DEPUTY COMMISSIONER OF INCOME-TAX, CHENNAI V. KONY INC, UNITED STATES OF AMERICA

MA 59/CHNY/2024

AI Insights

The case involves a Miscellaneous Application by the Revenue seeking rectification of an earlier Tribunal order concerning the taxation of software license fees and annual maintenance fees under the India-USA Double Taxation Avoidance Agreement (DTAA). The Revenue argued that the Tribunal's reliance on previous years' orders was contrary to the facts on record for the assessment year 2021-22. However, the Tribunal upheld its earlier decision, stating that there was no mistake apparent from the record as the decision was consistent with previous rulings in the assessee's favor.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107208 (ITAT-CHENNAI)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Laws Referred To: India-USA DTAA
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C. MURUGESAN
• Keywords: Double taxation relief
• Section: 20

Judgement Text

"आयकर अपीलीय अिधकरण, ‘बी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ŵी एस एस िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी एस.आर.रघुनाथा, लेखा सद˟ क े समƗ BEFORE SHRI S.S. VISWANETHRA RAVI, HON’BLE JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, HON’BLE ACCOUNTANT MEMBER िविवध यािचका सं / M.A. No.59/CHNY/2024 (arising in I.T.A. No. 1572/CHNY/2023) िनधाᭅरण वषᭅ / Assessment Year : 2021-22 The DCIT, International Taxation -1(2), Chennai. v. Kony Inc, 5301, Southwest Parkway, Suite 250, Austin, Texas, USA – 5301 PAN: AAECK 4771D (अपीलाथᱮ / Applicant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से /Applicant by : Shri R. Sivaraman, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri C. Murugesan, Addl.CIT सुनवाई कᳱ तारीख/ Date of hearing : 07.02.2025 घोषणा कᳱ तारीख /Date of Pronouncement : 17.02.2025 आदेश /O R D E R PER S.R. RAGHUNATHA, ACCOUNTANT MEMBER: By way of this Miscellaneous Application, the Revenue has requested for rectification in the order of the Tribunal dated 30.05.2024 in ITA No.1572/CHNY/2023, for the assessment year 2021-22. 2 M.A No.59/CHNY/2024 2. The Revenue has filed this miscellaneous application stating that there is a mistake apparent on record in the findings given in its order for the assessment year 2021-22 as detailed below:- “ In the order for the impugned AY 202 T-22, it was established that the amount paid as software license fee is Equipment Royalty taxable under Article 3(b) of Article 12 of India-USA DTAA. Fe for included services as per Article 12(4)(a) of India-US DTAA covers those payments which are ancillary and subsidiary to the application or enjoyment of the right, property or information for which royalty payments are made. Since this annual maintenance fee is an inextricable part of the software license fee, in accordance with Article 12(4)(3) of India-US DTAA, they are in nature of fee for included services and the income is deemed to accrue and arise in India. On the issue of annual maintenance fees, ITAT granted relief relying on the earlier order in assessee own case. This reliance placed on the earlier year order is contrary to facts on record. In the A Ys 20 14-1 5, 2015-16 and 2017-18, software license fee was brought to tax as Software royalty under Article 3(a) of Article 12 of India-USA DTAA. However, in the order for the impugned AY, it was established that the amount paid as software license fee is Equipment Royalty taxable under Article 3(b) of Article 12 of India- USA DTAA. Fee for included services as per Article 12(4)(a) of India-US DTAA covers those payments which are ancillary and subsidiary to the application or enjoyment of the right, property or information for which royalty payments are made. Since this annual maintenance fee is an inextricable part of the software license fee, in accordance with Article 12(4)(a) of India-US DTAA, they are in nature of fee for included services and the income is deemed to accrue and arise in India. This is in nature of mistake apparent from record.” 3. The ld. Senior DR has stated that the order passed by this Tribunal by relying on the earlier year orders in assessee’s own case is contrary to the facts on record and hence, prayed for rectifying the order by dismissing the appeal of the assessee. 3 M.A No.59/CHNY/2024 4. Per contra, the Ld.AR stated that there is no mistake apparent from record since the impugned order has been passed by relying on the orders in assessee’s own case for earlier years and hence, prayed for dismissing the miscellaneous application filed by the Revenue. 5. We have heard rival submissions and gone through the order and the application filed by the Revenue. On perusal of records, we note that the order has been passed in favour of the assessee by relying on the Tribunal’s decision in assessee’s own case for the earlier years and hence, there is no mistake apparent from record. Therefore, we dismiss the Miscellaneous Application filed by the Revenue. 6. In the result, the miscellaneous application of the Revenue is dismissed. Order pronounced in the open court on 17th February, 2025 at Chennai. Sd/- (एस एस िवʷनेũ रिव) (S.S. VISWANETHRA RAVI) ᭠याियक सद᭭य /JUDICIAL MEMBER Sd/- (एस.आर .रघुनाथा) (S.R. RAGHUNATHA) लेखा सद᭭य /ACCOUNTANT MEMBER चे᳖ई/Chennai, ᳰदनांक/Dated, the 17th February, 2025 RSR 4 M.A No.59/CHNY/2024 आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Applicant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ /CIT, Chennai 4. िवभागीय ᮧितिनिध/DR 5. गाडᭅ फाईल/GF. "