TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether payments for software licences, internet and leased line charges, and other allied remittances to the non-resident associated enterprise attracted deduction of tax at source and consequent disallowance under section 40(a)(ia) of the Income-tax Act, 1961. (ii) Whether payments for web-based training fees and reimbursement of expatriate salaries were liable for tax deduction at source and, on failure, could be disallowed under section 40(a)(ia) of the Income-tax Act, 1961.
Issue (i): Whether payments for software licences, internet and leased line charges, and other allied remittances to the non-resident associated enterprise attracted deduction of tax at source and consequent disallowance under section 40(a)(ia) of the Income-tax Act, 1961.
Analysis: The dispute turned on whether the impugned remittances were taxable as royalty or fees for technical services, and whether the assessee was obliged to deduct tax at source before making the payments. The Tribunal followed the assessee's own earlier years' decisions and held that purchase of software as a copyrighted article did not amount to royalty, that the relevant DTAA definition prevailed over the amended domestic definition where more beneficial, and that internet, line and related charges did not constitute royalty or fees for technical services in the absence of any transfer of technology or make-available element. It was also accepted that lease line charges were at best reimbursement of expenses.
Conclusion: The assessee was not liable to deduct tax at source on these payments and the disallowance under section 40(a)(ia) could not survive.
Issue (ii): Whether payments for web-based training fees and reimbursement of expatriate salaries were liable for tax deduction at source and, on failure, could be disallowed under section 40(a)(ia) of the Income-tax Act, 1961.
Analysis: The Tribunal applied the same reasoning as in the assessee's earlier year and held that web-based training did not involve transfer of technology or make available technical knowledge so as to fall within fees for technical services. On the reimbursement of expatriate salaries, the assessee had already deducted tax at source and no default was established. In the absence of any distinguishing material from the Revenue, the prior view was followed.
Conclusion: The assessee was not in default in respect of these payments and the consequential disallowance under section 40(a)(ia) was unsustainable.
Final Conclusion: Both appeals were allowed as the impugned payments were held not to require tax deduction at source on the facts and on the binding effect of the assessee's own earlier-year decisions.
Ratio Decidendi: Where a payment for software, connectivity, or web-based training does not confer any copyright or make available technical knowledge or skill, it is not taxable as royalty or fees for technical services, and no obligation to deduct tax at source arises.
TaxTMI 
