AVEVA INFORMATION TECHNOLOGY INDIA PVT. LTD., MUMBAI V. DCIT-9(1), MUMBAI

ITA 2176/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7372 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 06-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR NARENDRA KUMAR
• Assessee Lawyers: SHIVANI KOTADIA
• Keywords: Double taxation relief; Retrospective amendment; Non-deduction of tax; TDS
• Section: 271(1)(c); 142(1); 234B; 40(a)(ia); 201(1); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I, BENC H MUMBAI BEFORE SHRI SAKTIJIT DEY, JM & SHRI G. MANJUNATHA, AM ITA NO.2176/MUM/2018 ( ASSESSMENT YEAR :2011-12 ) AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD. UNIT NO.202, A WING 2 ND FLOOR, SUPREME BUSINESS PARK, SUPREME CITY, BEHIND LAKE CSTLE, HIRANANDANI GARDENS, POWAI, MUMBAI-400 076 VS. DCIT-9(1) AAYKAR BHAWAN, M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AA DCA0847M APPELLANT ) .. RESPONDENT ) ASSESSEE BY NITESH JOSHI & SHIVANI KOTADIA REVENUE BY DR.NARENDRA KUMAR DATE OF HEARING 2 0 /06/2019 DATE OF PRONOUNCEME NT 26 / 0 7 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER OF THE LD CIT(A)-24, MUMBAI, DATED 30/08/2017 AND IT PERTAINS TO ASSESSMENT YEAR-2011-12. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. GENERAL GROUND 1.1. ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE HONBLE CIT(A) AND THE LEARNED AO HAVE ERRED IN ASSESSING THE TOTA L INCOME OF THE APPELLANT AT RS 1887,70,640/-AS AGAINST THE RETURNE D INCOME OF RS 5,31,20,670. 1.2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE HON'BLE CIT(A) HAS ERRED IN DISREGARDING THE SUBMISSIONS MADE BY THE A PPELLANT AND HOLDING THAT THE APPELLANT HAS FAILED TO PROSECUTE ITS APP EAL BEFORE HIM. ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 2 2. PAYMENTS MADE BY THE APPELLANT TO AVEVA SOLUTION S LIMITED ('AVEVA UK') ARE IN THE NATURE OF ROYALTY 2.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E HON'BLE CIT(A) AND THE LEARNED AO HAVE ERRED IN HOLDING THAT THE PAYME NTS MADE BY THE APPELLANT TO AVEVA UK AMOUNTING TO RS 13,06,49,972 UNDER THE DISTRIBUTION AGREEMENT ENTERED INTO BETWEEN AVEVA I NDIA AND AVEVA UK ARE SUBJECT TO TAX AS 'ROYALTY' IN THE HANDS OF AVEVA UK UNDER THE PROVISIONS OF ARTICLE 13 OF THE INDIA-UK TAX TREATY AS WELL AS SECTION 9(L)(VI) OF THE ACT. 3. DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT 3.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE CIT(A) AND THE LEARNED AO HAVE ERRED IN DISALLOWING A DEDUCTIO N IN RESPECT OF THE PAYMENTS MADE BY THE APPELLANT TO AVEVA UK AMOUNTIN G TO RS. 13,06,49,972 AS PER THE ABOVE MENTIONED DISTRIBUTIO N AGREEMENT UNDER SECTION 40(A)(IA) OF THE ACT, FOR NON-DEDUCTION OF TAX ON SUCH PAYMENTS AS PER SECTION 195 OF THE ACT. 4. SHORT GRANT OF TDS CREDIT 4.1. ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE HON'BLE CIT(A) AND THE LEARNED AO HAVE ERRED IN GRANTING SHORT CRE DIT OF TAXES DEDUCTED AT SOURCE AMOUNTING TO RS 6,81,907 CLAIMED BY THE A PPELLANT IN ITS RETURN OF INCOME. 5. LEVY OF INTEREST UNDER SECTION 234B OF THE ACT 5.1. ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE HON'BLE CIT(A) AND THE LEARNED AO HAVE ERRED IN LEVYING INTEREST A MOUNTING TO RS 1,00,86,236 UNDER SECTION 234C OF THE ACT. 6. LEVY OF INTEREST UNDER SECTION 234C OF THE ACT 6.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE CU(A) AND THE LEARNED AO HAVE ERRED IN LEVYING EXCESS INTERES T AMOUNTING TO RS 27,624 UNDER SECTION 234C OF THE ACT, 7. INITIATING PENALTY PROCEEDINGS 7.