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2015 (5) TMI 573 - ITAT PUNE

2015 (5) TMI 573 - ITAT PUNE - TMI - Payment made for transfer of user rights of software - whether the same are taxable as royalty under Article 12/13 of Double Taxation Avoidance Agreement (DTAA) between India and USA/UK/Singapore - non-deduction of tax at source - whether the assessee is liable to the demand raised u/s 201(1) and interest u/s 201(1A) - CIT(A) allowed assessee appeal - Held that:- Following the ratio laid down by the Mumbai Bench of the Tribunal in New Bombay Park Hotel Pvt. L .....

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2015 - Shri G.S. Pannu And MS. Sushma Chowla JJ. For the Appellant : Shri Rajesh Damor For the Respondent : Shri C.H. Naniwadekar ORDER Per Sushma Chowla, J.M: All these appeals filed by the Revenue are against the consolidated order of CIT(A)-IT/TP, Pune dated 21.03.2013 relating to assessment years 2008-09, 2009-10 and 2010-11 passed under section 201(1)/201(1A) of the Income Tax Act, 1961. 2. All the appeals relating to same assessee on similar issue were heard together and are being disposed .....

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availing other services such as maintenance of software, training are not taxable under Article 12/13 of the double Taxation Avoidance Agreement (DTAA) between India and USA/UK/Singapore. 2. On the facts and circumstances of this case, the Ld. CIT(A) was not correct in holding that the payment made for transfer of user rights of softwares are not taxable as royalty under Article 12/13 of the double Taxation Avoidance Agreement (DTAA) between India and USA/UK/ Singapore, without verifying as to w .....

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and other cases ignoring the factual differences. 4. On the facts and circumstances of this case, the Ld. CIT(A) erred in not considering the decisions, relied by the AO, of Hon'ble High Court of Karnataka in the case of Samsung Electronics Co. Ltd. (ITA No. 2808 of 2005), Hon'ble AAR Millennium IT Software Ltd. (AAR No. 835 of 2009), Hon'ble AAR, in the case of Citrix Systems Asia Pacific Pty. Ltd. (AAR No.822 of 2009) and Hon'ble Bangalore Tribunal in the case of ING Vyasya Ba .....

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he application or enjoyment of right to use software. 6. On the facts and circumstances of this case, the Ld. CIT(A) was not correct in holding payment for maintenance and training cannot be taxed as 'fees for technical services' under Article 13(4)(c) of DTAA as this conclusion is not based on any documentary evidence and in the light of the fact that if the assessee had received the customized software from the foreign suppliers then it could be termed as transfer of technical plan or .....

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o apply the technology contained therein specially when conclusion is not based on any documentary evidence and without analyzing the nature of services provided by the service providers and when it is not a ground of appeal raised by the appellant. 8. On the facts and circumstances of this case, the Ld. CIT(A) was not correct in holding that the assessee has not acquired any such technical inputs for its own use from the companies rendering such services, when in fact the assessee does acquire .....

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are taxable as royalty under Article 12/13 of Double Taxation Avoidance Agreement (DTAA) between India and USA/UK/Singapore. In view of the non-deduction of tax at source, whether the assessee is liable to the demand raised under section 201(1) of the Act and interest under section 201(1A) of the Act. 6. Briefly, the facts of the case are that the Assessing Officer had sought information from the assessee seeking details of foreign remittances made w.e.f. 01.04.2007 to till date. The Assessing .....

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lying on the ratio laid down by Hon ble Karnataka High Court in CIT Vs. M/s. Samsung Electronics Co. Ltd. in ITA No.2808 of 2005, held that the contention of assessee that the purchase of software was purchase of goods was not tenable. The conclusion of the Assessing Officer was that the payments made by the assessee for the purchase of software and related costs was royalty payment and in view of the provisions of section 195(1) of the Act, it was the obligation on the assessee for making payme .....

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he explanation of the assessee was that the amount paid towards fees or subscription charges for the use or access of data base of the portal do not fall within the definition of royalty and hence, no tax was deductible on such payments. Further, it was pointed out that with respect to purchases of computer parts and hardware, the Assessing Officer had inadvertently considered the payments made for the purchase of hardware along with the payments made for the purchase of software, possibly, beca .....

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placed on series of decisions before the CIT(A). The CIT(A) noted that the assessee had made payments during the year for the following purposes:- i) Purchase or license of computer software ii) Annual maintenance charges iii) Fees for accessing data base iv) Training and implementing charges v) Purchase of computer parts or hardware 9. With regard to payments made for purchase of computer parts and hardware, the CIT(A) held that TDS was not required to deduct on such payments and with respect t .....

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harges are concerned, the same would be taxable as a technical service rendered by non-resident to the Appellant company under section 9(1)(vii) as fees for technical services . These services are technical in nature and accordingly the provisions on fees for technical services would be applicable and the same would be taxable under the Income Tax Act. However, the CIT(A) held that However, when it comes to the taxability of the same under the DTAA, these payments would not be taxable either as .....

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ve amendment made under the Income tax Act taxing payments made for acquiring license of software would not be relevant in absence of similar corresponding amendment to the DTAA. In the cases of Nokia delivered by Delhi High Court as relied upon by the Appellant and in the case of B 4 U International Holdings Ltd v DCIT (ITA 3829/Mum/2008 dated 28.05.2012) Mumbai Tribunal has held that, in absence of corresponding amendment to the DTAA, payment made for acquiring license for software purchase is .....

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xable under the respective DTAAs and consequently, the assessee was not required to deduct tax on such payments. 11. The Revenue is in appeal against the order of CIT(A). 12. The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer and pointed out that where there was license to use software, then the assessee was liable to deduct tax at source and since the assessee has failed to so deduct the tax at source, was liable for the demand raised under .....

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have heard the rival contentions and perused the record. The assessee for the year under consideration had made payments for the purchase of software and for other related costs as detailed as under:- Name of the company Nature of payment Date of payment Amount (Rs) Savvion Inc. USA Purchase of general software 04.05.2007 1,23,80,564 NCC Services Ltd, UK Annual fees for checking software 24.06,2007 1,14,044 Serena Software Pte Ltd Purchase of general software 04.09.2007 66,990 Cipher Soft Inc,U .....

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ction 201(1) and further interest was charged under section 201(1A) of the Act. The plea of the assessee that it had purchased software which was akin to purchase goods and does not fall within the category of royalty or technical know-how, was rejected by the Assessing Officer. As per the Assessing Officer, the amounts paid fell within the definition of royalty or technical know-how and it was also held that these payments were taxable under DTAA. The case of the assessee before us was that whe .....

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been made taxable under the Income-tax Act. The issue arising before us is limited to the aspect that in such circumstances, can the assessee be held to be in default for non-deduction of tax at source relying on the subsequent amendments made in the Act with retrospective effect? 17. We find that Mumbai Bench of the Tribunal in New Bombay Park Hotel Pvt. Ltd. Vs. ITO (Intr. Taxation) (supra) has held as under:- If the entire services rendered by the foreign company to the assesses in respect o .....

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