The answer is in the afirmative as supported by the case law.

 

Thankyou shahi sir for such a detailed explanation and quoting the case laws. But it's a very debatable issue.

@ Shailendra following is my understanding of the example quoted by you:

Mircrosoft own a software called NAVISION and has created infinite number of licenses which it can issue for usage of this software by it buyers. In effect it has multiplied one unique software into infinite unique softwares.

A license, say A0001, once sold to Mr. X cannot be again sold to Mr. Y, but it can sell license number A0002 to Mr. Y. Each such sale of license becomes payment of royalty to the owner of the software for using the software for any specified period of time.

Hence, when Mr. X is making payment of the license fees he needs to deduct TDS under Section 194J.

@ J.K.Shahi AMC is a totally different contract and should not be mixed with license payment.

Dear jayesh sir,

In your case Microsoft holds infinite number of licenses of the same software. According to me License no. is only a medium to differentiate between the users of the software. Only a license number cant be the basis of holding that the payment are made for the exclusive rights of the software. I think exclusive rights means what one person is using, the other person don't have the option to use it. It's only the end use is to be seen and not the license number which is only a medium to differentiate between users.

@ shailendra Pls. note that in the eyes of law each and every license is a different product altogether, it is not merely a differentiator. If you see from Mircosoft's point of view, how will it show these sale of licenses. Can it argue that only the first sale is towards royalty and balance are all capital receipts?

Your arguement may be valid for a customised software which is built according to specification of each individual buyer. Sale of such software may be termed as sale of goods and hence not fall under perview of TDS.

this matter is iltrigation of law in both section u can deduct tds.

deduct tds u/s 194J to avoid unneccesary litigations. Refer to Section 194J (c)  "royatly" and Explanation 2 to section 9(1)(vi) for your answer.

This is a  usage-based payment made by one party (the "licensee") to another (the "licensor") which comes under the term " royalty" and accordingly section 194J attracts.

Finance Act 2012 has amended the definition of “royalty”. The amendment in section section 9 (1) (vi) now defines ‘royalty’ as any ‘right for use’ or ‘right to use’, a computer software (including granting of a license), irrespective of the medium through which such right is transferred. Section 194J provides for deduction of tax at source on payment of professional fees, technical fees, directors remuneration and royalty payments Hence payments towards right to use computer software will be liable to tax deduction at source under section 194J @ 10%