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TMI Blog2017 (8) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... missed. In ground no. 3, the assessee has challenged the decision of ld. CIT(A) in confirming the demand raised u/s. 201(1) and 201(1A) for non deduction of tax at source u/s. 194J on payments made to M/s. Avery Dennisson Hong Kong BV. 3. Briefly the facts are during a survey conducted u/s. 133A of the Act on the assessee to verify TDS compliance it was found that the assessee has paid an amount of Rs. 66,80,622/- to M/s. Sify Ltd. towards internet charges for broadband connection. It was also found that while making such payments, the assessee has deducted tax by applying the provisions of section 194C instead of section 194J. The Assessing Officer (A.O.) was of the view that the payment made by the assessee is towards technical services, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputers 898 Tracom Networks Ltd. 40,803 Videsh Sanchar Nigam Ltd. 4,800 You Telecom India Pvt. Ltd. 3,966 Petty Cash expenses 3,559 (B) 66,597 Sify Limited 33,45,011 TDS deducted u/s. 194C of the Act (C) 33,45,011 Total A+B+C 66,80,623 6. From the details furnished, the ld. CIT(A) found that the payments made to M/s. Avery Dennisson Hong Kong BV and M/s. Sify Ltd. and Tracom Networks Ltd, attracted TDS provision. As far as payment amounting to Rs. 32,69,015/- to M/s. Avery Dennisson Hong Kong BV is concerned, it was submitted by the assessee that such payments are for purchase of barcode stickers which is in the nature of stationery. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be treated as payment for technical services. He submitted, as far as the part payment made towards software is concerned, it is for assessee's own use. Therefore, it will not come within the purview of section 194J. He submitted, under no circumstances it can be treated as royalty. Further, the ld. AR submitted computer software was treated as royalty by virtue of amendment to section 9(1)(vi) by insertion of Explanation 4 by Finance Act, 2012 w.r.e.f. 01.6.1976. The ld. AR submitted, as a result of such retrospective legislation which the assessee could not have foreseen when the payment was made, liability to deduct tax at source u/s. 194J would not arise. In support of such contention, the ld. AR relied upon the following decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 194J. Therefore, we are left with the 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, withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment made towards internet/broadband/lease line charges are not in the nature of royalty, hence, there is no liability to deduct tax u/s. 194J. In this context, he relied upon the following decisions: Lintas India Pvt. Ltd. vs. Dy. CIT (in ITA No. 3803/Mum/2015 dated 18.1.2017) My Guru Online Ltd. vs. CIT (in ITA No. 470/Vizag/2013) dated 15.4.2015 14. He submitted, even, the payment cannot be treated as rent u/s. 194I, as held by the ld. CIT(A). The ld. AR submitted, as per the provision of section 194I existing at the relevant point of time, rent did not include machinery, plant or equipment. By virtue of an amendment made in The Taxation Laws (Amendment) Tax, 2006 w.e.f. 13.7.2006, plant, machinery and equipment were brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with retrospective effect cannot fasten liability on the assessee. That being the case assessee cannot be treated as assessee in default. The decisions relied upon by the ld. AR support this view. As far as the observation of the ld. CIT(A) that the payment made otherwise is covered u/s. 194I, we must observe in case of Hero Moto Corp. Ltd. (supra)and Global India (supra), the tribunal has held that the broadband/lease line facilities provided by the service provider for transmission of data does not come in the category of payment made towards rent for equipment, plant and machinery. Therefore, respectfully following the decisions of the ITAT, we set aside the order of the ld. CIT(A) on this issue. Grounds raised are allowed. 17. In groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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