Payment towards Import of Software Amounts to ‘ Royalty ’, TDS applicable: ITAT [Read Order]

Late Fee - TDS Default -ITAT - Taxscan

The Bangalore bench of Income Tax Appellate Tribunal in the case of Telecomone Teleservices India Private Limited Vs. The Deputy Commissioner of Income Tax wherein bench ordered that payment towards import of software amounts to ‘Royalty’, TDS applicable.

In instant case Assessee had imported software for a sum of 14 lakh and no TDS was made on F.Y. 2011-12 during its payment, accordingly, AO disallowed the entire payment while invoking the provisions of section 40a(ia) of the Act. Assessee preferred an appeal before CIT (A) and submitted that he paid customs duty during the import treating it as goods and also forms part of Ministry of Finance, Government of India.

Further Assessee made the submission that sale of goods got completed in the country from where it was purchased hence no income accrues or arises in India and also bank on the decision of apex court in the case of Tata Consultancy Services v. State of Andhra Pradesh wherein payment for transfer of computer software was brought under the definition of royalty under finance Act of 2012 which has a retrospective effect from 1976-77.

The CIT (A) while pressing the decision of High Court in the case of Samsung Electronics Company Ltd confirmed the disallowance made by the AO. Being further aggrieved Assessee filed its appeal before the Tribunal. The counsel for revenue calls for the decision in Samsung case as relied on Assessee wherein judgment was delivered on October 15, 2011, during the relevant financial year in which assessee was required to deduct the TDS.

The bench comprising of Judicial Member Sunil Kumar Yadav and Accountant Member Inturi Rama Rao heard the contention and perused the record of submissions.

Finally bench ordered that payments for importing software from non-resident are a payment towards royalty and the assessee is required to deduct the TDS and the bench observed that “Before the amendment, the jurisdictional High Court through its judgment in the case of CIT v. Samsung Electronics Company Ltd. reported in [2011] 16 taxmann.com 141 (Kar) vide its judgment dated 15.10.2011 made it very clear that payments for importing software from non-resident are a payment towards royalty and the assessee is required to deduct the TDS. When the High Court has clarified the legal position with regard to nature of payment on account of import of software during the FY 2011-12, the assessee was required to deduct the TDS on making the payment towards import of software as it was payment of royalty

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