TMI Blog2022 (4) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... tive basis while the substantive assessment was in the hands of MOLC. The assessments in the hands of Gracemac which stands amalgamated with MOLC stands set aside in regard to assessment years 2005-06, 2006-07 and 2007-08 by the co-ordinate Bench s judgment dated 16.11.2020 which have been further upheld by Hon ble Delhi High Court by judgment dated 07.03.2022. The same were based on the principles of law that sale of software products does not give rise to royalty income as laid down in Infrasoft Ltd.[ 2013 (11) TMI 1382 - DELHI HIGH COURT] case which have now further been affirmed by the Hon ble Supreme Court of India in the case of Engineering Analysis Centre of Excellence P. Ltd. ( 2021 (3) TMI 138 - SUPREME COURT] There are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to manufacture Microsoft Retail Software Products and exclusive license to distribute the products retailers or to MS Corp. or other subsidiaries of MS Corp. Then there is MOL Corporation (MOLC), a wholly owned subsidiary of MS Corp. in which Gracemac Corporation was merged on 02.10.2006 in pursuance of which rights which earlier belonged to Gracemac were assigned in favour of MOLC. Microsoft operations Pte. Ltd. ( MO ) was a company incorporated under the laws of Singapore and was a wholly owned subsidiary of MS Corp. MOLC has granted Microsoft Operations Ltd. Singapore the non exclusive right to manufacture MS Retail Software Products in Singapore and distribute such products in Asia (with restrictions in China, Korea and Taiwan), Japan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee and remanded back the matter to the file of AO. The AO again passed draft assessment order proposing to assess the revenue of the assessee from sale of MS Retail Software Products to Indian Distributors as royalty under the Act as well as under DTAA between India and US. 2.4 The assessee filed objections to the said draft assessment orders before DRP however the DRP observed that the grounds have been considered by DRP-1, New Delhi in its order dated 19.09.2017 in the case of assessee for the Assessment year 2014-15 post the orders of Hon ble Delhi High Court in Infrasoft case and confirmed the action of AO. Based on the same findings the DRP upheld the action of AO substantively assessing the said receipt in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Products to distributors belonging to India is taxable as Royalty (on protective basis) contradicting conclusions reached by this Hon ble Tribunal, is contrary to settled law. 2.4 In the facts and circumstances of the case and in law, Id. DRP and ld. AO have failed to appreciate that sale of software is a sale of Copyrighted Article and not Copyright and accordingly, that revenue from sale of software is in the nature of business income not taxable under Article 7 of India - USA DTAA in the absence of a Permanent Establishment of the Appellant in India. 2.5 Routine reiteration by Ld. DRP and Ld. AO that amount paid by Microsoft Operations Pte Ltd to MOL Corporation is not only contrary to directions of this Hon ble Tribunal but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent development. 5. Giving thoughtful consideration to the matter on record, the Bench is of considered opinion that the revenue has been following a persistent approach in regard to assessee and its sister assessee subsidiaries of MS Corp holding sale of MS Retail Software Products to Indian Distributors as royalty under the Act as well as under DTAA between India and US. The assessment in the hands of present assessee was made on protective basis while the substantive assessment was in the hands of MOLC. The assessments in the hands of Gracemac which stands amalgamated with MOLC stands set aside in regard to assessment years 2005-06, 2006-07 and 2007-08 by the co-ordinate Bench s judgment dated 16.11.2020 which have been further u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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