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TMI Blog2012 (10) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of software purchased by the assesse - Both the appeals are allowed for statistical purposes. - IT Appeal Nos. 3029 and 3030 (Mum.) of 2010 - - - Dated:- 18-5-2012 - B. R. Mittal And Sudhakar Reddy, JJ. Ji tendra Yadav for the Appellant M. P. Lohia and Payal Shah for the Respondent ORDER J. Sudhakar Reddy, Accountant Member The present appeals preferred by the Revenue, are directed against impugned separate but identical order dated 28th January 2010, passed by the Commissioner (Appeals)-X, Mumbai, for assessment years 2008-09 and 2009-10 respectively. 2. The facts, as brought out by the Commissioner (Appeals) vide Paras-1.1 to 1.1.2, in his order, are extracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly the AO passed an order under Section 195(2) of the Act holding payments as Royalty under the Act and directing to withhold taxes at 10.56% on gross basis as per Section 115A of the Act. 3. Before the first appellate authority, the assessee contended as follows:- ( i ) Provisions of section 195(1) of the Income Tax Act, 1961 (for short the Act ) would be applicable only to payments which are chargeable to tax under the provisions of the Act. There should be an income element embedded in such payments; ( ii ) Section 2(24) of the Act defines the term Income and includes profits and gains. The term reimbursement has not been defined under the Act and hence, should be understood in common parlance. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as reimbursement of expenses not liable to withholding tax. Further, he examined the other contentions of the assessee and observed that the agreement with FADV U.S. forbid the assessee from transferring or modifying the software. While observing that the current transaction cannot be considered as a transfer of a copyright either in part or in whole came to a conclusion that being reimbursement of expenditure, there is no transfer of a copyright. Thereafter, he referred to various decisions of the Courts and Tribunal. While concluding, he observed that the payment for use of software does not amount to payment of royalty within the meaning of term as defined in India U.S. DTAA or section 9(1)( vii ) of the Act. Alternative, he held that be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal and the Courts that the payment in question, when not for the transfer of right in the software would not amount to payment for royalty. He contended that it is a case of sale of copyrighted article. He referred to the paper book where a number of invoices have been placed and argued that the payment cannot be considered as payment for royalty either under the Act or under the DTAA. 7. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on a perusal of the papers on record, as well as the case laws cited before us, we hold as follows:- 8. At page-70 of assessee's paper book, a copy of the reimbursement agreement dated 15th July 2009, entered between the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst appellate authority erred in coming to a conclusion that this is a mere reimbursement of expenses. The agreement and the invoices are not indicating the same facts. The agreement appears to be an after thought. 11. As the Commissioner (Appeals) based his decision on the premise that the assessee has reimbursed expenses. He has not examined the nature of software acquired by the assessee, as the agreement and other material were not on record. Facts have to be verified. Accordingly, we restore the issue to the file of Commissioner (Appeals) and direct him to examine the nature of software purchased by the assessee and then apply the law to the facts. 12. In the result, both the appeals are allowed for statistical purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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