INCOME TAX ACT, 1961

Section 201(1)/(1A)

Tax deduction at source - Assessee-in-default - Non-deduction of tax relying on decision in case of Co-ordinate Benches - AO raised demand based on subseqeunt decision rendered by jurisdictional High Court

Assessee made payment to non-resident towards purchase of software. AO held that payment made for purchase of licence to use a software was 'royalty' income in the hands of non-resident and accordingly assessee was one-in-default for non-deduction of tax under section 195. Accordingly, AO raised demand under section 201(1) and also charged interest under section 201(1A). Assessee's case was that jurisdictional High Court had rendered its decision holding that payments made for purchase of licence to use software in case of Samsung Electronics Co. Ltd. on 15-10-2011. Prior to said decision there were decisions holding that payments for software licenses did not constitute royalty and, therefore, assessee did not deduct tax at source under bona fide belief.Held: Assessee was under bona fide belief that there was no required to deduct tax at source from payments made for purchase of software, since there were certain decisions holding so. However, jurisdictional High Court in Case of Samsung Electronics Co. Ltd. held that payments made for purchase of software was in the nature of royalty and said decision came to be pronounced on 15-10-2011. Accordingly, assessee could not be treated as one in default in respect of payments made for purchase of licensed software prior to 15-10-2011, being the date of pronouncement of decision in case of Samsung Electronics Co. Ltd. Accordingly, demand raised in the hands of assessee under section 201(1) and 201(1A) could not be sustained. Accordingly, demand raised in the hands of assessee under section 201(1) and 201(1A) could not be sustained.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10 to 2012-13

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