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE CIT(A} AND THE LEARNED AO HAVE ERRED IN INITIATING PENALTY PRO CEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF RENDERING CONSULTANCY AN D OTHER SOFTWARE DEVELOPMENT RELATED SERVICES ETC, FILED IT S RETURN OF INCOME FOR AY 2011-12 ON 30/11/2011, DECLARING TOTAL INCOM E AT ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 3 RS.5,81,20,670/-. THE CASE WAS SELECTED FOR SCRUTIN Y AND NOTICE U/S 143(2) AND 142(1) OF THE INCOME TAX ACT, 1961 (HERE INAFTER THE ACT) WERE ISSUED. IN RESPONSE TO NOTICES, THE LD. AUTHOR IZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FILED VARIOUS DETAILS AS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS ENTERED INTO DISTRIBUTION AGREEMENT WITH M/S AVEVA SOLUTIONS LTD. ENGLAND, A PARENT COMPANY OF THE ASSESSEE. THE ASS ESSING OFFICER FURTHER NOTED THAT AVEVA IS THE LICENSE HOLDER TO U SE VARIOUS SOFTWARE PRODUCTS AND ALSO OWN INTELLECTUAL PROPERTY RIGHTS RELATED TO THE SOFTWARE. AS PER THE AGREEMENT DATED 10/07/2005, TH E ASSESSEE DISTRIBUTES AND SUBLICENSE CAD AND CAM SOFTWARE PRO DUCTS DEVELOPED BY AVEVA TO THE CUSTOMERS WITHIN INDIAN T ERRITORY AND PROVIDES TRAINING AND SALES SUPPORT TO THE CUSTOMER S. AS PER THE TERMS AND CONDITIONS OF THIS AGREEMENT, AVEVA HAS A PPOINTED THE ASSESSEE TO SUBLICENSE SOFTWARE PRODUCTS TO INDIVID UALS AND PROVIDING MARKETING SERVICES WITHIN INDIAN TERRITOR Y. IN TERMS OF DISTRIBUTION AGREEMENT, THE ASSESSEE HAS DEBITED LI CENSE FEE OF RS.13,06,49,972/- TO AVEVA WITHOUT DEDUCTION OF TAX AT SOURCE AS REQUIRED U/S 195 OF THE ACT. THEREFORE, THE ASSESSI NG OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY LICENSE FEE PAID TO AVEVA, ENGLAND, SHALL NOT BE DISALLOWED U/S 40(A)(IA) OF T HE ACT, FOR FAILURE TO ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 4 DEDUCT TAX AT SOURCES U/S 195 OF THE ACT. IN RESPON SE, THE ASSESSEE VIDE ITS LETTER 30/10/2013 FILED A DETAILED WRITTEN SUBMISSIONS WHICH HAS BEEN REPRODUCED AT PARA 4.3 ON PAGES 2 TO 9 OF ASSESSMENT ORDER. THE SUM AND SUBSTANCE OF THE ARGUMENTS OF TH E ASSESSEE, BEFORE THE ASSESSING OFFICER ARE THAT LICENSE FEE PAID TO AVEVA ENGLAND IS FOR DISTRIBUTION OF COPYRIGHTED SOFTWARE PRODUCTS IN INDIA BUT NOT PAYMENT FOR ACQUIRING COPYRIGHTS IN SOFTWAR E, THEREFORE, THE QUESTION OF DEDUCTION OF TDS U/S 195 OF THE ACT, DO ES NOT ARISE, CONSEQUENTLY, NO DISALLOWANCE COULD BE MADE U/S 40( A)(IA) OF THE ACT. THE ASSESSING OFFICER AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE AND ALSO RELIED UPON VARIOUS JUDICIAL PREC EDENTS, INCLUDING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT I N THE CASE OF SAMSUNG ELECTRONICS LTD. & ORS. IN ITA NO.2808 OF 2 005 HELD THAT A RIGHT GRANTED BY WAY OF LICENSE TO MAKE A COPY OF T HE COMPUTER PROGRAM AND USE IT FOR INTERNAL BUSINESS AND BACK U P WOULD ITSELF AMOUNT TRANSFER OF RIGHT TO USE COPYRIGHTS. IN ABS ENCE OF SUCH LICENSE, MAKING A COPY OF WOULD HAVE BEEN AN ACT OF INFRINGEMENT UNDER THE COPYRIGHT ACT, 1957. ACCORDINGLY, PAYMENT FOR PURCHASE OF COPY OF A COMPUTER PROGRAM FOR INTERNAL BUSINESS US E BY AN END USER AS WELL AS FOR RESELL TO END USER WAS HELD TAX ABLE AS ROYALTY UNDER THE INCOME TAX ACT, AS WELL AS UNDER RESPECT IVE DOUBLE TAX AVOIDANCE AGREEMENT. ACCORDINGLY, BY TAKING NOTE OF AGREEMENT ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 5 BETWEEN THE ASSESSEE AND ITS PARENT COMPANY AVEVA, ENGLAND,HE CAME TO THE CONCLUSION THAT PAYMENT OF LICENSE FEE TO ITS PARENT COMPANY COVERED UNDER THE DEFINITION OF ROYALTY AS DEFINED U/S 9(1)(VI), THEREFORE, THE ASSESSEE OUGHT TO HAVE DED UCT TDS AS REQUIRED U/S 195 OF THE ACT. SINCE, THE ASSESSEE HA S FAILED TO DEDUCT TAX AT SOURCE, TOTAL PAYMENT MADE TO ITS PARENT CO MPANY HAD BEEN DISALLOWED U/S 40(A)(IA) OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) , THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSION ALONG WITH C ERTAIN JUDICIAL PRECEDENTS WHICH HAS BEEN REPRODUCED AT PARA-2.3.1 ON PAGES 4 TO 34 OF THE LD. CIT(A)S ORDER. THE ASSESSEE HAS REI TERATED ITS SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER TO AR GUE THAT DISTRIBUTION OF COPYRIGHTED SOFTWARE PRODUCTS IN IN DIA FOR END USERS AND PAYMENT FOR