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TMI Blog2024 (9) TMI 1442X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Naveen K. Agarwal, CA For the Department : Shri Vijay B. Vasanta, CIT-DR ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- The above captioned appeal by the assessee is preferred against the order of the Assessing Officer dated 20.03.2024 framed u/s 147 r.w.s 144C(13) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to A.Ys 2017-18. 2. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules. Relevant judicial decisions considered wherever necessary. 3. The grounds of appeal raised by the assessee read as under: 1. The Ld. AO erred in initiating and completing the assessment without possessing information as required under explanation 1 to section 148 of the Act, rendering such assessment to be void ab initio and liable to be quashed. 2. The Ld. AO while issuing the notice under section 148 of the Act, 148A(b) of the Act and passing the order under section 148A(d) of the Act erred in not obtaining prior approval of the competent authority as specified under Section 151 of the Act and therefore the said notices a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under the Article 12 under the India-US tax treaty and taxing the said income at a higher rate of 40%. 10. The Ld. AO erred in levying interest under section 234B and 234C of the Act. 11. The Ld. AO erred in law on initiation of penalty proceedings under section 270A of the Act. 4. M/s Qualcomm is a non-resident company incorporated under the laws of USA. It is engaged in the business of design, development, manufacture, marketing and licensing of digital wireless telecommunication products and services based on its code division multiple access (CDMA) technology. M/s Qualcomm Incorporated is a world leader in 3G, 4G, 5G and next generation wireless technologies. M/s Qualcomm Incorporated includes Qualcomm licensing business, QTL and the vast majority of it s patent portfolio. QTL grants licenses or otherwise provides rights to use portions of their intellectual property portfolio, which among other rights include certain rights essential to and/or useful in the manufacture and sale of certain wireless products, including, without limitation, products implementing CDMA 2000, WCDMA, CDMA, TDD and/ or LTE standards and their derivatives. 5. The Revenue has made recurring additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the submissions of the ld. counsel for the assessee that the issue is squarely covered in favour of the assessee and against the Revenue by the order of the Tribunal [supra]. The Tribunal has given a categorical finding at Para 11 to 16 at page 36-56 of its order which reads as under: 11. We have considered rival submissions in the light of decisions relied upon and perused the materials on record. As could be seen from the facts on record, the assessee has offered the royalty income received from OEMs carrying on business in India through their PEs. Whereas, in respect of royalty received from OEMs located outside having no PE in India, the assessee has not offered royalty income to tax. It is the say of the assessee that it has granted patent license of subscriber units/equipments to OEMs, who manufacture them by incorporating/embedding the patents license given by the assessee. The manufactured handsets/equipments also incorporate/embed the chipsets sold by the QCT Division of the assessee, containing the CDMA technology. Whereas, the Assessing Officer has observed that since the subscriber units(handsets/equipments) containing CDMA technology/patent is ultimately used in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econd one for assessment years 2005-06 to 2008-09, it is observed in the order passed for the AY 200-01 to 2004-05, the Tribunal has categorically held that foreign OEM s since have not carried on any business in India, it cannot be said that such OEMs have used assesses patents for the purpose of any business by them in India. The Tribunal has further held that by utilizing the patents of the assessee, OEMs have not earned any income from a source in India. Therefore, the royalty income cannot be taxable under the first limb of section 9(1)(vi)( c) of the Act. Even in the second order passed for assessment years 2004-05 to 2005-06, the Tribunal has agreed with the observation made in the earlier order to the effect that as long as patents are used in the manufacturing process which has taken place outside India, such royalty income cannot have tax implications in India. 15. As could be seen, the assessing officer, as discussed earlier, has laid much emphasis on the report of technical experts for the assessment year 2004-05 to 2008-09. However, the crucial issue which arises is whether that technical report can be utilized for deciding the issue in the impugned assessment years. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant AY 2017-18, has also noted the DRP s findings as under: Since both the AY 2016-17 and 2017-18 are together with the DRP, directions given by the DRP for AY 2014-15 are being issued for both the AY 2016-17 and 2017-18.As per the submissions of the assessee and as per record, the statement of facts and grounds of objection are similar to that of AY 2015-16. Though the grounds of objection for AY 2015-16 are worded differently than grounds of objection for AY 2016- 17 and 2017-18, in essence issues are same for both years. For AY 2017-18, to maintain consistency, DRP is using same orders mutatis mutandis . 15. Respectfully following the decision of the co-ordinate bench [supra]that when the entire edifice of the present additions made by the Assessing Officer is based on the assessment order passed for the assessment year 2012-13, which now stands reversed by the Tribunal (supra), in our view, the addition made by the Assessing Officer are not sustainable , this grievance is allowed in favour of the assessee and against the Revenue. Accordingly, we direct the Assessing Officer to delete the additions made u/s 9(1)(vi)(c). Accordingly, Ground Nos. 3 to 9 are allowed. 16. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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