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Internet charges -tds applied?

Santosh V. Thakur (Sr. Accountant) (187 Points)

24 August 2012

We use Sify Tehcnology Ltd.- internet service,

As Invoice mention as below

Primary port rental charges/Fixed B/W

Is TDS would be attact to Interent service? If TDS attact in what section?

Experts kindly suggest.

Waiting for reply.

Thanks in Advance.

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9 Replies

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 24 August 2012

TDS is not deductible on services using technology -- telephone charges, Internet charges, cable TV, leased lines. Payments for use of standard facilities by the public at large in which some form of technical service is inherent are not covered under section 194J. It has also been held in the case of Skycell Communications Ltd. v. Deputy CIT[2001] 251 ITR 53 (Mad.).

NO TDS

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CA SANDESH MAHIPAL (Practicing in GST and MSME ) (1985 Points)
Replied 24 August 2012

Agree with ca praveen singh. No TDSTDS

CA Kedar Sakhardande (Proprietor) (942 Points)
Replied 24 August 2012

Further to the query by Mr. Thakur and subsequent replys by Mr. praveen, I have following 2 specific questions to ask:

1) Lease line charges as the name suggests hiring/renting of internet connection on a fixed monthly charge with assured level of service, then why it does not take shape of rental service provided and attract TDS us 194I ?

2) About Cable TV charges, if they are paid by company which has a special relevance to it (not in the sense we understand that it is used by public by and large) say a company which is enhgaged in advertisement on TV or Internet medium or say any company which uses it other than for recreation purposes then why TDS should not be deducted under Section 194 c contractual payments

Thanks

CA SANDESH MAHIPAL (Practicing in GST and MSME ) (1985 Points)
Replied 24 August 2012

Answer for question by mr. Kedar 1. As per section 194 I, definition of rent means rent charged only for land, building, plant, machinery, furniture, equipment and fittings. Hiring of internet connection does not fall in any of above category. 2. If there is a contract for advertisement or broadcasting or telecasting, then this will be covered in the definition of WORK as per section 194C and tds will be deducted. Thanks

deepak (Job) (69 Points)
Replied 24 August 2012

No , TDS will apply at all....even if it is contract still no ,, because there should be human labour in the work done....not by machines.....Hence no TDS apply at all neither u/s 194 I or 194 C .

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CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA) (7024 Points)
Replied 24 August 2012

Tds shall be applicable under section 194J since the definition of royalty now includes all the things discussed in the query. Anuj Femaquery @ gmail.com

CA SANDESH MAHIPAL (Practicing in GST and MSME ) (1985 Points)
Replied 24 August 2012

CA anuj....would you tell the definition of royalty as per sec.194j or any link where I can find that. Thanks

CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA) (7024 Points)
Replied 29 August 2012

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 ;

(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property ;

(iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property ;

(iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ;

⁸⁶[(iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB;]

(v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or

(vi) the rendering of any services in connection with the activities referred to in sub-clauses (i) to ⁸⁶[(iv), (iva) and] (v).

[Explanation 3.—.......................

[Explanation 4.—................

Explanation 5.—.....................

Explanation 6.—For the removal of doubts, it is hereby clarified that the expression "process" includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret;]