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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 ..... n 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. - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 ..... 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/commodities. Therefore, it 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 decisions: Capgemini Business Service India Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 services liable for deduction of tax at source under the provisions of section 914J. 12. The ld. CIT(A) upheld the view of the A.O. Further, ld. CIT(A) held that even if the payment made is not coming within section 194J, it will certainly come u/s. 194I, as it is rent paid for use of equipments and miscellany. Accordingly, he upheld the order of the A.O. 13. The ld. AR submitted, the assessee has made the payment towards internet/broadband connectivity and there is no technical service involved in respect of such payment. He submitted, the ld. CIT(A) has held that the internet connectivity is a process as provided in Explanation 6 to section 9(1)(vi). However, the said explanation was introduced to the statute by Finance Act, 2012 w.r.e.f. 01.6.1976. He submitted, by virtue of such retrospective amendment, the assessee cannot be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability 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 ground no. 8, the assessee has challenged the applicability of section 194-J to payment made to Tracom Network Ltd., is also towards broadband charges and not in the nature of royalty. 18. We have heard the rival contentions and perused the material on record. The department has not disputed that the payment made to Tracom Network Ltd is for internet/lease line charges. Therefore, in view of our decision in ground no. 5, there is no liability to deduct tax u/s. 194J. In any case of the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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