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TMI Blog2024 (11) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act instead of royalty under section 9(1)(vi) of the Act. The AO after examining the agreement ideally ought to have filed a MA before the Tribunal seeking for an open remand so that the receipt could have been either taxed under FTS or under royalty . On perusal of the above Order of the Tribunal, it is clearly discernible that it is not an open remand but only a limited remand to examine the receipt whether it can be taxed in light of the judgment of Engineering Analysis Centre of Excellence (P.) Ltd., (supra) and other judicial pronouncements relied on by the assessee. AO cannot go beyond the directions given in the remand order and look into the matters which was not subject matter of appeal before the Tribunal. This proposition was affirmed by the Hon ble Allahabad High Court in the case of S. P. Kochhar [ 1982 (5) TMI 3 - ALLAHABAD HIGH COURT] wherein the scope of remand by the Tribunal was explained as when the Tribunal allows the appeal and sets aside the assessment and remands the case for making a fresh assessment, the power of the ITO is confined to such subject-matter only. He cannot take up the questions which were not the subject-matter of appeal before the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the belief that the aforesaid receipt is not taxable in India. Accordingly, in the return of income, assessee claimed refund of taxes that was paid by ABMC. 3. The AO passed Draft Assessment Order (DAO) on 27.12.2016 holding that the aforesaid receipts by assessee from ABMC is income in the nature of royalty which is chargeable to tax in India. The Dispute Resolution Panel (DRP) confirmed the DAO vide its directions dated 09.09.2017. Final Assessment Order (FAO) was passed on 26.09.2017. 4. Aggrieved by the same, assessee filed appeal before the Tribunal. A copy of the aforesaid master services agreement dated 01.04.2013 was filed before the Tribunal. The Tribunal vide its order dated 30.03.2022 in IT(IT)A No.2496/Bang/2017 for Assessment Year 2014-15 remanded the issue to the files of the AO. The relevant finding of the Bangalore Bench of the Tribunal remanding the matter to the AO reads as follows: 5. We have perused the submission advanced by both sides in light of records placed before us. The Ld.AR submitted that under India Malayasia DTAA as per Article 12(3) of the Royalty is defined as payments of any kind received as a consideration for the, use of , or the right to us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessee s, have no application in the facts of these cases. 169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 of the Income-tax Act. The answer to this question will apply to all four categories of cases enume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax, International Taxation, Circle 1(1), Bangalore (hereinafter referred to as AO for brevity) has erred in passing the assessment order under section 143(3) read with section 254 read with section 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as the Act for brevity) in the manner passed by him. The order passed being bad in law is liable to be quashed. 1.2. The Hon ble office of the Dispute resolution panel -1, Bangalore (hereinafter referred to as DRP for brevity) has erred in issuing its directions under section 144C(5) of the Act in the manner passed by it. 2. Ground relating to principles of natural justice- Section 143(3) rws 254 2.1. The learned AO has erred in passing the assessment order without considering the submissions of the Appellant and has erred in alleging that no response had been submitted by the Appellant. 3. Ground relating to assumption of excess jurisdiction 3.1. The learned AO has erred in a) passing the assessment order in contradiction to the directions issued by the Income Tax Appellate Tribunal, Bangalore Bench in its order dated 30.3.2022 in IT (IT)A No 2496/Bang/2017 for AY 2014-15. The issue of treating the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT was not an open remand but was limited to examine the chargeability of income earned under the Act / DTAA as royalty . It was submitted that this is clearly discernible in light of the judgment of the Hon ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd., Vs. CIT reported in (2021) 432 ITR 71 (SC) and other decisions relied on by the assessee. In this context, the learned AR placed reliance on the judgment of the Hon ble Delhi High Court in the case of LI Fung India (P.) Ltd., Vs. ACIT (2017) 298 CTR 427 (Del). It was submitted that Hon ble Apex Court had dismissed the SLP filed by the Revenue arising out of the aforesaid judgment of the Hon ble Delhi High Court reported in (2018) 95 taxmann.com 110 (SC). The learned AR had also placed reliance on the Order of the Pune Bench of the Tribunal in the case of Bhagwandas associates Vs. ITO reported in (2009) 119 ITD 1 (Pune) wherein it was held that the AO has to confine his examination only to the points on which remand has been made and not to the other issues. 8. The learned DR strongly supported the Orders of the AO and the DRP. It was submitted by the learned DR that during the course of original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O after examining the services agreement to tax the same as FTS under section 9(1)(vii) of the Act instead of royalty under section 9(1)(vi) of the Act. The AO after examining the agreement ideally ought to have filed a MA before the Tribunal seeking for an open remand so that the receipt could have been either taxed under FTS or under royalty . On perusal of the above Order of the Tribunal, it is clearly discernible that it is not an open remand but only a limited remand to examine the receipt whether it can be taxed in light of the judgment of the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd., Vs. CIT (supra) and other judicial pronouncements relied on by the assessee. 10. In such circumstances, AO cannot go beyond the directions given in the remand order and look into the matters which was not subject matter of appeal before the Tribunal. This proposition was affirmed by the Hon ble Allahabad High Court in the case of S. P. Kochhar Vs. ITO reported in (1983) 145 ITR 255 (All.) wherein the scope of remand by the Tribunal was explained as follows: When the remand is made by the Tribunal, the position is different. The powers of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion having far reaching effect and at the outset, we may like to place in plain words that the A.O do not have that vast jurisdiction. Rather, the A.O has a very limited jurisdiction while giving effect of an appellate order. At this juncture, we may also like to clarify ourselves that there are generally two types of directions of the appellate authority; first, specific relief pertaining to a specific addition, and, second; direction of denovo assessment afresh by setting aside an assessment order in its entirety. In a situation, falling under second category, since the direction is denovo assessment, on account of set aside of an order in totality, the A.O has to complete the assessment afresh as prescribed under law. Naturally, consequence is that the A.O has got jurisdiction of fresh assessment as if framing it a-knew, hence the jurisdiction lies with the A.O. at par with the fresh assessment. Again, we want to make ourselves clear that if a rider is provided by the appellate authority, then the A.O is judicially duty bound to refrain himself not to exceed his jurisdiction and to re-frame the assessment within the prescribed limits following the rider. 14. Therefore, the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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