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

Software license access may not attract TDS where payments are cost sharing reimbursements for access, not royalty, under tax law. Whether reimbursements by an Indian subsidiary to its US parent for hourly use of a software login attract TDS: the department may treat such payments as royalty, but the commentator argues they are cost sharing reimbursements for mere access to a software license (not royalty) and therefore should be remitted without TDS deduction.