TEKLA INDIA P.LTD, NAVI MUMBAI V. ITO 15(3)(1), MUMBAI

ITA 211/MUM/2016

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6164 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; Double taxation relief; Opportunity of being heard; International transaction; Additional evidence; Non-deduction of tax; Bad and doubtful debts
• Section: 37; 271(1)(c); 143(3); 234B; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.211/Mum./2016 (Assessment Year : 2011–12) Trimble Solutions India Pvt. Ltd. (Formerly known as Tekla India Pvt. Ltd.) Shree Sawan Knowledge Park, 4 th Floor, Plot No. D-507, Thane Belapur Road, Turbhe, Navi Mumbai – 400 705 PAN – AACCT8089R ................ Appellant v/s Income Tax Officer Ward–15(3)(1), Mumbai ................Respondent Assessee by : Shri Divesh Chawla Revenue by : Shri Milind Chavan Date of Hearing – 31/05/2022 Date of Order – 17/08/2022 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned final assessment order dated 02/12/2015, passed by the Assessing Officer under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 („the Act‟) for the assessment year 2011–12. 2. In this appeal, the assessee has raised following grounds: “Based on the facts and circumstances of the case, Trimble Solutions India Pvt. Ltd. (hereinafter referred to as the Appellant) respectfully craves leave to prefer an appeal against the order passed under Section 144C(13) read with Section 143(3) of the Income-tax Act, 1961 (the Act) Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 2 by the Income Tax Officer 15(31) (hereinafter referred to as the "AO') in pursuance of the directions issued by Dispute Resolution Panel-2 (hereinafter referred to as the "DRP'), Mumbai, under Section 253 of the Act on the following grounds. which are independent and without prejudice to each other. On the facts and in the circumstances of the case and in law, the learned DRP, the learned AO and the learned Transfer Pricing Officer (hereinafter referred as 'TPO) have: General Ground 1. erred in determining the total taxable income of the Appellant for the subject AY at Rs 14,59,36,820 instead of the amount of Rs 10,77,004 as reported in the return of income filed by the Assessee. Transfer Pricing Ground 2. erred in determining the arm's length price (ALP) in respect to the international transaction of management services availed by the Appellant from its Associate Enterprise (AE") at Rs. Nil. Reference to TPO 3. erred in making a reference of the Appellant's case to the learned TPO without applying his mind and without recording its satisfaction thereby making the entire process of referring the matter to the learned TPO as invalid. Sufficient opportunity of being heard 4. erred in not providing sufficient opportunity of being heard while determining the ALP of the international transaction of availing of management services by the Appellant from its AE at Rs Nil. Benefit Test 5. erred in bolding that the Appellant has failed to demonstrate that it has received management services, without appreciating relevant documen- tary evidence to substantiate the receipt of management services by the Appellant from its AE. 6. erred in bolding that the Appellant has filed to demonstrate that it has benefited from the management services availed by it, by disregarding the submissions/emails/ correspondences filed by the Appellant, without providing any cogent reasons for the same. 7. erred in not appreciating the fact that benefit test is not a condition for benchmarking the international transaction with AE Commercial substance 8. erred in not appreciating the commercial rational/ expediency of the Appellant for availing of management services. Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 3 erred in rejecting the Appellant's benchmarking analysis 9. erred in disregarding the benchmarking analysis undertaken by the Appellant in its Transfer Pricing Study for determining the arm's length nature of the international transaction of availing of management services by the Appellant from its AE. 10. erred in not appreciating that international transaction of payment of fees for management services availed are inextricably linked to the software distribution activity of the Appellant and cannot be analysed separately and thus Transaction Net Margin method (TNMM) is the most appropriate method to benchmark the aforesaid international transaction. Use of method for benchmarking the international transaction 11. erred in holding the arm's length price of the international transaction of management fees at Rs Nil without using any of the five methods prescribed under the Act for benchmarking the international transaction. Corporate tax grounds 12. erred in upholding the disallowance of Rs 13,90,61,888 made by the learned AO under Section 40(a)(1) of the Act for non-deduction of tax at source