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2019 (3) TMI 1705 - AT - Income TaxRoyalty receipt - Receipts towards access to use software and IT support services being reimbursement of cost - India-Netherland DTAA - HELD THAT - As decided in assessee's own case 2020 (1) TMI 573 - ITAT MUMBAI and 2018 (5) TMI 1957 - ITAT MUMBAI no merit in the action of lower authorities for holding that payment received by assessee constitutes income or alternatively treating the same as royalty under Article 12(4) of India-Netherland DTAA. IT Support Services treated as Fees for Technical Services (FTS) under the Income-tax Act as well as in India-Netherlands DTAA - HELD THAT - As decided in assessee's own case 2020 (1) TMI 573 - ITAT MUMBAI and 2018 (5) TMI 1957 - ITAT MUMBAI No merit in the action of lower authorities for treating the receipt as fees for technical services despite the concept of make available clause contained in article 13(4)(c) of the treaty. Accordingly, AO is directed to delete the addition so made.
Issues Involved:
1. Assessment of total income. 2. Receipts towards access to use software and IT support services as income. 3. Receipts towards access to use software held as 'royalty' under the India-Netherlands DTAA. 4. Receipts towards IT support services held as 'Fees for Technical Services' (FTS) under the Act and India-Netherlands DTAA. 5. Non-granting of credit for Tax Deducted at Source (TDS). 6. Levying of interest under section 234B of the Act. Detailed Analysis: 1. Assessment of Total Income: The appellant contested the assessment of total income at ?1,80,29,88,734 against NIL total income offered in the return of income. The Tribunal did not need specific adjudication on this general ground. 2. Receipts Towards Access to Use Software and IT Support Services as Income: The appellant argued that the payments received were reimbursements in the nature of cost allocation without markup and hence did not constitute 'income' under section 2(24) of the Act. The Tribunal noted that the appellant raised alternative grounds related to the use of software treated as 'royalty' under the India-Netherlands DTAA. Once these grounds (Grounds 3 & 4) were decided in favor of the appellant, Ground No. 2 would become academic. 3. Receipts Towards Access to Use Software Held as 'Royalty' under the India-Netherlands DTAA: The appellant contended that payments received for access to use copyrighted software should not be construed as royalty taxable under Article 12 of the India-Netherlands DTAA. The Tribunal noted that similar grounds were raised in earlier years (A.Y. 2012-13 & 2013-14) and decided in favor of the appellant. The Tribunal followed the decision of the coordinate bench, which held that the payments did not amount to 'royalty' as defined under the DTAA. The Tribunal allowed Grounds 3 and 4 in favor of the appellant. 4. Receipts Towards IT Support Services Held as 'Fees for Technical Services' (FTS) under the Act and India-Netherlands DTAA: The appellant argued that IT support services did not 'make available' any technical knowledge, experience, skill, know-how, or processes to the service recipient under Article 12 of the India-Netherlands DTAA and hence should not be subject to tax in India. The Tribunal noted that similar grounds were raised in earlier years and decided in favor of the appellant. The Tribunal followed the decision of the coordinate bench, which held that the receipts did not constitute FTS under the DTAA. The Tribunal allowed Grounds 5 and 6 in favor of the appellant. 5. Non-Granting of Credit for Tax Deducted at Source (TDS): The appellant submitted that a rectification application was filed before the lower authorities, and appropriate credit for TDS was granted. Therefore, this ground was not pressed. 6. Levying of Interest under Section 234B of the Act: The appellant contested the levy of interest under section 234B of the Act. The Tribunal noted that this ground was consequential in nature and did not need adjudication. Conclusion: The Tribunal allowed the appeal of the appellant, deciding Grounds 3, 4, 5, and 6 in favor of the appellant, and noted that Grounds 1, 2, 7, and 8 did not need specific adjudication or were not pressed. The order was pronounced in the open court on 05/03/2019.
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