TMI Blog2018 (10) TMI 1939X X X X Extracts X X X X X X X X Extracts X X X X ..... r N. K. Saini, Vice President: This is an appeal by the assessee against the order dated 09.02.2014 passed by the AO u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as the Act). 2. Following ground have been raised in this appeal: 1. That on facts and in law, the Dy. Commissioner of Income Tax, Circle - 'Gurgaon', International Taxation, New Delhi ('Learned AO') erred in computing the total income of the Appellant at INR 27,79,45,07,738 as against 'Nil' income reported in the return of income by the Appellant. 2. Without prejudice to the below mentioned grounds of appeal, the Hon'ble Dispute Resolution Panel ('DRP') and Learned AO erred on the facts of the case and in law, in determining the income of the Appellant for the subject Assessment Year at INR 27,79,45,07,738 thereby completely ignoring the fact that the payments received by the Appellant from licensing of manufacturing and distribution rights to Microsoft Operations Pte Ltd. ('MO') pertaining to India was INR 16,67,67,04,643. 3 Tax on revenue alleged as 'Royalty' under the India US tax treaty: 3.1 That on facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal / AAR rulings relied on by the Appellant. 4 Tax on revenue alleged 'as royalty' under the Incometax Act. 1961 ('the Act'): 4.1 That on facts and in law, the Hon'ble DRP erred in confirming the variations proposed by the Learned AO in the draft assessment order by holding that payments received by the Appellant from MO is taxable as 'Royalty' under the provisions of section 9(1)(vi) of the Act. 4.2 That on facts and in law, the Hon'ble DRP erred in confirming the conclusion drawn by the Learned AO in the draft assessment order that revenue received from sale of software by a group company of the Appellant - Microsoft Regional Sales Corporation ('MRSC'), from Indian distributors is taxable in India in the hands of the Appellant under the provisions of the section 9(1)(vi) of the Act. 4.3 That on facts and in law, the Learned AO erred in observing that amount paid by MO to Appellant was for earning income from a source in India and from licensing of software carried out in India. 4.4 That on facts and in law, the Hon'ble DRP and the Learned AO erred in placing reliance on the order passed by the Hon'ble Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Learned AO has grossly erred on facts and in law in levying interest under section 234B of the Act. 8.1 which is not maintainable in law in view of the decisions of jurisdictional High Court and various other judicial precedents decided in favor of taxpayers on this issue. 8.2 which is otherwise not leviable as DRP has directed the Ld. AO for transferring the TDS credit claimed by MRSC to the appellant and the law laid down by the Supreme Court in the decision of ITO vs. Bachu Lal Kapoor (60 ITR 74) (1966) (SC). The above grounds of appeal are mutually exclusive and without prejudice to each other. The appellant craves leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the appeal. The appellant prays for appropriate relief based on the said grounds of appeal. 3. From the above grounds, it is gathered that the only grievance of the assessee relates to the nature of the payments received from licensing of manufacturing and distribution rights of Microsoft Operations Pte Ltd. and as to whether the said payment is taxable as royalty under the provisions of Section9(1)(vi) of the Act or not. 4. During the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orous to the assessee should be followed for the purpose of the taxation in case of that assessee. In the present case therefore Double Taxation Avoidance Agreement between India and USA is required to be seen and applied, if by retrospective amendment to the Income Tax Act the taxation regime with respect to the royalty and fees for technical service have become more stringent. Likewise, on many issues about taxation of sale of software, after the decision of Honorable Delhi high court in DIT V Infrasoft limited (supra) view of the coordinate bench in case of Gracemac corporation no longer remains a good law. 18. In view of the above facts it is apparent that after rendering of the decision of the tribunal based on which the reopening has been initiated by revenue and addition has been made in the hands of the appellant, the decision of the Hon ble Delhi high court in case of DIT V versus Infrasoft limited covers the issue in favour of the assessee. As the lower authorities did not have any benefit of the decision of the Hon ble Delhi high court while deciding the issue about the taxation of copyrighted article i.e. the software being sold by the appellant but have solely r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax as royalty. We have decided this issue in the appeal of the assessee for assessment year 2007-08 wherein we set aside the whole issue to the file of the assessing officer to decide it afresh in accordance with the decision of the Hon ble Delhi High Court in case of DIT V Infrasoft Limited ( supra). Similarly in this year also we set aside the whole issue to the file of the assessing officer with similar direction as contained in ITA number 6089/Del/2012. 7. It is also noticed that against the order, the assessee preferred a Miscellaneous Application in MA No. 74 to 77/Del/2017 for the assessment years 2007-08 to 2010-11 wherein vide order dated 04.10.2017, it has been held in paras 20 21 as under: 20. The third error pointed out was that specific ground of appeal No. 3.3 as under has not been adjudicated upon: That on facts and in law, the Hon ble DRP and the learned AO erred in not following the judgments of the Hon ble jurisdictional High Court in the case of DCIT Vs Infrasoft (ITA No. 1034/2009) and the judgment of the jurisdictional ITAT in the case of convergys Customer Management Group Vs ADIT (ITA No. 1443/2012) (Del ITAT) which are squarely applicable to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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