on payment made by the Appellant to Tekla Corporation for purchase of license, upgrades and maintenance; Benefit under DTAA 13. erred in not appreciating the fact that the Appellant is eligible to claim benefit under the provisions of India-Finland Tax Treaty and that the said payments do not qualify as "royalty" under Article 13 of the India-Finland Tax Treaty. Without prejudice to the above, benefit under the Act 14. erred in treating purchase cost of the Appellant towards license and upgrades and maintenance as royalty payments as per the provisions of clause (v) of Section 9(1)(vi) of the Act. 15. erred in not appreciating the fact that the newly inserted explanation 4 in Section 9(1)(vi) of the Act is not applicable while applying Section 40(a)(i) of the Act; Interest under Section 234B of the Act 16. erred in upholding the levy of interest under Section 234B of the Act; Interest under Section 234D of the Act 17. erred in upholding the levy of interest under Section 234D of the Act: Penalty proceedings under Section 271(1)(c) of the Act Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 4 18. erred in initiating penalty proceedings under Section 271(1)(c) of the Act, and The above grounds of appeal are without prejudice to each other.” 3. The ground No. 1, is general in nature and therefore need no separate adjudication. 4. The issue arising in grounds no. 2 to 11, raised in assessee‟s appeal, is pertaining to transfer pricing adjustment in respect of management services availed by the assessee from its associated enterprise. 5. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is a company registered in India and is in the business of distribution of software products. Tekla Corporation is the tax resident of Finland. Tekla Corporation develops and markets specialised off the shelf software products, which are used in industries like building, construction, energy distribution and infrastructure management. For the year under consideration, assessee filed its return of income on 30/09/2011, declaring total income of Rs. 10,77,000. On 20/01/2008, assessee entered into Distribution Agreement with Tekla Corporation, Finland (i.e. its associated enterprise) to distribute and sublicense shrink-wrap software products developed by the associated enterprise. Assessee also entered into Service Agreement dated 01/01/2008, with its associated enterprise whereby support and guidance was provided to the assessee in the area of marketing, communications, quality management as well as information management services. During Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 5 the relevant assessment year, assessee entered into following international transactions with its associated enterprise: Nature of international transactions Amount (INR) Purchase of software products 13,90,61,888 Payment of management fees 57,97,930 6. As both the transactions were inextricably linked, assessee adopted combined transaction approach to benchmark the aforesaid international transactions with its associated enterprises using Transactional Net Margin Method („TNMM‟). As its margin from software distribution activity was 1.53% as against 0.41% earned by the comparable companies, therefore, the software distribution activity of assessee was claimed to be at arm‟s length price. Since the management fees was benchmarked along with the software distribution activity, the same was also considered to be at arm‟s length, since management fees forms part of the cost base. 7. The Assessing Officer made reference to the Transfer Pricing Officer („TPO‟) for determination of arm‟s length price of the international transactions entered into by the assessee. The TPO vide order dated 14/01/2015, passed under section 92CA(3) of the Act after noting that the assessee has failed to establish rendition, receipt and benefit availed from the services, in respect of which management fees was paid by the assessee to its associated enterprise, treated the arm‟s length price of international transaction pertaining to „Payment of Management Fees‟ as NIL and proposed an upward adjustment of Rs.57,97,930. In conformity, Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 6 the Assessing Officer passed the draft assessment order dated 19/02/2015. 