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TDS ON SOFTWARE PURCHASE

BHAVIN SHAH (FINANCE MANAGER) (38 Points)

26 March 2009

Dear All,

Is the TDS U/ 194-J applicable on the amount of the purchase of computer sofware?

According to Section 194-J, Payment of royalty is covered under this section, and on that amount TDS is applicable.

Section 9(1)(vi) define that the meaning of the royalty, but i want a detail, that TDS is applicable on the amount of the computer software purchase.

Bhavin Shah

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5 Replies

BHAVIN SHAH (FINANCE MANAGER) (38 Points)
Replied 26 March 2009

Originally posted by :BHAVIN SHAH
"	Dear All, Is the TDS U/ 194-J applicable on the amount of the purchase of computer sofware? According to Section 194-J, Payment of royalty is covered under this section, and on that amount TDS is applicable. Section 9(1)(vi) define that the meaning of the royalty, but i want a detail, that TDS is applicable on the amount of the computer software purchase. Bhavin Shah	"

Ramakrishna (Financial Executive) (438 Points)
Replied 28 March 2009

Dear Member!

You have stated that you have purchased a software for use and it appears that it is not a package specially developed to address your requirements in which case it is a contractual obligation on the part of the supplier and the same is liable for TDS under Section 194J being professional services rendered.

Normally, in the case of any software only the license is given for the use of the software. It has been clarified by the Supreme Court of India, in the case of TCS V State of Andhra Pradesh (2004) 271 ITR 401 (SC) that granting of such licenses for th use of software is in the nature of a payment for a copyright. Just as a printed book is a copyrighted article, a standard software i.e Shrink wrapped software (though may be modified) is only a goods liable for sales tax. In such a transaction, the primary object of the transaction and intention of the parties, is to avail of an article for use.

Therefore, no TDS liability arise in your case.

Good Bye! Cheers!!

1 Like

neha (Article Clerk) (29 Points)
Replied 19 January 2010

But what if the software licence is purchased and it is expensed out then whether TDS will be applicable?

CA Pramod Jain (manager finance) (1577 Points)
Replied 19 January 2010

no tds u/s194j

CA Chander Kant (ICAI) (107 Points)
Replied 03 January 2012

Please do tell me what will be the TDS implication, If the vendor charged both service tax & vat on invoice raised by him for sale of software. Please quote relevant case law also, if any.