Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 77318 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-06-2014
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
23-04-2014
Assessment Year
2009-2010
Appeal Filed On
17-12-2013
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , !' , # $! % BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ ITA NOS. 2190, 2191, 2192, 2193, 2194, 2195, 2196 & 2199/MDS//2013 / ASSESSMENT YEARS : 2003-04 TO 2010-11 M/S FINANCIAL SOFTWARE AND V. THE DEPUTY COMMISS IONER OF SYSTEMS PRIVATE LIMITED, INCOME TAX/ SARADHA GROUND FLOOR, THE ASSISTANT COMMISSION ER OF NO.42, THIRD MAIN ROAD, INCOME TAX, GANDHI NAGAR, ADYAR, CHENNAI. COMPANY CIRCLE II(1) , PAN: AAACF 2351 C CHENNAI 600 034. ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI NISHANT THAKKAR, ADVOCATE A ND SHRI B. RAMAKRISHNAN, CA / RESPONDENT BY : SHRI SHAJI P. JACOB, IRS, ADDL. CIT /DATE OF HEARING : 23 RD APRIL, 2014 /DATE OF PRONOUNCEMENT : 05 TH JUNE, 2014 $& / O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THIS IS A BUNCH OF EIGHT APPEALS. ALL THE APPEAL S ARE FILED BY THE ASSESSEE. THE APPEALS RELATE TO THE ASSESSM ENT YEARS 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-0 9, 2009- - - ITA NOS.2190 TO 2197 & 2199/MDS/13 2 10 AND 2010-11. THESE APPEALS ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME- TAX(APPEALS)-II AT CHENNAI, ON 30.8.2013. THE APPE ALS FOR THE FIRST FOUR ASSESSMENT YEARS, 2003-04 TO 2006-07 AR ISE OUT OF THE INCOME ESCAPING ASSESSMENTS COMPLETED UNDER SEC.143 (3), READ WITH SEC.147 OF THE INCOME-TAX ACT, 1961. THE REMAINING FOUR APPEALS RELATING TO THE ASSESSMENT YEARS 2007- 08 TO 2010- 11 ARISE OUT OF REGULAR ASSESSMENTS COMPLETED UNDER SEC.143(3). 2. THE ASSESSEE, FINANCIAL SOFTWARE AND SYSTEMS PRI VATE LIMITED (FSS FOR SHORT), IS AN INDIAN COMPANY. IT IS ENGAGED IN PROVIDING SOFTWARE AND RELATED SERVICES IN BANKING AND FINANCIAL SERVICE SECTOR. THE ASSESSEE-COMPANY PARTICULARLY PROVIDES SERVICES IN ELECTRONIC PAYMENT TRANSACTIONS UNDER D IFFERENT MODULES. USUALLY, IT PROVIDES A WIDE RANGE OF SOLU TIONS FOR ATM/POINT OF SALES(POS). IT DELIVERS SERVICES RELA TING TO DRIVING, SWITCHING, MOBILE BANKING, INTERNET COMMERCE GATEWA Y, ELECTRONIC BILL PAYMENT AND PRESENTMENT ETC. 3. IN THE COURSE OF CARRYING ON OF ITS ACTIVITY, TH E ASSESSEE COMPANY HAS MADE PAYMENTS TO TWO NON-RESIDENT ENTIT IES. THEY - - ITA NOS.2190 TO 2197 & 2199/MDS/13 3 ARE ACI WORLDWIDE SINGAPORE (PTE) LIMITED (ACI SIN GAPORE FOR SHORT) AND INTEGRATED RESEARCH PVT. LTD., AUSTRALIA (IRPL AUSTRALIA FOR SHORT). THE FORMER COMPANY, ACI SIN GAPORE IS A RESIDENT OF SINGAPORE AND THE LATTER COMPANY, IRPL AUSTRALIA IS A RESIDENT OF AUSTRALIA. THE ASSESSEE COMPANY HAS BE EN MAKING PAYMENTS TO THESE TWO NON-RESIDENT COMPANIES TOWARD S PROCUREMENT OF STANDARD SOFTWARE. THE ASSESSEE COM PANY OPERATES UNDER A DISTRIBUTION MODEL, WHEREIN SOFTWA RE PRODUCTS ARE PROCURED FROM THE TWO NON-RESIDENT COMPANIES NA MELY, ACI SINGAPORE AND IRPL AUSTRALIA AND IN TURN, SUPPLY TH OSE SOFTWARE PRODUCTS TO VARIOUS CUSTOMERS IN INDIA. IN THE PRE VIOUS YEARS RELEVANT TO THE ASSESSMENT YEARS UNDER APPEAL, SUCH PAYMENTS WERE MADE TO THE ABOVE SAID NON-RESIDENT COMPANIES, BUT NO TAX HAS BEEN DEDUCTED AT SOURCE WHILE MAKING THE PAYMEN TS. THE ASSESSEE COMPANY WAS OF THE VIEW THAT THE PAYMENTS MADE TO THE NON-RESIDENT COMPANIES TOWARDS PROCUMBENT OF SO FTWARE PRODUCTS UNDER THE ABOVE STATED DISTRIBUTION MODEL DO NOT GENERATE TAXABLE INCOME FOR THE NON-RESIDENT COMPAN IES IN INDIA AND THEREFORE, THERE WAS NO NECESSITY TO DEDUCT TAX AT SOURCE WHILE MAKING THE PAYMENTS. BUT THIS PROPOSITION WA S NOT - - ITA NOS.2190 TO 2197 & 2199/MDS/13 4 ACCEPTABLE TO THE ASSESSING AUTHORITY. THE ASSESSI NG OFFICER WAS OF THE VIEW THAT THE PAYMENTS MADE BY THE ASSES SEE COMPANY TO THE NON-RESIDENT COMPANIES WERE IN THE N ATURE OF ROYALTY. ROYALTY GENERATES TAXABLE INCOME IN THE H ANDS OF THE NON-RESIDENT COMPANIES, IN INDIA. THEREFORE, HE HE LD THAT THE ASSESSEE WAS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE, WHILE MAKING THE PAYMENTS, AND AS NO SUCH TDS HAS BEEN MA DE, THE ASSESSEE IS LIABLE FOR THE CONSEQUENCE OF PROVISION S OF SEC.40(A)(I). ACCORDINGLY, THE ASSESSING OFFICER D ISALLOWED THOSE PAYMENTS INCURRED FOR PROCUREMENT OF SOFTWARE CLAIM ED BY THE ASSESSEE COMPANY AS EXPENDITURE, WHILE COMPUTING IT S TAXABLE INCOME. 4. AS ALREADY STATED, THE ASSESSMENTS FOR THE ASSES SMENT YEARS 2003-04 TO 2006-07 WERE COMPLETED UNDER SEC.1 43(3), READ WITH SEC.147. THE ORIGINAL ASSESSMENTS FOR TH ESE YEARS WERE COMPLETED EITHER UNDER SEC.143(1) OR UNDER SEC .143(3). THE PAYMENTS MADE TO NON-RESIDENT COMPANIES WERE DI SALLOWED BY THE ASSESSING OFFICER UNDER SEC.40(A)(I), IN THE RE- ASSESSMENTS. THE QUESTION OF INVOKING SEC.40(A)(I) ON THE CONTENTION THAT NO TAX WAS DEDUCTED AT SOURCE AS PR OVIDED UNDER - - ITA NOS.2190 TO 2197 & 2199/MDS/13 5 SEC.195 WAS FIRST RAISED IN THE COURSE OF ASSESSMEN T PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08. IT IS IN THE LIGHT OF THIS, THE ASSESSING OFFICER HAS ISSUED NOTICES UNDE R SEC.148 AND MADE INCOME ESCAPING ASSESSMENTS FOR THE ASSESSMENT YEARS 2003-04, 2004-05, 2005-06 AND 2006-07. 