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2014 (5) TMI 1122 - ITAT MUMBAI

2014 (5) TMI 1122 - ITAT MUMBAI - TMI - Income on account of 'Royalty and Fees for Technical Services' - taxable on receipt basis OR accrual basis - Held that:- As decided in assessee's own case for assessment years 1990-91, 1991-92, 1994-95, 1996-97, 1997-98 and 2001-02 has held that Royalty has to be assessed to tax on receipt basis and not on accrual basis - Software is a part and parcel of equipment sold, therefore, no Royalty is payable - ITA No.8094/MUM/2010 - Dated:- 6-5-2014 - SHRI I .....

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account of 'Royalty and Fees for Technical Services' is taxable on receipt basis and not on accrual basis as held by the Assessing Officer in the assessment order. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that value of the software supplied by the assessee to M/s. Siemens Ltd. Cannot be treated as 'Royalty" in the hands of the assessee." 2. At the outset it may be mentioned here that Ld. AR was required to submit wheth .....

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ng its income arising on account of "Royalty and Fee for Technical Services" on receipt basis. The stand of the assessee has not been accepted by A.O on the ground that Department has taken a consistent view that the income in this regard should be recognized on accrual basis. It is in this manner the income of the assessee was worked out. The action of AO was agitated in an appeal filed before Ld.CIT(A), who relying upon the orders rendered by ITAT in respect of assessment years 1990- .....

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er is placed at pages 3 to 4 of the paper 3 book. Following question was raised by the Revenue before Hon'ble Bombay High Court: "i) Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the Royalty and fees for technical services should be taxed on receipt basis without appreciating the fact that the Hon'ble Supreme Court has held in the case of Standard Drum Motors Private Limited V/s. CIT, 201 ITR 391 that the credit entry to the .....

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services should be made in the year in which the amounts are received and not otherwise. Counsel for the Revenue relied upon the Special Bench decision of the Tribunal in the assessee's own case, which in our opinion, has no relevance to the facts of the present case, as it relates to the period prior to the issuance of Notification dated 26t1 August 1985. In this view of the matter the decision of the Income Tax Appellate Tribunal in holding that the royalty and fees for technical services .....

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No.2, this issue relates to equipments having software which were required for proper running of the equipments sold by the assessee. The A.O segregated the sale amount into two categories; (a) sale of equipments; (b) sale of software and assessed a sum of ₹ 236.81 crores on account of supply of software by treating the same as Royalty in the hands of the assessee company. On the other hand, it is the stand of assessee that software is a part and parcel of equipment sold, therefore, no Ro .....

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ition, hence, the Department has raised Ground No.2. 7. At the outset it was submitted by ld. AR that this issue is consistently deciding in favour of the assessee by the ITAT and reference was made to the orders of ITAT rendered in respect of assessment year 2001-02, 2002-03 and 2003-04 and 2004-05. Copy of these orders have been enclosed in the paper book from pages 1 to 18. The initial order of the Tribunal is in respect of assessment year 2001-02, copy of which is placed at pages 15 to 18 of .....

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