TMI Blog2017 (8) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... ore-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 paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards 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, hence, assessee was required to deduct the tax u/s. 194J. He, therefore, called upon the assessee to explain why it should not be treated as an assessee in default for non-deduction of tax at source at the appropriate rate. Though, the assessee objected to the proposed action of the A.O., however, rejecting the objections of the assessee, the A.O. held that the payment made by the assessee towards internet charges is towards technical services, hence, the assessee was liable to deduct tax u/s. 194J. Accordingly, he proceeded to treat the assessee as an assessee in default and raised a demand of ₹ 6,44,627/- including interest charged u/s. 201(1A) amounting to ₹ 2,69,844/-. 4. Being aggrieved of the demand raised by the A.O., the assessee preferred an appeal before the ld. CIT(A). 5. During the first appellate proceeding, the ld. CIT(A) noticing that the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon certain decisions, the ld. CIT(A) ultimately held that the payment made to M/s. Avery Dennisson Hong Kong BV for purchase of barcode being in the nature of royalty, the assessee was liable to deduct tax at source u/s. 194J. Accordingly, he upheld the decision of the A.O. 7. The ld. Authorized Representative (AR) submitted before us that the assessee had made payment of ₹ 32,69,015/- to M/s. Avery Dennisson Hong Kong BV for purchase of bar code stickers, thermal transfer printers, software charges, on-site installation and operator training. He submitted, as far as thermal transfer printers are concerned they are capital goods, hence payment made for purchase of such goods cannot be treated as royalty, thereby attracting the provision of section 194J. He submitted, barcodes are in the nature of stationery, hence, cannot be equated to intangible property as held by the ld. CIT(A). He submitted, barcodes are nothing but stickers which are attached to the goods/commodities sold by the assessee. In this context, the ld. AR drew our attention to the literature/brochure of bar code and printer to emphasize that the payments made were nothing but for purchase of goods/commod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 11. In ground nos. 5 to 7, the assessee has challenged the applicability of section 194J to the payments made to M/s. Sify Ltd. for internet broadband charges. As discussed earlier, the A.O. was of the view that the payment made by the assessee to M/s. Sify Ltd. towards internet charges is in the nature of fees for technical service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt in question to Sify Ltd. towards use of internet/lease license charges. As could be seen, in a number of judicial precedents, some of which have been cited before us, 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. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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