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TMI Blog2022 (4) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of Section 115A(1)(a)(iiaa) - HELD THAT:- In view of the agreement of Learned AR and Learned DR for restoring the matter back to the file of AO for necessary verification, we restore the issue to the file of AO for carrying out necessary verification and thereafter to bring it to tax in accordance with law. Needless to state that the AO shall grant adequate opportunity of hearing to the Assessee. Assessee is also directed to promptly furnish all the required details called for by the authorities. Thus the ground of the assessee is allowed for statistical purposes. - ITA No. 6270/Del/2018 - - - Dated:- 8-4-2022 - SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER Assessee by : Shri Nageshwar Rao, Adv. Shri Deepika Agarwal, Adv Revenue by : Ms. Anupama Anand, CIT-DR ORDER PER ANIL CHATURVEDI, AM : This appeal filed by the assessee is directed against the order dated 16.08.2018 of the Deputy Director of Income Tax, New Delhi under section 143(3)/144C(13) of the Income Tax Act pursuant to the direction of Dispute Resolution Panel (DRP) 2, New Delhi order dated 11.07.2018 for Assessment Year 2014-15. 2. Brief facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aty and consequently liable tax in India. 4. Without prejudice to the above grounds, the learned AO has erred, in law and in facts, by calculating tax payable on additions made on income from sale of subscription at the rate of 40% (excluding cess and surcharge) instead of calculating at 10% on the gross basis as per Article 12 of the Treaty. 5. Without prejudice to the above grounds, the learned AO has erred, in law and in facts, by calculating tax payable on additions made on income from sale of software at the rate of 40% (excluding cess and surcharge) instead of calculating at 10% on the gross basis as per Article 12 of the Treaty. 6. Without prejudice to the above grounds, the learned AO has erred, in law and in facts, by calculating tax payable on interest income in the nature referred to in Section 115A(1)(a)(iiaa) of the Act at the rate of 40% (excluding cess and surcharge) as against the rate of 5% (excluding cess and surcharge) as envisaged under the provisions of Section 115A(1)(a)(iiaa) of the Act. 7. The learned AO has erred, in law and in facts, in levying interest under Section 234A of the Act, amounting to INR 32,07,834, disregarding the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions of the assessee were not found acceptable to AO. AO noted that the activities undertaken by the assessee during the relevant assessment year was identical to the activities undertaken by the assessee in A.Y. 2008-09, 2010-11 and 2011-12. He was further of the view that software receipts and subscription receipts were in the nature of royalty and taxable @10% on the gross basis as per Article 12 of the India- Netherlands treaty. The AO in the draft assessment order thus proposed the aforesaid addition. Aggrieved by the proposed addition, assessee carried the matter before DRP. Before DRP assessee inter alia submitted that in assessee s own case for A.Y. 2008-09 2010-11, the Hon ble Delhi High Court had ruled in favour of the assessee on the appeal filed by the department. DRP noted that against the order of Hon ble High Court on the issue of royalty, the competent authority was contemplating to file SLP before the Hon ble Apex Court. It accordingly upheld the proposed addition by AO. The AO thereafter in the assessment order framed u/s 143(3)/144C(13) of the Act dated 16.08.2018 treated the amount received from software and subscription receipts as royalty and taxed it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f subscription receipts as the royalty income under Article 12(3) of the India-Netherlands DTAA. The Assessing Officer, vide para 12 of the impugned final assessment order, has considered the subscription revenue of ₹ 16,43,90,916/- in the nature of royalty and made addition to the extent of ₹ 14,99,39,032/- in terms of Article 7 read with Article 12 of the DTAA. The Ld. AR submitted that the Assessing Officer has considered the addition on the basis of the view taken in the assessment order for Assessment Year 2008-09 and 2010-11. It was further submitted by the Ld. AR that identical issue had come up for consideration before this Tribunal in Assessment Years 2008-09 and 2010-11 wherein the issue was restored to the file of the Assessing Officer with the direction to verify whether the facts of the case were identical to those as decided by the Hon ble Delhi High Court in the case of Infrasoft Ltd. reported in 264 CTR 329 (Delhi). It was accordingly submitted that this issue also may be similarly restored as per the order of the Co-ordinate Bench in Assessment Year 2008-09 and 2010-11. 7.0 Per contra, the Ld. CIT-DR relied upon the assessment order. 8.0 Hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy, decompile. disassemble or reverse-engineer the Software without infrasoft s written consent. The Licensee's rights shall not be restricted by this Clause 2(h) to the extent that local law grants Licensee a right to do so for the purpose of achieving interoperability with other software and in addition thereto Infrasoft undertakes to make information relating to interoperability available to Licensee subject to such reasonable conditions as Infrasoft may from time to time impose including a reasonable fee for doing so. To ensure Licensee receives toe appropriate information, Licensee must first give Infrasoft sufficient details of its objectives and the other software concerned. Requests for the appropriate information should be directed to the Vice president Technical of Infrasaft • Clause 2(f) of the Infrasoft License Agreement is quoted as below: (f) The Software shall be used only for Licensee's own business as defined within the Infrasoft License Schedule and shat? not, without prior written consent from Infrasoft; (i) be loaned, rented, sold, transferred to any third party (ii) used by any parent, subsidiary or affiliated entity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NSE IS PERSONAL TO CUSTOMER.. CUSTOMER SHALL NOT ASSIGN , SUBUCENSE OR TRANSFER THE LICENSE OR AGREEMENT WITHOUT NET APRS PRIOR WRITTEN APPROVAL; ANY ATTEMPT TO DO SO SHALL BE VOID. 49. The revenue is also not seriously disputed before us that the issue is not covered by the decision of the Hon ble Delhi High Court. However the issue needs to be verified by the Ld. assessing officer whether the licensing agreement involved in the present appeal is similar to the issue decided by the Hon ble Delhi High Court. Therefore we set aside ground3 and 4 of the appeal of the assessee back to the file of the Ld. assessing officer to decide the issue afresh considering the decision of the Hon ble Delhi High Court. In the result ground No. 3 and 4 of the appeal of the assessee allowed with above direction. 8.1 It is also pertinent to note that the issue of software royalty was recently adjudicated by the Hon ble Apex Court in the case of Engineering Analysis Center of Excellence Pvt. Ltd. vs. CIT (2021) 432 ITR 471 (SC). The Hon ble Apex Court, in its detailed judgment, has analyzed various aspects of the issue taking into consideration end user license, Copy Right ..... X X X X Extracts X X X X X X X X Extracts X X X X
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