8. The learned Dispute Resolution Panel („DRP‟) vide directions dated 27/11/2015, issued under section 144C(5) of the Act rejected the objections filed by the assessee on this issue by holding that the assessee has failed to satisfy „benefit test‟ and the „willingness to pay test‟. Accordingly, the Assessing Officer passed the impugned final assessment order dated 02/12/2015. Being aggrieved, the assessee is in appeal before us. 9. During the course of hearing, learned Authorised Representative („learned AR‟) submitted that assessee is part of multinational group and it is required to maintain standard of quality while conducting its operations. It was further submitted that requisite expertise to maintain the required quality standard is not easily available outside the group on account of the fact that the 3 rd parties would not have updated and detailed knowledge of the group‟s operations and that the services being unique in nature and adhering to the global standards have to be undertaken centrally for the benefit of the services recipient and cannot be procured locally. Learned AR also submitted that certain costs incurred centrally by the associated enterprise were allocated to the group entities including the assessee. The learned A.R. further submitted that arm‟s length price of the impugned international transaction was arrived at Nil without adopting any of the prescribed method. Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 7 10. On the other hand, learned Departmental Representative („learned DR‟) vehemently relied upon the orders passed by the lower authorities. 11. We have considered the rival submissions and perused the material available on record. As noted above, assessee entered into Service Agreement dated 01/01/2008, with its associated enterprise for availing the administrative services in the nature of marketing, communications, quality management as well as information management services, in respect of which management fees was payable by the recipient. In its submissions before the lower authorities, the assessee provided following details of nature of services, under the aforesaid agreement, and the benefits derived by the assessee from availing the services from its associated enterprises:  “ Quality Management The Quality Management unit of the A.E. performs internal quality audits, co–ordinates external certification audits, process modelling and maintenance of documentation. These services benefit Tekla India in cases where the customers require specific certifications as a pre-requisite for sale of Tekla products.  Corporate Marketing The Corporate marketing group of the AE performs various functions such as setting brand guidelines and advices, carrying out web campaigns, formulating marketing strategies, co–ordination of various marketing activities, etc. This centralized marketing function enables Tekla India to leverage on core competences of the skilled marketing personnel thereby resulting in cost savings.  Information Management Information Management group is responsible for maintaining the system and communications environment including hardware and software, networks and SAP system operations within the Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 8 Tekla Group. Performance of these centralized tasks helps in cost savings for the group including Tekla India.  Customer Relationship Management (CRM) Tekla India distributes the software products to customers in Building & Construction business. There is a centralized CRM team which provides services such as (a) system implementation and project management for area offices where the CRM team is deployed; (b) user support services such as training, provision of instruction materials, technical support; (c) process automation development and system integration; (d) Tekla account management and (e) system development and maintenance services. On availing the above mentioned Services, Tekla India is benefitted by way of improved customer service, efficient tools for managing day-to-day tasks, process accountability and transparency, standardization of marketing, sales and service processes, etc.  Corporate Communications This unit handles the preparation and publication of various company reports, financial statements, internal and external communication and other statutory requirements (ie. organization of meetings, updating investor relations site, insider management, etc.) of Tekla group. The work relates to internal and external communications which benefits all Tekla group companies.” 12. The assessee further submitted that the managerial service availed from the associated enterprise would not have been able to be performed with the same level of efficiency and effectiveness by a 3 rd party vendor given the fact that these services are unique for the group and requires expertise and experience in the relevant field and it would have involved very high cost and also huge amounts in hiring third-party vendors. The assessee also submitted that the administrative services (as done by the group) involve exchange of confidential information, which is integral to the group and involving a third party vendor would pose legal and competitive risk. The TPO as well as the learned DRP treated the arm‟s length price of this transaction at NIL on the basis that assessee has Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 9 failed to justify/prove