SHINHAN BANK, MUMBAI V. DCIT (IT) 4(2)(1), MUMBAI

ITA 1100/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1744 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: L
• Next Hearing Date: 21-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 23-02-2015
• Court: TRIBUNAL
• Department Lawyers: JABIR CHAUHAN
• Keywords: Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A. NO.1100/M/2015 (ASSESSMENT YEAR: 2010 - 2011) SHINHAN BANK (EARLIER KNOWN AS CHOHUNG BANK) 5 TH FLOOR, WOCHARDT TOWER, (WEST WING), BKC, BANDRA (E), MUMBAI 400 051. / VS. DCIT (IT) - 4(1)(2), MUMBAI. ./ PAN :AAACC2144A ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : MS. HIRALI DESAI & MR. PRATIK SHAH / RESPONDENT BY : SHRI JABIR CHAUHAN, CIT - DR / DATE OF HEARING : 05.12.2016 / DATE OF PRONOUNCEMENT : 05 .12.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 23.2.2015 IS AGAINST THE DIRECTIONS OF THE DRP DATED 30.10.2014 / ORDER OF THE AO DATED 29.12.2014 FOR THE ASSESSMENT 2010 - 2011. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. THE HONBLE DISPUTE RESOLUTION PANEL ERRED IN LAW AND ON FACTS IN DIRECTING THE DCIT (IT) - 4(1)(2), MUMBAI IN REJECTING THE APPELLANTS CLAIM FOR THE BENEFIT OF THE NON - DISCRIMINATION CLAUSE OF THE INDIA - KOREA DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) AND TAXING THE APPELLANTS INCOME @ 40% (PLUS SURCHARGE AND EDUCATION CESS) INSTEAD OF AT THE RATE OF APPLICABLE TO A RESIDENT TAX PAYER (IE 30% PLUS SURCHARGE AND EDUCATION CESS). 2. THE HONBLE DISPUTE RESOLUTIO N PANEL ERRED IN LAW AND ON FACTS IN DIRECTION THE DCIT (IT) - 4(1)(2), MUMBAI IN DISALLOWING PAYMENT (OF RS. 2,59,397) OF SOFTWARE CHARGES U/S 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TAX. 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROU ND NO.1 HAS TO BE ALLOWED IN FAVOUR OF THE REVENUE , BEING RELATABLE TO THE APPLICABLE RATE OF TAX. LD AR FURTHER SU BMITTED THAT THE SAID ISSUE IS REPETITIVE IN NATURE AND THE SAME IS CONSISTENTLY DECIDED AGAINST THE ASSESSEE. SHE FURTHER SUBMITTED THAT A MATTER IS 2 PENDING BEFORE THE HONBLE HIGH COURT, THEREFORE, THE GROUND IS REQUIRED TO BE DECIDED BASED ON THE FINDING OF THE TRIBUNAL IN THE ASSESSEES OWN CASE. AFTER HEARING BO TH THE PARTIES, WE DISMISSED THE SAID G ROUND NO.1 AND CONFIRM THE DECISION OF THE DRP / AO ON THIS ISSUE. 3. REFERRING TO THE GROUND NO.2 , WHICH RELATES TO THE NON - DEDUCTION OF TAX ON SOFTWARE CHARGES, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO / DR P CAME TO THE CONCLUSION THAT THE SOFTWARE CHARGES RECEIVED BY THE ASSESSEE HAS TO BE CONSIDERED AS ROYALTY . ACCORDINGLY, AO PROCEEDED TO INVOKE THE PROVISIONS OF SECTION 40(A)(IA) OF THE A C T CONSIDERING THE ASSESSEES FAILURE TO MAKE TDS ON THE SAID SOFTWA RE CHARGES. IN THIS REGARD, BRINGING OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 1936/M/2014 (AY 2009 - 2010), DATED 4.7.2016, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID ORDER OF THE TRIBUNAL WAS PASSED SUBSEQUE NT TO THE DIRECTIONS OF THE DRP (DATED 30.10.2014) AND THE AO S ORDER DATED 29.12.2014. BRINGING OUR ATTENTION TO THE CONTENTS OF THE SAID ORDER OF THE TRIBUNAL IN GENERAL AND PARA 4 IN PARTICULAR, WHICH DEALS WITH SIMILAR DISALLOWANCE OF SOFTWARE CHARGES , LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT ON IDENTICAL GROUND, THE TRIBUNAL CAME TO THE CONCLUSION STATING THAT THE SAID SOFTWARE CHARGES RECEIVED DID NOT AMOUNT TO ROYALTY. THE CONTENTS OF PARA 8 OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) ARE RELE VANT IN THIS REGARD. FOR THE SAKE OF COMPLETENESS OF THE ORDER, RELEVANT LINES FROM THE SAID PARA 8 OF THE TRIBUNALS ORDER (SUPRA) ARE EXTRACTED AS UNDER: - 8.......THE CASE OF THE ASSESSEE HAS BEEN THAT IT HAS ONLY PURCHASED SOFTWARE FOR ITS BANKING BUS INESS AND LICENSE WAS GIVEN ONLY FOR USING THE SOFTWARE. THERE IS NO TRANSFER OF ANY COPY RIGHT ALBEIT IT WAS THE TRANSFER OF THE COPY RIGHTED ARTICLE. WITHOUT GOING INTO THE MERITS WHETHER THE SAID PAYMENT WILL FALL WITHIN THE NATURE OF ROYALTY UNDER THE NEWLY AMENDED PROVISION BROUGHT WITH RETROSPECTIVE EFFECT OR NOT, WE ARE OF THE OPINION THAT, AT THE TIME OF MAKING OF THE PAYMENT THERE WAS NO SUCH PROVISION UNDER THE LAW TO TAX SUCH PAYMENT OF COMPUTER SOFTWARE AS ROYALTY..........THUS, WE HOLD TH AT THE ASSESSEE WAS NOT OBLIGED TO DEDUCT TDS AT THE TIME OF MAKING THE PAYMENT AND THE LAW WHICH HAS COME INTO STATUTE AFTER FOUR YEARS FROM THE DATE OF PAYMENT CANNOT BE HELD TO BE APPLIED RETROSPECTIVELY AT BEST FOR DEDUCTION OF TDS. THUS, WE HOLD THAT DISALLOWANCE U/S 40(A)(I) FOR NON - DEDUCTION OF TDS CANNOT BE UPHELD..... 4. CONSIDERING THE ABOVE SETTLED LEGAL POSITION ON THE FACTS OF THE PRESENT CASE, WE ARE OF THE OPINION, GROUND NO.2 HAS TO BE DECIDED IN FAVOUR OF THE ASSESSEE. AO IS DIRECTED ACC ORDINGLY. 3 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOU NCED IN THE OPEN COURT ON 0 5 T H DECEMBER, 2016. S D / - S D / - ( PAWAN SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 05.12 .2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI