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2019 (2) TMI 1942 - AT - Income TaxPE in India - net global profits - Attribution of profits to the PE in India in respect of hardware components of the telecom equipments and the mobile handsets as business profits under article 7 of the Indo-China DTAA - Measurement of profit - HELD THAT:- As decided in own case [2016 (6) TMI 329 - ITAT DELHI] we find that the level of operations carried out by assessee through its PE in India are considerable enough to conclude that almost entire sales functions including marketing, banking and after sales were carried out by PE in India and, therefore, keeping in view th decision of Rolls Royce [2007 (10) TMI 321 - ITAT DELHI-C] and Nortel Networks India International Inc. [2014 (6) TMI 941 - ITAT DELHI] we are of the opinion that it would meet the ends of justice if 35% of net global profits as per published accounts out of transactions of assessee with India are attributed to PE in India in respect of both hardware and software supplied by assessee to Indian customers. At this juncture we may point out that while deciding the department's appeal in subsequent part of this order, we have upheld the findings of ld. CIT(A) to tax the income from sale of software as business income and not royalty. We may point out that in AY 2009-10 the AO estimated the operating profits at 7.5% as against the weighted average of net operating profit at 2.53% as per the global accounts. Taxability of software as royalty - HELD THAT:- As decided in own case [2016 (6) TMI 329 - ITAT DELHI] Receipts on account of supply of software were integrally connected to the supply of hardware and, therefore, AO was not right in taxing such receipts as royalty. In view of the decision of Hon'ble Delhi High Court in the case of DIT v. Nokia India [2012 (9) TMI 409 - DELHI HIGH COURT] software supplies could not be taxed even under the amended law - as per the provisions of Article 12(5) of the DTAA the supply of software being integral to the supply of hardware and the finding of existence of a PE of assessee in India, Article 12(5) of the DTAA would cease to apply and the provision of Article 7 would be applicable and, therefore, the income from software is to be taxed as business income. - Decided in favour of assessee Levy of interest u/s 234B - Held that:- We find that the facts are almost identical to the facts as obtaining in the case of GE Packaged Power Inc. [2015 (1) TMI 1168 - DELHI HIGH COURT] which is the latest decision of Hon'ble Jurisdictional High Court on this issue and, therefore, respectfully following it we hold that assessee was not liable to pay interest u/s 234B.- Decided in favour of assessee
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