TDS u/s 195

[sathyanarayanan kasinathan]

The US Holding company has bought the license for a login, and uses the same during it's day time. The Indian subsidiary company, uses the same login and uses the license during the day time.(Night time in US)

The indian company is reimbursing the US holding company, on the cost portion only, on the basis of Hours usage. It may again be noted that only the cost is shared.

Will this attract TDS u/s 195?
What is the correct stand in the current scenario?

[Anuj Gupta]

Here the Department shall like to treat the same as Royalty u/s 9(1)(vii), but according to me the foreign Company is just granting an access to Software License(which according to various court decisons is not royalty). Hence in my view the same should be remmitted without dedction of TDS.

AI Summary

Indian Subsidiary's Software License Reimbursement to US Parent Not Subject to TDS under Section 195, Says Response A query was raised regarding whether the reimbursement by an Indian subsidiary to its US holding company for shared software license usage would attract Tax Deducted at Source (TDS) under Section 195. The US company uses the license during its day, and the Indian company uses it during its day, reimbursing only the cost based on usage hours. The response suggested that while the tax department might treat this as royalty under Section 9(1)(vii), it should not be considered royalty as per various court decisions, and thus, remittance should occur without TDS deduction.