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TMI Blog2020 (7) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 (hereinafter referred to as the Act ), dated 26.09.2019. The impugned order has been assailed before us by the assessee on the following grounds of appeal: Based on the facts and circumstances of the case, Dassault Systemes Solidworks Corporation ( assessee or appellant ), respectfully submits as under: 1. General 1.1. The order of the learned Assessing Officer (AO), is contrary, to canons of equity and natural justice, cont., to law and facts involved, not based on facts and circumstances of the case, contrary to mandatory, Provisions of Income'. Act, 1961 ( Act ), lacks jurisdiction and is liable to be struck down. 1.2. The learned AO has erred in law and on facts in computing the total income of the assessee at INR 63,71,64,640/-. 2. Taxability of receipts towards sale of software products 2.1. The Honourable DRP has erred in upholding the draft assessment order after rejecting the appellant's objections merely for the reason that the issue was decided against the appellant by the DRP in the earlier years, even as it noted that the binding decisions of the jurisdictional Mumbai Bench of the Income Tax Appellate Tribunal on identical issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chanical design solutions e.g CAD. The assessee company had on 30.03.2018 filed its return of income for A.Y 2016-17, declaring its total income at ₹ 1,17,41,400/-. On the basis of the return of income the assessee had claimed a refund of ₹ 6,59,89,780/- out of tax deducted at source of ₹ 6,72,23,330/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 3. During the course of the assessment proceedings it was observed by the A.O that the shrink-wrap application software developed and sold by the assessee was called SolidWorks , and was used for 3D modeling. It was observed by the A.O, that the software was sold by the assessee through distributors/resellers to the end-users in India. Accordingly, the assessee had entered into software distribution agreements with resellers in India who would buy shrink wrapped software from the assessee, and in turn sell the same to the customers in India. It was noticed by the A.O that the assessee had suo motto offered a sum of ₹ 1,17,41,400/- to tax as royalty received from one concern viz. M/s Geometric Ltd. However, it was observed by the A.O that as per Form No. 26A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... USA tax treaty. 4. The A.O after deliberating on the contentions advanced by the assessee, therein observed, that as per the License and Subscription Service Agreement , SolidWorks granted the end-user a non-exclusive nontransferable license to use the software and the printed or electronic documentation. I was observed by the A.O, that in lieu of the single user license which entitled the end-user to use one copy of the software or a multiple user or network license, as the case may be, the end-user would pay license fees. Admittedly, as claimed by the assessee, it was observed by the A.O that the software was owned by SolidWorks and the copyright, trademark and proprietary rights were retained by it and not transferred to the end-user. At the same time, the A.O held a conviction that the software was not goods or tangible property but was an intangible intellectual property, which being similar to patent, invention, design, secret formula etc. would fall within the meaning of process as mentioned in Explanation 2 to the definition of royalty under the Act. In support of his aforesaid view, the A.O relied on the CBDT Circular No. 621 of 19/12/1991 to hold that payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, backed by his aforesaid conviction, the DRP held the sale receipts of software to be in the nature of royalty, both under the India-USA tax treaty, as well under the Act. As regards the alternative claim of the assessee that if the sale receipts were to be held as royalty , then the same should be taxed at the rate of 10% under Sec. 115A of the Act, the same de hors availability of facts in support thereof was rejected by the DRP. 6. The A.O after receiving the order passed by the DRP u/s 144C(5) of the Act, dated 01.07.2019, therein passed the final assessment order u/s 143(3) r.w.s 144C(13) of the Act, dated 26.09.2019, and assessed the income of the assessee company at ₹ 63,71,64,640/-. 