Section 194J of the Income-tax Act, 1961—TDS — Payment made by assessee for providing toll free telephone services amounts to Royalty u/s. 9(1)(vi) , thus, assessee liable to deduct TDS u/s. 194J.

Facts: Ground raised in the appeal is that AO erred in disallowing expenditure incurred towards toll-free telephone charges under section 40(a)(ia) for non-deduction of taxes under section 194J on the basis that the payments would qualify as 'royalty' under the Act. Commissioner of Income-tax (Appeals) erred in upholding the finding of the AO.

Held, that payments made are towards toll-free telephone charges paid for toll free telephone number provided by telecom operators, whereby charges for calls made by consumers to the toll-free number is borne by assessee. These are dedicated private circuit lines available to assessee. For the calling party, call to such toll-free number is free of charge. It is for this exclusive telephone line that payment is made by assessee. Revenue is of the opinion that payment made by assessee for such services amounts to Royalty u/s. 9(1)(vi) and assessee is liable to deduct TDS u/s. 194J, admittedly, assessee has not deducted TDS on payments made towards toll-free charges, and therefore, disallowance under section 40(a)(ia) is warranted. However, we set aside this issue to AO for verification as to whether the payee paid taxes on such payments received from assessee during relevant period. - VIDAL HEALTH INSURANCE TPA (P.) LTD. V/s JT. CIT - [2020] 182 ITD 030 (ITAT-BANGALORE)