rendition, receipt and benefit of this expenditure. The learned DRP termed it as „benefit test‟ and the „willingness to pay test‟, which was alleged to be not satisfied by the assessee. Further, the additional evidence filed by the assessee in form of emails relating to corporate marketing and corporate communication and information management in order to substantiate rendition of service were held to be very general in nature by the learned DRP. From the perusal of sample copies of these emails, forming part of the paper book, it is evident that the same pertains to marketing, quality control, test campaigning, newsletters services, website updation related services provided by the associated enterprise to the assessee. The lower authorities without finding any fault in the benchmarking analysis conducted by the assessee, i.e. combined benchmarking of international transactions pertaining to payment of management fees and purchase of software products adopting TNMM, considered the arm‟s length price of the transaction as NIL only by applying the so called „benefit test‟ and the „willingness to pay test‟. The TPO also neither undertook any benchmarking analysis by adopting any of the prescribed methods under the Act nor searched any comparable transaction for considering the arm‟s length price at NIL. In this regard, it is relevant to note following observations of Hon‟ble Delhi High Court in Cushman and Wakefield (India) Pvt. Ltd. [2014] 367 ITR 730 (Del.): “35. The TPO's Report is, subsequent to the Finance Act, 2007, binding on the AO. Thus, it becomes all the more important to clarify the extent of the TPO's authority in this case, which is to determining the ALP for international transactions referred to him or her by the AO, rather than determining whether such services exist or benefits have accrued. That Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 10 exercise - of factual verification is retained by the AO under Section 37 in this case. Indeed, this is not to say that the TPO cannot - after a consideration of the facts - state that the ALP is 'nil' given that an independent entity in a comparable transaction would not pay any amount. However, this is different from the TPO stating that the assessee did not benefit from these services, which amounts to disallowing expenditure.” 13. As noted above, in the present case, no search was conducted to find out the independent entity in a comparable transaction and the arm‟s length price of the international transaction was treated to be NIL. In the present case, no doubts about payments made by the assessee have been raised by the Assessing Officer under section 37 of the Act. Further, accrual of benefit to assessee or the commercial expediency of any expenditure incurred by the assessee cannot be the basis for disallowing the same, as held by Hon‟ble Delhi High Court in the case of EKL Appliances Ltd. [2012] 345 ITR 241 (Del.). 14. We further find that Hon‟ble jurisdictional High Court in CIT v/s Lever India Exports Ltd. [2017] 246 Taxmann 133 (Bombay), observed as under: “7. We note that the Tribunal has recorded the fact that the respondent assessee has launched new products which involved huge advertisement expenditure. The sharing of such expenditure by the respondent assessee is a strategy to develop its business. This results in improving the brand image of the products, resulting in higher profit to the respondent assessee due to higher sales Further, it must be emphasized that the TPO's jurisdiction was to only determine the ALP of an International Transaction. In the above view, the TPO has to examine whether or not the method adopted to determine the ALP is the most appropriate and also whether the comparables selected are appropriate or not. It is not part of the TPO's jurisdiction to consider whether or not the expenditure which has been incurred by the respondent assessee passed the test of Section 37 of the Act and/or genuineness of the expenditure. This exercise has to be done, if at all, by the Assessing Officer in exercise of his jurisdiction to determine the income of the assessee in accordance with the Act. In the present case, the Assessing Officer has not disallowed the expenditure but only adopted the TPO's determination of ALP of the Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 11 advertisement expenses. Therefore, the issue for examination in this appeal is only the issue of ALP as determined by the TPO in respect of advertisement expenses. The jurisdiction of the TPO is specific. and limited i.e. to determine the ALP of an International Transaction in terms of Chapter X of the Act read with Rule 10A to 10E of the Income Tax Rules. The determination of the ALP by the respondent assessee of its advertisement expenses has not been disputed on the parameters set out in Chapter X of the Act and the relevant Rules. In fact, as found both by the CIT (A) as well as the Tribunal that neither the method selected as the most appropriate method to determine the ALP is challenged nor the comparables taken by the respondent assessee is challenged by the TPO. Therefore, the ad-hoc determination of ALP by the TPO dehors Section 92C of the Act cannot be sustained.” 