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2015 (5) TMI 708 - ITAT BANGALORE

2015 (5) TMI 708 - ITAT BANGALORE - TMI - Royalty u/s 9(1)(vi) - Nature of amount received towards supply of software by the Parent company to (non-resident) to Intel Technology India Private Limited on account of software expenses - DTAA between India and the USA - Held that:- In the absence of any evidence to the effect that the assessee has supplied software license to the Indian company and the Indian company was obliged under the agreement to reimburse the expenses of such software license, .....

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for purchase of shrink-wrapped software was in the nature of royalty - Decided against assesse.

Re-imbursements of relocation expenses - Held that:- As find that the assessee has filed sample evidence relating to April and May 2004 in support of its claim of relocation and related expenses. From these details, it is clear that the Indian company has incurred expenses on account of employees who are deputed to Indian company. Whether these reimbursements are cost to cost basis and whe .....

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- IT(TP)A No.1528/Bang/2010 - Dated:- 20-3-2015 - Shri Rajpal Yadav And Abraham P.George JJ For the Appellant : Mr. Kaushik Mukherjee, CA. For the Respondent : Mr. Farhat Hussain Quereshi, CIT(DR) ORDER Per Abraham P George, AM: In this appeal filed by the assessee directed against an order of assessment under section 143(3) of the Income-tax Act, 1961 (for short the Act ) pursuant to the direction of Dispute Resolution Panel ( DRP for short) under section 144C, it has raised the following grou .....

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into with India and the USA ( the Treaty ). (b) That on the facts and in the circumstances of the case, the learned AO and the learned Panel erred in not appreciating that the aforesaid receipt of ₹ 26,80,32,271 represents merely reimbursement of expenses incurred by the Appellant on behalf of ITIPL. 2(a) That on the facts and in the circumstances of the case, the learned AO and the Panel has erred in treating the amount of ₹ 1,59,68,374 received from ITIPL on account of cross charge .....

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cluded Services ( FIS ). b) That on the facts and in the circumstances of the case, the learned AO and the Panel has erred in not appreciating the fact that the amount of ₹ 7,31,91,290 received from ITIPL represents mere reimbursement of relocation and related costs of expatriates incurred in connection with business of ITIPL. 4. That even assuming but not admitting that the reimbursement of relocation expenses of ₹ 7,31,91,290 is in connection with the rendering of services in India .....

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judgment of the Hon ble jurisdictional High Court in the case of Samsung Electronics Co. Ltd., vs. CIT (345 ITR 494) and the decision of this Tribunal in assessee s own case for assessment year 2005-06 (ITA No.201/Bang/2012 dated 13/06/2014). 3. Issues raised by the assessee in the above mentioned grounds are on treatment of ₹ 26,80,32,271/- and ₹ 1,59,68,374/- received by it from M/s.Intel Technology India Pvt. Ltd. ( ITIPL for short) against software expenditure and cross charges o .....

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ransactions with its associated enterprises ( AE ), the quantum of which exceeded ₹ 5 crores. Therefore, the issue of determination of arms length price of the international transactions was referred to the Transfer Pricing Officer (TPO) u/s 92CA of the Act. However, the TPO did not recommend any adjustment to the international transactions. Thereafter the AO observed that the assessee has received a sum of ₹ 6,85,17,312/- towards reimbursement from M/s.Intel Technology India Pvt. Lt .....

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are expenses. It was submitted that the assessee procured software license in respect of certain computer aided design software from third parties and the same is used by various Intel entities globally and the cost of such software license is cross charged to the respective entities based on the usage of each entity. He submitted that the assessee raised invoices on respective entities based on number of users in each entity and in support of his contention, copies of invoices raised by the ass .....

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held that the assessee has failed to furnish copies of the agreements with the Indian company on account of which software expenses are reimbursed. He observed that the assessee could submit only one agreement which was entered into with M/s.Sigrity Inc., USA and the assessee could not explain the basis on which software was charged to the Indian company. He, therefore, held that the receipt could not be treated as reimbursement of expenses on account of software. Thereafter, he proceeded to co .....

