TMI Blog2022 (3) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... l purposes. - ITA No. 1125/Bang/2019 - - - Dated:- 9-3-2022 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER For the Appellant : Deepak Kumar Jain, CA For the Respondents : Priyadarshi Mishra, Addl. CIT (DR) ORDER Per Chandra Poojari, Accountant Member This appeal by the assessee is directed against the order dated 21.3.2019 of the CIT(Appeals)-5, Bengaluru for the assessment year 2016-17 on the following grounds:- 1. The Appellant submits that the impugned order has been passed by the learned Commissioner of Income Tax (Appeals)-5, Bangalore without appreciating the factual position in full and without proper application of law on certain matters and therefore the order deserves to be set aside, to the extent inconsistent with law and on facts. Disallowance under section 40(a)(i) 2. The learned Commissioner of Income Tax (Appeals)-5, Bangalore has erred by upholding the disallowance of online advertisement expenditure amounting to ₹ 5,06,48,758/- under section 40(a)(i). On facts and in circumstances of the case and law applicable, disallowance under section 40(a)(i) is not applicable. 3. Without pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued to the Appellants on 07.7.2017. In this regard, various notices u/s. 142(1) were also issued on various dates, calling for details, which were duly submitted by the Appellant. The AO passed the assessment order under section 143(3), dated 24.12.2018. 3. During the year, the appellant made certain payments to vendors outside India towards online advertisements amounting to ₹ 5,06,48,758. The AO observed that these payments were in the nature of royalty and were liable for deduction of taxes at source. The Appellant, in their reply dated 22.10.2018 submitted that the impugned payments did not constitute royalty or fees for technical services. It further submitted that these parties do not have a permanent establishment in India and hence these payments did not warrant withholding of taxes. The Appellant supported the same with Form 15CA/CB for the payments made outside India. 4. The AO did not agree to the arguments of the Appellant and issued a show cause notice dated 07.12.2018 as to why the impugned sum should not be disallowed under section 40(a)(ia)/40(a)(i). In the show cause notice, the AO relied on the case of Consim Info Pvt. Ltd. v. Google India Pvt. Ltd. an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 ITR 209 (Kar) and Hon'ble Supreme Court in the case of Transmission Corporation of A.P. Ltd. Vs. Anr., 239 ITR 537 (SC). Against this, the assessee is in appeal before the Tribunal. 8. The Ld. AR submitted that the Hon'ble Supreme Court in the GE India Technology Cen (P) Ltd. Vs. CIT [2010] 193 Taxman 234 (SC) had set aside/reversed the order of Hon'ble Karnataka High court in the case of CIT v. I Samsung Electronics (supra). Thus the appellant's contention that the impugned payments did not constitute Royalty/FTS and supported by various arguments and judicial precedents has been ignored and the CIT(A) placed reliance on the judgments in the case of CIT Vs. Samsung Electronics(Supra) and Transmission corporation of A.P. Ltd. Vs. Anr. (Supra) to hold that the appellant was duty bound to apply for adjudication u/s. 195(2). 9. The Ld. AR further submitted that the CIT(Appeals) has not provided any findings in relation to ground No. 6 raised before him regarding disallowance to be restricted to 30% of expenses, not subject to deduction of tax at source u/s. 40(a)(i). It is submitted that the appellant has filed an application for rectification of the same on 05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or end-users. 5.2 After analysing the provisions of Income tax Act, provisions of DTAA, the relevant agreements entered by the assessees with non-resident software suppliers, provisions of Copy right Acts, the circulars issued by CBDT, various case laws relied upon by the parties, the Hon'ble Supreme Court concluded as under:- CONCLUSION 168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. 169. Our answer to the question p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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