2016 (1) TMI 177 - AT - Income Tax

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 decision of Hon ble Gujrat High Court in the case of CIT vs. Reliance Industries (2008 (9) TMI 115 - GUJARAT HIGH COURT) wherein it was held that Sodexo coupons given by an employer to the employee are not amenable to TDS provisions. - Decided in favour of assessee. Payments made towards purchase of software licenses - Held that - 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 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 of Article 12 of DTAA or fee for technical services u/s 9(1)(vii) of the IT Act and accordingly no tax need to be deducted u/s 195 of the IT Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. License Fee
2. Sodexo Coupons
3. Bandwidth Charges

Detailed Analysis:

1. License Fee:
The primary issue revolves around whether the payment of Rs. 1,11,08,623 for the purchase of Microsoft License Agreement constitutes 'Royalty' and thus requires TDS under section 194J(1)(c) of the I.T. Act. The A.O. contended that the software licenses were tailored to the assessee's needs, thereby classifying the payment as 'Royalty'. However, the Tribunal referred to the decision in the case of ADIT (Int. Taxation) vs. M/s. Batronics India Ltd., Hyderabad, where it was held that payments for software licenses do not constitute 'Royalty' under the Income Tax Act or DTAA. The Tribunal emphasized that the license granted was non-exclusive, non-transferable, and was limited to internal business use without transferring any copyright rights. Consequently, the Tribunal concluded that such payments are not subject to TDS provisions.

2. Sodexo Coupons:
The A.O. held that the expenditure on Sodexo Coupons provided to employees should be subject to TDS under section 194C of the Act, as it constituted a pre-determined contract. However, the Tribunal referenced the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Reliance Industries, which established that Sodexo Coupons given by an employer to employees are not subject to TDS provisions. Following this precedent, the Tribunal ruled in favor of the assessee, setting aside the orders of the A.O. and Ld. CIT(A).

3. Bandwidth Charges:
The A.O. categorized the payment of Rs. 25,98,629 towards bandwidth charges as 'technical services', thereby attracting TDS under section 194J(1B). The Ld. CIT(A) provided relief by deleting this disallowance. The Tribunal upheld this relief, citing the decision in the case of M/s. Ushodaya Enterprises P. Ltd., Hyderabad, where it was established that payments for bandwidth and network operations do not constitute technical services and thus are not liable for TDS under section 194J. The Tribunal dismissed the Revenue's appeal on this issue, affirming that the bandwidth charges are not subject to TDS.

Conclusion:
The Tribunal concluded by dismissing the Revenue's appeals and allowing the assessee's appeals. The decisions were pronounced in the open Court on 13.11.2015.