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2016 (7) TMI 1689 - AT - Income TaxIncome taxable in India - royalty receipts - taxability of consideration for facilitating grant of user rights in off-the-shelf software and provision of related support services - India-US Tax Treaty - HELD THAT:- As common point between the parties that the issue relating to the taxability in India of consideration received for facilitating grant of user rights in software to Indian entities was decided against the assessee by the Tribunal in 2013 (8) TMI 952 - ITAT- PUNE] relating to assessment year 2004-05 and 2006-07 and [2015 (2) TMI 1391 - ITAT PUNE] relating to assessment year 2007-08. Receipt of IT charges by the assessee from CIL and CSSL during the year under consideration - As assessee in the year consideration had provided services to the Indian entities and had received charges in respect of desktop/laptop software licence and internet mail and had determined the value of transactions by allocating cost based on cost estimates TPO adopted the actual cost incurred by the assessee in order to determine the adjustment, if any, to be made on account of international transactions. Main plea of the assessee before the authorities below was that cost allocation based on cost estimates was an accepted method for the purpose of determining the arm's length price and if the actual cost allocation results in any erosion of overall base of India, then no adjustment is required to be made to the value of international transaction. This has to be seen from the angle that where the assessee is a foreign company and is recipient of internet mail charges and desktop/laptop service charges from the Indian entities, then in cases where it is held that the assessee should have been charged higher amounts from the Indian entities, then the same would result in reduction of overall tax base of India. In such circumstances, the Indian Transfer Pricing provisions are not to be applied. DRP in assessment year 2007-08 and the AO in assessment year 2009-10 has not made any adjustment in the hands of assessee on account of internet mail service charges and desktop/laptop service charges though identical international transactions were carried out in the later years also. In the totality of the above said facts and circumstances of the case, we reverse the order of CIT(A) and direct the Assessing Officer to delete the addition. Ground of assessee allowed.
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