SUCH PRODUCTS DOES NOT COME UNDER T HE DEFINITION OF ROYALTY AS DEFINED U/S 9(1)(VI) OF THE ACT, CONSEQU ENTLY, REQUIREMENT OF DEDUCTION OF TAX AT SOURCE U/S 195 OF THE ACT, D OES NOT ARISE, THEREFORE, THE ASSESSING OFFICER WAS INCORRECT IN D ISALLOWING PAYMENT MADE TO AVEVA, ENGLAND FOR PURCHASE OF COPY RIGHTED SOFTWARE U/S 40(A)(IA) OF THE ACT. THE LD. CIT(A) A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT THE ASSESSING OFFICER HAS BROUGHT OUT CLEAR FACTS IN LIGHT OF DISTRIBUTION AG REEMENT BETWEEN THE ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 6 ASSESSEE AND AVEVA, U.K. THAT PAYMENT MADE TO ITS P ARENT COMPANY FOR SOFTWARE PRODUCTS IS COVERED UNDER THE DEFINITI ON OF ROYALTY AS DEFINED U/S 9(1)(VI) OF THE ACT, CONSEQUENTLY, THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE, AS REQUIRED U/S 195 OF THE ACT. SINCE, THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE AS REQUIRED U/S 195 OF THE ACT, THE ASSESSING OFFICER WAS RIGHT IN DISA LLOWING TOTAL PAYMENT MADE TO AVEVA ENGLAND U/S 40(A)(IA) OF THE ACT. SIMILARLY, THE LD. CIT(A) REJECTED THE GROUND TAKEN BY THE ASS ESSEE REGARDING SHORT CREDIT OF TDS HOWEVER, DIRECT THE ASSESSING OFFICER TO VERIFY THE SAME AND GRANT PROPER RELIEF. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US. 6. GROUND NO.1 OF ASSESSEES APPEAL IS GENERAL IN N ATURE AND HENCE, IT DOES NOT REQUIRE SPECIFIC ADJUDICATION AN D ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 7. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N FROM GROUND NO. 2 & 3 IS DISALLOWANCE OF PAYMENT MADE TO AVEVA SOLUTIONS LTD. UK FOR COPYRIGHTED SOFTWARE PRODUCTS U/S 40(A)(IA) OF THE ACT, FOR NON-DEDUCTION OF TAX AT SOURCE AS REQUIRED U/S 195 OF THE ACT. 8. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEAR ING SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE ITAT, MUMBAI A BENCH IN ASSESSEES OWN CASE F OR AY 2007-08 ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 7 IN ITA NO.3506/MUM/20014, WHERE UNDER IDENTICAL SET OF FACTS AND ALSO ON THE BASIS SIMILAR DISTRIBUTION AGREEMENT, T HE TRIBUNAL HELD THAT PAYMENT MADE BY THE ASSESSEE TO AVEVA SOLUTIO NS LTD., ENGLAND FOR PROCURING AND DISTRIBUTING COPYRIGHTED SOFTWARE ON PRINCIPLE TO PRINCIPLE BASIS COULD NOT BE TREATED A S PAYMENT TOWARDS ROYALTY AS DEFINED U/S 9(1)(VI) OF THE ACT, CONSEQU ENTLY, THE ASSESSEE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 195 OF THE ACT, ON SUCH PAYMENT AND HENCE NO DISALLOWANCE COULD BE MADE U/S 40(A)(IA) OF THE ACT. THE LD. AR FURTHER SUBMITTED THAT THE TRIB UNAL HAD FURTHER CONSIDERED THE ISSUE OF TDS UNDER THE PROVISIONS OF SECTION 201(1) AND 201(1A) OF THE ACT, FOR IMPUGNED AY IN ITA NO.3 510/MUM/2014 AND HELD THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON PAYMENT MADE TO AVEVA ENGLAND AND ALSO IT CANNOT BE TREATED THAT ASSESSEE IS IN DEFAULT WITHIN THE PROVISIONS OF SEC TION 201(1) AND 201(1A) OF THE ACT. THE LD. AR FURTHER SUBMITTED TH AT EVEN THOUGH THE ASSESSING OFFICER HAS RELIED UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS SAMSUNG ELECTRONICS LTD. & ORS.(SUPRA) WHILE DECIDING THE ISSUE OF PAYM ENT MADE FOR COPYRIGHTED PRODUCTS TO COME TO THE CONCLUSION THAT SAID PAYMENTS ARE COVERED U/S 9(1)(VI) OF THE ACT, BUT HONBLE JU RISDICTIONAL HIGH COURT OF BOMBAY HAD AN OCCASION TO CONSIDER AN IDE NTICAL ISSUE IN THE CASE OF DCIT VS M/S RELIANCE JIO INFOCOMM LTD. IN ITA NO.1395 ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 8 OF 2016 AND BY FOLLOWING THE DECISION OF THE HONBL E DELHI HIGH COURT IN THE CASE OF CIT. VS. SIEMENS AKTIONGESELLSCHAFT. (2009) 310 ITR 320 HELD THAT MERE AMENDMENT IN THE ACT, WOULD NOT OVERRIDE PROVISIONS OF DOUBLE TAX AVOIDANCE AGREEMENT, UNLES S SUCH AMENDMENT IS BROUGHT OUT IN THE AGREEMENT, AS SAID PAYMENTS COVERED UNDER DTAA CANNOT BE TAXED UNDER THE PROVIS IONS OF INCOME TAX ACT, 1961. 