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TMI Blog2024 (3) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... or 'Ld AO')) ('Impugned order') under section 143(3) read with 144C(13) of the Income-tax Act, 1961 (the Act) in pursuance of the directions issued by the Hon'ble DRP, dated May 22, 2023, under section 144C(5) of the Act inter-alia on the following grounds: A. Grounds of appeal challenging the validity of DRP directions 1. Impugned order is contrary to law laid down by Hon'ble Supreme Court of India and fails in not refunding amounts collected as tax deducted at source from receipts towards sale of software in hands of non-resident with no Permanent establishment and Ld. DRP directions are perfunctory, contrary to section 144C and fail to give clear directions to Ld. AO. 2. Impugned order unlawfully retains amounts collected as tax at source on transactions not chargeable to tax under the Act and completely failed to investigate/ call for / consider relevant material for adjudicating taxability of receipts during the year. 3. Impugned order and Ld. DRP directions erroneously retain amounts collected at source by concluding that the receipts from supply of copyrighted software license customers is in the nature of 'Royalty' as per the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such sale of software was for mere distribution/end use of customers which has not resulted in any transfer of any rights against such software. The assessee referred to the judgment delivered by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT, 432 ITR 471 (SC) to submit that supply of mere copy of software for distribution/use by customer did not result in transfer of any rights in the copyright and consideration received for supply of copyrighted article / software did not fall within the definition of royalty in terms of the relevant tax treaty. On the basis of judgment in the case of Engineering Analysis (supra) delivered on March 2, 2021, i.e., delivered after the filing of the return on 08.01.2021, the assessee contended that neither the receipts from different customers incorrectly reported as taxable income in ITR by way of royalty nor receipt from Bharti Airtel remaining unreported can be regarded as income chargeable to tax in India in the absence of Permanent Establishment in India. The assessee thus contended that the benefit of judgment in the case of Engineering Analysis (supra) should apply to all the receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble royalty income on consideration of nature of product sold. The AO further observed that the contextual facts to apply the ratio of Engineering Analysis (supra) have never been examined and the assessee has failed to establish the similarity in facts vis-à-vis facts existing in Engineering Analysis. 8. Aggrieved by the denial of relief claimed on account of non taxability of receipts from various customers including Bharti Airtel towards sale of software, the assessee preferred appeal before the Tribunal. 9. The ld. counsel for the assessee pointed out at the outset that the assessee has reported receipts from various customers on sale of software as 'Royalty Income' in its return of income under wrong belief owing non availability of Engineering Analysis case at the time of filing of ITR. However, it is incumbent upon AO to determine taxable income as per the provisions of law regardless of overstatement of income declared by the assessee under wrong belief. The ld. counsel thus submitted that there was no justification in the action of the DRP as well as the AO in its refusal to exclude the receipts on account of sale of software, which are copyrighted, from the ambit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT vs. Shelly Products (2003) 261 ITR 367 (SC), S. R. Koshti vs. CIT (2005) 276 ITR 165 (Guj), Ester Industries vs. CIT (2009) 185 TAXMAN 266 (Delhi) and CIT vs. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 349 ITR 336 (Bom). The essence of these decisions are that mere admission on the part of the assessee with respect to an addition/disallowance in its original return or in revised return would not ipso facto bar an assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. It is thus well settled that if a particular income is not taxable under the Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. The Revenue Authorities cannot enforce untenable actions of the assessee against it which led to declaration of income of higher amount incorrectly. It is thus open to assessee to show that it was over assessed under erroneous impression of law or facts even if it is attributable to the mistake of assessee. 12.2 So viewed, we do see potency in the argument laid on behalf of the assessee that the Assessing Officer committed error in denying the relief claimed. In our considered view, the action of the AO is in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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