5. WHILE CONSIDERING THE QUESTION OF TDS ON THE GRO UND THAT THE PAYMENTS MADE BY THE ASSESSEE COMPANY TO THE N ON- RESIDENT COMPANIES WERE ROYALTY IN NATURE, IT WAS A LSO CONSIDERED BY THE ASSESSING OFFICER THAT EVEN OTHER WISE THE ASSESSEE WAS LIABLE FOR DEDUCTING TAX AT SOURCE UN DER SEC.195 ON THE GROUND THAT THE ASSESSEE COMPANY BEING A DI STRIBUTOR OF SOFTWARE PRODUCTS OF THE NON-RESIDENT COMPANIES, HA S TO BE TREATED AS A PERMANENT ESTABLISHMENT(PE) OF THE NON -RESIDENT COMPANIES. THIS CONCLUSION WAS ARRIVED AT BY THE A SSESSING OFFICER IN VIEW OF ARTICLE-V OF INDIA SINGAPORE T REATY. THE ASSESSING OFFICER, THEREFORE, HELD THAT EVEN IF THE ARGUMENT OF THE ASSESSEE THAT THE PAYMENTS WERE MADE TOWARDS SA LE OF SOFTWARE PRODUCTS IS ACCEPTED, STILL THE ASSESSEE I S BOUND TO DEDUCT TAX AT SOURCE AS THE NON-RESIDENT COMPANIES HAVE A PE IN INDIA. - - ITA NOS.2190 TO 2197 & 2199/MDS/13 6 6. THE ASSESSING OFFICER HAS ALSO MADE PARTIAL DISA LLOWANCE OF DEDUCTIONS UNDER SEC.10A/10B OF VARIOUS ITEMS FO R DIFFERENT ASSESSMENT YEARS. THE ASSESSING OFFICER HAS REDUCE D THE EXPENSES FROM EXPORT TURN OVER WITHOUT CORRESPONDIN G DEDUCTIONS MADE FROM THE TOTAL TURNOVER. HE HAS AL SO REDUCED FOREIGN EXCHANGE LOSS FROM THE EXPORT TURNOVER OF T HE ASSESSEE. 7. THE ASSESSING OFFICER HAS ALSO MADE PARTIAL DISA LLOWANCE OF DEDUCTIONS UNDER SEC.10A/10B ON THE GROUND THAT FOREIGN EXCHANGE CORRESPONDING TO THE EXPORTS MADE BY THE A SSESSEE WERE NOT REALIZED WITHIN THE TIME PRESCRIBED BY THE STATUTE. THAT PART OF THE EXPORT TURNOVER HAS BEEN REDUCED BY THE ASSESSING AUTHORITY FROM THE EXPORT TURNOVER. 8. THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION AT 100% ON EXPENSES INCURRED FOR INTERIOR FURNISHING O F ITS WORK STATIONS. THE ASSESSEE COMPANY HAS CLAIMED 100% DEPRECIATION ON THE GROUND THAT SUCH EXPENSES WERE INCURRED FOR TEMPORARY STRUCTURES. BUT THE ASSESSING OFFICER HE LD THAT THE EXPENSES INCURRED WERE CAPITAL IN NATURE AND ALLOWE D DEPRECIATION AT 10%. THE ASSESSING OFFICER ALSO DI D NOT ACCEPT - - ITA NOS.2190 TO 2197 & 2199/MDS/13 7 THE CONTENTIONS OF THE ASSESSEE COMPANY REGARDING T HE CREDIT AGAINST TDS AVAILABLE TO THE ASSESSEE. 9. ALL THE ABOVE ADDITIONS AND ADJUSTMENTS MADE BY THE ASSESSING OFFICER WERE TAKEN IN FIRST APPEALS. AS ALREADY STATED, THE COMMISSIONER OF INCOME-TAX(APPEALS) CONSIDERED ALL THE ISSUES, BUT REJECTED THE CONTENTIONS OF THE ASSESSE E COMPANY AND DISMISSED THE APPEALS THROUGH HIS COMMON ORDER DATED 30.8.2013. 10. THE ASSESSEE IS AGGRIEVED AND, THEREFORE IN SEC OND APPEALS BEFORE US. 11. IN THESE BUNCH OF EIGHT APPEALS, BY AND LARGE, COMMON ISSUES ARE RAISED. CERTAIN COMMON ISSUES RELATE TO ALL THE EIGHT ASSESSMENT YEARS UNDER APPEAL AND CERTAIN COMMON IS SUES ARISE ONLY IN RESPECT OF CERTAIN ASSESSMENT YEARS. THE ASSESSEE COMPANY HAS ALSO RAISED INDIVIDUAL ISSUES FOR PARTI CULAR ASSESSMENT YEARS. THE ISSUES AND THE GROUNDS BEING IN THE ABOVE NATURE, WE PROCEED TO DISPOSE THE APPEALS ISS UE-WISE RATHER THAN ASSESSMENT YEAR-WISE. WE WILL CONSIDER THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUND OF APPEALS ONE AFTER THE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 8 OTHER AND ALSO MENTION THE RELEVANT ASSESSMENT/ASSE SSMENT YEARS TO WHICH THE ISSUES RELATED. 12. SHRI NISHANT THAKKAR, THE LEARNED COUNSEL ALONG WITH SHRI B. RAMAKRISHNAN, APPEARED FOR THE ASSESSEE COMPANY . THEY HAVE PRODUCED BEFORE US A PAPER BOOK CONTAINING COP IES OF VARIOUS AGREEMENTS, EXTRACTS OF PURCHASE AND SALES ACCOUNTS, COPIES OF PURCHASE ORDERS, COPIES OF INVOICES, RELE VANT EXTRACTS FROM TAX TREATY BETWEEN INDIA AND SINGAPORE AND TAX TREATY BETWEEN INDIA AND AUSTRALIA. THEY HAVE FILED COPIE S OF VARIOUS DECISIONS RELIED ON BY THEM, IN THE COURSE OF ARGUM ENTS. THEY HAVE ALSO FILED BEFORE US CERTAIN CHARTS AND TABLES DETAILING THE ISSUES RAISED IN THE APPEALS FOR DIFFERENT ASSESSME NT YEARS AND SHORT NOTES THEREON. 13. SHRI SHAJI P. JACOB, THE LEARNED ADDITIONAL COM MISSIONER OF INCOME-TAX APPEARED FOR THE REVENUE AND ARGUED T HE CASE AT LENGTH. HE HAS ALSO PRODUCED BEFORE US COPIES OF T HE DECISIONS RELIED ON BY HIM. 14. THE FIRST ISSUE TO BE CONSIDERED IS THE VALIDIT Y OF INCOME ESCAPING ASSESSMENTS COMPLETED BY THE ASSESSING AUT HORITY FOR THE ASSESSMENT YEARS 2003-04 TO 2006-07. THE CONTE NTION OF - - ITA NOS.2190 TO 2197 & 2199/MDS/13 9 THE ASSESSEE COMPANY IS THAT REOPENING OF AN ASSES SMENT IN THE ABSENCE OF ANY FRESH MATERIAL IS BAD IN LAW. I T IS THE CASE OF THE ASSESSEE COMPANY THAT THE TAX AUDIT REPORTS WER E ALREADY AVAILABLE BEFORE THE ASSESSING OFFICER IN THE COURS E OF ORIGINAL ASSESSMENTS AND THE NECESSARY DETAILS ARE AVAILABLE IN THE SAID REPORTS AND AS SUCH, CONSIDERING A TDS FOR THE FIRS T TIME IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08 CANNOT BE CONSIDERED AS A FRESH MATERIAL TO INITIATE REASSESSMENT PROCEEDINGS FOR THE FOUR ASSESSMENT YE ARS, 2003- 04 TO 2006-07. IT IS THE CASE OF THE ASSESSEE THA T AS THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2004-05 AND 20 06-07 WERE COMPLETED UNDER SEC.143(3), THE REASSESSMENTS FOR THOSE TWO ASSESSMENT YEARS SHOULD BE CONSIDERED AS REASSE SSMENTS MADE ON A CHANGE OF OPINION. 15. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE HAS RELIED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS TO SUPPORT HIS ARGUMENTS AGAINST REOPENING OF ASSESSMENTS FOR THE ASSESSMENT YEARS 2003-04 TO 2006-07: 1. ASTEROIDS TRADING AND INVESTMENTS P. LTD. V. DCIT, 308 ITR 190(BOM). 2. ASIAN PAINTS LTD. V. DCIT, 308 ITR 195(BOM) - - ITA NOS.2190 TO 2197 & 2199/MDS/13 10 3. RAYALA CORPORATION (P) LTD. VS. ACIT, 264 CTR 282(MDS) 4. CIT VS. ORIENT CRAFT LTD., 354 ITR 536(DELHI) 16. WE CONSIDERED THIS ISSUE. AS ALREADY STATED EL SEWHERE, THE RETURNS FILED BY THE ASSESSEE COMPANY FOR THE ASSESSMENT YEARS 2003-04 AND 2005-06 WERE PROCESSED UNDER SEC. 143(1). OBVIOUSLY, IN SUCH CASES, THERE IS NO QUESTION OF C HANGE OF OPINION. THE QUESTION OF DEDUCTING TAX AT SOURCE W HILE MAKING THE PAYMENTS TO THE NON-RESIDENT COMPANIES WAS FIRS T CONSIDERED AND DETERMINED FOR THE ASSESSMENT YEAR 2 007-08. WHEN THE ASSESSING OFFICER HAS ARRIVED AT A FINDING THAT THE ASSESSEE COMPANY IS IN FACT PAYING ROYALTY TO THE NON-RESIDENT COMPANIES, HE HAS TO APPLY THE SAME RATIO FOR PENDI NG ASSESSMENTS AS WELL AS ASSESSMENTS CONCLUDED RECENT LY; ESPECIALLY, THE ASSESSMENTS CONCLUDED UNDER SEC.143 (1). WHEREVER THE TIME PERMITS, THE ASSESSING OFFICER HA D TO REOPEN THE EARLIER ASSESSMENTS. IT IS ONLY A NECESSITY IN LAW TO BRING CONSISTENCY IN DECISIONS RELATING TO IMPORTANT ISSU ES. THEREFORE, IT IS EVIDENT THAT AS FAR AS THE ASSESSING AUTHORIT Y IS CONCERNED, THERE IS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENTS - - ITA NOS.2190 TO 2197 & 2199/MDS/13 11 FOR THE EARLIER ASSESSMENT YEARS 2003-04, 2004-05, 2005-06 AND 2006-07. 17. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE REASSESSMENTS COMPLETED BY THE ASSESSING AUTHOR ITY FOR THE FOUR ASSESSMENT YEARS 2003-04, 2004-05, 2005-06 AND 2006-07 ARE VALID IN LAW. THE RELEVANT GROUNDS RAISED BY T HE ASSESSEE ARE REJECTED AND THIS ISSUE IS DECIDED AGAINST IT. 18. THE SECOND ISSUE RAISED IN THESE APPEALS IS THE QUESTION, WHETHER THE PAYMENTS MADE BY THE ASSESSEE COMPANY T O NON- RESIDENT COMPANIES WOULD CONSTITUTE IN THE NATURE O F ROYALTY OR NOT. THE GROUND RAISED BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN HO LDING THAT AS THE PAYMENTS WERE IN THE NATURE OF ROYALTY, THE SAME TO BE DISALLOWED UNDER SEC.40(A)(I) FOR NON-FULFILLMENT O F THE PROVISIONS OF SEC.195 RELATING TO TDS. 19. THIS ISSUE IS RAISED BY THE ASSESSEE COMPANY FO R ALL THE EIGHT ASSESSMENT YEARS VIZ., 2003-04 TO 2010-11. 20. THE NON-RESIDENT COMPANIES, ACI SINGAPORE AND I RPL AUSTRALIA HAVE ENTERED INTO AGREEMENTS WITH THE ASS ESSEE COMPANY TO DISTRIBUTE SOFTWARE PRODUCTS IN INDIA FO R OPERATING - - ITA NOS.2190 TO 2197 & 2199/MDS/13 12 NETWORK PAYMENT SYSTEMS, AUTOMATED TELLER MACHINES( ATMS) ETC. THESE SOFTWARE PRODUCTS ARE MOSTLY USED BY B ANKS AND FINANCIAL INSTITUTIONS. THE AGREEMENTS AUTHORIZE T HE ASSESSEE COMPANY TO ENTER INTO DISTRIBUTION AGREEMENTS WITH THE CUSTOMERS IN INDIA. THE AGREEMENT ENTERED INTO BET WEEN THE ASSESSEE COMPANY AND ACI SINGAPORE HAS BEEN RENEWED FROM TIME TO TIME. THE MAIN SOFTWARE PRODUCTS PROCURED FROM ACI SINGAPORE ARE BASE 24/BASE24 EPS. THE AGREEMENT B ETWEEN THE ASSESSEE COMPANY AND IRPL AUSTRALIA WAS ENTERE D ON 16 TH JULY, 1998 FOR A PERIOD OF SIX MONTHS, WHICH WAS NO T RENEWED. THE SOFTWARE PRODUCTS PURCHASED FROM IRPL AUSTRALIA WERE SOFTWARE FOR ATM AND SYSTEM MONITORING SERVICES. I N RESPECT OF SOFTWARE SOLD BY IRPL AUSTRALIA, IT WAS AVAILABLE O NLY IN OBJECT CODE AND NO MODIFICATION WAS DONE ON THE SOFTWARE B Y THE ASSESSEE COMPANY. IN THE CASE OF SOFTWARE PRODUCTS PURCHASED FROM ACI SINGAPORE, THE ASSESSEE COMPANY WAS AUTHO RIZED TO ENTER INTO SOFTWARE LICENSE AND MAINTENANCE AGREEME NTS WITH THE CUSTOMERS OF ACI SINGAPORE. THE SOFTWARE PROCU RED BY THE ASSESSEE FROM ACI SINGAPORE IS A VANILLA SOFTWARE. IMPLEMENTATION OF THE SOFTWARE REQUIRES DETAILED UN DERSTANDING - - ITA NOS.2190 TO 2197 & 2199/MDS/13 13 OF THE CUSTOMER ENVIRONMENT TO CARRY OUT NOMINAL C HANGES TO SUIT CUSTOMERS SPECIFIC ENVIRONMENTS. 21. THE ASSESSEE COMPANY BASED ON THE REQUEST FOR PROPOSALS OR BASED ON THE SUBSEQUENT BUSINESS REQUI REMENT DOCUMENTS GIVEN BY THE CUSTOMERS, ASSIST THEM IN CR YSTALIZING THE SOFTWARE REQUIREMENTS. ONCE THE REQUIREMENT O F THE CUSTOMERS IS CRYSTALIZED, THE CUSTOMERS PLACE THE PURCHASE ORDERS(POS) WITH THE ASSESSEE COMPANY BASED ON WHIC H THE ASSESSEE PLACES BACK TO BACK PURCHASE ORDERS WITH A CI SINGAPORE TO GET THE REQUIRED SOFTWARE FOR ONWARD D ELIVERY TO THE CUSTOMERS. 22. THE SOFTWARE PROVIDED BY ACI SINGAPORE CONSISTS OF TWO PARTS, NAMELY, THE NETWORK LAYER(NUCLEUS) AND AN AP PLICATION LAYER. THE NETWORK LAYER IS AN OBJECT CODE AND CAN NOT BE ALTERED EITHER BY THE ASSESSEE COMPANY OR BY ITS CUSTOMERS. IT IS CUSTOMER SPECIFIC AND MACHINE SPECIFIC. THE APPLIC ATION LAYER IS IN VANILLA FORMAT. THE APPLICATION LAYER CANNOT FU NCTION WITHOUT THE NETWORK LAYER WHICH IS THE SOUL OF THE SOFTWARE . THE OUTCOME OF THE ABOVE MODEL OF OPERATION WITH THE SOFTWARE L ICENSED BY ACI SINGAPORE IS THAT THE SOFTWARE TUNED FOR ONE CU STOMER - - ITA NOS.2190 TO 2197 & 2199/MDS/13 14 CANNOT BE USED FOR ANOTHER CUSTOMER. THE SOFTWARE IS SUPPLIED IN MODULAR BASIS, WHERE THE CUSTOMERS HAVE THE CHOI CE TO CHANGE THE MODULES ACCORDING TO THEIR CONVENIENCE A ND SPECIFIC BUSINESS REQUIREMENTS. THE CUSTOMERS APPROACH THE ASSESSEE COMPANY AND CONSEQUENTLY THE ASSESSEE COMPANY PLACE S ORDERS WITH ACI SINGAPORE. NO SOFTWARE MODULE IS D EVELOPED BY THE ASSESSEE COMPANY INTERNALLY. 