2015 (2) TMI 1391 - AT - Income Tax

Royalty receipts - Taxability of consideration received for facilitating grant of user charges in software to Indian entities as per the provisions of Indian-US Tax Treaty - HELD THAT - The issues raised by the assessee are decided against the assessee following the decision of Tribunal in assessee s own case relating to assessment years 2004-05 and 2006-07 2013 (8) TMI 952 - ITAT- PUNE payment made by the respondents to the non-resident supplier amounts to royalty and is rightly brought to tax in India. The assessee is not entitled to get the immunity of the DTAA between India and USA. Since there is no change in the facts and circumstances. However, in view of the declaration made by the assessee in prescribed Form No.8 in terms of section 158A(1) of the Act, the Assessing Officer is directed to apply the decision of the Hon ble Bombay High Court and / or Hon ble Supreme Court of India, on the said issues being decided in assessee s own case, relating to assessment years 2004-05 and 2006-07. The grounds of appeal Nos.1 to 3 raised by the assessee are accordingly, dismissed.

Summary

Issues:
1. Taxability of consideration received for facilitating grant of user charges in software to Indian entities under Indian-US Tax Treaty.
2. Applicability of previous Tribunal decisions and High Court judgment on similar issues.

Issue 1: Taxability of consideration under Indian-US Tax Treaty:
The appeal was against the order of the Dy. Director of Income Tax regarding the taxability of consideration received for facilitating grant of user charges in software to Indian entities under the Indian-US Tax Treaty for assessment year 2007-08. The Assessing Officer and the Dispute Resolution Panel treated the receipt as taxable in India as royalty under the Income-tax Act and Article 12 of the Double Taxation Avoidance Agreement between India and the USA. The Authorized Representative for the assessee argued that a similar issue was decided against the assessee by the Tribunal in previous cases. The Hon'ble Bombay High Court had admitted the appeal but did not alter the decision of the Tribunal. The assessee filed an application under section 158A(1) of the Act, pointing out the pending question of law before the High Court, and requested the decision to be applied in the present case. The Assessing Officer admitted the correctness of the claim based on the pending decision.

Issue 2: Applicability of previous Tribunal decisions and High Court judgment:
The Tribunal decided against the assessee on the grounds of appeal related to taxability, following its previous decisions in the assessee's cases for assessment years 2004-05 and 2006-07. The Tribunal directed the Assessing Officer to apply the decision of the Hon'ble Bombay High Court and/or the Hon'ble Supreme Court of India on the issues decided in the assessee's previous cases. The grounds of appeal raised by the assessee were dismissed based on the declaration made by the assessee in the prescribed Form No.8 under section 158A(1) of the Act. The appeal was dismissed, subject to the observations made in the judgment. The ground of appeal against the levy of interest under sections 234B and 234C of the Act was also dismissed as consequential.

In conclusion, the appeal filed by the assessee was dismissed based on the taxability issue under the Indian-US Tax Treaty and the applicability of previous Tribunal decisions and the High Court judgment on similar issues. The Tribunal directed the Assessing Officer to apply the decision of the higher authorities on the taxability issue as decided in the assessee's previous cases. The judgment provided a detailed analysis of the legal arguments and the application of relevant provisions under the Income-tax Act and the Double Taxation Avoidance Agreement between India and the USA.