9. THE LD. DR, ON THE OTHER HAND, FAIRLY ACCEPTED T HAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE ITAT, MUMBAI, A BENCH IN ASSESSEES OWN CASE, HOWEVER H E STRONGLY SUPPORTED THE ORDER OF THE LD. ASSESSING OFFICER AN D FINDINGS RECORDED IN HIS ASSESSMENT ORDER IN THE LIGHT OF DE CISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SAMSUNG ELECTRONICS LTD. (SUPRA). 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MA TERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE CO-ORDINATE BENCH OF THE IT AT, MUMBAI, A BENCH IN ASSESSEES OWN CASE FOR AY 2007-08 IN ITA NO.3506/MUM/2014 HAD CONSIDERED IDENTICAL ISSUE IN LIGHT OF DISTRIBUTION AGREEMENT BETWEEN THE ASSESSEE AND ITS PARENT COMPANY AVEVA INFORMATION TECHNOLOGY INDIA PVT. LTD ., ENGLAND AND AFTER CONSIDERING RELEVANT FACTS AND ON ANALYSIS OF PROVISIONS OF ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 9 SECTION 9(1)(VI) OF THE ACT, AND ARTICLE 5 AND 13 O F INDO-UK TAX TREATY HELD THAT PAYMENT MADE BY THE ASSESSEE TO ITS PAREN T COMPANY FOR PROCURING AND DISTRIBUTING COPYRIGHTED SOFTWARE ON PRINCIPLE TO PRINCIPLE BASIS COULD NOT BE TREATED AS PAYMENT TOW ARDS ROYALTY. THE TRIBUNAL, FURTHER HELD THAT SINCE THE PARENT COMPAN Y WAS NOT HAVING PE IN INDIA, THEREFORE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AS REQUIRED U/S 195 OF THE ACT AND HENCE FOR FAILURE TO DEDUCT TDS, NO DISALLOWANCE COULD BE MADE U/S 40(A)(IA) OF THE ACT. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE WOULD LIKE TO REFER TO SOME OF THE CLAUSES OF THE AGREEMENT, ENTERED INTO BETWEEN THE ASSESSEE AND ASL, AS SAME WOULD HELP US TO DECIDE THE ISSUE BEFORE US. AS PER THE AGREEMENT AVEVA END USER WAS DEFINED A S UNDER :- AVEVA END USER SHALL MEAN A THIRD PARTY WITHIN THE TERRITORY WHO IS LICENSED BY AVEVA OR AN AVEVA LICENSE TO USE ONE OR MORE OF THE PRODUCTS CLAUSE 2 AND CL.3 DEALS WITH LICENCE AND DELIVERY A S FOLLOWS: 2 LICENCE 2.1 AVEVA HEREBY GRANTS TO THE COMPANY WITH EFFECT FROM THE EFFECTIVE DATE A NON- EXCLUSIVE, NON-TRANSFERABLE LICENCE TO DO THE FOLLO WING ONLY WITHIN THE TERRITORY AND IN -ACCORDANCE WITH THIS AGREEMENT: 2.1.1 MARKET, PROMOTE AND DEMONSTRATE THE PRODUCTS; 2.1.2 GRANT SUB-LICENSES OF AND DISTRIBUTE THE PROD UCTS; 2.1.3 PROVIDE TRAINING AND FIRST LINE SUPPORT TO EN D USERS AND AVEVA END USERS; AND 2.1.4 COPY THE PRODUCTS FOR THE PURPOSES ONLY OF FU LFILLING ITS OBLIGATIONS UNDER THIS AGREEMENT. DELIVERY OF PRODUCTS 3.1. AVEVA SHALL PROVIDE TO THE COMPANY WITHIN 10 BUSINESS DAYS OF THE COMMENCEMENT DATE COPIES (IN SUCH NUMBER AS AVE VA SHALL DETERMINE) OF THE LATEST VERSION OF EACH OF THE PRO DUCTS IN OBJECT CODE ONLY. 3.2. UPON RECEIPT OF AN EXECUTED SUB-LICENCE THE CO MPANY SHALL DELIVER A COPY OF THE ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 10 RELEVANT PRODUCT OR PRODUCTS TO THE END USER. 3.3. AVEVA MAY PROVIDE NEW VERSIONS TO THE COMPANY FROM TIME TO TIME. ANY NEW VERSION MADE AVAILABLE TO THE COMPANY SHALL FORM PA RT OF THE RELEVANT PRODUCT AND SHALL BE SUBJECT TO THIS AGREEMENT. THE COMPANY SHALL, PROMPTLY UPON RECEIPT OF A NEW VERSION, PROVIDE A C OPY OF THE SAME TO EACH END USER OF THE RELEVANT PRODUCT AND ENSURE TH AT ALL RELEVANT MARKETING AND PROMOTIONAL MATERIALS AND ALL DEMONST RATIONS OF THE RELEVANT PRODUCT INCLUDE SUCH NEW VERSION. SOME OF THE OTHER USEFUL CLAUSES OF THE AGREEMENT A RE REPRODUCED, AS SAME WOULD BE HELPFUL IN DECIDING THE ISSUE AND SAM E READ AS UNDER: 7. SUB-LICENCES 7.1. SUBJECT TO CLAUSE 7.3 BELOW, THE COMPANY SHALL ENSU RE THAT EVERY END USER TO WHICH THE COMPANY PROVIDES ONE OR MORE OF THE PRODUCTS SH ALL ENTER INTO A VALID AND BINDING SUB-LICENCE WITH THE COMPANY ON T HE STANDARD TERMS SET OUT IN SCHEDULE C. 7.2. AVEVA MAY AMEND THE STANDARD TERMS FROM TIME TO TI ME AND THE COMPANY SHALL, UPON RECEIPT OF WRITTEN NOTICE OF THE SAME AND SUBJ ECT TO CLAUSE 7.3 BELOW, INCORPORATE SUCH AMENDMENTS INTO ALL SUBSEQU ENT SUB-LICENCES. 