7. The assessee being aggrieved with the order passed by the A.O u/s 143(3) r.w.s 144C(13), dated 26.09.2019, has carried the matter in appeal before us. The ld. Authorised representative (for short A.R ) for the assessee, at the very outset submitted that the issue involved in the present appeal i.e as to whether or not the sale receipts from the licensees of the software was to be held as royalty , was squarely covered in the favor of the assessee by the orders of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products was not liable to tax as royalty. The precise observation of the Tribunal for the A.Y.2011- 12 order dated 28/02/2017 reads as under:- ISSUE NO.1 TO 7:- 4. Issue no. 1 to 7 are interconnected, therefore, are being taken up together for adjudication. Under these issues, it is to be determined that the receipt from the sale of software products to clients in India through its distributor / reseller amounting to USD 6.05 millions is in the nature of royalty or not. The learned representative of the assessee has argued that the case of the assessee has duly been covered by the decision of the Hon ble Income Tax Appellate Tribunal in the assessee s own case for the A.Y.2002-03 in ITA No. 3095/Mum/2007 order dated 15th December 2009 and for the A.Y.2005-06 in ITA No.5097/Mum/2008 order dated 1st April 2010 and for A.Y.2006-07 in ITA No.3219/Mum/2010 order dated 08.02.2012 and for A.Y.2007-08 in ITA No.8721/Mum/2010 order dated 31.03.2016 and for A.Y.2009-10 in ITA No.7790/Mum/2012 order dated 31.03.2016. Therefore, in the said circumstances, the order passed by the Assessing Officer on the direction of the DRP is wrong against law and facts and is liable to be set aside and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in this regard is hereby reproduced below:- 5. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. There is nothing much that we can add to such a w ell researched and erudite order either. The decisions of non jurisdictional High Courts, in favour of the revenue on this point, have already been dealt with in this order. As to what should be done in a situation in which there are conflicting views of Hon ble non jurisdictional High Courts and in which we do not have the benefit of guidance from Hon ble jurisdictional High Court, we can only add, with respectful concurrence, the views expressed below by the coordinate benches: ..It will be wholly inappropriate for us to choose views of one of the High Courts based on our perceptions about reasonableness of the respective viewpoint, as such an exercise will be de facto amount to sitting in judgment over the views of the High Courts something diametrically opposed to the very basic principles of hierarchical judicial system. We have to, with our highest respect of both the Hon le High Courts, adopt an objective criterion for deciding as to which of the Hon ble High Court should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Old Ltd. (supra) though a view in favour of the Revenue has been taken, but, the Hon ble Delhi High Court in the case of DIT Vs. Infrasoft Ltd. (supra) which is a latter decision and has discussed the Samsung case also has taken the view in favour of the assessee. The Hon ble Delhi High Court has taken the identical view favouring the assessee in the case of DIT Vs. Nokia Network (supra) and in the case of DIT Vs. Ericson A.B. (supra) also. The Hon ble Bombay High Court in the case of the Addl. Commissioner of Sales Tax Vs/ M/s. Ankit International, Sales Tax Appeal No.9 of 2011 vide order dated 15th September, 2011 while relying upon the decision of the Hon ble Supreme Court in the Commissioner of Income Tax V. Vegetable Product Ltd. (1973) 88 ITR 192 and in Mauri Yeast India Pvt. Ltd. Vs. Stte of U.P. (2008) 14 VST 259 (SC) : (2008) 5 S.C.C. 680 has held that, if two views in regard to the interpretation of a provision are possible, the Court would be justified in adopting that construction which favours the assessee. Reliance can also be placed in this regard on the 7 ITA No. 7027/MUM/2018 (A.Y: 2015-16) Dassault Systems Solidworks Corporation decision of Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be set aside on this issue. It is therefore held that receipt to the tune of ₹ 26,87,30,378/- on account of the receipt for sale of shrinkwrap software is not liable to tax in India. Therefore, the Assessing Officer is hereby directed to delete the full addition. Accordingly, these 8 ITA No. 7027/MUM/2018 (A.Y: 2015-16) Dassault Systems Solidworks Corporation issues are decided in favour of the assessee against the revenue. 6. In the result, the appeal filed by the assessee is hereby ordered to be Allowed. 4. We have gone through the orders of the Tribunal as cited by Ld. AR and Tribunal Order dated 28/02/2017, wherein the Tribunal have held that receipts from sale of Shrink-wrap software is not liable to tax in India accordingly, AO was directed to delete the addition so made on account of receipts for sale of Shrink-wrap software. Facts and circumstances in both the years under consideration are parimateria, therefore, respectfully following the order of the Tribunal in assessee s own case, we do not find any justification for taxing the receipt as taxable as royalty. 6. No distinguishing facts have been brought to our notice. Thus, facts being identical, respe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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