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TMI Blog2022 (5) TMI 1660X X X X Extracts X X X X X X X X Extracts X X X X ..... being a copy righted article would not be construed as royalty under the provisions of section 9(1)(vi) of the Act as well as Article 12(13) of the DTAA between India and the USA. Co-ordinate Bench of the Tribunal also held that assessee being a non resident company incorporated in the USA would not be liable to tax in India in respect of the receipt from the sale of software by treating the same in the nature of royalty and as such ordered to be deleted. Merely because of the fact that the Revenue has gone in appeal in the earlier years the findings returned by the co-ordinate Bench of the Tribunal cannot be brushed aside. Assessee appeal allowed. - Shri M. Balaganesh, Accountant Member And Shri Kuldip Singh, Judicial Member For the Assessee : Shri Pranith Golecha, A.R. For the Revenue : Shri Milind Chavan, Sr. D.R. ORDER PER : KULDIP SINGH, JUDICIAL MEMBER: The appellant, M/s. Dassault Systemes Solid Works Corporation (hereinafter referred to as the assessee ) by filing the present appeal, sought to set aside the impugned order dated 24.02.2021 passed by Commissioner of Income Tax (Disputes Resolution Panel-1), Mumbai [hereinafter referred to as the CIT(DRP)] qua the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned AO ought to have appreciated that the Hon'ble Supreme Court in the recent case of Engineering Analysis Centre of Excellence Private Limited (Civil Appeal No(s). 8733-8734/2018) (vide order dated 02 March 2021) held that the amount paid by resident Indian end users/ distributors to non-resident computer software manufacturers/ suppliers, is not payment for royalty for the use of copyright in the computer software, and held that such income shall not taxable in the hands of the nonresident, 2.7. The AO erred in levying interest under section 234A of the Act. 2.8. The AO erred in levying interest under section 234B of the Act. Each of the above ground is independent and without prejudice to the other grounds of appeal preferred by the appellant. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal, so as to enable the Honourable Income Tax Appellate Tribunal to decide this appeal according to law. 2. Briefly stated facts necessary for adjudication of the controversy at hand are : assessee is a non resident company incorporated in USA, which is into the business of dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being in the nature of royalty under the provisions of section 9(1)(vi) of the Act as well as article 12(13) of the Double Taxation Avoidance Agreement (DTAA) between India and the USA. 8. The Ld. D.R. for the Revenue though admitted the fact that in the earlier years issue has already been decided in favour of the assessee by the Tribunal but the department intends to keep this issue alive as it has already gone in appeal against the earlier order before the Hon ble Bombay High Court. 9. We have perused the order passed by the co-ordinate Bench of the Tribunal in assessee s own case for A.Y. 2016-17 available at page 8 to 13 of the case law paper book, which is on the identical issue in the identical facts and circumstances of the case. No distinguishable facts have been brought on record by the Ld. Lower Revenue Authorities. Co-ordinate Bench of the Tribunal in order dated 30.06.2020 for A.Y. 2016-17 held that income derived by the assessee from the sale of shrink wrapped software being a copy righted article would not be construed as royalty by returning following findings: 9. We have heard the authorized representatives for both the parties, perused the orders of the lower aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not liable to be treated as royalty. It is also argued that when no patent right was sold however computer programs were sold which could not be taxed in view of the provision u/s.9(1) of the Act therefore in the said circumstances the amount in question is not liable to be treated as royalty. However, on the other hand, the learned representative of the department has refuted the said contentions and argued that the Hon ble Karnataka High Court has decided the issue in favour of the revenue in the cases of CIT Vs. Synopsis International Old Ltd., 212 Taxman 0454 (Kar. HC), dated 03.08.2010, CIT V. Samsung Electronics Co. Ltd. Others, (2011) 345 ITR 0494, Kar HC, dated 15.10.2011, CIT V. Wipro Ltd. (2011), 355 ITR 0284 (Kar) / 203 Taxman 621 (Kar.) HC, dated 15.10.2011 and CIT Vs. CGI Information Systems and Management Consultants (P) Ltd., (2014) 48 Taxmann.com 264 (Kar), dated 09.06.2014. It is also specifically argued that the Jurisdictional Tribunal in case of the DIT(IT) Vs. Reliance Infocomm Ltd. (Mum Trib) dated 06.09.2013 has followed the decision of Hon ble Karnataka High Court in the case of CIT Vs. Synopsis International Old Ltd., 212 Taxman 0454 (Kar. HC), dated 03.08.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by us. 8. We find guidance from the judgment of Hon ble Supreme Court in the matter of CIT Vs. Vegetable Products Ltd. 1973 CTR (SC) 177 : (1972) 88 ITR 192 (SC). Hon ble Supreme Court has laid down a principle that if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted . This principle has been consistently followed by the various authorities as also by the Hon ble Supreme Court itself. In another Supreme Court judgment Petron Engg. Construction 6 ITA No. 7027/MUM/2018 (A.Y: 2015-16) Dassault Systems Solidworks Corporation (P.) Ltd. Anr. Vs. CBDT Ors. (1998) 75 CTR (SC) 20: (1989) 175 ITR 523 (SC), it has been reiterated that the above principle of law is well established and there is no doubt about that. ITA No. 936/M/2015 A.Y. 2011-12 8 Hon ble Supreme Court had, however, some occasions to deviate from this general principle of interpretation of taxing statute which can be construed as exceptions to this general rule. It has been held that the rule of resolving ambiguities in favour of taxpayer does not apply to deductions, exemptions and exceptions which are allowable only when plainly authorized. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Board and another Vs. M/s. Usha Martin Industries and another : (1997) 5 SSC 289. We accordingly adopt the construction in favour of the assessee. [Capgemini Business Services India Ltd. Vs. ACIT (TS 100 ITAT 2016 (Mum)] 6. In view of the above discussion and having noted that there is no material difference in the facts of the case for this year vis- -vis the facts of the assessment year 2006-07 as discussed above, respectfully following the views of the coordinate benches, we uphold the grievance of the assessee. It is, therefore, held that the receipts of Rs. 19,20,14,000/- on account of receipts for software are not exigible to tax in India. The Assessing Officer is, therefore, directed to delete the impugned addition of Rs. 19,20,14,000/. 7. In the result, the appeal is allowed. Pronounced in the open court today on 31st day of March, 2016. 5. However, the present case has been decided in view of the latest law settled by the Hon ble Delhi High Court in case of Ericsson AV (343 ITR 470) (Del.) On appraisal of the above mentioned finding, it came into the notice that the Hon ble Delhi High Court in case of DIT Vs. Infrasoft Ltd. 264 CTR 329 (Del.) and in case of CIT Vs. Vege ..... 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