7.3 . PRIOR TO ENTERING INTO THE FIRST SUB-LICENCE IN A NY JURISDICTION WITHIN THE TERRITORY THE COMPANY SHALL ENSURE THAT THE STANDARD TERMS ARE RE VIEWED BY A REPUTABLE EXPERIENCED LAWYER QUALIFIED TO PRACTICE IN SUCH JURISDICTION AND THAT WRITTEN XXXX 4 SECURITY CODES 4.1 A VALID SECURITY CODE IS NECESSARY IN ORDER TO USE EACH OF THE PRODUCTS. THE COMPANY SHALL EITHER: 4.1.1 REQUEST FROM AVEVA OR SUCH THIRD PARTY AS DIR ECTED BY AVEVA A SECURITY CODE FOR EACH COPY OF ONE OR MORE PRODUCTS ON BEHALF OF ITSELF AND END USERS; OR 4.1.2 WHERE PERMITTED TO DO SO BY AVEVA, GENERATE A SECURITY CODE FOR EACH COPY OF ONE OR MORE PRODUCTS ON BEHALF OF ITSE LF AND END USERS. THE COMPANY SHALL GENERATE OR REQUEST AS APPROPRIAT E REPLACEMENT SECURITY CODES IN GOOD TIME PRIOR TO THE EXPIRY OF THE RELEVANT EARLIER SECURITY CODE. XXXXX 11 FEES AND ROYALTY SUB-LICENCE FEE 11.1 THE COMPANY SHALL SET THE SUB-LICENCE FEES TA KING INTO ACCOUNT THE PRICING GUIDELINES 11.2 THE COMPANY MAY AMEND SUCH SUB-LICENCE FEES FR OM TIME TO TIME IN ACCORDANCE WITH THE PRICING GUIDELINES AND SHAL L PROMPTLY PROVIDE WRITTEN NOTICE OF SUCH AMENDMENT TOGETHER WITH AN U PDATED LIST OF SUB- LICENCE FEE TO AVEVA. 11.3 AVEVA SHALL BE ENTITLED AT ITS SOLE OPTION AT ANY TIME TO ADJUST THE PRICING GUIDELINES. SUCH ADJUSTMENTS SHALL TAKE EFFECT IMMEDIATELY. ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 11 ROYALTY 11.4 ROYALTY SHALL BE CALCULATED ON THE REMAINDER O F ALL SUB-LICENCE FEES LESS ANY RELEVANT THIRD PARTY ROYALTIES IN ACCORDAN CE WITH THE FOLLOWING PROVISIONS: 11.4.1 IN RELATION TO INITIAL FEES PAID OR PAYABLE BY AN END USER DURING EACH QUARTER, THE ROYALTY SHALL BE CALCULATED IN AC CORDANCE WITH SCHEDULE D ON THE REMAINDER OF SUCH INITIAL FEES LE SS ANY RELEVANT THIRD PARTY ROYALTIES; 11.4.2 IN RELATION TO ANNUAL FEES PAID OR PAYABLE B Y AN END USER DURING EACH QUARTER, THE ROYALTY SHALL BE CALCULATED IN AC CORDANCE WITH SCHEDULE D ON THE REMAINDER OF SUCH ANNUAL FEES LES S ANY RELEVANT THIRD PARTY ROYALTIES; AND 11.4.3 IN RELATION TO ANY OTHER FORMS OF SUB-LICENC E FEES PAID OR PAYABLE BY AN END USER DURING EACH QUARTER, SUCH SUB-LICENC E FEES SHALL BE TREATED AS FOLLOWS FOR THE PURPOSES OF CALCULATING THE RELEVANT ROYALTY: (I) A PROPORTION OF SUCH SUB-LICENCE FEES SHALL BE DEEMED TO BE INITIAL FEES AND ROYALTY SHALL BE PAYABLE THEREON IN ACCORD ANCE WITH CLAUSE 11.4.1; AND (II) THE REMAINDER OF SUCH SUB-LICENCE FEES SHALL B E DEEMED TO BE ANNUAL FEES AND ROYALTY SHALL BE PAYABLE THEREON IN ACCORD ANCE WITH CLAUSE 11.4.2, AND THE PROPORTIONS IN WHICH SUCH SUB-LICE NCE FEES SHALL BE DEEMED TO BE INITIAL FEES AND ANNUAL FEES SHALL BE AS SET OUT IN AVEVA GROUP PLC'S REVENUE RECOGNITION POLICY AS AMENDED F ROM TIME TO TIME. 13. INTELLECTUAL PROPERTY RIGHTS AND INDEMNITIES 13.1 THE COMPANY ACKNOWLEDGES THAT AVEVA OWNS OR IS LICENSED TO USE ALL COPYRIGHT AND OTHER INTELLECTUAL PROPERTY RIGHT S OF WHATEVER NATURE IN AND RELATING TO THE PRODUCTS AND ANY RELATED DOCUME NTATION. 13.2 IN THE EVENT THAT NEW INVENTIONS, DESIGNS, PRO CESSES OR OTHER WORKS OR MATERIALS OF WHATEVER NATURE EVOLVE IN THE PERF ORMANCE OF OR AS A RESULT OF THIS AGREEMENT, THE COMPANY ACKNOWLEDGES AND AGREES THAT ALL INTELLECTUAL PROPERTY RIGHTS IN THE SAME SHALL BELO NG TO AVEVA (UNLESS OTHERWISE AGREED BY AVEVA IN WRITING) AND THE COMPA NY SHALL, ON REQUEST, ASSIGN TO AVEVA WITH FULL TITLE GUARANTEE ALL INTELLECTUAL PROPERTY RIGHTS IN AND TO THE SAME AND SHALL EXECUTE AND DO ALL SUCH INSTRUMENTS AND THINGS AS ARE NECESSARY TO VEST IN AVEVA FULL L EGAL TITLE IN THE INTELLECTUAL PROPERTY RIGHTS IN AND TO THE SAME AB SOLUTELY AND AS SOLE BENEFICIAL OWNER. WE FIND THAT THE ASSESSEE HAD ENTERED INTO A DISTRI BUTION AGREEMENT WITH ASL TO DISTRIBUTE THE SOFTWARE