Tribunal exempts software, Sodexo, bandwidth payments from TDS under Income Tax Act

The Tribunal ruled in favor of the assessee, holding that payments for software licenses, Sodexo Coupons provided to employees, and bandwidth charges were not subject to TDS provisions under the Income Tax Act. The Tribunal emphasized that the software licenses did not constitute 'Royalty,' Sodexo Coupons were not subject to TDS, and bandwidth charges were not categorized as 'technical services.' Consequently, the Tribunal dismissed the Revenue's appeals and allowed the assessee's appeals on all issues.

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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.

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