15. We further find that the Co-ordinate Bench of Tribunal in Hamon Colling Systems Pvt. Ltd. v/s DCIT, in ITA No.3911/Mum./2015, vide order dated 27/05/2020, after considering aforesaid decisions observed as under: “9. ....Neither the ALP adjustments can be equated with disallowances of expenses, even though effect may be same, nor the TPO has the authority to disallow the expenses. Clearly, the impugned ALP adjustments are vitiated in law for this short reason alone. In any case, the observations with respect to the lack of evidence in support of the benefits is based on sweeping generalizations and is incapable of sustaining legal scrutiny.” 16. In addition to above, it is pertinent to note that the assessee by considering both the international transactions as inextricably linked benchmarked the same by adopting the TNMM and the TPO has accepted the benchmarking analysis in respect of international transaction pertaining to „Purchase of Software Products‟, as assessee‟s margin of 1.53% was higher as compared to margins of the comparable companies. In this regard, it is relevant to note following details of „Operating & Other Expenses‟ forming part of the financials of the assessee: Schedule–10 Operating & Other Expenses March 31, 2011 March 31, 2010 Electricity 4,74,727 3,79,215 Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 12 Rent 37,31,718 19,65,538 Repairs and maintenance – others 6,93,975 5,27,295 Brokerage and commission expenses 6,97,000 – Rates and taxes 15,27,110 10,34,449 Traveling and conveyance 47,75,571 73,33,508 Communication 9,26,916 13,15,995 Postage and courier 3,27,020 3,22,111 Printing and stationery 8,41,844 34,57,033 Management fees 57,97,930 30,54,143 Legal and professional fee 32,27,916 50,94,033 Bad debts 44,52,918 61,20,735 Provision for doubtful debts, net 51,54,179 145,25,407 Advertisement and sales promotion 82,60,838 96,94,489 Exchange loss, net 1,69,73,663 – Loss on discarding of fixed assets 5,17,904 13,68,516 Finance charges 31,36,322 26,24,149 Office expenses 12,29,375 10,96,371 Miscellaneous expenses 1,77,476 18,22,673 6,29,24,402 61,735,660 Thus, from the above it is evident that management fees of Rs. 57,97,930 forms part of the „Operating and other expenses‟ as per schedule 10 to the profit and loss account for the year ending 31/03/2011. The aforementioned „Operating and other expenses‟ of Rs. 6,29,24,402 formed part of the cost base, while computing the operating profit margin of 1.53% of the assessee. The relevant computation of operating profit margin of the assessee, forming part of the Transfer Pricing Study Report, is as under: Particulars Amount (Rs.) Amount (Rs.) Amount (Rs.) Income: 224,574,631 Total Sales Other Income 131,626 Less: Interest (131,626) Total Operating Income (A) 224,574,63 Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 13 Expenditure: Purchase of licenses & upgrade and service cost 1396,061,088.000 Personal expense 20,343,932 Operating and other expenses 62,924,402 Depreciation and amortisation 2,460,845 Less: Loss on discarding of fixed assets (517,904) Less: Finance charges (3,316,322) Total operating costs (B) 221,136,841 Operating profit C = (A–B) 3,437,790 Operating Profit / Operating Revenue (in %) C/A 1.53% 17. Thus, the management fees of Rs. 57,97,930 paid by the assessee forms part of the cost base, while computing the net margin of the assessee, which has already been accepted to be at arm‟s length by the TPO. Therefore, once margin of profit in distribution segment has been accepted after consideration of management fees, then there is no question of making any separate adjustment insofar as payment of management fees is concerned. In this regard, following observations of the Hon‟ble Delhi High Court in Sony Ericsson Mobile Communication India Private Limited vs CIT 374 ITR 118, becomes relevant: “194. ... ....... (v) Where the Assessing Officer/TPO accepts the comparables adopted by the assessed, with or without making adjustments, as a bundled transaction, it would be illogical and improper to treat AMP expenses as a separate international transaction, for the simple reason that if the functions performed by the tested parties and the comparables match, with or without adjustments, AMP expenses are duly accounted for. It would be incongruous to accept the comparables and determine or accept Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 14 the transfer price and still segregate AMP expenses as an international transaction.” 