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ore us. 5. Shri Kaushik Mukherjee, learned counsel for the assessee, while reiterating the assessee s submissions made before the authorities below, submitted that the assessee-company is a foreign company and had purchased software license from a third party and supplied them to its group companies globally and as per use of the license, such expenses are cross charged to the group companies and in accordance with such agreement with it, the Indian company has reimbursed the assesseecompany whi .....

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issue is covered in favour of the assessee by the decision of the Hon ble Delhi High Court in the case of DIT vs. Ericsson A.B.(2011)343 ITR 470(Del). He submitted that these decisions have been considered by the Mumbai Bench of the Tribunal in the case of Dy.Director of Income-tax (Intl. Taxation) vs Solid Works Corporation reported in (2012) 152 TTJ 570 (Mum) wherein it has been held that the payment for mere right to use of shrink wrapped software cannot be held as royalty. He, therefore, pr .....

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entions as well as the material on record, we find that to substantiate the claim of the assessee that the expenses received from Indian counterpart of the assessee-company are reimbursement of expenses; the assessee has not filed copies of any of the agreements. In the absence of any evidence to the effect that the assessee has supplied software license to the Indian company and the Indian company was obliged under the agreement to reimburse the expenses of such software license, we are not inc .....

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sson A.B.(cited supra). This Bench, being at Bangalore, is bound by the decision of the jurisdictional High Court and therefore, we are inclined to follow the decision of the Hon ble Karnataka High Court and the assessee s ground of appeal is rejected. Since the receipts for the impugned assessment year were also from the very same company and of similar nature, we have no hesitation to dismiss grounds 1(a) and (b) and 2(a) and 2(b) raised by the assessee. 4. Vis-à-vis ground 3(a), (b) an .....

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tra, learned Departmental Representative supported the orders of the authorities below. 5. We have perused the orders and heard the rival contentions. On the claim of the assessee that what were received were only re-imbursement of expenditure and on production of evidence to substantiate its claim, this Tribunal had held as under in paras.8 to 13 of its order dated 13/06/2014 for assessment year 2005-06, in assessee s own case mentioned supra. 8. As regards grounds No.2 to 4 are concerned, we f .....

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conveyance and hotel etc. It was submitted that these expenses have been reimbursed by the Indian company only on cost to cost basis and therefore it does not amount to any income in the hands of the assesseecompany. The assessee also filed a detailed note before the authorities below citing the decisions on which it placed reliance upon. The AO was, however, not convinced with the contentions of the assessee. The AO asked the assessee to furnish details of employees towards whom these costs we .....

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ards the cost of expats like salaries and other related expenses should be reimbursed with a mark up. He observed that the cost incurred for relocations etc., also form part of expat costs which is charged to the ITIPL as fees for technical services. He, therefore, held that the receipt of ₹ 4 crore and odd is also integral part of fees for technical services and the same is chargeable to tax in India. 9. Aggrieved, the assessee preferred an appeal before the CIT(A) who confirmed the order .....

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eimbursement of relocation expenses. By letter dated 16-4-2014, the assessee has filed additional evidence in the form of paper book which contains the copies of invoices and supporting documents as well as break-up of relocation expenses for the months of April and May 2004 as well as month-wise break-up of relocation and related expenses for the months of January 2004 and March 2005 and submitted that all other and relevant supporting documents are also available with the assessee. He submitte .....

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nt back to the AO for verification. She submitted that the assessee in spite of several opportunities given by the AO and the CIT(A) has failed to file the relevant evidence due to which the AO was constrained to make the disallowance. 12. Having heard both the parties and having considered the rival contentions as well as the material on record, we find that the assessee has filed sample evidence relating to April and May 2004 in support of its claim of relocation and related expenses. From the .....

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