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TMI Blog2020 (11) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... under royalty only by insertion of Explanation 4 of section 9(1)(vi). 3. CIT(A) has placed reliance on Karnataka HC decision in the case of Synopsis International and other cases and has erred in not passing a speaking order as to why the reasons stated by the Appellant differentiating the said decision was not applicable or not being considered. 4. The appellant reserves the right to add additional grounds to, or elaborate on the above grounds during the appeal hearing as long as it is in relation to the above subject matter under dispute. 3. On 05.10.2020, learned AR of the assessee has filed additional written submissions and also raised the following additional ground:- "Ground No.5: The Learned CIT(A) has erred in passing the appellate order and has consider the appellant as a purchaser of software without appreciating the fact that the appellant is an intermediary of product not having any right over the software and the payment made by the intermediary is only payment made after retaining the intermediary margin and not for purchase of software". 4. We find that this additional ground is not signed by the assessee but it is signed by the learned AR of the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, he submitted that it is not made part of the paper book but he will file the same on the date of hearing itself after the hearing is completed. Accordingly, learned AR of the assessee has filed a copy of the audited accounts of the asessee company for the year ended as on 31.03.2013. 4. He made arguments that in spite of this specific objection raised by the assessee before the AO and CIT (A) that the assessee company is only an intermediary and not a purchaser of the software, this aspect was not specifically decided by the AO or CIT (A) and hence, the order of the AO should be reversed or the matter be restored to the AO for a fresh decision. Thereafter, he submitted that in para 3.3 of the assessment order, the AO has noted about the judgment of Hon'ble Karnataka High Court rendered in the case of CIT vs. Samsung Electronics Co. Ltd. as reported in 345 ITR 494/245 CTR 481. He pointed out that in the same para, another judgment of Hon'ble Karnataka High Court rendered in the case of Synopsis International Ltd. Vs. CIT as reported in 28 Taxman.com 162 was also noted by the AO. He further pointed out that in the same para, a tribunal order rendered in the case of M/s Kalki Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a purchaser of the software, this aspect was not specifically decided by the AO or CIT (A). In this regard, we find that in para 3.1 of the assessment order, the AO has reproduced the contents of the letter dated 29.12.2015 filed by the assessee before him in which this contention was raised that the assessee company is only an intermediary and not a purchaser of the software and in para 3.3 of the assessment order, the AO held that the assessee's contention is not acceptable and thereafter, the AO decided the issue on merit by following various judicial pronouncements. Hence, this contention is not correct that this aspect of the matter was not decided by the AO. Before CIT (A), the assessee has raised five grounds out of which, Ground Nos. 1 and 5 are general and in Ground Nos. 2 to 4, the issue has been raised about applicability of section 9 (1) (vii), section 195 and section 40 (a) (i) and there is no ground in this regard that there is no purchase of software and therefore, this argument is rejected because it has no merit. 8. The main issue in dispute is this as to whether this amount of Rs. 213,03,772/- debited by the assessee company to its P & L Account as Software exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is 15% of total purchases Rs. 213,03,772/- whereas, the letter dated 03.01.2009 talks about margin being 15% of cost. We fail to understand as to how the net payment made by the assessee company to its AE is cost of AE and even if it is so, it means that the AE will get only cost reimbursement from the assessee company and will reimburse various expenses also. We also find that Rs. 390,12,618/- is debited by the assessee company on account of Employees' Benefit Expenses whereas, the letter dated 03.01.2009 says that the assessee's AE will reimburse all expenses incurred by the assessee company on account of salary including Director's Remuneration. It may be that the Employees' Benefit Expenses debited by the assessee company to its P & L Account is on account of salary not related to this activity and it is net of reimbursement of salary paid by the assessee incurred in respect of this activity but there is no such disclosure in the audited accounts and no such detail is made available to us. In respect of reimbursement of other expenses such as Advertisement, Travelling and Travelling related expenses, Business Promotion Expenses, Communication Expenses, Marketing Expenses, pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its AE in this regard is nothing but purchase price of the computer software and various judgments followed by the lower authorities are applicable and simply because specific detailed Distribution Agreement is not executed between the assessee company and its AE, it cannot be said that these judgments are not applicable when the understanding between the assessee company and its AE is similar. Because in that case also, computer software was imported by the assessee without deducting TDS and it was held that it is payment of Royalty and therefore, the assessee should have deducted TDS. Para 5 of the Statement of facts (SOF) filed by the assessee before CIT (A) as available on page 12 of the paper book reads as under:- "5. Kaseya Software India Private Limited acts as a Distributor (or Intermediary) for distributing keys of certain IT monitoring software products of Kaseya International Limited. The appellant, Kaseya India, obtains a Purchase Order from the Indian customers and raises a purchase request on Kaseya International Limited, Jersey as per the agreed price." 10. As per this para of SOF, it comes out that the assessee company obtains the purchase order from the Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X
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