2017 (7) TMI 960 - HC - Income Tax

Exemption claimed u/s 10B denied - Treatment to transfer of license to use software - sale OR royalty - Held that - The assessee had also filed some additional evidences before the CIT(A) in support of its claim of exemption under Section 10B of the Act. These submissions of the assessee were never filed before the Assessing Officer during the assessment proceedings and thus remained unexamined by the Assessing Officer. Accordingly, the CIT(A) called for the comments of the Assessing Officer. The CIT(A) passed order dated 18.09.2013 to the effect that no such remand report was received till the date of passing of order and allowed the appeal of the assessee on this issue. We find that in the circumstances of the case, the matter requires to be remanded to the Assessing Officer for deciding it afresh after considering the additional evidence produced by the assessee.

Issues:
1. Treatment of transfer of license to use software as sale or royalty.
2. Treatment of "Usher charges" on transfer of licenses as royalty.
3. Validity of assessment made under Section 144 of the Income Tax Act.
4. Consideration of additional evidence by the CIT(A) without the Assessing Officer's comments.
5. Decision on remand report submission timing by the Assessing Officer.
6. Appeal against the order of the CIT(A) dismissed by the Tribunal.

Analysis:
1. The appellant-revenue appealed against the ITAT order treating the transfer of software license as a sale instead of royalty, citing a Supreme Court decision. The appellant claimed the treatment as royalty was justified under Section 9 of the Act. The assessment was made under Section 144 due to non-submission of information by the assessee, leading to various disallowances. The CIT(A) allowed the appeal based on additional evidence submitted post-assessment. The Tribunal upheld the CIT(A)'s decision. The High Court remanded the matter to the Assessing Officer for fresh consideration after reviewing the additional evidence.

2. The issue of "Usher charges" on license transfer was raised, questioning their treatment as royalty under Section 9 of the Act. The appellant argued for a different classification based on explanations (2) & (5) to Section 9. The assessment under Section 144 included various additions, and the CIT(A) allowed the appeal without considering a remand report submitted post-decision. The Tribunal upheld the CIT(A)'s decision. The High Court set aside the orders and remanded the matter to the Assessing Officer for a fresh decision after considering all evidence.

3. The validity of the assessment under Section 144 was challenged due to the ex-parte nature of the proceedings. The appellant contended that disallowances were unjustified, and the CIT(A) allowed the appeal based on additional evidence submitted post-assessment. The Tribunal upheld the CIT(A)'s decision. The High Court remanded the matter to the Assessing Officer for a fresh decision considering all evidence.

4. The CIT(A) considered additional evidence submitted by the assessee without the Assessing Officer's comments, leading to the appeal by the Department. The Tribunal dismissed the appeal, upholding the CIT(A)'s decision. The High Court remanded the matter to the Assessing Officer for a fresh decision after considering all evidence and comments from both parties.

5. The timing of the submission of the Assessing Officer's remand report post-CIT(A) decision was disputed. The High Court found discrepancies in the timing and remanded the matter to the Assessing Officer for a fresh decision after considering all evidence and reports.

6. The appeal against the CIT(A)'s order dismissed by the Tribunal was reviewed by the High Court, which remanded the matter to the Assessing Officer for a fresh decision after considering all evidence and legal provisions.

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