ACIT, CIRCLE-10(1) NEW DELHI, C.R BUILDING ITO V. IGROUP INFOTECH INDIA PVT. LTD. , LAJPAT NAGAR

ITA 263/DEL/2024

AI Insights

The case involves two appeals by the Revenue against Igroup Infotech India Pvt Ltd concerning the assessment years 2015-16 and 2017-18. The core issue was the classification of payments for software solutions, specifically Turnitin and Ithenticate, and whether these payments constituted 'royalty' under section 9(1)(vi) of the Income-tax Act, 1961, thereby attracting TDS requirements. The Assessing Officer had added substantial amounts to the assessee's income for not deducting TDS on these payments, considering them taxable under the India-Singapore DTAA. However, the Tribunal, referencing a Supreme Court decision, found in favor of the assessee, stating that such payments do not amount to royalty and thus are not taxable in India.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46889 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Other Referred Cases: Engineering Analysis Centre of Excellence Pvt Ltd 432 ITR 471
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PARKASH
• Assessee Lawyers: K. R. MANJANI
• Keywords: TDS; Double taxation relief
• Section: 195

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘C’ BENCH, NEW DELHI BEFORE SHRI YOGESH KUMAR US, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No.1155/DEL/2024 [A.Y. 2015-16] ITA No. 263/DEL/2024 [A.Y. 2017-18] The A.C.I.T Vs. Igroup Infotech India Pvt Ltd Circle – 10(1) 119, Vinobapuri, Lajpat Nagar II New Delhi New Delhi PAN: AABCI 7221 B CO No. 34/DEL/2024 (A/o ITA No.1155/DEL/2024 [A.Y. 2015-16]) Igroup Infotech India Pvt Ltd Vs. The A.C.I.T 119, Vinobapuri, Lajpat Nagar II Circle – 10(1) New Delhi New Delhi PAN: AABCI 7221 B (Applicant) (Respondent) Assessee By : Shri K.R. Manjani, Adv Shri Tarun Ashwani, Adv Shri Sidhant Arora, CA Department By : Shri Om Parkash, Sr. DR Date of Hearing : 07.04.2025 Date of Pronouncement : 09.04.2025 2 ITA Nos. 1155/DEL/2024 & 263/DEL/2024 Co No. 34/DEL/2024…Igroup Infotech ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- The above captioned two appeals by the Revenue are preferred against the order of the ld. CIT(A), New Delhi dated 19.01.2024 for A.Y 2015-16 and order of the ld. CIT(A) - 4, New Delhi dated 29.11.2024 for A.Y 2017-18 respectively. Cross objection has been filed by the assessee for A.Y 2015-16. 2. Since the underlying facts are common in both the appeals of the Revenue and pertain to same assessee, they were heard together and are disposed of by this common order for the sake of convenience and brevity. 3. Briefly stated, the quarrel in both the appeals of the Revenue and cross objections by the assessee is in respect of treatment of products, namely turnitin and ithenticate being software solutions and not journals as mentioned in Form No. 15CA filed and claimed by the assessee. 3 ITA Nos. 1155/DEL/2024 & 263/DEL/2024 Co No. 34/DEL/2024…Igroup Infotech 4. The Assessing Officer was of the opinion that as per the provisions of section 9(1)(vi) of the Income-tax Act, 1961 [the Act, for short], consideration for software constitutes ‘Royalty’ under the Act and such royalty is taxable in India and hence the company was required to deduct TDS on payments made to Innovative Education Services PTE Ltd, Singapore. According to the Assessing Officer, provisions of India- Singapore DTAA will govern the taxability of such payments. 5. The assessee was asked to show cause as to why expenses incurred by the assessee company for purchase of turnitin and Ithenticate should not be disallowed u/s 40(a)(i) of the Act as due TDS was not deducted on such remittances even though the amount was taxable in India. 6. The assessee filed detailed reply which did not find any favour with the Assessing Officer who, after referring to various decisions, made addition of Rs. 6,19,69,194/- in A.Y 2015-16 and Rs. 11,54,03,806/- in A.Y 2017-18. 4 ITA Nos. 1155/DEL/2024 & 263/DEL/2024 Co No. 34/DEL/2024…Igroup Infotech 7. The assessee carried the matter before the ld. CIT(A) but without any success. 8. Before us, the ld. counsel for the assessee straightaway relied upon the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt Ltd 432 ITR 471 and vehemently stated that the impugned quarrel has now been decided by the Hon'ble Supreme Court in favour of the assessee and against the revenue. The ld. counsel for the assessee submitted that the assessee case is also squarely covered in favour of the assessee and against the Revenue by the decision of the co-ordinate bench in assessee’s own case for A.Y 2016-17. 9. The ld. DR fairly conceded to the above submission of the assessee. 10. We have heard the rival submissions and have perused the relevant material on record. We find that the co-ordinate bench in assessee’s own case for A.Y 2016-17 had an occasion to deal with similar issue wherein the issue was decided in favour of the assessee and against the Revenue in ITA No. 1293/DEL/2020 for A.Y 2016-17. The relevant finding of the Tribunal read as under: 5 ITA Nos. 1155/DEL/2024 & 263/DEL/2024 Co No. 34/DEL/2024…Igroup Infotech “10. We have carefully considered the orders of the authorities below. It is a fact that the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence [supra] has settled the dispute in favour of the assessee and against the Revenue. The Hon'ble Supreme Court has grouped four categories while deciding the appeal as under: (i) The first category deals with cases in which computer software is purchased directly by an end-user, resident in India, from a foreign, non-resident supplier or manufacturer.3 (ii) The second category of cases deals with resident Indian companies that act as distributors or resellers, by purchasing computer software from foreign, non- resident suppliers or manufacturers and then reselling the same to resident Indian end-users.4 (iii) The third category concerns cases wherein the distributor happens to be a foreign, non-resident vendor, who, after purchasing software from a foreign, non- resident seller, resells the same to resident Indian distributors or end-users.5 (iv) The fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or end-users.” 11. The present appellant comes under Category III. 6 ITA Nos. 1155/DEL/2024 & 263/DEL/2024 Co No. 34/DEL/2024…Igroup Infotech 12. The DTAA considered by the Hon'ble Supreme Court at Para 40 as the DTAA between India and Republic of Singapore at Item No. 14. Category III which belongs to the assessee has been considered by the Hon'ble Apex Court at Para 44 of its judgment and the Hon'ble Supreme Court has arrived at a conclusion as under: “168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear 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 assessees, 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 enumerated by us in paragraph 4 of this judgment”. 7 ITA Nos. 1155/DEL/2024 & 263/DEL/2024 Co No. 34/DEL/2024…Igroup Infotech 11. Respectfully following the decision of the Hon'ble Supreme Court [supra], we direct the Assessing Officer to delete the impugned addition. The ground of Revenue is dismissed. 12. Since we have deleted the addition made by the Assessing Officer in A.Ys 2015-16 and 2017-18, the cross objection of the assessee becomes infructuous and is dismissed as such. 13. In the result, appeals of Revenue in ITA Nos. 1155/DEL/2024 and 263/DEL/24 as well as CO No. 34/DEL/2018 of the assessee stand dismissed. The order is pronounced in the open court on 09.04.2025. Sd/- Sd/- [YOGESH KUMAR US] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 09th APRIL, 2025. VL/ 8 ITA Nos. 1155/DEL/2024 & 263/DEL/2024 Co No. 34/DEL/2024…Igroup Infotech Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order .04.2025 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member .04.2025 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order "