9911796707
TMI Blog2018 (10) TMI 1939X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 law, the Hon'ble DRP erred in confirming the variations proposed by the Learned AO in the draft assessment order by holding that: 3.1.1 payments received by the Appellant are deemed to arise in India under Article 12(7) of the India US tax treaty, disregarding the fact that 'royalty' paid by MO is not for earning income from a source in India; 3.1.2 revenue earned and received from sale of software by MRSC is taxable in India in the hands of the Appellant under the provisions of Article 12(2) and Article 12(3)(a) of the India US tax treaty. 3.2 That on facts and in law, the Hon'ble DRP and the Learned AO erred in not appreciating that: 3.2.1 the definition of Royalty is different in the Act and the India US t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Appellate Tribunal (ITAT) in case of Gracemac Corporation (now MOLC) for Assessment Years 1999-00 to 2004-05 which is not a good law. 4.5 That on the facts and in law, the Learned AO erred in observing as under: 4.5.1 that the agreement between MO and MRSC clearly establishes that the Appellant is getting royalty out of licensing of software carried out in India; 4.5.2 that the payment received by the Appellant is related to number of software that is ultimately licensed and distributed in India; 4.5.3 that the use of computer programme is a use of process; 4.5.4 that computer programme being patented are inventions; 4.5.5 that all payments made for import of software are royalty and the only exception is the second proviso to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of hearing, the ld. Counsel for the assessee at the very outset sated that this issue is squarely covered in assessee's favour vide order dated 26.09.2016 in assessee's own case for the assessment years 2007-08 to 2010-11 in ITA Nos. 6089 to 6091/Del/2012 and 1969/Del/2014 respectively (copy of the said order was furnished which is placed on record). It was also stated that the issue vide the aforesaid order had been restored to the AO, however, he had not followed the directions given by the ITAT in right perspective and had not held that the said payment received was not a royalty. 5. In his rival submissions, the ld. CIT DR submitted that the ITAT in the aforesaid referred to cases of the assessee restored the issue to the AO for fresh adjudication and no direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relied upon the decision of the coordinate bench in case of M/s Gracemac Corporation, it would be in the interest of the Justice to set the whole issue back to the file of the Ld. assessing officer to decide it afresh after considering the decision of Hon'ble Delhi high court DIT versus Infrasoft Ltd (supra), applying it to nature of the software of the appellant, which covers the issue with respect to the sale of software holding that according to article 12 (3) of the Indo US DTAA, is a sale of "copyrighted article", and is not chargeable to tax as "royalty". In view of above, ground No. 3 to ground number 4.13.4 of the appeal of the assessee are allowed with above direction. 30. It was submitted before us that the issue involved in the present appeal are identical to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the facts of the appellant." 21. The above ground of appeal was already decided in the main appeal of the assessee wherein, the whole issue of taxation of royalty on software of the assessee has been sent back to the file of the ld. Assessing Officer to decide afresh. Therefore, there is no error in the order of the coordinate bench. In view of this on this ground the miscellaneous application of the assessee is dismissed." 8. We, therefore, by considering the aforesaid referred to facts and by respectfully following the order dated 26.09.2016 ITA Nos. 6089 to 6091/Del/2012 and 1969/Del/2014 in assessee's own case set aside this issue back to the file of the AO to be adjudicated afresh in accordance with law as has been directed in the aforesaid referred to order dated 26.09.2016. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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