TMI Blog2020 (10) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... ri N.V. Vasudevan, Vice President And Shri B.R. Baskaran, Accountant Member For the Appellant : Shri Sharath Rao, A.R. For the Respondent : Shri Pradeep Kumar, D.R. ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER: All the appeals filed by the assessee are directed against the orders passed by Ld CIT(A)-12, Bengaluru and they relate to the assessment years 2009-10 to 2012-13. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the demand raised u/s 201(1) of the Income-tax Act,1961 ['the Act' for short] and the interest charged u/s 201(1A) of the Act treating the assessee as assessee in default for not deducting tax at source u/s 195 of the Act from the payment made for purchase of licensed software. 2. The Ld A.R of the assessee submitted that the assessee has filed separate appeals for the demand raised u/s 201(1) and the interest charged u/s 201(1A) for each of the years and accordingly eight appeals came to be posted before us for the four years, referred above. 3. At the outset, the Ld A.R submitted that the assessee company is engaged in the business of manufacture and trading of computer systems and peripherals. It also prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Infineon Technologies India P Ltd (IT(TP)A No.405/Bang/2015) (c) GE Medical Systems India P Ltd (ITA 1368/Bang/2019) (d) WS Atkins India P Ltd (2015)(41 ITR(T) 397)(Bang. Trib) The Ld A.R submitted that the decision of jurisdictional High Court was rendered on 15.10.2011. Accordingly he submitted that the assessee should not be fastened with the TDS liability for the payments made prior to 15.10.2011. Accordingly he prayed that the demand raised u/s 201(1) and 201(1A) for the payments made prior to 15.10.2011 be deleted. 5. We heard Ld D.R and perused the record. We notice that the co-ordinate bench has examined the issue of making disallowance u/s 40(a)(i) of the Act for non-deduction of tax at source on the basis of subsequent amendment/decision of High Court in the case of Infineon Technologies India P Ltd (supra). For the sake of convenience, we extract below the relevant observations made by the co-ordinate bench in the above cited case:- 25. We have carefully considered the rival submissions. The payment in question was made to the non-resident in the previous year relevant to AY. 10-11. Therefore the law as on 31.3.2010 the last date of the previous year was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e jurisdictional High Court in the case of CIT v. Samsung Electronics Co. Ltd. (supra) which was passed on 15.10.2011 transactions carried out on purchase of off the shelf software are not liable to TDS and hence there can be no disallowance u/s.40(a)(ia) of the Act based on subsequent development of law after the date on which payments are made. 27. we are of the view that in the light of law as laid down by this Tribunal in the case of Ingersoll Rand (I) Ltd. (supra), there cannot be a retrospective obligation to deduct tax at source and therefore as on the date when the assessee made payments to the non-resident for acquiring off-the-shelf software cannot be regarded as in the nature of royalty and therefore there was no obligation on the part of assessee to deduct tax at source. The payment would be in the nature of business profits in the hands of non-resident and since admittedly the non-resident does not have a Permanent Establishment in India, the sum in question is not chargeable to tax in the hands of non-resident. Consequently, the disallowance made IT(TP)A Nos.405 474/Bang/2015 u/s. 40(a)(ia) of the Act has to be deleted. We direct accordingly. Ground No.14 by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws that there was no requirement to deduct tax at source from the payment made towards software purchases. Accordingly, by placing her reliance on the decision rendered by the coordinate bench in the case of Allegis Services India Pvt. Ltd. v. DCIT [(2017) 51 CCH 0083], the learned AR submitted that the liability to deduct tax at source, in the facts of the present case, cannot be fastened upon the assessee retrospectively. 11. We heard the learned DR and perused the record. We noticed that an identical issue was considered by the coordinate bench in the case of Allegis Services India Pvt. Ltd. (supra) and identical disallowance made was deleted by the co-ordinate bench on the reasoning that the TDS liability cannot be fastened upon the assessee retrospectively. For the sake of convenience, we extract below the operating portion of the order passed by the co-ordinate bench:- 4. Ground Nos.2 to 5 are regarding disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 (in short 'the Act') of payment towards software licenses treated by the Assessing Officer as royalty for want of TDS. The assessee has also raised additional grounds which are as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n there was no such law or declaration of law at the time of payment made by the assessee to cast the duty on the assessee to deduct tax. 6. On the other hand, the learned Departmental Representative has submitted that the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Samsung Electronics Co. Ltd. (supra) though was subsequent to the transaction in question however, the said decision has not brought into statute any new law but it is only a declaration and interpretation of existing law. He has relied upon the orders of the authorities below. 7. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the transaction in question regarding payment of purchase of software was completed in the F.Y.2008-09 whereas the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Samsung Electronics Co. Ltd. (supra) was passed on 15.10.2011 much later than the time of transaction carried out by the assessee. It is also not in dispute that this issue of considering the payment for purchase of software as royalty is a highly debatable issue and various High Courts have taken divergent views ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 653) CIT v. Kotak Securities Ltd. (20 taxmann.com 846). 04. The relevant portion of the CIT(A) order is extracted as under : Disallowance of expenses under 40(a)(i) / 40(a)(ia) : 5.1. As regards disallowance of expenses under 40(a)(i)/40(a)(ia), it has been submitted that the company had determined the rate of tax to be deducted and following the judgments that were prevalent at the time of tax deduction, Supreme Court in the case of Tata Consultancy Services and jurisdictional Tribunal in the case of Samsung Electronics Co. Ltd, the appellant submitted that the said judgment shall not be applicable since it was pronounced on 15/10/2011 and Velankani Mauritius Ltd., whereas the liability to deduct tax for the appellant was the F.Y. 2010-11. The appellant has relied on the judgment of Cochin Tribunal in the case of Kerala Vision Ltd and Agra Tribunal in the case of Virola International, wherein it was held that The law amended was undoubtedly retrospective in nature but so far as tax withholding liability is concerned, it depends on the law as it existed at the point of time when payments, from which taxes ought to have been withheld, were made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny commercial exploitation thereof. The assessee simply purchased software delivered along with computer hardware for utilization in the day-to-day business. 5.3 Relying on the above decision, the ITAT `C Bench, Bangalore upheld the order of the CIT(A) who had observed that the assessee did not have the benefit of the clarification brought brought about by the retrospective amendment that the payments tantamount to payment for royalty and consequently tax was to be deducted u/s 194J. The law as extant on the date when the payment for obtaining the software was made, has not categorically laid down that tax is required to be deducted. It is impossible to fasten liability for deducting tax at source retrospectively. 5.4 In view of the above decisions, it is correct to say that it is not possible to fasten liability for deducting tax at source retrospectively as tax is to be deducted at source at the time when the payment is credited or made. When purchase of software was made the assessee did not have the benefit of the clarification brought about by the retrospective amendment. The contention of the appellant is correct that the softwar e payment disallowed by the AO did ..... X X X X Extracts X X X X X X X X Extracts X X X X
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