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TMI Blog2020 (11) TMI 1049X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as 'The Act' for short] for A.Ys 2005-06, 2006-07 and 2007-08. Since common issues are involved in all these appeals, they were heard together and are being disposed of by this common order. ITA No. 947/DEL/2012 is against the assessment order framed u/s 154 of the Act relating to the charging of interest u/s 234B of the Act. For the sake of convenience and brevity, we have considered the facts of A.Y 2005-06. 2. Briefly stated the facts of the case are that the assessee is a wholly owned subsidiary of Microsoft Corporation, USA ("MS Corp"). MS Corp entered into a Parent Subsidiary agreement ("PSA") with Gracemac on January 1, 1999 wherein MS Corp has granted Gracemac: * the exclusive license to manufacture Microsoft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution and intercompany services agreement ("distribution agreement") with Microsoft Regional Sales Corporation, USA ("MRSC") wherein MRSC has been appointed as a distributor of Microsoft products manufactured by MO. MRSC has been given the right to distribute Microsoft products in Asia (with restrictions in China, Korea and Taiwan), Japan, South East Asia and the South Pacific as per Schedule A of distribution agreement. Pursuant to the distribution agreement, MRSC has entered into agreements with various distributors in India. The distributors have a right to distribute the products in India. 6. Thus, all the three companies i.e. the assessee company, the licensee and the distribution company i.e. MSRSC are all associated enterprises a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of stocks to MS Corp. Due to this, the intellectual property rights owner is Gracemac Corp. and any payments arising in India in light of provisions of Paragraph 7(b), Article 12 of the India-US tax treaty, are taxable as royalties. Forming this belief, the Assessing Officer held that not only 35% or 40% of the amount but total amount of USD 155,646,892 is taxable as royalty @ 15% as provided in Article 12 of India US DTAA. 9. Before us, the ld. counsel for the assessee, at the very outset, stated that the entire action by the Assessing Officer has been decided in favour of the assessee and against the revenue by the Tribunal in the case of Mocrosoft Corporation for AY.s 1997-98 to 1999-2000 in the case of MOL Corporation for A.Y 2011-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rise to any royalty income and would be business income only. 10..... 11..... 12. On a careful reading of the facts of Infra-soft Ltd (supra), as could be culled out from paragraphs 3 to 12 we find that the facts in both the cases are identical and the issue that was dealt with is also identical. We, therefore, do not have any hesitation in our mind to hold that in view of the decision of the Hon'ble jurisdictional High Court in the case of Infrasoft (supra), the issue involved in this matter is no longer res integra and has to be answered by stating that there is no transfer of any right in respect of copyright by the assessee and it is the case of mere transfer of copyrighted article and the payment was for a copyrighted article an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Department can take action against the payer under the provisions of Section 201 of the Act and compute the amount accordingly; that in such a case, the non-resident is liable to pay tax but there is no question of payment of advance tax; and that, therefore, assessee is not liable to pay interest under Section 234B on account of default of the payer in deducting tax at source from the payments made to the assessee. It is pertinent to note that the decision in Jacabs Civil incorporated(supra) relates to the AY2001-02. 15. Be that as it may, inasmuch as we held in the preceding paragraphs that there is no royalty income involved in this matter, and for want of Permanent Establishment, the business income of the assessee is not taxable i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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