DCIT (International Taxation), New Delhi V. M/s Alcatel Lucent France, New Delhi

ITA 1852/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1646 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 07-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DHALL
• Assessee Lawyers: SHASHI MATTHEWS; ABHISHEK BOW
• Keywords: Business income; Double taxation relief; TDS
• Section: 234B; 195; 13; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER I.T.A. NO.1852/DEL/2016 ASSESSMENT YEAR: 2009-10 DCIT, CIRCLE-1(1)(1), INTERNATIONAL TAXATION, NEW DELHI. VS. M/S. ALCATEL LUCENT FRANCE (NOW KNOWN AS ALCATEL LUCENT INTERNATIONAL) TAN/PAN: AABCC4864E (APPELLANT) (RESPONDENT) CO NO.214/DEL/2016 (ARISING OUT OF ITA NO.1852/DEL/2016) ASSESSMENT YEAR: 2009-10 M/S. ALCATEL LUCENT FRANCE (NOW KNOWN AS ALCATEL LUCENT INTERNATIONAL) VS. DCIT, CIRCLE-1(1)(1), INTERNATIONAL TAXATION, NEW DELHI. TAN/PAN: AACCR 9241D (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.K. DHALL, CIT-DR RESPONDENT BY: S/SHRI SHASHI MATTHEWS & ABHISHEK BOW, ADV. DATE OF HEARING: 17 09 2019 DATE OF PRONOUNCEMENT: 09 12 2019 O R D E R PER AMIT SHUKLA, JM: THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE AGAINST THE IMPUGNE D ORDER DATED 28.10.2016 PASSED BY COMMISSIONER OF INCOME T AX (APPEALS)-XLII, NEW DELHI FOR THE QUANTUM OF ASSESS MENT I.T.AS. NO.1852/DEL/2016 & CO NO.214/DEL/2016 2 PASSED U/S.143(3) R.W.S. 144C. THE GROUNDS RAISED B Y THE REVENUE READ AS UNDER: 1. WHETHER THE CIT(A) WAS NOT JUSTIFIED IN LAW AND ON FACTS OF THE CASE BY NOT TREATING EMBEDDED SOFTWARE AS RO YALTY INCOME OF THE ASSESSEE AS PER EXPLANATION 4 TO SECT ION 9(I)(VI) OF THE INCOME TAX ACT, 1961. WHEREAS IN THE CROSS OBJECTION, ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A) ERRED IN NOT CONCLUDING THA T INTEREST UNDER SECTION 234B OF THE IT ACT IS NOT LEVIABLE IN THE FACTS OF THE PRESENT CASE IGNORING THE FACT THAT THE ENTIRE CONSIDERATION IN THE HANDS OF THE ASSESSEE WAS SUBJECT TO DEDUCTI ON OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT AND HENCE TH E ASSESSEE WAS NOT LIABLE TO PAY ANY ADVANCE TAX. 2. AT THE OUTSET, IT HAS BEEN SUBMITTED THAT THE IS SUE RAISED IN REVENUES APPEAL IS NOW SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE WHI CH HAS ALSO BEEN CONFIRMED BY THE HONBLE HIGH COURT. FURT HER IN THE CASE OF ISSUE OF INTEREST AS RAISED IN CROSS OBJECT ION, SAME IS ALSO COVERED BY THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF DIT VS. GE PACKAGED POWER INC. , (2015) 373 ITR 65 (DEL.) 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A CO MPANY INCORPORATED UNDER THE LAWS OF FRANCE AND IS A TAX RESIDENT OF FRANCE IN TERMS OF ARTICLE 4 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) ENTERED BETWEEN INDIAN AND FRANC E. I.T.AS. NO.1852/DEL/2016 & CO NO.214/DEL/2016 3 FURTHER, ALU IS A GROUP COMPANY OF THE ALCATEL LUCE NT GROUP. ALCATEL LUCENT GROUP IS A LEADING TELECOMMUNICATION GROUP AND INFRASTRUCTURE SUPPLIER. THE ASSESSEE IS A LEAD ING ENTERPRISE OF THE GROUP FOR THIS