S.40(a) (ia):Amounts not deductible – Deduction at source-Royalty – Payment for purchase of software
assessee is not liable to deduct tax at source. (S.9(1) (vi).)
Assessee is engaged in the business of purchase and sale of software. While computing its income from business the assessee had claimed expenditures on account of service charges paid to SSC (Sonata Software Ltd.) and deputation charges in respect of personnel deputed by SSC (Sonata Software Ltd.). Book the expenses were allowed by Tribunal by following the Tribunal decision in assessee’s own case for earlier years. The assessee made payment for purchase of software from persons who are resident in India. The assessee did not deduct tax at source while making payment towards such purchases. The Assessing Officer treated the payment as royalty on the basis that the assessee as a purchaser of the software had a right to use the software. The CIT (A) deleted the addition made by Assessing Officer.
The Tribunal held that the payment made by assessee for purchase of software from various resident entities was not in nature of royalty and therefore, there was no obligation on the part of assessee to deduct tax at source from such payment and consequently no disallowance of the payments can be made under section 40(a) (ia) for non deduction of tax at source. (A. Y. 2006-07)
No comments:
Post a Comment