Thursday, September 24, 2009

IT cos to pay tax on software purchases

BANGALORE: The Karnataka High Court has ruled that technology firms are subject to withholding tax - deduction of tax at source - when they purchase software from global vendors such as Microsoft. This would push tech firms and branded software distributors into a corner as they will be required to withhold anywhere between 10-20% of their software purchase payments in the future.

The division bench of Justice DV Shylendra Kumar and Justice Arvind Kumar pronounced the judgement on Thursday afternoon while upholding an appeal by the income tax department that tech firms were legally obliged to withhold tax on software purchases. The order is with retrospective effect.

The IT department argument was on the premise that any software purchase amounted to royalty payment for a licence to use it, and should not be deemed as a mere purchase of good that is excluded from withholding tax.

The order could impact branded software vendors such as Microsoft, their third party distributors like Sonata Software, hardware makers like Samsung and GE who bundles branded software with their products, tech firms like Infosys when they effect a licensing of software, or even the local arms of HP and IBM which could be licensing software from their parent.

This is the first court order that has gone against the taxpayer in Income Tax disputes relating to withholding tax on software purchase. In fact, the Karnataka High Court intervention came after the Income Tax Tribunal had ruled in favour of taxpayers prompting the department to go on appeal.

Read More Article...

Related Posts by Categories



Widget by Hoctro | Jack Book

AddThis Social Bookmark Button

2 comments:

mathew said...

tax software is available to many companies as well for the payment of corporate tax.the decidion taken by the high court is a welcome..many good softwares are available.but its good if you buy it from a right company with the help of a better adviser.

Anonymous said...

»email marketing software
»PDF file creator software
»email marketing software
»PDF file creator software
»email marketing software
»PDF file creator software
»email marketing software
»PDF file creator software

Software Development Outsourcing
Outsourcing Services