23. THE SOFTWARE DEVELOPED BY ACI SINGAPORE IS A VA NILLA VERSION THAT IS DISTRIBUTED WORLDWIDE. THEREFORE, BEFORE INSTALLATION, THE SOFTWARE WILL NECESSARILY HAS TO BE MADE COMPATIBLE TO INDIVIDUAL CUSTOMERS ENVIRONMENT. I T IS HERE, THAT THE SERVICES OF THE ASSESSEE COMPANY ARE REQUIRED. THE ASSESSEE COMPANY IS PERMITTED TO CARRY OUT SUCH CH ANGES TO MAKE THE SOFTWARE COMPATIBLE TO THE CUSTOMERS ENVI RONMENT AND BUSINESS REQUIREMENT. BUT ANYHOW, THESE ACTIVI TIES CARRIED OUT BY THE ASSESSEE COMPANY DO NOT CHANGE THE UNIQU E CHARACTER OF THE SOFTWARE/MODULE. THE CHANGES CARR IED OUT BY THE ASSESSEE COMPANY ARE JUST NOMINAL, SO AS TO IN STAL THE SYSTEM AND TO FACILITATE ITS FREE FUNCTIONING IN TH E BUSINESS ENVIRONMENT OF THE CUSTOMERS. - - ITA NOS.2190 TO 2197 & 2199/MDS/13 15 24. IN THE ABOVE SCHEME OF BUSINESS, THE ASSESSEE COMPANY IS PROVIDING INSTALLATION SERVICE, LICENSE UPGRADAT ION SERVICE, ANNUAL MAINTENANCE ETC. TO ITS CUSTOMERS. THE AGRE EMENTS BETWEEN THE ASSESSEE COMPANY AND ACI SINGAPORE AND ALSO BETWEEN THE ASSESSEE COMPANY AND ITS CUSTOMERS CONS IST OF TWO COMPONENTS; CONSISTING OF PROVISION OF SOFTWARE LIC ENSE AND THE ANNUAL MAINTENANCE CONTRACT. THE ASSESSEE COMPANY CHARGES ITS CUSTOMERS AN ANNUAL MAINTENANCE FEE FOR THE ABO VE SERVICES AND PAY BACK TO BACK TO ACI SINGAPORE. THE ANNUAL MAINTENANCE FEE IS CHARGED AS A PERCENTAGE OF THE L ICENCE FEES. 25. ON THE AFORESAID PAYMENTS MADE TO THE ASSESSEE COMPANY FOR INSTALLATION OF SOFTWARE AND THE ANNUAL MAINTENANCE FEE, THE CUSTOMERS DEDUCT TAX AT SOURCE. LIKEWISE , THE ASSESSEE COMPANY ALSO DEDUCTS TAX AT SOURCE ON THE PAYMENTS MADE TO ACI SINGAPORE FOR THE SERVICES RENDERED BY IT TOWARDS MAINTENANCE. 26. THE ASSESSEE COMPANY HAS ADOPTED A STANCE THAT THE PAYMENTS MADE BY THE ASSESSEE COMPANY TO ACI SINGAP ORE AND IRPL AUSTRALIA FOR PURCHASE OF SOFTWARE PRODUCTS AR E NOT TAXABLE IN INDIA, AS THEY ARE PAYMENTS MADE FOR PURCHASE OF SOFTWARE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 16 PRODUCTS AND IT IS NOT NECESSARY FOR THE ASSESSEE T O DEDUCT TAX AT SOURCE UNDER SEC.195 OF THE ACT. THE ASSESSEE CO MPANY HELD A VIEW THAT THOSE PAYMENTS MADE FOR THE PROCUREMENT OF SOFTWARE PRODUCTS ARE NOT SUBJECT TO LEVY OF INCOME -TAX IN INDIA AND THEREFORE, THERE IS NO NEED TO DEDUCT TAX AT SO URCE UNDER SEC. 195. 27. THE ARGUMENTS PLACED BY THE ASSESSEE COMPANY B EFORE THE LOWER AUTHORITIES ON THE ABOVE PROPOSITION, IN SHORT, ARE AS FOLLOWS: THE ASSESSEE COMPANY HAS NO EXCLUSIVE RIGHT TO DI STRIBUTE THE SOFTWARE PRODUCTS SUPPLIED BY THE NON-RESIDENT COMPANIES. ORDERS ARE PROCURED BY THE ASSESSEE COMPANY FROM INDIAN CUSTOMERS ON ITS OWN ACCOUNT ONCE CUSTOMERS PLACE ORDERS WITH THE ASSESSEE COM PANY, IT APPROACHES NON-RESIDENT COMPANIES AND IF THE ORD ERS ARE APPROVED BY THE NON-RESIDENT COMPANIES, THEY RAISE INVOICES ON THE ASSESSEE COMPANY, IN TURN, THE ASS ESSEE COMPANY RAISES INVOICES ON ITS CUSTOMERS IN INDIA. - - ITA NOS.2190 TO 2197 & 2199/MDS/13 17 SOFTWARE PRODUCTS ARE DELIVERED TO THE ASSESSEE C OMPANY ON A CD/ANY OTHER MEDIA SPECIFIED IN THE INVOICES ISSUED BY THE NON-RESIDENT COMPANIES. THE ASSESSEE COMPANY HAS NO RIGHT OF OWNERSHIP IN THE COPY RIGHT AND ALSO NO RIGHT TO MAKE COPIES OR USE THE SOFTWARE. THE RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND THE NON-RESIDENT COMPANIES IS ON A PRIN CIPAL- TO-PRINCIPAL BASIS. THE ASSESSEE COMPANY SHOULDERS THE RISK OF FAILUR E OF A CONTRACT. THE ASSESSEE COMPANY DOES NOT MAKE ANY FUNCTIONAL OR FUNDAMENTAL CHANGES IN THE SOFTWARE PRODUCTS DELIVE RED BY THE FOREIGN COMPANIES, BUT MAKE ONLY NOMINAL AND COSMETIC CHANGES CONFINED TO THE INSTALLATION AND S TART-UP OF THE SOFTWARE IN THE BUSINESS ENVIRONMENT OF THE CUSTOMERS. SOFTWARE UNDER CONSIDERATION IS A STANDARD SOFTWAR E. 28. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE COMPANY CONTENDED THAT THE ASSESSEE COMPANY PURCHA SES SOFTWARE PRODUCTS FROM NON-RESIDENT VENDORS AND RE- SELLS SUCH - - ITA NOS.2190 TO 2197 & 2199/MDS/13 18 PRODUCTS TO ITS CUSTOMERS IN INDIA. IT IS A PURE TRADING TRANSACTION. VAT & CENTRAL SALES TAX AT APPROPRIAT E RATES ARE CHARGED ON THE SALES MADE BY THE ASSESSEE COMPANY T O ITS CUSTOMERS. THE LIABILITY OF SALE FOR VAT/CST LEADS TO A CONCLUSION THAT THE PURCHASE AND SALE OF SOFTWARE B Y THE ASSESSEE COMPANY IS ONLY A TRADING TRANSACTION AND THEREFORE, NO WITHHOLDING TAX WOULD BE REQUIRED, SINCE THE CON SIDERATION IS PAID TOWARDS PURCHASE OF SOFTWARE AND NOT TOWARDS R OYALTY. 