Pepperl & Fuchs (India) Private Limited, Bangalore V. DCIT, Bangalore

ITA 1171/BANG/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2840 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-10-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 03-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 143(3); 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER IT (TP) A NO. 1171 & 1172 /BANG/201 6 ASSESSMENT YEAR S : 20 1 0 - 1 1 & 2011 - 12 PEPPERL & FUCHS (INDIA) PVT. LTD., NO.546/1, 7 TH MAIN, 4 TH PHASE, PEENYA INDUSTRIAL ESTATE, BANGALORE 560 058. PAN: AAACP 1218L VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 5(1)(2), BANGALORE. APP ELL ANT RESPONDENT A PP EL LANT BY : SHRI DHEERAJ , ADVOCATE RE SPONDENT B Y : SMT. SREE NANDINI DAS , ADDL. CIT(DR), ITAT, BENGALURU. DATE OF HEARING : 30.10 .201 8 DATE OF PRONOUNCEMENT : 31 .10. 201 8 O R D E R PER BENCH THESE ARE APPEALS BY THE ASSESSEE AGAINST THE SE PARATE ORDERS DATED 03.03.2016 OF THE CIT(APPEALS)-5, BANGALORE P ASSED U/S. 143(3) R.W.S. 144C OF THE INCOME-TAX ACT, 1961 [THE ACT] RELATING TO ASSESSMENT YEARS 2010-11 & 2011-12. 2. THE COMMON ISSUE THAT ARISES FOR CONSIDERATION I N BOTH THE APPEALS WHICH IS PROJECTED BY THE ASSESSEE IN GROUND NOS.1 TO 1.11 IN BOTH THE APPEALS, IS WITH REGARD TO THE DISALLOWANCE MADE U/ S. 40(A)(IA) OF THE INCOME-TAX ACT, 1961 [THE ACT] IN RESPECT OF THE PAYMENTS MADE TO A NON- RESIDENT WITHOUT DEDUCTING TAX AT SOURCE U/S. 195 O F THE ACT FOR RIGHT TO USE ITA NOS. 1171 & 1172 /BANG/2016 PAGE 2 OF 4 SOFTWARE. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF INDUSTRIAL COMPONENTS. THE AO HELD THAT SINCE THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE ON THE PAYM ENTS MADE TO THE NON- RESIDENTS AND SINCE THE PAYMENT WAS IN THE NATURE O F ROYALTY WITHIN THE MEANING OF EXPLANATION (2) TO SECTION 9(1)(VI) OF T HE ACT, THE AO MADE DISALLOWANCE OF EXPENSES CLAIMED IN THE PROFIT & LO SS ACCOUNT TO THE EXTENT OF PAYMENT MADE WITHOUT DEDUCTION OF TAX AT SOURCE. 3. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CONF IRMED THE ORDER OF AO. 4. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS RAISED GROUND NOS.1 TO 11 IN BOTH THE APPEALS. 5. AT THE TIME OF HEARING, IT WAS AGREED BY BOTH TH E PARTIES THAT IDENTICAL ISSUE WAS DECIDED BY THIS TRIBUNAL IN ASSESSEES OW N CASE IN AY 2009-10 IN IT(TP)A NO. 227/BANG/2014, ORDER DATED 14.09.201 8. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE TRIBUNAL:- 29. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS S EEN THAT THE CASE OF THE ASSESSEE IS THAT THE PAYMENT WAS MADE F OR RIGHT TO USE THE SOFTWARE AND SUCH PAYMENT WAS NOT IN THE NATURE OF ROYALTY WITHIN THE MEANING OF EXPLANATION (2) TO SECTION 9( 1)(VI) OF THE ACT. FURTHER, THE PLEA OF THE ASSESSEE WAS THAT TH E PARENT COMPANY INCURRED EXPENDITURE FOR PURCHASING SOFTWARE AND TH E SAME WAS REIMBURSED BY THE ASSESSEE. THE CONTENTION OF THE ASSESSEE WAS THAT REIMBURSEMENT WAS NOT SUBJECT TO TDS U/S. 195 OF THE ACT. WE ARE OF THE VIEW THAT THE PAYMENT THOUGH WAS MADE AS REIMBURSEMENT, WAS IN FACT A PAYMENT FOR PURCHASE O F SOFTWARE. THE FACT THAT THE PARENT COMPANY MADE THE PAYMENTS TO THE LICENSOR WHICH WAS REIMBURSED BY THE ASSESSEE TO TH E PARENT COMPANY WILL NOT MAKE THE PAYMENT IN QUESTION AS RE IMBURSEMENT. IN OTHER WORDS, IT WAS A PAYMENT BY THE ASSESSEE TO THE LICENSOR OF THE SOFTWARE THROUGH THE PARENT COMPANY. THEREFORE THE PROVISIONS OF SECTION 195 WILL STAND ATTRACTED. ITA NOS. 1171 & 1172 /BANG/2016 PAGE 3 OF 4 30. AS FAR AS THE QUESTION WHETHER THE PAYMENT IN QUESTION IS A RIGHT TO USE THE SOFTWARE AND THEREFORE NOT ROYALTY WITHIN THE MEANING OF EXPLANATION (2) TO SECTION 9(1)(VI) OF T HE ACT, THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF SAMSUNG ELECTRONICS CO. LTD. (SUPRA) IN IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE, HAS TAKEN A VIEW THAT THE PAYMENT IN QUES TION WAS IN THE NATURE OF ROYALTY. IN VIEW OF THE AFORESAID DECISI ON OF THE HONBLE HIGH COURT OF KARNATAKA, WE FIND NO GROUNDS TO INTE RFERE WITH THE ORDER OF DRP. 6. THE FACTS AND CIRCUMSTANCES IN THE PRESENT ASSES SMENT YEAR ARE IDENTICAL. RESPECTFULLY FOLLOWING THE DECISION IN ASSESSEES OWN CASE FOR THE AY 2009-10, WE DISMISS THE GROUNDS NO.1 TO 11 I N BOTH THE APPEALS. 7. AS FAR AS ITA NO.1172/BANG/2016 IS CONCERNED, TH E ASSESSEE HAS RAISED GROUND NO.2.1 RELATING TO THE ACTION OF THE REVENUE AUTHORITIES IN NOT GRANTING APPROPRIATE MAT CREDIT WHILE COMPUTING TAX PAYABLE U/S. 115JAA OF THE ACT. THIS ISSUE WAS NOT DECIDED BY THE CIT( APPEALS), THOUGH A SPECIFIC GROUND WAS RAISED BY THE ASSESSEE BEFORE T HE CIT(APPEALS). WE THEREFORE DIRECT THE CIT(APPEALS) TO DECIDE THE ISS UE AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, ITA NO.1171/BANG/2016 IS DISMISSE D, WHILE ITA NO.1172/BANG/2016 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2018. SD/- SD/- ( INTURI RAMA RA O ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 31 ST OCTOBER, 2018. / D ESAI S MURTHY / ITA NOS. 1171 & 1172 /BANG/2016 PAGE 4 OF 4 COPY TO: 1. APP ELL ANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGA LORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.