Case Law Details
Acer India Private Ltd. Vs DCIT (ITAT Bangalore)
Conclusion: The decision holding that the payments made for purchase of software was in the nature of royalty came to be pronounced on 15.10.2011. Accordingly, assessee could not be treated as an assessee in default for not deducting TDS under section 195 in respect of payments made for purchase of licensed software prior to 15.10.2011.
Held: Assessee company was engaged in the business of manufacture and trading of computer systems and peripherals. It had purchased software from non-residents and it did not deduct TDS from the payments made towards the said purchases. Hence AO had treated the assessee as assessee in default and initiated proceedings under section 201(1). AO held that the payment made for purchase of license to use a software was “royalty” income in the hands of non-resident accordingly, assessee should have deducted tax at source under section 195 from the payments made to the non-residents towards consideration for purchase of license to use software. In the instant case, assessee was under bonafide belief that it was not required to deduct tax at source from the payments made for purchase of software, since there were certain decisions holding so. However, the jurisdictional High Court in Samsung Electronics Co. Ltd held that the payments made for purchase of software was in the nature of royalty and the said decision came to be pronounced on 15.10.2011. Accordingly, assessee could not be treated as an assessee in default in respect of payments made for purchase of licensed software prior to 15.10.2011, being the date of pronouncement of the decision in the case of Samsung Electronics Co. Ltd. Accordingly, the demand raised in the hands of the assessee u/s 201(1) and 201(1A) could not be sustained and the demands raised in respect of payments made prior to 15.10.2011 in assessment year 2012-13 could also not be sustained.
FULL TEXT OF THE ITAT JUDGEMENT
All the appeals filed by the assessee are directed against the orders passed by Ld CIT(A)-12, Bengaluru and they relate to the assessment years 2009-10 to 2012-13. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the demand raised u/s 201(1) of the Income-tax Act,1961 [‘the Act’ for short] and the interest charged u/s 201(1A) of the Act treating the assessee as assessee in default for not deducting tax at source u/s 195 of the Act from the payment made for purchase of licensed software.
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