TDS on software purchase

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  1. Dear friends,

    Please advise me on a case.
    I have purchased a software for rs. 53,13,945 which includes 6,59,750 of service tax and 1,04,195 for CST. Whether TDS should be deducted on this transaction or not?
  2. ZED

    ZED Well-Known Member

    Both CST and Service tax should not be applicable simultaneously. Only either of them should be payable. Check which one is paid wrongly.

    Kindly do refer the judgement of S.C in case of TCS.

    As for TDS
    The income is covered u/s 9. Citing of the explanations to S.9

    Explanation 2.—For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for—

    (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property ;

    Explanation 4.[S.9]—For the removal of doubts, it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred.

    Therefore TDS provisions are applicable [S.195 if payee is NR and S,194J, if payee is other than NR]

    But Tax will not be required to be deducted if conditions as laid down
    under NOTIFICATION NO. 21/2012 are fulfilled.

    In exercise of the powers conferred by sub-section(1F) of section 197A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that no deduction of tax shall be made on the following specified payment under section 194J of the Act, namely:-

    Payment by a person (hereafter referred to as the transferee) for acquisition of software from another person, being a resident, (hereafter referred to as the transferor), where-

    (i) the software is acquired in a subsequent transfer and the transferor has transferred the software without any modification,

    (ii) tax has been deducted-

    (a) under section 194J on payment for any previous transfer of such software; or

    (b) under section 195 on payment for any previous transfer of such software from a non-resident, and

    (iii) the transferee obtains a declaration from the transferor that the tax has been deducted either under sub-clause (a) or (b) of clause (ii) along with the Permanent Account Number of the transferor.

    Also refer the following article
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