AI Drafter 
TaxTMI 
TaxTMI 
2016 (11) TMI 1607
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....s during the a y 2011-12: Sl No Vendor Rupees 1 CCDC Software Limited 23,463 2 Altoris Inc 68,709 3 Molecular Networks GMBH 2,84,406 4 Schrodinger LLC 26,42,049 5 Symyx Software Inc 51,259 6 Polmon Instruments Pvt Ltd 46,361 Total 31,16,247 So, the AO sought the reasons for non-deduction of taxes on such payments in accordance the judgment of Karnataka High Court in the case of Samsung Electronics Co. Ltd. The assessee submitted that the transactions were made towards renewal of the software licenses purchased in the earlier years, the softwares were in the nature of off the shelf software i.e., the copyrighted articles sold by the overseas....
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....o deduct TDS on the impugned payment of Rs. 31,16,247/- under sections 195 & 194 J , respectively . Since it failed to deduct TDS on the impugned payments, the AO disallowed Rs. 30,69,886/- u/s 40(a)(i) & Rs. 46,361/- u/s 40(a) (ia), respectively. On an appeal, the CIT(A) allowed the assessee's appeal in this regard and hence the Revenue filed this appeal with the following grounds of appeal : 03. We heard the rival submissions and gone through the relevant orders. The assessee resubmitted the plea taken before the lower authorities and placed on the ruling of the Hon'ble Bangalore ITAT in Sonata Information Technology Ltd v. ACIT (103 ITD 324) which had held that payments for software licenses do not constitute royalty under the pro....
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....ve consistently upheld this principle as seen in: * ITO v. Clear Water Technology Services (P.) Ltd. (52 taxmann.com 115) * Kerala Vision Ltd v. ACIT (46 taxmann.com 50) * Sonic Biochem Extractions (P.) Ltd v. ITO (35 taxmann.com 463) * Channel Guide India Ltd v. ACIT (25 taxmann.com 25) * DCIv. Virola International (20 14(2) TMI 653) * CIT v. Kotak Securities Ltd. (20 taxmann.com 846). 04. The relevant portion of the CIT(A) order is extracted as under : " Disallowance of expenses under 40(a)(i) / 40(a)(ia) : 5.1. As regards disallowance of expenses under 40(a)(i)/40(a)(ia), it has been submitted that the company had determined the rate of tax to be deducted and foll....
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....ITA No 14671Bang12014 and the Mumbai Tribunal in the case of Channel Guide India Ltd. vs ACIT ([2012] 25 taxmann.com 25). 5.2 The ITAT 'C' Bench in the case M/s WS Atkins India Pvt. Ltd and in the case of Infotech Enterprises Ltd of the Hyderabad Bench of the Tribunal wherein it has been held that section 40(a)(ia) would not apply to disallow payments when TDS was not done and subsequent l y become taxable on ac count o f a retrospective legislation. It has also referred to in the case of Sonic Biochem Extractions Pvt. Ltd. (supra), identical issue was considered and decided by the Mumbai Tribunal. Following were the relevant observations:- "The assessee purchased software, capitalized the payment to the computers accoun....
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....as extant on the date when the payment for obtaining the software was made, has not categorically laid down that tax is required to be deducted. It is impossible to fasten liability for deducting tax at source retrospectively. 5.4 In view of the above decisions, it is correct to say that it is not possible to fasten l iabi l ity for deducting tax at source retrospectively as tax is to be deducted at source at the time when the payment is credited or made. When purchase of software was made the assessee did not have the benefit of the c lar i f i c at ion brought about by the ret rospec t ive amendment. The contention of the appellant is correct that the software payment disal lowed by the AO did not warrant withholding of the tax u....