Tds on sale of software
This query is : Resolved
20 October 2011
A foreign company with no permanant establishment in India performs a sale of Wireless Telecommunication equipment and related software to use the same to a resident company.
While making the payment the resident company desires to deduct TDS @10.58% on the payments relating to the sale of software on the contention that the sale of software should be considered as royalty paid and such amount would form part of total income of the non resident even though he does not have a PE or business connection in India under Sec 9(1)(vi). However my contention is that sale of software is nothing but the sale of license pertaining to the software and such software cannot be customised by the buyer further hence should not be considered as royalty.
Can you please explain if my contention is correct and no tax is deductible under Sec 195?
While making the payment the resident company desires to deduct TDS @10.58% on the payments relating to the sale of software on the contention that the sale of software should be considered as royalty paid and such amount would form part of total income of the non resident even though he does not have a PE or business connection in India under Sec 9(1)(vi). However my contention is that sale of software is nothing but the sale of license pertaining to the software and such software cannot be customised by the buyer further hence should not be considered as royalty.
Can you please explain if my contention is correct and no tax is deductible under Sec 195?
CA. Anuj Gupta
(Expert)
20 October 2011
Although in the present situation what you are saying is correct but as a matter of prudence TDS should be deducted @ 20% if Foreign Company doesn't have PAN and 10.51% if it has PAN.
Anuj
+91-9810106211
femaquery@gmail.com
Anuj
+91-9810106211
femaquery@gmail.com
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