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2024 (3) TMI 145 - AT - Income TaxTaxability of receipts on sale of software under the provisions of the Act r.w. applicable DTAA - Denial of relief from taxation on receipts arising from sale of software in the hands of non-resident assessee - assessee-company is incorporated in the United Kingdom and thus a non-resident assessee for the purposes of Indian Taxation - whether the AO was justified in assessing the receipts on sale of software as ‘Royalty Income’ in the factual matrix merely because the assessee has offered such income as taxable income in its ITR? HELD THAT:- Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or not being properly instructed is over assessed, the authorities under the Act are required to ensure that only legitimate tax dues are collected. Mere admission on the part of the assessee with respect to an addition/disallowance in its original return or in revised return would not ipso facto bar an assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. It is thus well settled that if a particular income is not taxable under the Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Revenue Authorities cannot enforce untenable actions of the assessee against it which led to declaration of income of higher amount incorrectly. It is thus open to assessee to show that it was over assessed under erroneous impression of law or facts even if it is attributable to the mistake of assessee. So viewed, we do see potency in the argument laid on behalf of the assessee that the AO committed error in denying the relief claimed. In our considered view, the action of the AO is in defiance of the judicial precedents on the issue and thus cannot be countenanced. In our view, the assessee can not be prevented from raising a claim that receipts from sale of software wrongly offered as royalty income and not chargeable to Indian Taxation merely because such income was wrongly offered in the ROI and which was not revised. The factual matrix towards the nature and character of sale proceeds qua the underlying evidences however does not appear to have been verified by the AO at any stage of the proceedings. Without any expression of opinion on merits on taxability of such receipts, in our view, it would be in fitness of things to remit the issue back to the file of AO.. It shall be open to the assessee to demonstrate that receipts from various customers in India arises on account of sale of software and does not give rise to any chargeable income in law. Ground No.1 to 4 of the appeal of the assessee is allowed for statistical purposes
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