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2016 (12) TMI 48 - ITAT DELHI

2016 (12) TMI 48 - ITAT DELHI - TMI - Sale of software - chargeable to tax under Article 7 of DTAA as business income of the assessee OR not under Article 12 as ‘Royalty’ - Held that:- On identical set of facts, respectfully following the decision of the coordinate bench of the ITAT in the assessee’s own case for A.Ys. 07-08, 08-09 and 09-10, we hold that for A.Ys. 11-12 and 12-13, the sale of software by the assessee is the sale of standard software which is chargeable to tax under Article 7 of .....

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CE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For The Assessee : Sh. Piyush Chawla, CA Ms. Poonam Ahuja, CA For The Revenue : Sh. Anuj Arora, CIT DR ORDER PER BENCH: Both these appeals have been preferred by the assessee. ITA No. 726/Del/2015 pertains to the AY 2011-12 and has been filed against the order dated 25/11/2014 passed u/s 143(3)/144C(13) of the Income Tax Act, 1961 (hereinafter called the Act ). ITA No. 1686/Del/2016 pertains to AY 2012-13 and has been filed against the .....

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d deliver off the shelf mediation, charging and fulfillment solutions and software. The company s solution and software are being sold to the telephone operators who maintain and provide services in the Telecommunication Networks. The assessee company is stated to be a Global Market Player in providing convergent mediation software solutions. Comptel Solutions support the core business processes of operators and service providers by generating concrete savings that allow for new business models .....

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of royalty under the provisions of the Act as well as under the provisions of India - Finland (DTAA). 2.2 For AY 2012-13 the return of income was filed declaring income from Fee from Technology Services (FTS) at ₹ 20,92,31,368/- and offering it for taxation under the provisions of DTAA. In this year also, the core issue of contention is as to whether the consideration received by the assessee fell in the category of royalty under the provisions of the Act as well as under the provisions o .....

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in his orders of earlier years. 2.4 The assessee has now preferred appeals before the ITAT and has raised the following grounds of appeal: Grounds of ITA No. 726/Del/15 for AY 2011-12: 1. That on the facts and circumstances of the case and in law, the impugned order passed by the Deputy Commissioner of Income Tax, Circle 1(2)(1), International Taxation, New Delhi u/s 143(3) read with section 144C of the Income-tax Act, 1961 is bad in law and void ab-initio. 1.1 That the Ld. AO grossly erred in a .....

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e for the supply of software to be used by the assessee in its own business would not amount to royalty. 3. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in holding that the receipts in the hands of the Appellant from sale of standard software are in the nature of royalty u/s 9(1)(vi) clauses (i), (iii), (iva) and (v) of the Act and under Article 13(3)(a) and 13(3)(b) of the Double Taxation Avoidance Agreement (DTAA) between India and Finland. 3.1 That the Ld. .....

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scientific equipment. 4. That on the facts and in the circumstances of the case and in law, the Ld. AO/DRP erred in applying the retrospective amendment introduced by the Finance Act, 2012 in the definition of Royalty under section 9(1)(vi) of the Act without appreciating that there is no corresponding amendment in the definition of royalty under the DTAA. 5. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in not allowing the TDS credit of ₹ 6,40,81,778/- .....

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he provisions of section 115A of the Act. 6.1 That on the facts and circumstances of the case and in law, the Ld. AO erred in grossing up the receipts without appreciating that the same can be done only in the hands of the payer for the purpose of deduction of taxes and not for computing the income. 7. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in levying the interest u/s 234B of the Act. The above grounds of appeals are without prejudice to each other. That .....

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me of the Appellant at ₹ 37,59,28,211/- as against the income of ₹ 20,92,31,368/- declared by the appellant in the return of income. 2. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in not appreciating the fact that the case of the Appellant is squarely covered by the judgment of the jurisdictional High Court in the case of Infrasoft Ltd. vs. ADIT [264 CTR 329 (Del)] wherein the Hon ble High Court while interpreting a similar agreement held that the .....

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the Appellant is receiving the payment for conferment of a right allowing the use of a copyright. 3.2 That the Ld. AO/DRP erred in holding that the Appellant is receiving the payment for transfer of right to use the process embedded in the software to the customer who use such process while carrying out their business. 3.3 That the Ld. AO/DRP erred in holding that the consideration for supply of software shall qualify as Royalty by virtue of retrospective amendment introduced in the definition o .....

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t on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in grossing up the receipts without appreciating that the same can be done only in the hands of the prayer for the purpose of deduction of taxes and not for computing the income. 5.1 Without prejudice to the aforesaid, where in case of net of tax contracts, grossing up is done assuming taxes have been duly withheld by the payer, additional tax credit for taxes withheld on account of grossing up ought to have been given .....

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er Article 12 as royalty has already been settled in favour of the assessee by the ITAT Delhi B Bench in assessee s own case in ITA Nos. 5411/Del/2010, 5587/Del/2011 and ITA No. 699/Del/2013 for A.Ys. 07-08, 08-09, 09-10 respectively. The Ld. AR submitted a copy of the said order and pointed out that the issues under appeal in the present appeals were identical to the issues decided by the ITAT as aforesaid and submitted that in view of the decision of the coordinate bench of the ITAT, the issue .....

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als that the AO has given a categorical finding that there was no change in the facts or the business model during assessment years 11-12 and 12-13 as compared to earlier assessment years 08-09, 09-10 and 10-11 and, therefore, the findings made and conclusions arrived at in earlier assessment years would also apply with equal force in the assessment years in question. It has been stated by the AO that there has been admittedly no change in the factual matrix or the business model of the assessee .....

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