The disallowance on buying software for non-deduction of Tax at Source has been eliminated by Income Tax Appellate Tribunal (ITAT), Banglore. The taxpayer is the owner of Acer India Private Limited which is involved in the business of manufacture and trading computer systems.
The problem is that under section 40 (a)(i) of the Act for non-deduction of Tax at Source there is the disallowance of buying the software developed by AO. AO seeks the buying of computer software as the payment in the nature of royalty. As the taxpayer did not tax deduct at source from the executed payments, the AO disallowed the corresponding under section 40(a)(i) of the Act.
CIT(A) ruled that the payment implemented by the taxpayer to buy the software was relevant to the copyrighted article and also ruled that disallowance under section 40(a)(i) of the Act is not said for. Accordingly, this disallowance was deleted.
The council states that the payment made for the buying of the computer software comes under the act of payment of royalty. As to that, the taxpayer must have cut down the tax deducted at source (TDS) from the payment furnished to buy the software. Thus, he provides that AO was cleared in building disallowance under section 40(a)(i) of the Act.
The disallowance beneath section 40(a)(i) of the act does not build on the grounds of the same case said two judges George George K. and B.R. Baskaran during the declaration of the order of CIT(A).