29. THE LEARNED COUNSEL FURTHER EMPHASIZED THAT SOF TWARE PRODUCTS PURCHASED BY THE ASSESSEE COMPANY FROM FOR EIGN COMPANIES ARE ONLY COPYRIGHTED ARTICLES. THE ASSES SEE DOES NOT HAVE ANY RIGHT TO COPY THE PRODUCTS PURCHASED FROM ACI SINGAPORE AND IRPL AUSTRALIA. THE FACT IS THAT INS TALLATION OF SOFTWARE BY THE ASSESSEE COMPANY FOR ITS CUSTOMERS DOES NOT, IPSO FACTO, BESTOW ANY COPYRIGHT ON THE ASSESSEE ON THE PRODUCTS SUPPLIED BY THE FOREIGN COMPANIES. THE RI GHT TO COPY THE PRODUCTS OF THE NON-RESIDENT COMPANIES ARISES F ROM SPECIFIC APPROVAL AND IT IS NOT IN ANY WAY LINKED TO THE SOU RCE CODE OF THE PRODUCT. THE ASSESSEE COMPANY NEITHER HAD THE AUT HORITY TO CREATE OR SUPPLEMENT THE SOFTWARE THAT CAN BE USED WITH THE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 19 PRODUCTS PURCHASED FROM THEM. COPYRIGHTS ALWAYS RE STED WITH ACI SINGAPORE AND IRPL AUSTRALIA. THE RIGHT GIVEN TO THE ASSESSEE COMPANY IS A LIMITED ONE, SO AS TO CATER T O THE CUSTOMER REQUIREMENTS WHILE OPERATING WITHIN A BROA D FRAME WORK OUTLINED BY THE NON-RESIDENT COMPANIES. 30. THE LEARNED COUNSEL CONCLUDED HIS ARGUMENT REGA RDING THE NATURE OF PAYMENTS MADE BY THE ASSESSEE COMPANY TO NON- RESIDENT ENTITIES IN THE FOLLOWING MANNER: THE ASSESSEE COMPANY ACQUIRES COPYRIGHTED ARTICLE S FROM ACI SINGAPORE AND IRPL AUSTRALIA AND THE ASSESSEE COMPANY DOES NOT HAVE A RIGHT TO USE COPYRIGHT. THEREFORE, THE PAYMENTS MADE BY THE ASSESSEE COMP ANY TO ACI SINGAPORE AND IRPL AUSTRALIA ARE NOT IN THE NATURE OF ROYALTY UNDER THE PROVISIONS OF THE ACT, AS EX ISTED DURING THE RELEVANT ASSESSMENT YEARS, PRIOR TO THE AMENDMENT MADE TO FINANCE ACT, 2012, AND ALSO UNDER THE RELEVANT TAX TREATIES. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PA YMENTS MADE TO ACI SINGAPORE AND IRPL AUSTRALIA ARE NOT CHARGEABLE TO TAX IN INDIA AND THEREFORE, THERE IS NO - - ITA NOS.2190 TO 2197 & 2199/MDS/13 20 REQUIREMENT TO WITHHOLD TAX ON THOSE PAYMENTS UNDER SEC.195 AND ACCORDINGLY, THERE IS NO JUSTIFICATION IN MAKING DISALLOWANCE UNDER SEC.40(A)(I). 31. THE LEARNED COUNSEL HAS RAISED ANOTHER ALTERNAT IVE ARGUMENT REGARDING THE NATURE OF PAYMENT THAT IF AT ALL AMENDMENT BROUGHT IN BY FINANCE ACT, 2012 IS WITH R ETROSPECTIVE EFFECT, SUCH AMENDMENT COULD NOT HAVE BEEN FORESEEN BY THE ASSESSEE COMPANY AND IT HAD NO OCCASION DURING THE PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YEARS UNDER APPEAL TO CHANGE ITS STAND AND DEDUCT TAX AT SOURCE UNDER SEC.195. THE LEARNED COUNSEL SUBMITTED THAT NO DISALLOWANCE IN THE HANDS OF THE ASSESSEE CAN BE MADE UNDER SEC.40(A)(I), ON THE GRO UND THAT THE NATURE OF PAYMENT DID CONSTITUTE ROYALTY BY VIRTUE OF RETROSPECTIVE AMENDMENT MADE IN SEC.9(1)(VI) BY FIN ANCE ACT, 2012. HE FURTHER SUBMITTED THAT THE AMENDED LAW WA S NOT BROUGHT INTO THE STATUTE BOOK AT THE TIME THE PAYME NTS WERE MADE BY THE ASSESSEE COMPANY TO THE FOREIGN ENTITIE S. 32. IN SUPPORT OF THE DETAILED ARGUMENTS MADE BY TH E LEARNED COUNSEL APPEARING FOR THE ASSESSEE COMPANY, THE FOL LOWING DECISIONS WERE CITED FOR RELIANCE : - - ITA NOS.2190 TO 2197 & 2199/MDS/13 21 (I) DASSAULT SYSTEMS K.K.AAR-NEW DELHI, 322 ITR 125. IN THIS DECISION, THE AUTHORITY FOR ADVANCE RULING HAS HELD THAT MERELY AUTHORIZING OR ENABLING A CUSTOMER TO HAVE BENEFIT OF DATA OR INSTRUCTIONS CONTAINED IN COPYRIGHTED ARTICLE WITHOUT ANY FURTHER RIGHT TO DE AL WITH THEM INDEPENDENTLY DOES NOT AMOUNT TO TRANSFER OF R IGHTS IN RELATION TO COPYRIGHT OR CONFERMENT OF RIGHT OF USING COPYRIGHT. IN THIS CASE, THE ASSESSEE WAS A JAPANE SE COMPANY ENGAGED IN THE BUSINESS OF PROVIDING PRODU CTS LIFECYCLE MANAGEMENT SOFTWARE SOLUTIONS, APPLICATI ONS AND SERVICES. THE ASSESSEE MARKETS THE LICENSED SOFTWARE PRODUCTS MOSTLY THROUGH A DISTRIBUTION CHA NNEL COMPRISING OF VALUE ADDED RESELLERS(VAR), WHO ARE INDEPENDENT THIRD PARTY RESELLERS ENGAGED IN BUSINE SS OF SELLING SOFTWARE TO END USERS. AS PER THE BUSINESS MODEL OF THE ASSESSEE, PRODUCT IS SOLD TO RESELLERS FOR A CONSIDERATION BASED ON THE STANDARD PRICE LIST AND RESELLERS, IN TURN, WILL SELL SUCH PRODUCT TO END USERS AT A PRICE INDEPENDENTLY DETERMINED BY IT. RESELLERS GE T ORDERS FROM END USERS AND PLACES BACK TO HACK ORDER ON - - ITA NOS.2190 TO 2197 & 2199/MDS/13 22 THE ASSESSEE. ON ACCEPTANCE OF ORDER BY THE ASSESS EE, IT WILL PROVIDE A LICENSED KEY VIA E-MAIL SO THAT C USTOMER WILL DIRECTLY DOWNLOAD PRODUCTS THROUGH WEB LINK. AFTER EXAMINING THE BUSINESS MODEL IN THE PRESENT CASE, AUTHORITY FOR ADVANCE RULING HELD THAT NO RIGHTS IN RELATION TO COPYRIGHT HAVE BEEN TRANSFERRED NOR ANY RIGHT OF USING COPYRIGHT, AS SUCH HAS BEEN CONFERRED ON LICENSEE AND, THEREFORE, PAYMENT RECEIVED BY THE ASSESSEE FROM RESELLERS ON ACCOUNT OF SUPPLIES OF SOFTWARE PRODUCTS TO END CUSTOMERS DOES NOT RESULT IN INCOME IN NATURE OF ROYALTY TO THE ASSESSEE. (II) CIT VS. DYNAMIC VERTICAL SOFTWARE INDIA (P) L TD, 332 ITR 222(DELHI): THE FINDING OF THE HONBLE DELHI HIGH COURT IN THIS CASE IS THAT WHERE THE ASSESSEE IS PURCHASING SOFTWARE FROM MICROSOFT AND SELLS IT FUR THER IN INDIAN MARKET, BY NO STRETCH OF IMAGINATION BECOMES A TRANSACTION RESULTING IN PAYMENT OF ROYALTY. THE ASSESSEE IN SUCH CIRCUMSTANCES, ACTED AS A DEALER O F MICROSOFT AND AS SUCH, SEC.40(A)(I) OF THE ACT HAS NO APPLICATION. - - ITA NOS.2190 TO 2197 & 2199/MDS/13 23 (III) DIT VS. ERICSSON A.B., NEW DELHI, 343 ITR 470(DELHI). THE HONBLE DELHI