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TMI Blog2015 (5) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... t the payment made for transfer of user rights of softwares and availing other services such as maintenance of software, training are not taxable under Article 12/13 of the double Taxation Avoidance Agreement (DTAA) between India and USA/UK/Singapore. 2. On the facts and circumstances of this case, the Ld. CIT(A) was not correct in holding that the payment made for transfer of user rights of softwares are not taxable as royalty under Article 12/13 of the double Taxation Avoidance Agreement (DTAA) between India and USA/UK/ Singapore, without verifying as to what rights are given to the assessee by the software suppliers, as to whether the software were customized for the use of assessee, the nature of maintenance/training services provided by the assessee, as to whether any personnel were deputed by the software suppliers and visited India for maintenance/training services. 3. On the facts and circumstances of this case, the Ld. CIT(A) was not correct in applying the decisions of Hon'ble Delhi High Court in the case Ericsson AB (ITA 507 of 2007) and other cases ignoring the factual differences. 4. On the facts and circumstances of this case, the Ld. CIT(A) erred in not consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the maintenance and training services provided by the services provider, which then are utilized continuously for its own use. 9. The appellant craves leave to add to or modify any of the grounds of appeal. 4. The grounds of appeal No.1 and 4 raised by the Revenue are general in nature and hence, the same are dismissed as general. 5. The issue raised in other grounds of appeals is in relation to payment made for transfer of user rights of software and whether the same are taxable as royalty under Article 12/13 of Double Taxation Avoidance Agreement (DTAA) between India and USA/UK/Singapore. In view of the non-deduction of tax at source, whether the assessee is liable to the demand raised under section 201(1) of the Act and interest under section 201(1A) of the Act. 6. Briefly, the facts of the case are that the Assessing Officer had sought information from the assessee seeking details of foreign remittances made w.e.f. 01.04.2007 to till date. The Assessing Officer noted that the assessee had made payments towards software purchases and related cost without deduction of tax. The claim of the assessee before the authorities below was that since the assessee was engaged in the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g purposes:- i) Purchase or license of computer software ii) Annual maintenance charges iii) Fees for accessing data base iv) Training and implementing charges v) Purchase of computer parts or hardware 9. With regard to payments made for purchase of computer parts and hardware, the CIT(A) held that TDS was not required to deduct on such payments and with respect to remaining payments made for acquiring license of software, the CIT(A) noted that it had been made taxable by the amendment to section 9(1)(vi) of the Act by way of amendment to Finance Act, 2012 with retrospective effect from 01.06.1976. Hence, the payments made for acquiring software could not be taxable under the Income-tax Act. It was further held by the CIT(A) that As far as the payments made towards Annual Maintenance charges, fees paid for accessing data base, training and implementing charges are concerned, the same would be taxable as a 'technical service' rendered by non-resident to the Appellant company under section 9(1)(vii) as 'fees for technical services'. These services are technical in nature and accordingly the provisions on 'fees for technical' services would be applicable and the same would be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act cannot be applied retrospectively. Reliance in this regard was placed on the ratios laid down in the following decisions:- i) Director of Income Tax Vs. Infrasoft Ltd. (2013) 96 DTR (Del) 113 ii) New Bombay Park Hotel Pvt. Ltd. Vs. ITO (Intr. Taxation) (2014) 61 SOT 105 (Mumbai) 14. We have heard the rival contentions and perused the record. The assessee for the year under consideration had made payments for the purchase of software and for other related costs as detailed as under:- Name of the company Nature of payment Date of payment Amount (Rs) Savvion Inc. USA Purchase of general software 04.05.2007 1,23,80,564 NCC Services Ltd, UK Annual fees for checking software 24.06,2007 1,14,044 Serena Software Pte Ltd Purchase of general software 04.09.2007 66,990 Cipher Soft Inc,USA Software License Fee-conversion of forms release 3.0 Java with XML Swing 08.11.2007 47,784 Ajira Technologies Inc, USA Purchase of software Licenseinternet use-pilot testing of BPO 14.11.2007 3,93,800 Ajira Technologies Inc, USA Purchase of software Licenseinternet use-pilot testing of BPO 07.02.2008 22,12,023 Total 1,52,15,205 15. The assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive effect. The Tribunal based its decision on a legal Maxim lex non cogit ad impossiblia meaning thereby that the law cannot possibly compel a person to do something which is impossible to perform. Amendment brought into the statute by Finance Act 2012 with retrospective effect from 01.06.1976 amendment does not create any liability against the assessee as the legal position prevailing at the relevant time was to be considered. Assesses was not liable for deduction of tax under section 195 of the Act. Channel Guide India Ltd. vs. ACIT, 139 ITD 49, relied on. Assessee cannot be made liable to deduct TDS on basis of subsequent amendment in respect of payment made to non-resident for providing technical designs and drawings services outside India in relation to project in India." 18. Following the ratio laid down by the Mumbai Bench of the Tribunal in New Bombay Park Hotel Pvt. Ltd. Vs. ITO (Intr. Taxation) (supra), we hold that no liability can be fastened on the assessee to deduct tax at source on the basis of subsequent amendments made in the Act, in relation to earlier payments made to Non-residents, when the said amendment was not in force. We confirm the order of CIT(A) albei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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