PRODUCTS DEVELOPED B Y UK COMPANY TO THE CUSTOMERS WITHIN THE TERRITORY OF INDIA. THE PERUSA L OF THE AGREEMENT INDICATE THAT THE ASSESSEE WAS GRANTED A NON EXCLU SIVE AND NON TRANSFERABLE LICENSE TO MARKET AND DISTRIBUTION TH E SOFTWARE PRODUCTS DEVELOPED BY ASL TO END CUSTOMERS, THAT THE ASSESSE E DID NOT HAVE ANY RIGHT TO THE SOURCE CODE OF SOFTWARE PRODUCTS AND W AS NOT PERMITTED TO MODIFY THE SOFTWARE PRODUCTS, INCLUDING THE DOCUMEN TATION, THAT ASL WAS THE SOLE OWNER OF IPR OF THE PATENTS COPY RIGHTS TR ADEMARKS MODIFICATIONS AND UPDATES, THAT ASSESSEE WAS NOT GIVEN ANY OF THE SE PROPRIETARY RIGHTS BY ASL, THE ASSESSEE WOULD BE PURCHASING THE LICEN SE FOR SOFTWARE PRODUCTS FROM ASL AND WOULD DISTRIBUTE IT TO END-CU STOMERS, THAT THE END- CUSTOMERS WOULD PAY SUB LICENSING FEE TO THE ASSESS EE. ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 12 IF WE CONSIDER ALL THESE FACTS IT BECOMES CLEAR THA T THE ASSESSEE WAS FUNCTIONING AS A DISTRIBUTOR OF ASL. THERE IS NO DO UBT THAT ASL IS A TAX RESIDENT OF UK AND AS PER THE PROVISIONS OF INDIA-U K DTAA WAS ELIGIBLE TO BE GOVERNED BY THE TAX TREATY TO THE EXTENT IT WAS MORE BENEFICIAL VIS- A- VIS THE PROVISIONS OF THE ACT. 5.1. THE AO AND THE FAA HAD HELD THE ASSESSEE WAS IN REC EIPT OF ROYALTY AS THE PAYMENTS MADE BY IT TO ASL FOR THE DISTRIBUT ION OF SOFTWARE PRODUCTS WOULD QUALIFY AS ROYALTY IN THE HANDS OF A SL, AS PER THE EXPL.2 TO SECTION 9(1)(VI) OF THE ACT AS WELL AS THE PROVI SIONS OF ARTICLE-13 OF THE INDIA UK TAX TREATY. ON THE OTHER HAND, THE ASSESSE E CLAIMED THAT PAYMENT MADE BY IT COULD NOT BE TREATED AS ROYALTY. 5.1.1. BEFORE DECIDING THE ISSUE OF ROYLATY, WE WANT TO HO LD THAT ASL DID NOT HAVE ANY PE IN INDIA IN TERMS OF ARTICLE 5 OF T HE TREATY.ARTICLE-13 OF THE TREATY DEFINES THE TERM ROYALTY AS UNDER :- (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATI ON FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC OR SCIEN TIFIC WORK, INCLUDING CINEMATOGRAPHY FILMS OR WORK ON FILMS, TAPE OR OTHE R MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TE LEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECR ET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIA L OR SCIENTIFIC EXPERIENCE; AND (B) .. FROM THE ABOVE IT IS CLEAR THAT CONSIDERATION PAID FOR THE USE OF/ THE RIGHT TO USE THE COPY RIGHT OF ANY SCIENTIFIC WORK ETC. W OULD QUALIFY AS ROYALTY. IN OTHER WORDS IF THE PAYMENT IS NOT FOR INTELLECTUAL PROPERTIES SUCH AS COPYRIGHT, PATENTS TRADEMARKS ETC., THE PAYMENT CAN NOT BE TREATED AS ROYALTY. THE ASSESSEE HAD ACQUIRED RIGHT TO SELL TH E COPY RIGHTED ARTICLE (SOFTWARE PRODUCTS)AND NOT THE RIGHT TO USE THE COP YRIGHT. WE WOULD LIKE TO REFER TO CASE OF VINZAS SOLUTIONS INDIA (P.) LTD . OF HON'BLE MADRAS HIGH COURT (SUPRA), WHEREIN IT WAS HELD THAT THERE WAS A DIFFERENCE BETWEEN A TRANSACTION OF SALE OF A COPYRIGHTED ARTICLE AND ON E OF, COPYRIGHTS ITSELF, THAT THE PROVISIONS OF SECTION 9(1)(VI) AS A WHOLE WOULD STAND ATTRACTED IN CASE OF LATTER AND NOT FORMER. SIMILARLY IN THE CASE OF DYNAMIC VERTICAL SOFTWARE INDIA (P.) LTD. THE HON'BLE DELHI HIGH COURT DEALT WITH SIMILAR ISSUE. IN THAT MATTER THE ASSESSEE WAS PURCHASING THE SOFTWARE FROM MICROSOFT AND SOLD IT FURTHER IN INDIAN MARKET. THE AO TREATED THE PAYMENT MADE B Y THE ASSESSEE TO MICROSOFT AS ROYALTY AND, THEREFORE, CAME TO THE CO NCLUSION THAT TAX AT SOURCE WAS TO BE DEDUCTED. THE FAA CONFIRMED THE OR DER OF THE AO, HOWEVER, THE TRIBUNAL DELETED THE ADDITION. THE HON BLE COURT HELD THAT BY NO STRETCH OF IMAGINATION IT WOULD BE TERMED AS 'ROYALTY. IN THE OTHER CASES, REFERRED TO BY THE ASSESSEE BEFORE US, SIMIL AR VIEW HAD BEEN TAKEN. 