18. In view of our aforesaid findings, we are of the considered opinion that TPO / Assessing Officer was not justified in making adjustment in respect of international transaction of „Payment of Management Fees‟ in the present case. Accordingly, grounds no. 2 to 11 raised in assessee‟s appeal are allowed. 19. The issue arising in grounds No. 12 to 15, raised in assessee‟s appeal, is pertaining to disallowance of Rs. 13,90,61,888 under section 40(a)(i) of the Act for the non-deduction of tax at source on payment made by the assessee to Tekla Corporation for purchase of license, upgrades and maintenance. 20. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee had entered into an agreement with Tekla OYJ, Finland („Tekla Finland‟). The software products are developed and marketed by Tekla Finland, which are used in industries like building and construction, energy distribution and infrastructure management. Tekla Finland is the license holder to use the various software products and owns all the intellectual property rights related to the software. As per the aforesaid agreement, the assessee had to distribute and sublicense software products developed by Tekla Finland to the customers within Indian Territory and to provide training and sales support to the customers. In terms of the agreement, in relation to the software products, assessee made remittance to Tekla Finland without deduction of Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 15 taxes. During the course of assessment proceedings, assessee was asked to show cause as to why the payment made by the assessee to Tekla Finland for purchase of licenses and upgrades and services would not qualify as Royalty as per the provisions of the Act as well as India Finland tax treaty. In reply, assessee submitted that the payments made to Tekla Finland are not in the nature of royalty and hence not subjected to tax in India, as the payment made by the assessee are towards the purchase of a copyrighted article. The Assessing Officer vide draft assessment order dated 19/02/2015 passed under section 143(3) read with section 144C(1) of the Act treated the payment made by the assessee to Tekla Finland as Royalty falling under clause (v) and (vi) of explanation 2 to section 9(1)(vi) of the Act and disallowed the payment made by the assessee under section 40(a)(i) of the Act for non-deduction of tax at source. Learned DRP vide directions issued under section 144C(5) of the Act rejected the objections filed by the assessee on this issue. In conformity, the Assessing Officer passed the final assessment order. Being aggrieved, the assessee is in appeal before us. 21. During the course of hearing, learned A.R submitted that the coordinate bench of the Tribunal in assessee‟s own case for assessment years 2009–10 and 2010–11 has remanded this issue to the file of Assessing Officer for de novo adjudication. On the other hand, learned DR vehemently relied upon the orders passed by the lower authorities. 22. We have considered the rival submissions and perused the material available on record. We find that coordinate bench of the Tribunal in Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 16 assessee‟s own case in Trimble Solutions India Private Limited vs ITO, in ITAs No. 3079/Mum./2013 and ITA no.7031/Mum./2014, vide order dated 06/09/2019, for assessment years 2009–10 and 2010–11, remanded the similar issue to the file of Assessing Officer for de novo adjudication, by observing as under: “13. Having considered the rival stands, it is abundantly clear that the dispute hinges around the mechanics of Re-seller agreement of the assessee with Tekla Finland in terms of which assessee is appointed to distribute and market the software of Tekla Finland in the Indian territory. The case sought to be made out by the assessee is that it has merely purchased and sold a copyrighted article while, on the contrary, what the Assessing Officer has concluded is that assessee acquired a right in the copyright of the article and it is not a case where assessee has merely dealt with a copyrighted article. The stand of the Assessing Officer is primarily based on clause 4.13 of the agreement, which says that assessee would have a right to develop customer specific features in the software product and only thereafter sell it to the Indian customers. Without going into the question as to whether the aforesaid clause enables the characterisation of the payment to Tekla Finland as „Royalty‟, it is vehemently claimed by the appellant before us that on facts, no such activity has been undertaken by the assessee during the period under consideration. It is sought to be emphasised that no such localised features were developed, and, on the basis of sample copies of documents, the entire sequence starting from initiation of