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Tds on internet lease line

CA Ankit Bhutoria (CA ) (372 Points)

04 December 2014

We are a private Limited Company

We are paying to Vodafone for Internet Lease line Monthly Rental

My Query is TDS would be Deducted under 194 C or 194 j or 194 I

Please give logic also

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5 Replies

CA rahul (BCOM(H) ACA) (725 Points)
Replied 04 December 2014

One of the debateable issue i am also seraching For Logic behind TDS Deduction.

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Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 04 December 2014

In my view one has to verify if the payment is 'royalty' and tax to be deducted under section 194J. FA 2012 has widened the definition of term royalty under section 9(1)(vi).

Please see extracts from VKS, Ready Reckoner. You need to judge if the criteria specified there matches with your transaction. Do come back with your views.

Regards,

Attached File : 580277 1387465 194j royalty.pdf downloaded: 254 times

sneha (audit assistant) (21 Points)
Replied 04 December 2014

Tds would be deducted us 194J ..becoz it is a technical service.

CA Vap Patel (Practice) (1205 Points)
Replied 04 December 2014

It will be chargeable u/s 194J as Royalty.

I Would like to give you reference of the case “ CIT vs Estel Communication P Ltd.(2009) 318ITR(Del.)” where in similar circumstances court came to conclusion that there were no technical services provided by service provider to the service receiver and the provision of section 9(1)(vii) {Technical Service} of the Act did not apply.

But then Finance Act, 2012 has inserted explanation 6 in Section 9(1)(vi) which is related to Royalty, whereby government has made retrospective amendment from 01.06.1976.

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;

This Explanation has reversed the judgment of delhi high court. And now internet lease line will be covered under Royalty.

Wait for Expert Suggestion and Advise

Regards

CA Nayan Gupta (Finance Manager Overcart.com) (1695 Points)
Replied 04 December 2014

I agree.. We had a similar issue and finally opined in case of our client that TDS should be deducted u/s 194J. You can find various case laws on this issue.

Originally posted by : CA Vap Patel
	. It will be chargeable u/s 194J as Royalty. I Would like to give you reference of the case “ CIT vs Estel Communication P Ltd.(2009) 318ITR(Del.)” where in similar circumstances court came to conclusion that there were no technical services provided by service provider to the service receiver and the provision of section 9(1)(vii) {Technical Service} of the Act did not apply. But then Finance Act, 2012 has inserted explanation 6 in Section 9(1)(vi) which is related to Royalty, whereby government has made retrospective amendment from 01.06.1976. 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; This Explanation has reversed the judgment of delhi high court. And now internet lease line will be covered under Royalty. Wait for Expert Suggestion and Advise Regards