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2017 (12) TMI 1676 - AT - Income TaxRectification of mistake u/s 254 - Royalty v/s fee for user rights for the copyrighted software - taxability of consideration received for facilitating grant of user rights in off-the-shelf software from wholly owned subsidiaries of the assessee and provision of related support services - Tribunal has misread the decision of Director of Income Tax Vs. Ericsson A.B. 2011 (12) TMI 91 - DELHI HIGH COURT to hold that the same is distinguishable on facts and non considering the decision of Allianz SE Vs. Asstt. Director of Income Tax 2012 (5) TMI 179 - ITAT PUNE HELD THAT - The assessee is seeking recalling of the order of Tribunal for the same reasons as was in the case of Reliance Communications Limited before the Mumbai Bench of the Tribunal 2013 (9) TMI 374 - ITAT MUMBAI . In the present case, we find that the Tribunal has failed to consider the decision of Co-ordinate Bench of the Tribunal in the case of Allianz SE Vs. Asstt. Director of Income Tax (supra) and has prima facie misread the decision rendered by Hon ble Delhi High Court in the case of Director of Income Tax Vs. Ericsson A.B. (supra). This is a mistake apparent from record, which needs to be rectified. - Decided in favour of assessee.
Issues Involved:
1. Taxability of consideration received for facilitating user rights in off-the-shelf software. 2. Rectification of the Tribunal's order due to alleged misreading and non-consideration of relevant judicial decisions. Detailed Analysis: 1. Taxability of Consideration Received for Facilitating User Rights in Off-the-Shelf Software: The assessee contested the taxability of the consideration received for facilitating user rights in off-the-shelf software from Cummins India Ltd. and Cummins Diesel Sales & Services (India) Ltd. The Tribunal initially adjudicated this issue by following the decision of the Karnataka High Court in Commissioner of Income Tax & Ors. Vs. Samsung Electronics Co. Ltd. & Anr., which was in favor of the Revenue. The assessee argued that the Tribunal misread the decision of the Delhi High Court in Director of Income Tax Vs. Ericsson A.B. and did not consider the decision of the Co-ordinate Bench in Allianz SE Vs. Asstt. Director of Income Tax. The Tribunal was reminded that in cases of conflicting views, the view favorable to the assessee should be adopted. 2. Rectification of the Tribunal's Order Due to Alleged Misreading and Non-Consideration of Relevant Judicial Decisions: The assessee filed Miscellaneous Applications under section 254(2) of the Income Tax Act, 1961, seeking rectification of the Tribunal's order dated 08-08-2013. The assessee highlighted that the Tribunal overlooked the decision in Allianz SE Vs. Asstt. Director of Income Tax and misread the decision in Director of Income Tax Vs. Ericsson A.B. The Department opposed the application, arguing that the facts in the assessee's case were distinguishable from those in Allianz SE Vs. Asstt. Director of Income Tax. The Tribunal, upon reviewing the submissions and various judicial decisions, concluded that the failure to consider the Co-ordinate Bench's decision and the misreading of the Delhi High Court's decision constituted a mistake apparent from the record. The Tribunal referred to a similar situation in the case of Reliance Communications Ltd., where the Mumbai Bench of the Tribunal accepted the Miscellaneous Applications and recalled its earlier order due to non-consideration of a relevant decision. This approach was subsequently upheld by the Bombay High Court, which emphasized that the Tribunal's jurisdiction to rectify mistakes under section 254(2) was valid and necessary for ensuring justice. Conclusion: The Tribunal acknowledged the mistake in its initial order by not considering the decision in Allianz SE Vs. Asstt. Director of Income Tax and misreading the decision in Director of Income Tax Vs. Ericsson A.B. Consequently, the Tribunal recalled its order dated 08-08-2013 and directed the office Registry to list the appeals for a fresh hearing. The Miscellaneous Applications filed by the assessee were allowed, ensuring that the assessee would be granted a fair opportunity to contest the appeals on merits. Order Pronounced: The order was pronounced on Wednesday, the 06th day of December, 2017.
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