transaction with the customer who intends to purchase the software, obtaining the from Tekia Finland and finally selling it to the customer, it has been explained that assessee has merely acted as a distributor of the product. We find that this aspect was not specifically raised by the assessee before the lower authorities and in this background, assessee has prayed for admission of such evidence as additional evidence in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. At the time of hearing, both sides were asked to give their say on the importance of the aforesaid evidence in order to determine the correctness of the tax liability of the assessee. Of course, the assessee sought to justify the consideration of such Additional evidence on the on the ground that it will enable the assessee to prove its point that the impugned payments could not be treated as royalties. The Ld. Departmental Representative on the other hand, opposed the plea primarily on the ground that such evidence was always available with the assessee but was not produced before the lower authorities. 13.1 In our considered opinion, Additional evidence now sought to be produced by the assessee does not enable the assessee to make out a new case but only would enable the assessee to support its assertions made before the authorities in an appropriate manner. Not only that, the Additional evidence will also enable income tax authorities to determine the correct nature of the payments in accordance with the extant position Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 17 of law. The assessee has consistently been asserting that the Re-seller agreement is merely a back to back arrangement whereby assessee distributes the software products developed by its holding company. In fact the emphasis by the Assessing Officer on Para 4.1.3 of the Re-seller agreement would be suspect to treat payments in the nature of royalty, if factually assessee is able to demonstrate that it has not undertaken any separate development in the software products on its own in the course of selling the product to the customer. Be that as it may, in our considered opinion, the aforesaid Additional evidence is germane and in the interest of justice it deserves to be considered while determining the tax liability of the assessee, qua the impugned payments. Of course, the said evidence was not before the lower authorities and, therefore, we deem it fit and proper to remit the matter back to the Assessing Officer, who shall revisit the controversy after considering the submissions put forth by the assessee and as per law. Thus, on this aspect assessee succeeds for statistical purposes.” 23. As is evident, the coordinate bench of Tribunal remanded the issue to the file of Assessing Officer in light of additional evidence filed by the assessee in support of its claim that payment made by the assessee is not in the nature of Royalty, since the said evidence was not before the lower authorities. In the present case, though during the course of hearing, learned AR placed reliance upon the aforesaid order passed by the coordinate bench of Tribunal and prayed for similar directions, however, despite adequate opportunity being granted the assessee did not file any additional evidence as were filed in preceding assessment years. Be that as it may, since, as submitted, similar issue is still pending before the Assessing Officer pursuant to aforesaid remand in preceding assessment years, in the larger interest of justice we deem it appropriate to remand this issue, in the present appeal, to the file of Assessing Officer for de novo adjudication with similar directions as were passed by the coordinate bench of Tribunal in aforesaid order. The Assessing Officer is further directed to examine the documentary evidence either presented by the Trimble Solutions India Pvt. Ltd. ITA No.211/Mum./2016 Page | 18 assessee or gathered by the Assessing Officer through enquiries which he may deem fit in the facts of the case. Needless to mention that no order shall be passed without affording opportunity of hearing to the assessee. As a result, grounds No. 12 to 15 raised in assessee‟s appeal are allowed for statistical purpose. 24. Grounds No. 16 and 17 pertains to levy of interest under section 234B and 234D of the Act, which is consequential in nature. Therefore, the said grounds are allowed for statistical purpose. 25. Ground no. 18 raised in assessee‟s appeal is pertaining to initiation of penalty proceedings, which is premature in nature and therefore is dismissed. 26. In the result, appeal by the assessee is partly allowed for statistical purpose. Order pronounced in the open Court on 17/08/2022 Sd/- PRAMOD KUMAR VICE PRESIDENT Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 17/08/2022 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary