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2014 (4) TMI 273 - AT - Income TaxAdmission of additional evidence Reduction in quantum of revenue - Exclusion of sales from revenue Held that - When the AO was not satisfied with the assessee s estimate, he should have allowed at least one more opportunity to the assessee intimating it that if it does not furnish the details, then the sale should be estimated at US 40 Million - there was no such argument raised either before the AO or before the CIT(A) - Before the AO, the assessee stated that the sales may be taken at Euro 27 Million on estimated basis - The AO did not accept the same and estimated the sales at US 40 Million - Before the CIT(A), the assessee itself furnished the complete details of the sales amounting to Euro 27,307,776 and the same was accepted by the CIT(A) thus, the ground claimed by the assessee is neither arising from the order of the AO nor from the order of the CIT(A) - The sales have been accepted as per the details furnished by the assessee itself before the CIT(A) thus, there was no merit in the ground Decided against Assessee. Taxability of Income from sale of software Article 7 of DTAA Income taxed as Royalty Whether the Income from the supply contract can be treated as Royalty under section 9(1)(vi) of the Act - Held that - The decision in assessee s own case and in Director of Income-tax Versus Ericsson AB & Ericsson Radio System AB & Metapath Software International Ltd. 2011 (12) TMI 91 - Delhi High Court followed the payment made to the assessee was not in the nature of royalty either under the Income-Tax Act or under the DTAA Decided against Revenue. Leviability of Interest u/s 234B of the Act Consideration subject to TDS u/s 195 of the Act Held that - The decision in DIT-I, International Taxation Vs. Alcatel Lucent USA, Inc. and another 2013 (11) TMI 734 - DELHI HIGH COURT followed - Even though there may not be any positive or direct evidence to show that the assessee did make a representation to its Indian telecom dealers not to deduct tax from the remittances, such a representation or informal communication of the request can be reasonably inferred or presumed - The Tribunal ought to have accorded due weightage to the strong possibility or probability of such a request having been made by the assessee to the Indian payers since otherwise the denial of its tax liability on its Indian income would have served little purpose for the assessee Decided against Assessee.
Issues Involved:
1. Admission of additional evidence and reduction in quantum of revenue. 2. Taxability of income from the sale of software as business receipts or royalty. 3. Exclusion of sales to a specific company for computing profits attributable to the alleged permanent establishment (PE). 4. Levy of interest under section 234B of the Income Tax Act. Detailed Analysis: 1. Admission of Additional Evidence and Reduction in Quantum of Revenue: The Revenue argued that the CIT(A) erred in reducing the quantum of revenues received from India from US $40 million to Euro 27 million by admitting additional evidence. The assessee had failed to provide necessary details during the assessment proceedings. The CIT(A) admitted the additional evidence under Rule 46A, citing the assessee's inability to provide details due to time constraints. The Tribunal upheld the CIT(A)'s decision, noting that the Assessing Officer (AO) did not allow further opportunity to the assessee and failed to point out discrepancies in the sales figures provided later. 2. Taxability of Income from Sale of Software: The Revenue contended that the CIT(A) erred in holding that income from the sale of software should be taxed as business receipts under Article 7 of the DTAA, rather than as royalty. The CIT(A) relied on the ITAT Special Bench decision in Motorola Inc. and subsequent Delhi High Court rulings in Ericsson A.B. and Nokia Networks OY, which held that such income is not royalty. The Tribunal affirmed the CIT(A)'s decision, noting that the issue is covered by the jurisdictional High Court's decisions. 3. Exclusion of Sales to Alcatel India Limited: The assessee argued that sales to Alcatel India Limited should be excluded from the revenue for computing profits attributable to the PE. This argument was not raised before the AO or CIT(A). The Tribunal rejected this ground, stating that the sales figures were accepted based on details furnished by the assessee itself during the appellate proceedings. 4. Levy of Interest under Section 234B: The assessee contended that interest under section 234B is not leviable as the entire consideration was subject to tax deduction at source under section 195. The Tribunal, referencing the Delhi High Court decision in Alcatel Lucent USA, Inc., held that the assessee was liable to pay interest under section 234B. The Tribunal reversed the CIT(A)'s decision on this issue and upheld the AO's levy of interest. Conclusion: - The Tribunal upheld the CIT(A)'s decision to admit additional evidence and reduce the revenue quantum. - The Tribunal agreed with the CIT(A) that income from the sale of software should be taxed as business receipts, not royalty. - The Tribunal rejected the assessee's claim to exclude sales to Alcatel India Limited from the revenue for computing PE profits. - The Tribunal upheld the AO's levy of interest under section 234B, reversing the CIT(A)'s contrary decision.
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