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2023 (8) TMI 912 - AT - Income TaxAssessment u/s 144C - Royalty receipt - income from distribution of software licenses and providing support services - India-Sweden Tax Treaty - Whether case of the assessee falls under FTS? - assessee submits that the support services provided by it do not make available any technology or technical skills to third party distributors and / or end users. In view of this, the services provided by IAR do not fall within the ambit of FTS under the Article 12 of the India-Sweden Tax Treaty - HELD THAT:- Assessee has received certain funds by supplying software through intermediaries in India and the various Companies are listed of the AO. Assessee has received the receipts as categorized by the DRP as per which assessee has received income from sale of software licence, hardware, support services to those parties who are intended to purchase the latest software from IAR and certain freight charges. Which are part and parcel of the total services rendered by the assessee during the current Assessment Year. Without going into merits of the findings of the DRP, we observe that DRP has come to the conclusion on their own analysis that the case of the assessee falls under FTS. We observe that while passing the final Assessment Order AO has not followed the directions of the DRP and passed his own Assessment Order by merely reproducing his analysis in draft Assessment Order. Final Assessment Order passed by the AO is not as per section 144C(13) - AO has filed a note in support of his final Assessment Order in which he has made submissions that the order passed by him is analyzing the various issue which are without prejudice views which Ld. DRP has not rejected. He is of the view that the final Assessment Order passed by him is as per section 144C(13). AO has not followed the directions of the DRP and the directions of the Ld. DRP are very clear and AO has not bothered to atleast classify the income earned by the assessee under the head FTS as per the directions of the Ld. DRP and royalty. He proceeded to complete the final Assessment Order based on his own analysis made by him in draft Assessment Order which is clearly a violation of not following the directions of the higher authorities and also the provisions of section 144C(13). At the time of hearing, DR heavily relied on the decision of the ITAT Bangalore in the case of Yokogawa India Ltd. [2021 (4) TMI 151 - ITAT BANGALORE] in which the bench has remitted the issue back to the file of the AO/TPO to redo the assessment by following the directions of the Ld.DRP. AO and Ld. DRP has taken a divergent view and without going into merits of the issues raised, we are inclined to treat the Assessment Order passed by the AO as bad in law and against the directions specified u/s. 144(13) of the Act. Accordingly, we quash the assessment order passed by the AO and grounds raised by the assessee are allowed in this regard.
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