9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (11) TMI 951 - AT - Income TaxIncome deemed to accrue or arise in India - Taxability of reimbursement received on account of SAP Software and Microsoft License Fee - Royalty receipts u/s 9(1)(vi) as well as Article 12 of the DTAA stands - HELD THAT - DR could not dispute the fact co-ordinate bench has categorically held that the issue of taxability of reimbursement of software licence fees stands covered in Assessee s favour by the Hon ble Supreme Court s decision in the case of Engineering Analysis Centre of Excellence (P.) Ltd. 2021 (3) TMI 138 - SUPREME COURT Taxation of payment received from PVM India on account of Information Communication Technology Service Charges ( ICT Service Charges ) as FTS under Article 12 of DTAA - Where the DRP had directed the AO on the basis of the decision of the Tribunal in assessee s own case for AY 2017-18 to examine the issue, the controversy before the AO was limited. AO had not examined the factual aspects of the agreements and nature of services in context to make available clause introduced by the amendment dated 30.08.1999 in India Netherlands DTAA. As we go through the decision in favour of assessee in AY 2017-18 we find that the Mumbai Bench of the Tribunal decision in SEA Hygiene Products 2021 (1) TMI 323 - ITAT MUMBAI had been relied and squarely applied without any examination of the assessee specific agreements and nature of services. It is not the case before us that the nature of services in the case of SEA Hygiene Products are similar to that of assessee. On the other hand the decision in SEA Hygiene Products (supra) was based on principles of law laid in the case of Steria India Ltd. 2016 (8) TMI 166 - DELHI HIGH COURT and accordingly in SEA Hygiene Products (supra) it was held that the provisions of Article 12(4)(b) of the Indo-Portuguese Treaty being restricted in scope vis- -vis Article 12(3)(b) of Indo-Swedish Tax Treaty will apply in the Indo-Swedish Tax Treaty as well and it was pari materia applied in the case of the assessee for Indo- Netherlands Treaty also. There was no plea on the basis of the said benefit being independently available under India Netherlands DTAA, through an amendment vide Notification No. S.O. 693(E), dated 30.08.1999, issued under section 90(1) of the Act. Consequently we are of the considered view that as with regard to these grounds 11 to 13(d), the contentions as raised cannot be sustained without there being an opportunity with the AO, to examine the factual aspects involved about the nature of agreements and services in terms of the amendment dated 30.08.1999 in India Netherlands DTAA, with regard to restricted scope of make available clause. Issue is restored to the files of AO, to reexamine the issue in the light of aforesaid observation of this bench.
Issues Involved:
1. Jurisdictional issue regarding Document Identification Number (DIN) compliance. 2. Taxability of software license fees as royalty under the Income Tax Act and India-Netherlands DTAA. 3. Taxability of Information & Communication Technology (ICT) service charges as Fees for Technical Services (FTS) under the India-Netherlands DTAA. 4. Incorrect levy of interest under section 234A of the Act. 5. Initiation of penalty proceedings under section 270A of the Act. Issue-wise Detailed Analysis: 1. Jurisdictional Issue Regarding DIN Compliance: The appellant contended that the directions issued by the Dispute Resolution Panel (DRP) were invalid due to the absence of a valid system-generated Document Identification Number (DIN), as mandated by the CBDT Circular No. 19/2019. However, these grounds were not pressed during the appeal, indicating that they were not pursued further in this proceeding. 2. Taxability of Software License Fees as Royalty: The appellant challenged the assessment of software license fees as royalty under section 9(1)(vi) of the Income Tax Act and Article 12 of the India-Netherlands DTAA. The appellant argued that the software license fees should not be classified as royalty, citing previous favorable decisions in their own case for earlier assessment years. The Tribunal found that the issue of taxability of software license fees had been previously decided in favor of the appellant by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT. As such, the Tribunal upheld the appellant's position and deleted the addition made by the Assessing Officer (AO). 3. Taxability of ICT Service Charges as FTS: The appellant contested the classification of ICT service charges as Fees for Technical Services (FTS) under Article 12 of the India-Netherlands DTAA. The appellant argued that the services did not meet the "make available" criteria required for classification as FTS. The Tribunal noted that the DRP had directed the AO to verify whether the decision in the appellant's case for AY 2017-18 had been accepted by the revenue and whether the facts were similar. The Tribunal observed that the AO did not examine the factual aspects of the agreements and nature of services in the context of the "make available" clause introduced by the amendment dated 30.08.1999 in the India-Netherlands DTAA. Consequently, the Tribunal restored this issue to the files of the AO for re-examination in light of the observations made. 4. Incorrect Levy of Interest Under Section 234A: The appellant's challenge regarding the incorrect levy of interest under section 234A was noted as consequential, meaning it would depend on the outcome of the primary issues. Since the Tribunal partly allowed the appeal, this issue would need to be recalculated based on the revised assessment. 5. Initiation of Penalty Proceedings Under Section 270A: The initiation of penalty proceedings under section 270A was also noted as consequential. Given the Tribunal's decision to partly allow the appeal, the initiation of penalty proceedings would be reconsidered following the reassessment by the AO. Conclusion: The Tribunal allowed the appeal partly, sustaining the appellant's grounds regarding the non-taxability of software license fees as royalty and remanding the issue of ICT service charges classification as FTS back to the AO for further examination. The jurisdictional issues and the initiation of penalty proceedings were not pressed and were deemed consequential. The order was pronounced in the open court on 18/09/2024.
|
