No TDS on Software Trading If Sales Tax is Already Remitted: ITAT [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) recently held that no tax is required to be deducted at source on software trading if sales tax is already remitted.

Assessee Techknowledgy Interactive Partners P. Ltd is a private limited company engaged in the business of trading in software and software products. They filed the return of income declaring with total income. After the scrutiny assessment the total income of the assessee was assessed and made disallowance on account of non-deduction of tax at source on software consultancy charges.

Siddharth Srivastava counsel for the assessee submits that assessee paid software charges to two companies .The first company was Orbit Software in the case of orbit software assessee already deduct tax at source.

The second company M/s Springfield Organics ,aseesee  submitted that as the assessee is in the business of trading in software the above amount is traded goods for the assessee and therefore, no tax was required to be deducted.

Further relied upon the decision of the case of Mastek Ltd, assessee contended that software developed specifically for a customer was held to be goods and since tax was levied thereon. If the sale tax was levied, it was sale of goods and no tax was required to be deducted therefore, there is no violation of the provisions of section 40(a)(ia) of the Income Tax Act 1961.”

Sanjeev Kashyap counsel for the revenue confirmed the order of  disallowance of tax deduction at source of the assessing officer.

After considering the contentions of the both parties the division bench of ITAT comprising Prashant Maharishi, (Accountant member) and Pawan Kumar Gadale, (Judicial Member) allowed the appeal filed by the assessee and observed that “If the purchases of software is traded goods and supplied to another client and not for the use of the assessee, no tax is required to be deducted at source”

To Read the full text of the Order CLICK HERE

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