Sonata Information Technology Ltd. v DCIT [ITA NO. 1507 (MUM.) OF 2012 dated 7.9.2012] (Mum ITAT) Background: The assessee is a company engaged in the business of purchase and sale of software. Assessee made a payment of Rs. 199,79,11,595/- for purchase of software from persons who are resident in India. The Assessee did not deduct tax at source while making payment towards such purchases. According to the AO, the payment is in the nature of Royalty because it was for a right to use software and therefore the Assessee ought to have deducted tax at source and since the Assessee had not so deducted tax at source, the sum in question was not allowed as deduction under the provisions of Section 40(a)(ia) of the Act. The CIT(A) also confirmed the addition.
Finance Act 2012
Letter [F.No.500/111/2009-FTD-1(Pt.)], dated 29-5-2012 The Finance Act 2012 has introduced certain clarificatory amendments in Section 2 clause (14), Section 2 clause (47), Section 9 and Section 195, of the Income Tax Act, 1961 (“Act”), with retrospective effect from 01.04.1962 or 01.04.1976, whereby meaning of various terms used in these sections have been clarified in order to remove any doubt regarding their interpretations. 2. These amendments have been introduced retrospectively in order to clarify the legislative intent and state the position of law from the date of coming into effect of these sections in the Act. 3. Doubts have been raised in various quarters about the implication of these amendments on the assessments that have already been completed and attained finality. 4. The Board, after due consideration, hereby directs that in case where assessment proceedings have been completed under section 143(3) of the Act, before the first day of April, 2012, and no notice for reassessment has been issued prior to that date; then such cases shall not be reopened under Section 147/148 of the Act on account of the abovementioned clarificatory amendments introduced by the Finance Act, 2012. However, assessment or any other order which stand validated due to the said clarificatory amendments in the Finance Act 2012 would of course be enforced. 5. This may be brought to the notice of all officers in your region immediately.