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2006 (7) TMI 349 - AT - Income TaxTaxability - PE of the assessee is in India or not - Income Deemed to accrue or arise in India - profit margin of the assessee on supply of hardware was 40 per cent is reasonable or not - consideration received by the assessee on licensing of software should be taxed as the business income or as royalty - interest under sections 234A and 234B of Income Tax Act. Action of the CIT (Appeals) in reducing the profit attributable to profits from 40 per cent to 8 per cent - HELD THAT:- The case of Motorola Inc. [...............................................] dealt with by the Special Bench also involved a case of ascertainment of profits attributable to PE in India, which had supplied hardware in India. In fact in the case of Motorola Inc. there were three activities attributable to the PE, namely, (i) network planning; (ii) negotiations in connection with the sale of equipment; and (iii) the signing of the supply and installation contracts. The Tribunal sustained 20 per cent of the net profits in respect of the Indian sales as income attributable to the PE - In the present case, it is already stated that the PE was merely doing the job business of negotiations - From the material available in the present case, the CIT (Appeals) was justified in reducing the profits attributable to PE to 8 per cent. The above percentage would also meet the requirements of rule 10(ii) of the I. T. Rules - there are no merits in the first ground of appeal of the Revenue and consequently, the same is dismissed. Whether the consideration received by the assessee on licensing of software should be taxed as the business income or as royalty? - HELD THAT:- In the light of the similarity of facts as it exists in the case of the assessee and that of the case of Motorola Inc. as is evident from the comparative chart filed, the plea of the assessee was rightly accepted by the CIT (Appeals) - it was held in the case of Motorola Inc. that Since we have held that the payments cannot be assessed either as royalties or as business profits, the ground is dismissed. - the order of the CIT (Appeals) confirmed on this issue and this ground of appeal of the Revenue is dismissed. Charging of interest under sections 234A and 234B of the Act - HELD THAT:- In the light of the decision of the Delhi Bench of the Tribunal in the case of SSEDCO FOREX INTERNATIONAL DRILLING INC. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX [1999 (3) TMI 111 - ITAT DELHI-B], which has since been confirmed by the Hon’ble Uttranchal High Court in the case of COMMISSIONER OF INCOME-TAX AND ANOTHER VERSUS SEDCO FOREX INTERNATIONAL DRILLING CO. LTD. [2003 (10) TMI 40 - UTTARANCHAL HIGH COURT]. No interference with the order of the CIT (Appeals) is called for. Consequently, the third ground of appeal of the Revenue is also dismissed. Appeal of Revenue dismissed.
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