201(1A) are attracted. He accordingly, made the disallowance and also brought the interest to tax. 3. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who confirmed the order of the A.O. with regard to the license fee payments as well as the Sodexo Coupons and granted relief of deleting the disallowance on account of band width charges. Against the confirmation of the additions made by the A.O., assessee is in appeal before us and against the relief granted by the Ld. .....

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has erroneously allowed the relief on account of band width charges even though they are in the nature of professional and technical services. 6. Having heard the rival contentions and the material on record, we find that on the issue of applicability of TDS provisions to Bandwidth charges, this Tribunal in the case of M/s. Ushodaya Enterprises P. Ltd., Hyderabad in ITA.No.1820 & 1821/Hyd/2014 and ITA.Nos.1858 & 1859/Hyd/2014 dated 24.04.2015 for the A.Ys. 2002-03 and 2003-04 at para-11 .....

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evenue vide para 17 of its order dated 23.3.2012, which reads as follows - "17. The learned counsel for the assessee Shri Shiva Kumar relied on the decision of the Tribunal Mumbai Bench in the case of Pacific Internet (India) P ltd. Vs. ITO 318 ITR (AT) 0197 Mum wherein it has been held that payment made for using bandwidth and network operation are not technical services and tax needed not be deducted from such payments u/s.194J. The learned Counsel for the assessee submitted that it is no .....

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being similar to those considered by the Tribunal in the above decision for the assessment years 2004-05 to 2006-07, respectfully following the said decision, we uphold the impugned order of the CIT(A) on this issue, and dismiss ground No.4 of the Revenue in these appeals. 6.1. Facts and circumstances in the case before us being the same, respectfully following the order of the Coordinate Bench, we hold that the band width charges are not liable for TDS under section 194J and dismiss the departm .....

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owing the same, this issue is decided in favour of the assessee and the order of the A.O. and Ld. CIT(A) is set aside. 9. As regards the payments made towards purchase of software licenses is concerned, we find that this issue is covered in favour of the assessee by the decision of A Bench of this Tribunal in the case of ADIT (Int. Taxation) vs. M/s. Batronics India Ltd., Hyderabad in ITA.No.918/Hyd/2010 dated 27.01.2014 wherein at para 38 to 49 of its order the Tribunal has held as under : 38. .....

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n business as def ined within the Intra Asia Trading (P) Ltd. Licence Schedule. 39. In order to qualify as royalty payment, it is necessary to establish that there is transfer of all or any rights (including the granting of any licence) in respect of copyright of a literary, artistic or scientif ic work. In order to treat the consideration paid by the Licensee as royalty, it is to be established that the licensee, by making such payment, obtains all or any of the copyright rights of such literar .....

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icence in respect of copyright. Copyright or even right to use copyright is distinguishable from sale consideration paid for copyrighted article. This sale consideration is for purchase of goods and is not royalty. 40. The license granted by the Assessee is limited to those necessary to enable the licensee to operate the program. The rights transferred are specif ic to the nature of computer programs. Copying the program onto the computer's hard drive or random access memory or making an arc .....

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or transfer of copyrighted articles. Right to use a copyrighted article or product with the owner retaining his copyright, is not the same thing as transferring or assigning rights in relation to the copyright. The enjoyment of some or all the rights which the copyright owner has, is necessary to invoke the royalty def inition. Viewed from this angle, a non-exclusive and non-transferable licence enabling the use of a copyrighted product cannot be construed as an authority to enjoy any or all of .....

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zing or enabling a customer to have the benef it of data or instructions contained therein without any further right to deal with them independently does not, amount to transfer of rights in relation to copyright or conferment of the right of using the copyright. The transfer of rights in or over copyright or the conferment of the right of use of copyright implies that the transferee/licensee should acquire rights either in entirety or partially co-extensive with the owner/ transferor who divest .....

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opyrighted product. Apart from such incidental facility, the licensee has no right to deal with the product just as the owner would be in a position to do. 43. There is no transfer of any right in respect of copyright by the Assessee and it is a case of mere transfer of a copyrighted article. The payment is for a copyrighted article and represents the purchase price of an article and cannot be considered as royalty either under the Income Tax Act or under the DTAA. 44. The licensees are not allo .....

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ding (P) Ltd. copyright and all copies of the sof tware shall be exclusive properties of Intra Asia Trading (P) Ltd. Licensee was allowed to use the sof tware only for its own business as specif ically identif ied and was not permitted to loan/rent/ sale/sub-licence or transfer the copy of sof tware to any third party without the consent of Intra Asia Trading (P) Ltd. 45. The licensee has been prohibited from copying, de-compiling, de-assembling, or reverse engineering the sof tware without the .....

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including supporting information and licence authorization device to Intra Asia Trading (P) Ltd.. 46. The incorporeal right to the sof tware i.e. copyright remains with the owner and the same was not transferred by the Assessee. The right to use a copyright in a programme is totally different from the right to use a programme embedded in a sof tware and the payment made for the same cannot be said to be received as consideration for the use of or right to use of any copyright to bring it within .....

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lso whether the amount received for use of sof tware would be royalty in terms thereof for the reason that the Assessee is covered by the DTAA, the provisions of which are more benef icial. The amount received by the Assessee under the licence agreement for allowing the use of the sof tware is not royalty under the DTAA. 48. What is transferred is neither the copyright in the sof tware nor the use of the copyright in the sof tware, but what is transferred is the right to use the copyrighted mate .....

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