HIGH COURT HAS HELD IN THE PRESEN T CASE THAT IN ORDER TO CONSTITUTE ROYALTY AS DEFIN ED IN EXPLANATION 2 TO SEC.9(1)(VI), WHAT IS CONTEMPLATED IS A PAYMENT THAT IS DEPENDENT UPON USER OF COPYRIGHT AN D NOT A LUMP SUM PAYMENT MADE FOR ACQUISITION OF A COPYRIGHTED ARTICLE. THE COURT OBSERVED THAT WHEN PAYMENT RECEIVED BY ASSESSEE WAS TOWARDS TITLE AND SYSTEM OF WHICH SOFTWARE WAS AN INSEPARABLE PART INCAPABLE OF INDEPENDENT USE AND WHERE IT WAS A CONTRACT FOR SUPPLY OF GOODS, NO PART OF PAYMENT CO ULD BE CLASSIFIED AS PAYMENTS TOWARDS ROYALTY. (IV) DIT VS. SOLID WORKS CORPN., 17 ITR(AT) 510(MUMBAI) IN THIS CASE, MUMBAI TRIBUNAL HELD THAT WHEN SHRINK WRAP SOFTWARE IS SOLD, CONSIDERATION IS PAID FOR RIGHT T O USE SOFTWARE AND SUCH CONSIDERATION IS NOT ROYALTY. - - ITA NOS.2190 TO 2197 & 2199/MDS/13 24 (V) DCIT VS. M/S. ABAQUS ENGINEERING PVT. LTD. (IT A NOS.1698 TO 1702/MDS/2010 AND M/S. DASSAULT SYSTEMS SIMULIA PVT. LTD. (CO NOS.145 TO 149/MDS/2010). IN THESE TWO CASES, ITAT, CHENNAI BENCH B HAS HEL D THAT THE PROCUREMENT OF COPYRIGHTED ARTICLE FOR LIM ITED USE WITHOUT ANY ACQUISITION OF RIGHT OR COPYRIGHT IN MA KING PAYMENTS CANNOT BE TREATED AS ROYALTY. 33. IN THE LIGHT OF THE RATIO LAID DOWN IN THE ABOV E JUDGMENTS, THE LEARNED COUNSEL SUBMITTED THAT THE PRESENT CASE IS VERY SIMILAR TO THE ABOVE CASES AND ESPECIALLY THAT OF M /S. DASSAULT SYSTEMS K.K. (322 ITR 125), CONSIDERED BY THE AUTHO RITY FOR ADVANCE RULING AND, THEREFORE, IT IS NECESSARY TO H OLD THAT WHAT IS PROCURED BY THE ASSESSEE COMPANY IS COPYRIGHTED ARTICLES TO RESELL WITHIN INDIA TO ITS CUSTOMERS AND THE TRANSA CTION BEING IN THE NATURE OF TRADE, THE PAYMENTS MADE BY THE ASSES SEE WERE ONLY IN THE NATURE OF PURCHASE PRICE. THEY WERE NE VER IN THE NATURE OF ROYALTY AND AS SUCH, THE ASSESSEE COMPANY HAD NO OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SEC.195. THEREFORE, THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN DISALLOWING THE PAYMENTS UNDER SEC.40(A)(I). - - ITA NOS.2190 TO 2197 & 2199/MDS/13 25 34. THE LEARNED COUNSEL FURTHER EXPLAINED THAT A RE TROSPECTIVE AMENDMENT HAS BEEN BROUGHT IN SEC.9(1)(VI) BY FINAN CE ACT, 2012. BEFORE THE AMENDMENT, EXPLANATION 2 TO SEC. 9(1)(VI) DEFINED THE TERM ROYALTY AS CONSIDERATION FOR THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WOR K INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION O R TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING, BUT NOT INCL UDING CONSIDERATION FOR THE SALE, DISTRIBUTION OR EXHIBIT ION OF CINEMATOGRAPHIC FILMS. AFTER THE RETROSPECTIVE AME NDMENT BROUGHT IN SEC.((1)(VI) BY FINANCE ACT, 2012, ROYA LTY INCLUDES ALSO THE CONSIDERATION PAID FOR TRANSFER OF ALL OR ANY RIGHT FOR USE OR RIGHT TO USE A COMPUTER SOFTWARE (INCLUDING GRAN TING OF A LICENSE) IRRESPECTIVE OF THE MEDIUM THROUGH WHICH L IGHT IS TRANSFERRED. 35. IN THE ABOVE SCENARIO, THE LEARNED COUNSEL SUBM ITTED THAT STILL IN THE PRESENT CASE, THE ASSESSEE COMPANY HAS PURCHASED COPYRIGHTED ARTICLES AND HAS NOT ACQUIRED ANY RIGHT FOR USE OR RIGHT TO USE A COMPUTER SOFTWARE. THE STANDARD SOF TWARE OWNED BY ACI SINGAPORE AND IRPL AUSTRALIA IS PURCHASED BY THE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 26 ASSESSEE AND THEREAFTER SOLD IT TO ITS CUSTOMERS IN INDIA. THEREFORE, NOWHERE IN THE COURSE OF THIS BUSINESS M ODEL, THE ASSESSEE COMPANY ACQUIRES ANY RIGHT OF SOFTWARE EIT HER TO USE OR TO RESELL OR TO COPY OR TO TRANSMIT TO OTHERS IN ANY MANNER. THE LEARNED COUNSEL FURTHER SUBMITTED, WITHOUT PREJUDIC E TO THE POSITION EXPLAINED BY HIM, THAT THERE IS STILL A RE CENT JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. INFRASOFT LTD., 264 CTR 329(DELHI), WHICH HAS BEEN RENDERED AFTER T HE AMENDMENT BROUGHT IN SEC.9(1)(VI) BY FINANCE ACT, 2 012, WHERE THE COURT APPROVES THE PROPOSITION MADE OUT BY THE ASSESSEE COMPANY IN THE PRESENT CASE. 36. IN THE SAID CASE OF INFRASOFT LTD. DECIDED BY T HE HONBLE DELHI HIGH COURT ON 22 ND NOVEMBER, 2013, AFTER THE AMENDMENT BROUGHT IN BY FINANCE ACT, 2012, THE COURT HAS HELD THAT AMOUNT RECEIVED BY A NON-RESIDENT COMPANY FOR GRANTING LIC ENSE TO USE ITS COPYRIGHTED ARTICLE FOR LICENSEES OWN BUSINESS PURPOSES COULD NOT BE BROUGHT TO TAX AS ROYALTY UNDER ARTICL E 12(3) OF INDO-US DTAA. IN THE SAID CASE, THE COURT HAS OBSE RVED THAT IN TERMS OF LICENSE AGREEMENT, LICENSEE WAS ALLOWED TO MAKE ONLY ONE COPY OF SOFTWARE AND ASSOCIATED SUPPORT INFORMA TION FOR - - ITA NOS.2190 TO 2197 & 2199/MDS/13 27 BACKUP PURPOSES WITH A CONDITION THAT SUCH COPYRIGH T WOULD INCLUDE INFRASOFT COPYRIGHT AND ALL COPIES OF SOF TWARE WOULD BE EXCLUSIVE PROPERTIES OF INFRASOFT, WHICH WAS ALSO APPARENT THAT SOFTWARE WAS TO BE USED ONLY FOR LICENSEES OWN BUS INESS AND WITHOUT CONSENT OF THE ASSESSEE, SOFTWARE COULD NOT BE LOANED, RENTED, SOLD, SUB-LICENSED OR TRANSFERRED TO ANY TH IRD PARTY. THE COURT HAS FURTHER HELD THAT IT WAS A CASE OF MERE T RANSFER OF RIGHT TO USE COPYRIGHTED MATERIAL I.E. SOFTWARE AND, THER EFORE, AMOUNT RECEIVED BY THE ASSESSEE FROM ITS INDIAN CUSTOMER DID NOT GIVE RISE TO ANY ROYALTY INCOME IN TERMS OF ARTICLE 12(3 ) UNDER INDIA- USA DTAA. THE LEARNED COUNSEL FURTHER SUBMITTED