TMI Blog2015 (4) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... s given in section 44C, has to be necessarily in the nature of executive and general administrative expenses only. The conclusion drawn by the learned Commissioner (Appeals) that such expenditure does not fall within the purview of section 44C. Thus as the assessee had itself disallowed the said amount on account of failure to deduct the tax at source and further disallowance will lead to double disallowance. Thus, the ground no.4 is also dismissed - ITA No.5857/Mum/2010 - - - Dated:- 10-4-2015 - SHRI R.C.SHARMA, AM SHRI AMIT SHUKLA, JM Assessee by : Shri Nitesh Joshi Revenue by : Shri S.D.Shrivastava O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order passed u/s.143(3) r.w.s.144C(13) of the IT Act. 2. The dispute of assessee relates to addition made on account of data processing cost, deduction u/s.44C, interest to head office. 3. At the outset, ld. AR placed on record order of the Tribunal in assessee s own case for the assessment year 2004-05, dated 14-3-2014, wherein exactly similar issue was decided by the Tribunal in favour of the assessee. The precise observation of the Tribunal with regard to addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience. 16. The above definition of royalty thus provides that, when the payment of any kind is received as a consideration for use of or the right to use of any of the copy right of any item or for various terms used in the said Article, then only it can be held to be for the purpose of royalty . The said definition of royalty is exhaustive and not inclusive and, therefore, it has to be given the meaning as contained in the Article itself and no other meaning should be looked upon. If the assessee is claiming the application of the DTAA, then the definition and scope of royalty given in the domestic law, in the present case, section 9(1)(vi) should not be read into or looked upon. The character of payment towards royalty depends upon the independent use or the right to use of the computer software, which is a kind of copy right. In the present case, the payment made by the Branch is not for use of or right to use of software which is being exclusively done by the Head Office only, installed in Belgium. The Branch does not have any indepe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment can be said to be for the use of specialized software on which data is processed or for the use of mainframe computer because the Indian company does not have any independent right to use the computer or even physical access to the mainframe computer, so as to use the mainframe computer or the specialized software. All that the right is for processing of data, and the use of mainframe computer is permitted only for that purpose. The Indian company can feed the raw data in the mainframe computer in Australia, with the help of the telecommunication link, and the output data, after due processing is transmitted back to the Indian company. There is no privilege or right granted to the Indian company by the Australian company. The control of the Indian company is only on the input transmission and the right is to get the output processed data back. The actual processing of data is the exclusive control of the Australian company and it is for this work that the Australian company gets paid. In our considered view, therefore, in essence the impugned payment is made to the Australian company in consideration of its processing of data belonging to the Indian company. 14. As far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific categories set out in article 12(3)(a), it cannot be covered by the general words following those categories either. For all these reasons, we are of the considered view that provisions of article 12(3)(a) cannot be invoked on the facts of the case before us. 15. That takes us to the question whether the provisions of article 12(3)(b), as relied upon by the revenue authorities, can be invoked on the facts of the present case. Article 12(3)(b) can apply only when the payment in question can be held to be payment for the use of, or the right to use, any industrial, commercial or scientific equipment . This condition can only be satisfied when it is established that the impugned payment is made for the use of, or right to use of, mainframe computer. The Indian company does not have any control over, or physical access to, the mainframe computer in Australia. There cannot, therefore, be any question of payment for use of the mainframe computer. It is indeed true that the use of mainframe computer is integral to the data processing but what is important to bear in mind is the fact that the payment is not for the use of mainframe computer per se, that the Indian company does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered within the scope of expression royalty under Article 12(3)(a) of the India Belgium DTAA. Accordingly, the conclusion drawn by the learned Commissioner (Appeals) is affirmed. 20. Since we have already held that the data processing cost paid by the assessee does not amount to royalty, consequently, there is no requirement for deducting tax at source on such payment. Therefore, the provisions of section 40(a)(i) will not apply. Accordingly, the issue arising out of ground no.1 and 2 is dismissed. 4. Ground No.2 relates to deduction u/s.44C of the Act. This issue has also been decided by the Tribunal in assessee s own case mentioned above, wherein the observation of the Tribunal is as under :- 23. Before us, the learned Senior Counsel has relied upon the Special Bench decision of the Tribunal in Goodricke (supra) and the decision of the co ordinate bench of the Tribunal in Stock Engineer and Contractors B.V. (supra). We find that in the said decision, the Tribunal had held that the Head Office expenses are restricted to executive and general administrative expenses only, as defined in Explanation (iv) to section 44C and it does not apply in respect of each and every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,950 therefore, the amount of Rs. 58,20,110 has been doubly added. The A.O. is directed to delete this double addition. Appeal in respect of this ground is partly allowed. 25. Before us, the learned Senior Counsel pointed out that apart from the fact that the assessee itself has disallowed the said amount, this issue of allowance of deduction of interest payment by Indian Branch to overseas Branch is squarely covered by the decision of the Tribunal in assessee s own case for the assessment year 2005 06, wherein the Tribunal has followed the decision of the Special Bench in Sumitomo Mitsui Banking Corporation v/s DDIT, order dated 30th March 2012. The learned Departmental Representative, however, relied upon the finding of the Assessing Officer. 26. In view of the above contention of the learned Senior Counsel and the categorical finding of the learned Commissioner (Appeals), we do not find any merit in the grounds raised by the Revenue, as not only the said issue is squarely covered by the decision of the Special Bench and the decision of the Tribunal in assessee s own case, but also there is no rebuttal of the finding of the fact recorded by the learned Commissioner (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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