Tds on license fees for digital content sharing

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jagdish vala (Querist)
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06 January 2014 My client has paid Rs.25,00,000/- as license fees for Digital Content Sharing (Images and E Magazines). Whether this license fees amounts to royalty?

Whether on this amount Rs.25 Lacs TDS needs to be deducted?

If yes then at what rate and under which section?

Please Experts help.

Thanks in advance.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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06 January 2014 It depends on the treatment given and the number of years benefit attached to such licence fee. If you have to pay every year this licence fee then this a revenue expenditure and if the benefit is for more than 3 years then it is a capital expenditure. If it is a capital expenditure then no need to deduct TDS. If it is a revenue expenditure and every year it is to be paid then you have to see whether the party has charged service tax or vat if vat is charged then it is purchase and sale of goods and if only service tax has been charged then it is under 194J and you have to deduct tax.

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jagdish vala

jagdish vala (Querist)
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06 January 2014 Thanks a lot Agarwal Sir for your prompt reply.

This License Fees is paid for Five Years and we are amortising the same on monthly basis and the same is shown in the books of accounts as advance license fees. The party has not charged the service tax at the time of raising of invoice but in later in the current year they are raising debit note for the same.

Please advice.

Thanks a lot.

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