As of the license Fee agreement % change ,MFSJ have provide the service to MSFT ,MFSJ have received income ,and MFSJ are a taxpayer, MSFT need a tax deduction when MSFT paid your invoice. MSFT are not a service provider or has revenue from services and therefore MSFT should not be deducting tax.
MFSJ are supposed to refund the excess portion is not supposed to be your income.