TH AT THE ABOVE DECISION OF THE HONBLE DELHI HIGH COURT REND ERED AFTER THE AMENDMENT BROUGHT IN BY FINANCE ACT, 2012, IS S QUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 37. THE LEARNED COUNSEL ALSO EXPLAINED THAT THE NAT URE OF CONTRACT ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND THE FOREIGN COMPANIES IS IN THE LIGHT OF RESPECTIVE DTA A, I.E. INDIA AND SINGAPORE AS WELL AS INDIA AND AUSTRALIA. HE C ONTENDED THAT IN BOTH THE DTAAS, THE EXPRESSION ROYALTY HAS NOT UNDERGONE ANY CHANGE AND THE EXPRESSION ROYALTY HAS BEEN CO NTINUED - - ITA NOS.2190 TO 2197 & 2199/MDS/13 28 WITHIN THE SAME MEANING, EVEN BEFORE AND AFTER THE AMENDMENT BROUGHT IN BY FINANCE ACT, 2012. THE LEARNED COUNS EL FURTHER SUBMITTED THAT WHEN THERE IS DIFFERENCE BETWEEN THE PROVISIONS OF THE INCOME-TAX ACT AND THE PROVISIONS OF DTAA, THE PROVISIONS OF DTAA WILL PREVAIL UPON THE PROVISIONS OF THE INCOME -TAX ACT IN THAT CASE. THEREFORE, HE SUBMITTED THAT AS NO CHAN GE HAS BEEN MADE IN THE EXPRESSION ROYALTY IN BOTH THE DTAAS, THE EXPRESSION ROYALTY AS EXPLAINED IN DTAAS WILL PRE VAIL UPON THE AMENDED DEFINITION OF ROYALTY IN THE PRESENT CASE. HE FURTHER SUBMITTED THAT IN VIEW OF THE ABOVE, THE TRANSACTIO NS MADE BETWEEN THE ASSESSEE COMPANY AND FOREIGN COMPANIES ARE ONLY SALE OF COPYRIGHTED ARTICLE AND, THEREFORE, THE PAY MENTS MADE THERETO, DO NOT COME UNDER THE PURVIEW OF ROYALTY. 38. THE LEARNED COUNSEL ALSO PLACED RELIANCE ON THE RELEVANT CONCEPTS REFLECTED IN INDIAN COPYRIGHT ACT, 1957, S O AS TO ESTABLISH THAT BY PROCURING SOFTWARE PRODUCTS, THE ASSESSEE HAS NOT ACQUIRED ANY COPYRIGHT SO AS TO QUALIFY THE PAY MENTS MADE BY IT TO BE ROYALTY. HE POINTED OUT THAT ONE OF TH E PRESCRIBED RIGHTS IN A COPYRIGHT IS EXCLUSIVE RIGHT TO RESELL SOFTWARE INCLUDING STORAGE OF ELECTRONIC MACHINE. IN THE INSTANT CASE , THE ASSESSEE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 29 HAS A NON-EXCLUSIVE RIGHT TO DISTRIBUTE THE PRODUCT OF THE NON- RESIDENT COMPANIES AND THE ASSESSEE DOES NOT HAVE O WNERSHIP RIGHT IN THE COPYRIGHT. THE ASSESSEE IS NOT AUTHOR IZED TO MAKE COPIES OF THE EXISTING SOFTWARE, EXCEPT FOR THE PUR POSE OF INSTALLING THE SAME IN SYSTEMS OF THE CUSTOMERS. THEREFORE, HE SUBMITTED THAT NO COPIES WERE MADE BY THE ASSESSEE COMPANY FROM A MASTER COPY AND THE PAYMENTS WERE MADE TOWAR DS COPYRIGHTED ARTICLES AND NOT FOR THE RIGHT TO USE COPYRIGHT. HE ACCORDINGLY, SUBMITTED THAT THIS CASE NEVER FALLS W ITHIN THE PURVIEW OF ROYALTY. 39. SHRI SHAJI P. JACOB, THE LEARNED COMMISSIONER A PPEARING FOR THE REVENUE, ON THE OTHER HAND, ARGUED THAT THE PAYMENTS MADE BY THE ASSESSEE COMPANY WERE IN THE NATURE OF ROYALTY. HE POINTED OUT THAT THE ASSESSEE HAS ENTERED INTO CONTRACT WITH TWO NRI COMPANIES; ON THE ONE SIDE WITH THE DEVELOP ER OF SOFTWARE, A NON-RESIDENT COMPANY AND ON THE OTHER S IDE, AN END USER, WHICH IS A BANK, A RESIDENT IN INDIA. THE AS SESSEE HAS PURCHASED LICENSE TO USE THE COPY OF SOFTWARE WITH THE RECORDED KEY, WHICH IS SUBLICENSED TO THE END USER. ONE COP Y OF THE SOFTWARE TO BE DELIVERED TO THE ASSESSEE BY THE NON -RESIDENT - - ITA NOS.2190 TO 2197 & 2199/MDS/13 30 DEVELOPER AND THE ASSESSEE IS AUTHORIZED TO MAKE CO PIES AS PER THE LICENSE IN THE AGREEMENT. THEREFORE, HE ARGUED THAT THE PAYMENTS MADE BY THE ASSESSEE COMPANY WERE NOTHING BUT FEES FOR THE LICENSE TO USE THE COPY OF THE SOFTWARE OR RIGHT TO USE THE COPY OF SOFTWARE FOR A SPECIFIED PERIOD. 40. THE LEARNED COMMISSIONER EXPLAINED THAT IN THE ABOVE CIRCUMSTANCES, THE TRANSACTION ENTERED INTO BY THE ASSESSEE IS NOT A TRADING TRANSACTION INVOLVING PURCHASE AND S ALE OF SOFTWARE. THE LEARNED COMMISSIONER FURTHER EXPLAIN ED THAT IF ROYALTY RECEIVED FROM THE USE OR RIGHT TO USE OR TR ANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF LICENCE) IN R ESPECT OF COPYRIGHT WAS NOT TAXABLE UNDER SEC.9(1)(VI), THE P ARLIAMENT WOULD NOT HAVE PRESCRIBED SPECIAL RATE OF TAX FOR R OYALTY INCOME IN RESPECT OF ANY COMPUTER SOFTWARE UNDER SEC.115A( 1A) OF THE ACT. 41. THE LEARNED COMMISSIONER FURTHER CONTENDED THAT ALL THE DECISIONS RELIED ON BY THE ASSESSEE WERE RENDERED B EFORE THE RETROSPECTIVE AMENDMENT BROUGHT IN SEC.9(1)(VI) BY FINANCE ACT, 2012. HE EXPLAINED THAT THE AMENDMENT BROUGHT IN B Y THE FINANCE ACT, 2012, HAS MADE THE MATTER VERY CLEAR T HAT ANY - - ITA NOS.2190 TO 2197 & 2199/MDS/13 31 PAYMENT MADE TOWARDS TRANSFER OF ALL OR ANY RIGHTS FOR THE USE OR RIGHT TO USE COMPUTER SOFTWARE IS TO BE TREATED AS ROYALTY. THIS AMENDMENT HAS BEEN BROUGHT IN, IN THE FORM OF A CLA RIFICATION, PARTICULARLY STATING THAT THE AMENDMENT IS RETROSPE CTIVE. THEREFORE, THE LAW ALWAYS STOOD AND ALSO FOR THE IM PUGNED ASSESSMENT YEARS THAT THE TRANSACTION OF OBTAINING THE SOFTWARE FROM NON-RESIDENT COMPANIES FOR USE OF THE ASSESSEE S CUSTOMERS IN INDIA, IS IN FACT THE RIGHT TO USE THE SOFTWARE WITH ALL INHERENT RIGHTS AND PRIVILEGES AND NOT A TRADING TR ANSACTION, AS ARGUED BY THE ASSESSEE. THEREFORE, THE PAYMENTS MA DE BY THE ASSESSEE TO ACI SINGAPORE AND IRPL AUSTRALIA ARE NO THING BUT ROYALTIES. 