TMI Blog2014 (5) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ociated enterprise - The assessee is required to prove that the payment made was not for 'royalty' as defined in explanation 2 to section 9(1)(vi) read with India-US DTAA - thus, the matter is remitted back to the AO for fresh adjudication - Decided in favour of Assessee. - ITA No.362/Hyd/2011 & ITA No. 1736/Hyd/2012 - - - Dated:- 6-1-2014 - CHANDRA POOJARI AND SAKTIJIT DEY, JJ. For the Appellant : S. Raghunathan For the Respondent : Solgy Jose T. Kottaram ORDER :- PER : Saktijit Dey These two appeals are filed by the assessee against separate orders of CIT (A)-III, Hyderabad pertaining to the assessment years 2007-08 and 2008-09. Since assessee is common, and identical issues are involved in these two appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee had debited an amount of Rs. 1,58,03,062/- towards software. On further examination, the Assessing Officer noted that the said expenditure includes the payment made towards purchase of certain software from Energy Solutions International, US and Neoware UK Limited for an amount of Rs. 1,33,46,155/-. The Assessing Officer on verifying details of bills/purchase orders was of the view that the payment in respect of the aforesaid software/licenses are in the nature of 'royalty' within the meaning of section 9(1)(iv) of the Act and hence was subject to the provisions of section 195 of the Act. Since the assessee has not deducted any tax at source on these payments, the Assessing Officer issued a show cause notice propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired software. The payment from customers towards software is received only once and there are no recurring payments. The learned AR submitted that the assessee is neither authorised nor is capable of making copies of the software as the software is protected with hardware lock or software lock permitting use by the end customer in India. Control over the hardware and software locks (source code) are the exclusive domain of AE. It was submitted, as a part of implementation process the assessee only carries out the configuration and parameter setting to suit the specific output needs of the clients. He further submitted, the overseas AE contract directly with the Indian customer for entering into the end user license agreement. It was sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d down in the decision reported in Dynamic Vertical Software India (P.) Ltd. (supra). 6. The learned Departmental Representative also expressed the view that the matter may be remitted back to the file of the Assessing Officer for considering the same afresh. 7. We have heard the contentions of the parties and perused the materials on record as well as the orders of the lower authorities. The sum and substance of the assessee's contention before us is, it is only a distributor of the software procured from its AEs to the end customer. In other words, the assessee has sold the software as it is as back to back sale. Apart from the carrying out initial configuration and parameter setting to suit the specific needs of the clients the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following observation: We have considered the rival submissions and perused the material available on record. After considering hate facts of the case, we find that both the representatives of rival parties agreed to send back the matters to the file of the Assessing Officer for reconsideration. In view of the above, we agree with the representatives of the parties and send back all the issues including additional grounds to the file of the Assessing Officer for consideration afresh in accordance with law and decide the same after hearing all the contentions of the assessee. 9. Therefore, considering the submission of the parties in the light of the ratio laid down in case of Dynamic Vertical Software India (P.) Ltd. (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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