9911796707
TMI Blog2022 (4) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... d for scrutiny and notices u/s 142(1), 143(2) of the Act was issued and served on the assessee. During the course of assessment proceedings, assessee inter alia submitted that the business model/process of the company remained the same as in earlier years. AO noticed that during the year under consideration assessee had entered into international transactions with its Associated Enterprises (AE). For determination of arm's length price for international transaction with AE, reference was made to TPO. The transactions between the AE and the assessee were examined by the TPO but no adverse inference was drawn by TPO. AO thereafter in the draft assessment order passed u/s 143(3)/144C dated 30.12.2017 proposed the total taxable income at Rs. 5,23,15,00,092/-. Aggrieved by the draft assessment order dated 30.12.2017, Assessee carried the matter before DRP. DRP vide order dated 02.07.2018 passed u/s 144C(5) directed the AO to complete the assessment as per the directions contained therein. Consequent to the directions of DRP, AO passed order dated 16.08.208 u/s 143(3)/144C(13) and determined the total income of the assessee at Rs. 5,23,150,092/-. Aggrieved by the aforesaid order of AO, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing penalty proceedings under Section 271 (1)(c) of the Act, since the Appellant is not liable to tax in India. The Appellant submits that each of the above grounds is independent and without prejudice to one another." 4. Before us, at the outset, Learned AR submitted that the effective grounds that required adjudication are Ground Nos. 1 to 6 and further the ground raised by the assessee in Ground Nos. 1 to 5 are interconnected and are with respect to the taxing of the sale of software and subscribers as royalty income. In view of the aforesaid submissions of Learned AR, we first proceed with deciding Ground Nos. 1 to 5. 5. AO noticed that during the year under consideration, assessee had received Rs. 26,28,99,905/- from the sale of software and received Rs. 259,679,810/- towards subscriptions. The assessee was asked to show-cause as to why the payment received by the assessee not be taxed as royalty to which assessee filed detailed submissions and it was inter alia submitted that the business model/processes of the assessee was similar to that of earlier years. It was further submitted that the payment received by the assessee did not constitute royalty and was therefore n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the paper book and from there he pointed that the matter was restored to the file of AO and the AO was directed to carry out the necessary exercise in accordance with the directions issued by the Coordinate Bench of Tribunal in A.Y. 2008-09 and in the light of the ration laid down by the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence P. Ltd. vs. CIT reported in (2021) 432 ITR 471 (Supreme Court). He submitted that consequent to the direction of the Tribunal, an order was passed by the AO u/s 254 r.w.s 143(3) of the Act vide order dated 19.03.2022 and the AO accepted the income declared by the assessee without making any addition. He placed on record the copy of the aforesaid order. He therefore submitted that since the issue in the year under consideration is identical to that of earlier years, therefore, following the order of the Co-ordinate Bench of Tribunal in earlier years, the matter be decided. 7. Learned DR on the other hand did not controvert the submissions made by Learned AR but however supported the order of lower authorities. 8. We have heard the rival submissions and perused the material available on record. The issue in the present g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Infrasoft Ltd. (supra), the matter was restored to the Assessing Officer for verification. The relevant observations of this Tribunal are being reproduced herein under: "48. Ground No. 3 and 4 of the appeal of the assessee are against the order of the Ld. assessing officer in holding that income from sale of software and income from sale of subscriptions is royalty income under article 12 (3) of the treaty and consequently liable to tax in India. Ld. Assessing Officer has discussed the whole gamut of the taxation of the software taxable as royalty in paragraph No. 6 of his order. Before us, Ld. Authorized Representative submitted that now the issue is squarely covered in favour of the assessee in view of the decision of the Hon'ble Delhi High Court in case of Director of income tax versus Infrasoft Ltd 264 CTR 329 (Delhi).He also submitted a chart during the course of hearing that compares the software considered by Hon'ble Delhi High Court and the features of the software licensing agreement in the present case. He has demonstrated that the issue involved is similar stating various aspects of software licensing agreement as under: Soft Limited Assessee • Clause 2(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Software except as reasonably necessary for backups. Neither Buyer nor any third party may: (a) reverse engineer or try to reconstruct or discover any source code or underlying ideas used in the Software; or (b) remove or conceal any product identification or proprietary notices contained in or on toe Software or products; or (c) except as allowed in Suppliers user documentation, modify or create a derivative work of any part of the Software. Buyer must not publish or provide any results of benchmark tests run on the Software to a third party without Suppliers prior written consent. The Software is Supplier's confidential property and is protected by copyrights and by one or more U.S. patents issued or pending. Buyer must take adequate steps to protect the Software from unauthorized use or disclosure." • Clause 2 of End User Software License : "Customer shall not, nor shall Customer allow any third party to: (i) decompile, disassemble, decrypt, extract, or otherwise reverse engineer or attempt to reconstruct or discover any source code or underlying ideas, algorithms, or file formats of or of any components used in the Software by any means whatever; or (ii) r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction of the Tribunal, AO passed order on 19.03.2022 u/s 254 r.w.s 143(3) of the Act for A.Y. 2013-14 and the AO has accepted the income declared by the assessee and no addition was made. Since the facts of the case in the year under consideration are identical to that of earlier years, we following the decision of Tribunal for A.Y 2013-14 and for similar reasons are of the view that no addition is required to be made. Thus the grounds of assessee are allowed. 10. Ground No.6 is with respect to the tax payable on interest income. 11. It was noticed that assessee had received interest on incorporate loan from NTPL amounting to Rs. 5,70,377/-. The AO taxed the interest income @40%. It is the contention of the assessee that the AO has considered it to be an interest income as referred in Section 115A(1)(a)(iiaa) of the Act and taxed it @ 40% as against the rate of 5% as envisaged under the provisions of Section 115A(1)(a)(iiaa) of the Act. He fairly submitted that the matter may be remitted back to the file of AO for necessary verification and directions to which Learned DR has not objection. 12. We have heard the rival submissions and perused the material on record. The issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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