2020 (3) TMI 1070

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.... assessment proceedings. As there was failure on the part of the assessee to deduct tax on payments made to foreign entities in connection with (i) Bandwidth charges, (ii) Legal & Professional charges and (iii) Direct cost and Networking & Communication charges. 2) The CIT(A) failed to consider that as per the provisions of Section 195, the assessee ought to have filed an application u/s.195 before the Assessing Officer at the time of making / crediting the payment to these foreign entities. 3) For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer be restored. 4. It was submitted that the learned Departmental Representative that there was a liability to deduct TDS on the bandwidth charges, legal and professional charges and the direct cost and networking and communication charges. On account of the failure on the part of the assessee to deduct TDS, the Assessing Officer had levied tax u/s.201(1) and 201(1A) of the Income Tax Act, 1961. It was a submission that the learned Commissioner of Income Tax (Appeals) had deleted the same holding that th....

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....harges without deduction of tax at source. The Assessing Officer examined the matter and found that the equipments used by the appellant company through which connectivity was provided are used by the assessee. Therefore, it treated the payment as royalty for the use of the equipments. Consequently, the Assessing Officer held that the appellant committed default u/s 195 in so far as it had not deducted tax at source. He therefore, worked out short deduction of tax u/s. 201(1) at Rs. 3,45,99,751/- and Rs. 3,33,39,659/- for A.Ys. 2002-03and 2003-04 respectively. The Assessing Officer also charged interest u/s. 201(1A) amounting to Rs. 1,99,6S,927/- and Rs. 1,52,71,474/- for A.Ys. 2002-03 and 2003-04 respectively. The Assessing Officer has, therefore, taken the following arguments for raising the impugned demands. (1) The service provided by the Telecommunication service Provider in the case is different from that provided by the nonresident companies in the present case. (2) Telephone is fundamentally different from a bandwidth service. (3) The bandwidth service is not a specified service. (4) Equipment of the nonresident company through which conn....

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....nation 2 to sec. 9(1)(i) which was further expanded to include 'the right to use any industrial commercial or scientific equipment but not including the amounts referred to in sec,. 44B. The amendment was made by Finance Act, 2001 by incorporating c1ause (iv a) w.e.f. 01-04-2002 i.e., applicable for A.Y. 2002-03. In simple words, therefore, royalty means the payment of any kind received as a consideration for the use of' or the right to use, any copy right of literary artistic or scientific work but, does not include the words 'use' or right to use, industrial, commercial or scientific equipment. In the appellant's case there is no "right to use equipment. Therefore, the payments made do not fall under 'royalty'. On similar facts the ITAT, Bangalore Bench in the case of ACIT Vs. Infosys Technologies Ltd. in ITA Nos. 653 and 969/Bang/2006 dated 17-10-2007 held that any payment made to database owners outside India for accessing such databases and the services provided by such telecom operator to the customers do not amount to technical services or royalty u/s 9(1)(vii) of the IT Act. Accordingly, it was held that no TDS is to be made. The Hon'ble Trib....

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....ove said order of the ITAT and decide the grounds against the Revenue''. We respectfully following the above decision, we upheld the order of the Commissioner of Income Tax (Appeals) and dismiss the Revenue appeal." 5.4 On Content Development Costs: "53. We have considered the facts and submissions made by the ld. Authorised Representative and Departmental Representative, on similar issue was adjudicated by us for the assessment year 2001-02 in ITA No.435/Mds/2010 at para 13 and we dismiss the ground of the Revenue." 5.5 On Direct Costs: "32. We have considered the facts and submissions made by the ld. Authorised Representative and Departmental Representative, on similar issue was adjudicated by us for the assessment year 2001-02 in ITA No.435/Mds/2010 at para 13 and we dismiss the ground of the Revenue. 5.6 Legal and Professional Charges" "53. We have considered the facts and submissions made by the ld. Authorised Representative and Departmental Representative, on similar issue was adjudicated by us for the assessment year 2001-02 in ITA No.435/Mds/2010 at para 13 and we dismiss the ground of the Revenue." Following, the co-ordinate bench decisi....