Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: ARTICLES ON INPUT TAX CREDIT IN VAT :: empanelment :: form 3cd :: cpt :: TAX RATES - GOODS TAXABLE @ 4% :: due date for vat payment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARD :: list of goods taxed at 4% :: VAT Audit :: articles on VAT and GST in India :: Central Excise rule to resale the machines to a new company :: VAT RATES :: TDS :: ACCOUNTING STANDARDS
News Headlines »
 Tax Return Preparer (Amendment) Scheme, 2018
 Tax-saving for young earners simplified
 How to save income tax? Here are 6 investments with tax free income
 10 Top salary deductions that can save tax for you
 What are the tax saving options beyond Section 80C?
 The penalties for not paying tax on time
 How to make your salary tax efficient
 I-T Department may go into overdrive this quarter
 Ways to reduce the TDS deduction from your salary
 4 Tips for choosing who prepares your 2017 Tax Returns
 Processing of income-tax returns under section 143(1) of the Income-tax Act which were filed in Forms ITR-1 to 6 & applicability of section 143(1)(a)(vi)

Imported software may get dearer
September, 07th 2006
Imported software could become more expensive for companies buying and distributing it in India, if the principles laid down in a verdict by the Authority for Advance Ruling (AAR) becomes the norm. More so, for buyers who enter into commercial contracts with vendors without factoring in taxes. In a recent ruling to Delhi-based solution provider Headstart Business Solutions (HBS), the authority held that the company has to deduct tax at source on payments made for buying software from Microsoft Regional Sales Corporation (MRSC), Singapore, which is a non-resident company. This is based on the principle that a payment to a non-resident, which includes trading receipts that may not be pure income, will attract withholding tax in India. AAR is a quasi-judicial body and its rulings are binding on the tax payer and the revenue department. It also has a persuasive value. The ruling will have implications in all cases where payment is made to a non-resident. In the absence of obtaining a nil or lower withholding certificate from tax authorities, AAR observed that taxes would have to be withheld on any payment made to a non-resident. This will lead to a flurry of applications to obtain these certificates, said Bijal Ajinkya, senior associate, Nishith Desai Associates. In this case, MRSC, Singapore, entered into a solution provider agreement (SPA) with HBS to supply packaged business software solutions. The product is sent in physical form through a compact disc along with a software licence key delivered through the internet. A ruling was sought on whether HBSPL had the legal obligation to withhold taxes for payments made to MRSC. HBSPL held payments on software are taxable as royalty only if the imported software is accompanied by copyrights enabling the importer to replicate it. The company held that the agreement with MRSC was without any copyright and only distribution rights; so it does not have to withhold tax on the remittance to MRSC. The revenue department disputed HBSPLs claim, saying the agreement with MSRC allows the company to make copies of software and also customise software for its clients. This means MRSC is providing technical know-how and the payment it receives has an element of royalty. Hence, it will attract withholding tax. The departments stand was based on the provisions of the IT Act, which says any person paying interest or any other sum chargeable (except salary) to a foreign company will have to deduct income tax. AAR held that there was no substance in HBSPLs contention that the expression any sum chargeable would not include cases where a sum payable to the non-resident is a trading receipt, which may or may not be pure income. The authority cited the principles laid down by the Supreme Court in the case of Transmission Corporation while ruling that the company has to deduct tax at source. According to Bharat Varadachari, partner, E&Y, the ruling has not addressed the issue of characterisation of income arising from software transactions for tax purpose i.e. whether royalty or sales income, either under the Act or under an applicable Double Taxation Avoidance Agreement. AAR was of the view that this was beyond the scope of consideration and subject matter of the application. The ruling, however, confirms that withholding tax provisions under Section 195(1) of the Act apply not only to amounts paid, which wholly bears income character, but also to gross sums, the whole of which may not be income or profits of the recipient chargeable to tax in India.
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Mission

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions