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2018 (7) TMI 1417 - HC - Income TaxTDS and the payment of royalty (on software) - Held that - This Court notices at the outset that the findings of the Settlement Commission fully accord with the law declared by this Court in ANZ Grindlays Bank vs. DCIT 2016 (3) TMI 56 - DELHI HIGH COURT and with DIT vs. Infrasoft Ltd. 2013 (11) TMI 1382 - DELHI HIGH COURT as far as the second issue urged with respect to royalty on software is concerned. Exclusion of the outstanding receivable of the Jharsuguda project - Held that - The exclusion of adjustments in respect of Jharsugoda project goes, the matter is factored. The case law as to the scope of the Court s remit under Article 226 of the Constitution of India while dealing with the orders of the Settlement Commission are categorical, it is only in the case where there is manifest and egregious findings of law that are erroneous; which call for interference. The other grounds on which the Court is permitted to interfere with the Settlement Commission s findings are non-application of mind or lack of bonafides, or as emphasised in CIT, Mumbai vs. Anjum M.H. Ghaswala 2001 (10) TMI 4 - SUPREME COURT and Brij Lal & Others vs. Commissioner of Income Tax, 2010 (10) TMI 8 - SUPREME COURT where no true and full disclosure was made by the assessee.
Issues:
1. Challenge to Settlement Commission's order for A.Y. 2009-10 to 2014-15. 2. Existence of permanent establishment, TDS, royalty, and Transfer Pricing issues. 3. Impugned order holding petitioner liable for total income. 4. Unsustainability of Settlement Commission's order on grounds of Section 40a(iii) violation and royalty dispute. 5. Exclusion of adjustments in respect of Jharsuguda project. Analysis: 1. The High Court addressed the challenge to the Settlement Commission's order for the Assessment Year (A.Y.) 2009-10 to 2014-15. The respondent, an entity headquartered in Germany, had a subsidiary in India providing consultancy services and entered into contracts for operation and maintenance services. A survey under Section 133A of the Income Tax Act led to the respondent applying under Section 245C(1) for the period in question. 2. The Settlement Commission dealt with various issues including the existence of a permanent establishment, TDS compliance, royalty payments, and Transfer Pricing matters. The final order held the petitioner liable for a total income of `53,75,27,974, with specific additions made based on the Commission's findings. 3. The Revenue challenged the Settlement Commission's order on grounds of Section 40a(iii) violation and a dispute regarding royalty payments. The Commission's decision to exclude adjustments in respect of the Jharsuguda project was also contested by the Revenue. 4. The Court found that the Settlement Commission's findings on TDS and royalty payments were in line with established legal precedents. However, regarding the exclusion of adjustments for the Jharsuguda project, the Court noted the Revenue's contention that the reasoning provided lacked logic and rationale. 5. The Court emphasized the limited scope of interference in Settlement Commission orders, highlighting that only manifest and egregious errors of law or non-application of mind warrant intervention. In this case, the Court found no vitiating factors disclosed by the Revenue that would justify interference with the Settlement Commission's order, leading to the dismissal of the petition.
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