Metro Shoes Ltd. vs. ITO - (Mumb Trib)- 31.07.2017
Question of law discussed/ Interpreted: "On the facts & circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming that the provisions of Section 201(1) of Income Tax Act, 1961 is applicable and treating the appellant as assessee in default by invoking the various provisions of TDS "Some important facts and statements of the case for easy reference:
1) TDS on commission paid to bank for ‘Credit Card’ sales facility:
The learned court has taken reference of the case M/s Kotak Securities Ltd. in ITA No. 6657/Mum/2011 in which it was held that guarantee commission paid to banks will not come under the perview of principal/ agent relationship and hence there is no obligation on the assessee to deduct TDS on any gurantee commission paid to banks. Similar view has been taken therefore concluded that the assessee was not required to deduct tax at source in respect of payments made to the acquiring bank for the facility of its credit card internet gateway provided to the assessee company
2) We find that our indulgence in the present case had been sought for adjudication of the issue as to whether or not the amount paid by the assessee towards „Web Hosting Charges‟ could be characterized as payments made towards „fees for technical services‟, therein casting a statutory obligation on the assessee to deduct tax at source u/s. 194J. We are of the considered view that the adjudication of the aforesaid issue would require understanding of the scope and gamut of the term „technical services‟
3) To understand the meaning of technical services, case of Skycell Communication Ltd. and another Vs. DCIT - Madras HC has been referred -
The High Court observed that the popular meaning associated with “technical” is “involving or concerning applied and industrial science”, but however mere collection of a fee for use of standard facility provided to all those willing to pay for it does not amount to the fee having been received for technical services
"We thus find that the Hon‟ble High Court after deliberating on the scope of the term „technical service‟ had therein concluded that collection of fees by a person for use of a standard facility which is provided by him to all those willing to pay for it, irrespective of the fact that the provision of such services involved usage of technical equipment on the part of said person to facilitate providing of the services, cannot be characterized as availing of „technical service‟ on the part of the consumer"
4) It was further noted by the learned judge "We are of the considered view that though the provision of „Web Hosting Charges‟ by the service provider would involve installation of sophisticated equipment on his part to facilitate rendering of such services to the customers, however the collection of a fee by him for use of such standard facility provided to all those willing to pay for it cannot be characterized and therein brought within the sweep of the term „fee for technical services‟
5) Further the learned court said in the case TDS on payment for renewal fees of SAP license " We have given a thoughtful consideration to the issue.before us, and are of the view that pursuant to the payment of the aforesaid amount for renewal of SAP licence, what is transferred to the assessee is neither the copyright in the software, nor the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article, which is clearly distinct from the rights in a copyright. Thus, now when the right that is transferred to the assessee company is not a right to use the copyright, but is only limited to the right to use the copyrighted material, therefore, the same cannot be characterized as a payment towards „royalty‟ by the assessee company"
For reading full text of the case please refer https://www.taxpundit.org/phocadownload/Taxpundit_Reporter/Taxpundit_Reporter_2017/August_2017/817Taxpundit57.pdf
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