5.1.2. HERE,WE WOULD ALSO LIKE TO REFER TO EXPLANATION-2 T O SECTION 9(1)(VI) WHEREIN ROYALTY HAS BEEN DEFINED. AS PER THE DEFINI TION TERM ROYALTY ENVISAGES PAYMENT FOR TRANSFER OF ALL OR ANY RIGHTS IN INTELLECTUAL PROPERTIES( SUCH AS COPYRIGHTS, PATENTS ETC.) BY TH E OWNER OF SUCH INTELLECTUAL PROPERTY BY ANY OTHER PERSON. IT IS CL EAR THAT THE ACT DOES NOT ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 13 CONTAIN A DEFINITION OF SUCH INTELLECTUAL PROPERTIE S THAT ARE INCLUDED WITHIN THE SCOPE OF TERM ROYALTY. 5.1.3. WE ARE AWARE THAT A RETROSPECTIVE AMENDMENT HAS BEE N MADE TO EXPLANATION TO SECTION 9(1)(VI) OF THE ACT BY FINA NCE ACT, 2012. EARLIER, THE EXPLANATION READ AS UNDER :- ROYALTY MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCO ME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD CAPITAL GAINS FOR. V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENSE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCI ENTIFIC WORK INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISIO N OR TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING, BUT NOT INCLUDI NG CONSIDERATION FOR THE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS. THE FINANCE ACT 2012 INSERTED EXPLANATION 4 TO THE SECTION 9(1)(VI) OF THE ACT WITH RETROSPECTIVE EFFECT FROM 1/06/1976. THE S AME IS REPRODUCED BELOW: EXPLANATION 4. - FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE TRANSFER OF ALL OR ANY RIGHTS IN RESPECT OF ANY RI GHT, PROPERTY OR INFORMATION INCLUDES AND HAS ALWAYS INCLUDED TRANSFER OF ALL OR ANY RIGHT FOR USE OR RIGHT TO USE A COMPUTER SOFTWARE (INCLUDING GRANTIN G OF A LICENSE) IRRESPECTIVE OF THE MEDIUM THROUGH WHICH SUCH RIGHT IS TRANSFERRED. FROM THE AMENDMENT IT IS CLEAR THAT IT COVERS THE T RANSFER OF ALL OR ANY RIGHT FOR USE/RIGHT TO USE OF COMPUTER SOFTWARE INC LUDING GRANT OF LICENSE. THE AMENDMENT HAS BEEN MADE TO THE SECTION I.E., T O DOMESTIC LAW. BUT,T HERE IS NO CORRESPONDING CHANGE IN TAX TREATY . IT IS ALSO TO BE REMEMBERED THAT THE ASSESSEE HAD ALREADY MADE THE P AYMENT BEFORE THE AMENDMENT WAS INTRODUCED. AT THE POINT OF MAKIN G PAYMENT TO ASL, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURC E. SO, NOW IT CANNOT BE COMPELLED TO DEDUCT TAX. THE BASIC PRINCIPAL OF TAX ATION STIPULATES THAT NOBODY IS SUPPOSED TO PERFORM THE IMPOSSIBLE. WE FI ND THAT IN THE CASE OF B4U INTERNATIONAL HOLDING LTD.(ITA/3326/MUM/2006)TH E TRIBUNAL HAD HELD AS UNDER :- 17.COMING TO THE ARGUMENT OF THE LEARNED DEPARTMEN TAL REPRESENTATIVE THAT THE AMENDMENT TO THE FINANCE ACT, 2012 CHANGES THE POSITION, WE FIND THAT THERE IS NO CHANGE IN THE DTAA BETWEEN IN DIA AND USA. THUS, THE AMENDMENT HAVE NO AFFECT ON OUR DECISION. IN THE CASE OF LEONHARDT ANDRA (249ITR418) THE HON BLE CALCUTTA HIGH COURT HAS HELD AS UNDER :- ROYALTY WAS NOT DEFINED IN THE AGREEMENT FOR AVOID ANCE OF DOUBLE TAXATION BETWEEN INDIA AND GERMANY AND WAS NOT INCL UDED WITHIN THE TERM INDUSTRIAL AND COMMERCIAL PROFITS. THE TERM ROYALTY NOT BEING DEFINED IN THE AGREEMENT FOR AVOIDANCE OF DOUBLE TA XATION THE DEFINITION IN THE ACT WOULD PREVAIL. THEREFORE, THE SUMS RECEI VED BY THE ASSESSEE FOR DESIGN AND TECHNICAL SERVICES FOR THE CONSTRUCT ION WORK WERE IN THE NATURE OF ROYALTY WITHIN THE MEANING OF THE TERM IN SECTION 9(1)(VI) OF THE ACT, WHICH WAS TAXABLE AND DID NOT CONSTITUTE INDUS TRIAL AND COMMERCIAL PROFITS. THE FACT THAT THE ASSESSEE HAD NO PERMANEN T ESTABLISHMENT IN INDIA WAS OF LITTLE CONSEQUENCE. SIMILAR IS THE POSITION OF INDO-UK DTAA, WHERE TERM ROYALTY HAS NOT BEEN DEFINED. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT DEFINITION ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 14 OF TERM ROYALTY AS APPEARING IN THE INDIA UK DTAA A PPLY AND AMENDMENTS MADE BY FINANCE ACT,2012 WOULD HAVE NO B EARING ON THE PRESENT CASE. EVEN THE CIR.NO.333 OF CBDT STATES TH AT WHERE A DTAA PROVIDES FOR A PARTICULAR MODE OF COMPUTATION OF IN COME, THE SAME SHOULD BE FOLLOWED IRRESPECTIVE OF THE PROVISIONS OF THE A CT. IN THE CASE BEFORE US, THE DTAA IS PROVIDING PARTICULAR MODE OF COMPUT ATION FOR ROYALTY. AS PER THE AGREEMENT THE ASSESSEE DID NOT HAVE ANY RI GHT TO GENERATE THE LICENSE KEY OR MAKE COPIES OF LICENSE KEY OR WAS PR OVIDED ACCESS TO SOURCE CODE IN THE SOFTWARE. THE ASL SOFTWARE PRODU CTS WERE DEVELOPED AND MARKETED BY IT WERE IN THE NATURE OF SHRINK-WRA P-SOFTWARE-PRODUCTS THAT ARE ALSO KNOWN AS OFF THE SHELF SOFTWARE PRODU CTS. THE ASSESSEE HAD NO ROLE IN DEVELOPING A SOFTWARE, IT WAS JUST D ISTRIBUTING THE SOFTWARE TO THE END USERS. THEREFORE, WE ARE OF THE OPINION THAT PAYMENT BY THE ASSESSEE TO ASL FOR PROCURING AND DISTRIBUTING COP YRIGHTED SOFTWARE ON PRINCIPAL TO PRINCIPAL BASIS COULD NOT BE TREATED A S PAYMENT TOWARDS ROYALTY.ASL WAS NOT HAVING A PE IN INDIA, THEREFORE , THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AS PER THE PROVI SION OF SECTION 195 OF THE ACT, HENCE, FOR ITS FAILURE IT CANNOT BE TREATE D AS A-I-D U/S. 201.REVERSING THE ORDER OF THE FAA WE DECIDE EFFECT IVE FIRST EFFECTIVE GROUND OF APPEAL(GS.OA-1TO3)IN FAVOR OF THE ASSESSE E. 11. WE, FURTHER NOTED THAT THE TRIBUNAL HAD ALSO CO NSIDERED THE ISSUE OF NON-DEDUCTION OF TDS AT SOURCE ON PAYMENT MADE TO ITS PARENT COMPANY AVEVA SOLUTIONS LTD., ENGLAND, IN LI GHT OF PROVISIONS OF SECTION 201(1) AND 201(1A) OF THE ACT, AND HELD THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AND ALSO IT CANNOT BE TREATED AS ASSESSEE IN DEFAULT FOR THE IMPUGNED YEAR IN RE SPECT OF PAYMENT MADE FOR PURCHASE OF COPYRIGHTED SOFTWARE. THEREFOR E, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO CO NSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN ASSESSEES O WNS CASE, WE ARE OF THE CONSIDERED VIEW THAT PAYMENT MADE BY THE ASSESSEE TO ITS PARENT COMPANY FOR PURCHASE OF COPYRIGHTED SOFTWARE TO BE DISTRIBUTED IN INDIA FOR END USERS CANNOT BE CONSID ERED AS ROYALTY WITHIN THE DEFINITION OF ROYALTY AS DEFINED U/S 9(1 )(VI) OF THE ACT, ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 15 CONSEQUENTLY, THE ASSESSEE IS NOT REQUIRED TO DEDUC T TAX AT SOURCE U/S 195 OF THE ACT AND HENCE, NO DISALLOWANCE COULD BE MADE U/S 40(A)(IA) OF THE ACT. THEREFORE, WE DIRECT THE ASSE SSING OFFICER TO DELETE ADDITIONS MADE TOWARDS DISALLOWANCE U/S 40(A )(IA) OF THE ACT. 12. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.4 OF ASSESSEES APPEAL IS SHORT CREDIT OF TDS OF RS.6,81,907/-. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ISSU E MAY BE SET- ASIDE TO THE FILE OF THE ASSESSING OFFICER TO VERIF Y THE FACTS TO ASCERTAIN WHETHER IS THERE ANY CREDIT FOR TDS AND A LSO TO GRANT CREDIT, THEREFORE, WE SET-ASIDE THE ISSUE TO THE FI LE OF THE ASSESSING OFFICER AND DIRECTED THE ASSESSING OFFICER TO CALL NECESSARY ENQUIRIES IN LIGHT OF EVIDENCE FILED BY THE ASSESSE E INCLUDING TDS CERTIFICATE IF, ANY AND GRANT RELIEF ACCORDINGLY. 13. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.5 AND 6 OF ASSESSEES APPEAL IS LEVY OF INTEREST U/S 234B AND 234C OF THE ACT. LEVY OF INTEREST U/S 234B AND 234C IS MANDATORY AND CONSEQUENTIAL IN NATURE, THEREFORE, WE DIRECT T HE ASSESSING OFFICER TO VERIFY THE FACTS IN LIGHT OF PROVISIONS OF SECTION 234B AND COMPUTE INTEREST AS APPLICABLE ON THE BASIS OF TOTA L INCOME COMPUTED FOR THE YEAR UNDER CONSIDERATION. WE FURTH ER DIRECT THE ASSESSING OFFICER TO COMPUTE 234C INTEREST ON RETUR NED INCOME. ITA NO.2176/MUM/2018 AVEVA INFORMATION TECHNOLOGY INDIA PVT.LTD.. 16 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.7OF ASSESSEES APPEAL IS INITIATION OF PENALTY P ROCEEDINGS U/S 271(1)(C) OF THE ACT. WE FIND THAT GROUND TAKEN BY THE ASSESSEE IS PREMATURE, WHICH DOES NOT REQUIRE ADJUDICATION AT T HIS POINT OF TIME AND HENCE, THE SAME IS DISMISSED AS IN FRUCTUOUS. 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26/07/2 019 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 26 /07/2019 SHASHISHEKHAR SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//