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Energy Solutions International Inc., Versus Dy. Commissioner of Income-tax – 1, International Taxation, Hyderabad.

2015 (11) TMI 1529 - ITAT HYDERABAD

Addition to royalty - non deduction of tds - DTAA between India and USA - Held that:- The orders passed by AO in 2007-08 and 2008-09 have been placed wherein the AO accepted the contentions of ESI India that such payments cannot be treated as royalty and deleted the disallowance for non-deduction of tax at source under section 40(a)(i) of the Act. The assessee “ESI US” sold the software to “ESI India” and in the assessment of “ESI India”, it is the payments are treated as towards the purchase of .....

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56/Hyd/2015 - Dated:- 27-11-2015 - SHRI P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For the Appellant: Shri Sharat Rao For the Respondent: Shri Siri Kumar O R D E R PER S. RIFAUR RAHMAN, A.M.: This appeal by assessee is directed against assessment order passed u/s 143(3) read with section 144C of the Income-tax Act (Act) for the AY 2011-12. 2. Briefly the facts of the case are that Energy Solution .....

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rage, marketing and delivery functions. 2.1 The assessee has, during the year under consideration, sold the above mentioned software products to Energy Solutions International (India) Private Limited ["ESI India"], a group entity incorporated in India, who in turn sells the same to its customers in India. • The customers, based in India, place a purchase order with ESI India, which inter alia consists of: a) Supply of software (either PLS/PLM/PL T .....

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nd users'), places back-to-back purchase orders on the assessee. * ESI India either imports software CDs, or downloads the software; and subsequently installs it on the customer's machine. • The hardware key or the soft key in relation to the above software is directly provided by the appellant to the users/ clients in India. • Further, the End User License Agreement ('EULA'), needs to be accepted by the customer directly before install .....

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AY") 2011-12, on December 18, 2012 declaring "NIL" taxable income under the Act. The case was selected for scrutiny under CASS. The draft assessment order was passed by the learned Assessing Officer ("AO") under section 144C of the Act on March 7, 2014, treating the payment towards the sale of software in the nature of Royalty taxable at the rate of 10 percent as applicable under the ambit of the provisions of DTM and applied surcharge at the rate of 7.5 percent on the i .....

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back to the file of the AO to decide the same in accordance with law on the issue of payment to the ESI US as Royalty and whether ESI India is liable to deduct tax at source u/s 195. The AO has not decided the matter yet. DRP observed that it will have impact on the present case in hand. Since the matter has not reached the finality, DRP rejected the objections of the assessee. 3.1 Consequent to the directions of the Hon'ble DRP, the learned AO passed the final assessment order da .....

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follows: 1. To delete the addition amounting to ₹ 1,46,05,511 made to the income of the assessee. 2. To hold that the income of the assessee towards the sale of software products is not in the nature of royalty under the provisions of section 9(1)(vi) of the Income-tax Act, 1961 (the Act) as well as under the provisions of the DTAA between India and USA. 6. Before us, the ld. AR submitted that in the case of ESl lndia for AY 2007-08 and AY 2008-09, the lea .....

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