PURPOSE. IN FEBRUA RY OF 2009, A SURVEY WAS CONDUCTED BY THE ASSISTANT DIRECTOR OF INCOME TAX, CIRCLE-1 AT THE OFFICE OF THE ASSESSEE. POST T HE SURVEY, ASSESSMENT ORDER WAS PASSED, INTER ALIA , HOLDING THAT THE SUPPLY OF SOFTWARE MADE BY THE ASSESSEE WAS TO BE T REATED AS ROYALTY AND THUS, TAXABLE IN TERMS OF SECTION 9(I )(VI) OF THE ACT. FURTHER, ON THE SAME BASIS, SHOW CAUSE NOTICE DATED 06.02.2013 WAS ISSUED TO THE ASSESSEE AS TO WHY ASS ESSMENT FOR THE YEAR 2009-10 (PERIOD OF DISPUTE) SHOULD N OT BE COMPLETED ON THE BASIS OF THE FINDINGS IN THE ASSES SMENT ORDER. THEREAFTER, ASSESSMENT ORDER DATED 19.03.201 3 WAS PASSED BY FOLLOWING THE EARLIER ASSESSMENT ORDER FO R AY 2006-07 HOLDING THAT THE SOFTWARE SUPPLIES ARE TAXA BLE AS ROYALTY UNDER SECTION 9(1)(VI) AND ARTICLE 13 OF THE DTAA. 4. LD. CIT (A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER, FOLLOWING THE EARLIER ORDER FOR THE ASSESSMENT YEAR 2006-07, WHEREIN THE TRIBUNAL VIDE ORDER DATED 04.04.2014 IN ITA NO.4866/DEL/2006 HAS CONFIR MED THE ORDER OF THE LD. CIT (A), FOLLOWING THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. ERICSSON AB (2012) 343 ITR 470. FURTHER, THE SAID ORDER OF THE TRIBUNA L HAS ALSO BEEN CONFIRMED BY THE HONBLE DELHI HIGH COURT VIDE ORDER DATED 27.02.2015. IT IS AN UNDISPUTED FACT THAT THE FACTS ARE I.T.AS. NO.1852/DEL/2016 & CO NO.214/DEL/2016 4 SIMILAR TO THOSE IN ASSESSMENT YEAR 2006-07 IN ASSE SSEES OWN CASE. 5. IN SO FAR AS TAXABILITY OF SOFTWARE IS CONCERN, WHEREIN IT HAS BEEN HELD THAT THE CONSIDERATION RECEIVED BY TH E ASSESSEE FOR IMPLYING OF EMBEDDED SOFTWARE IS TO BE TREATED AS SUPPLY OF GOODS, AND THEREFORE, TAXABLE AS BUSINESS INCOME AND NOT AS ROYALTY, THE HONBLE DELHI HIGH COURT IN THE CAS E OF ASSESSEE AS WELL AS SIMILAR GROUP COMPANIES HAD CON FIRMED THE ORDER OF THE TRIBUNAL AND ALSO HELD THAT NOW TH IS ISSUE STANDS COVERED BY CERTAIN DECISIONS OF THE HONBLE DELHI HIGH COURT, LIKE IN THE CASE OF DIT VS. NOKIA NETWORKS, OY, (2013) 358 ITR 259 (DEL.). RESPECTFULLY FOLLOWING THE BIND ING JUDICIAL PRECEDENTS OF THE HONBLE DELHI HIGH COURT, THE GRO UNDS RAISED BY THE REVENUE IS DISMISSED. 6. SIMILARLY IN SO FAR AS ISSUE OF INTEREST U/S.234 B IS CONCERN, AS RAISED IN THE CROSS OBJECTION, IT IS AN UNDISPUTED FACT THAT THE ENTIRE CONSIDERATION IN THE HANDS OF THE ASSESSEE WAS SUBJECT TO TDS U/S.195, THEREFORE, PRINCIPLE LA ID DOWN BY HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. GE PACKAGED POWER INC. (SUPRA) IS SQUARELY APPLICABLE WHEREIN I T HAS BEEN HELD THAT IF THE TAX IS DEDUCTIBLE BY THE INDIAN CU STOMER U/S.195 ON ALL THE PAYMENTS THEN NO ADVANCE TAX IS PAYABLE AND IN ABSENCE OF ANY LIABILITY TO PAY THE ADVANCE TAX THE PROVISION OF SECTION 234B ARE NOT APPLICABLE. ACCOR DINGLY, CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. I.T.AS. NO.1852/DEL/2016 & CO NO.214/DEL/2016 5 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DECEMBER, 2019. SD/- SD/- [B.R.R. KUMAR] [AMIT SHUKLA] [ACCOUNTANT MEMBER] JUDICIAL MEMBER DATED: 9 TH DECEMBER, 2019