42. THE LEARNED COMMISSIONER HAS RELIED ON THE ORDE R OF THE ITAT, MUMBAI L BENCH IN THE CASE OF DY. DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) VS. RELIANCE INFOCOM LTD., 98 DTR(MUMBAI)(TRIB) 66, WHEREIN THE TRIBUNAL HAS CONS IDERED IN DETAIL THE LAW STATED IN 9(1)(VI) BOTH, BEFORE AND AFTER THE AMENDMENT. THE TRIBUNAL HAS CLEARLY HELD THAT SIMI LAR TRANSACTIONS ENTERED UNDER VARIOUS AGREEMENTS IS ON LY LICENSE TO USE THE COPYRIGHT BELONGING TO THE NON-RESIDENT COM PANIES, - - ITA NOS.2190 TO 2197 & 2199/MDS/13 32 SUBJECT TO THE TERMS AND CONDITIONS OF THE AGREEMEN T WHILE THE NON-RESIDENT SUPPLIER CONTINUES TO BE THE OWNER OF THE COPYRIGHT AND ALL OTHER INTELLECTUAL PROPERTY RIGHTS. STILL THE TRANSACTION WOULD AMOUNT TO TRANSFER OF PART OF THE COPYRIGHT A ND TRANSFER OF RIGHT TO USE COPYRIGHT. THEREFORE, THE PAYMENTS IN THAT CASE WERE MADE FOR THE USE OR RIGHT TO USE COPYRIGHT AND THE SAME AMOUNTS TO ROYALTY WITHIN THE MEANING OF ARTICLE 12 (3) OF INDO- USA DTAA AND THE ASSESSING OFFICER HAS RIGHTLY HELD THAT SEC.195 IS APPLICABLE. THE LEARNED COMMISSIONER SU BMITTED THAT THE RATIO OF THIS DECISION IS SQUARELY APPLICABLE T O THE PRESENT CASE. HE ALSO MENTIONED THAT THIS ORDER OF THE TRI BUNAL HAS BEEN RENDERED AFTER THE AMENDMENT BROUGHT IN BY FINANCE ACT, 2012 AND THE TRIBUNAL HAD THE OCCASION TO CONSIDER THE L AW PREVAILING BEFORE THE AMENDMENT AND THE LAW THAT FOLLOWED THE AMENDMENT. 43. THE LEARNED COMMISSIONER RELIED ON THE SAID ORD ER OF THE TRIBUNAL IN THE CASE OF RELIANCE INFOCOM LTD. TO CO UNTER THE ARGUMENT OF THE LEARNED COUNSEL APPEARING FOR THE A SSESSEE, THAT AS NO AMENDMENT HAS BEEN MADE IN DTAAS IN CONSEQUENCE OF RETROSPECTIVE AMENDMENT BROUGHT IN S EC.9(1)(VI) - - ITA NOS.2190 TO 2197 & 2199/MDS/13 33 BY FINANCE ACT, 2012, THE AMENDMENT WILL NOT HAVE A NY EFFECT, AS THE TERMS OF DTAA OVERRIDE THE PROVISIONS OF LAW STATED IN THE ACT. THE LEARNED COMMISSIONER EXPLAINED THAT AS HE LD BY THE TRIBUNAL IN THE SAID CASE, THERE IS NO NEED TO BRIN G ANY CHANGE IN THE EXPRESSION OF ROYALTY IN DTAAS, BECAUSE THE AME NDED LAW IN SEC.9(1)(VI) AND THE EXPRESSION ROYALTY PROVID ED IN THE DTAAS DO NOT HAVE ANY CONFLICT, EVEN AFTER THE AMEN DMENT. 44. THE LEARNED COMMISSIONER ALSO OPPOSED THE ARGUM ENT OF THE LEARNED COUNSEL THAT AS THE AMENDMENT WAS BROUG HT ONLY IN 2012 AND AS ALL THE ASSESSMENT YEARS INVOLVED IN T HESE APPEALS ARE PRIOR TO THE AMENDMENT, IT WAS IMPOSSIBLE FOR T HE ASSESSEE TO DEDUCT THE TAX EVEN IF, IT WANTED TO DEDUCT TAX AT SOURCE WHILE MAKING THOSE PAYMENTS. THE LEARNED COMMISSIONER EX PLAINED THAT SEC.9(1)(VI) DID NOT GIVE ANY SUCH IMPRESSION TO THE ASSESSEE. THE AMENDMENT BROUGHT IN BY FINANCE ACT, 2012 WAS ONLY CLARIFYING THE POSITION; IT WAS NOT ALTERING T HE POSITION AT ALL. THEREFORE, HE SUBMITTED THAT THE ARGUMENT OF THE LE ARNED COUNSEL IS NOT A GOOD EXCUSE. 45. THE LEARNED COMMISSIONER ALSO EXPLAINED HOW THE TRANSACTIONS MADE BY THE ASSESSEE COMPANY WITH THE ACI - - ITA NOS.2190 TO 2197 & 2199/MDS/13 34 SINGAPORE AND IRPL AUSTRALIA RELATE TO TRANSFER OF RIGHT TO USE WITHIN THE MEANING OF INDIAN COPYRIGHT ACT, 1957. HE CONTENDED THAT AS PER THE INDIAN COPYRIGHT ACT, 1957, A COMPU TER PROGRAMME MEANS A SET OF INSTRUCTIONS EXPRESSED IN WORDS, CODES, SCHEMES OR IN ANY OTHER FORM, INCLUDING A MA CHINE READABLE MEDIUM, CAPABLE OF CAUSING A COMPUTER TO P ERFORM A PARTICULAR TASK OR ACHIEVE A PARTICULAR RESULT AND WHAT HAS BEEN PROCURED BY THE ASSESSEE IS EXACTLY THE SAME WHICH ENABLES THE ASSESSEE TO PERFORM THE TASK ACCORDING TO THE CUSTO MERS REQUIREMENT WITHIN THE FRAME WORK OF THE SOFTWARE P ROGRAMME. 46. HE, THUS, CONCLUDED THAT THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF INCOME-TAX(APPEALS) ARE JUSTIFI ED IN LAW IN HOLDING THAT THE PAYMENTS MADE BY THE ASSESSEE COMP ANY TO ACI SINGAPORE AND IRPL AUSTRALIA WERE IN THE NATURE OF ROYALTY AND THE ASSESSEE WAS BOUND TO DEDUCT TAX AT SOURCE UNDER SEC.195. AS THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE PAYMEN TS UNDER SEC.40(A)(I). - - ITA NOS.2190 TO 2197 & 2199/MDS/13 35 47. WE HEARD THE DETAILED ARGUMENTS ADVANCED FROM B OTH SIDES AND PERUSED THE JUDGMENTS AND ORDERS AND ALSO THE NOTES PLACED BEFORE US ON THE TECHNICAL ASPECTS OF SOFTWA RE. 48. ON GOING THROUGH THE FACTS AND DETAILS OF THE C ASE BEFORE US, WE FIND THAT THE ASSESSEE COMPANY HAS ENTERED I NTO AGREEMENTS WITH ACI SINGAPORE AND IRPL AUSTRALIA FO R SUPPLY OF STANDARD SOFTWARE PRODUCTS, WHICH IN TURN, ARE TO B E SOLD IN INDIA TO THE CUSTOMERS OF THE ASSESSEE COMPANY MAINLY, BA NKS AND FINANCIAL INSTITUTIONS. THE SOFTWARE TRANSMITTED TO THE ASSESSEE COMPANY IS INSTALLED ON A SERVER WITH IDENTIFYING L OCATION AND MACHINE NO. OF THE CUSTOMER. AS PER THE TERMS OF A GREEMENTS, THE ASSESSEE COMPANY DO NOT HAVE ANY EXCLUSIVE RIGH T TO DISTRIBUTE THE SOFTWARE PRODUCTS. IT OBTAINS ORDERS ON ITS OWN ACCOUNT FOR CUSTOMERS IN INDIA AND THEREAFTER PLACE S ORDERS WITH NON-RESIDENT COMPANIES. WHEN THE PRODUCTS ARE DELI VERED TO THE ASSESSEE, IT SELLS THE PRODUCTS TO THE CUSTOMERS IN INDIA. THE NON-RESIDENT COMPANIES RAISE INVOICES ON THE ASSESS EE COMPANY AND IN TURN, THE ASSESSEE COMPANY RAISES SE PARATE INVOICES ON THE END USERS. IT IS TO BE SEEN THAT T HE ORDERS ARE PLACED BY CUSTOMERS AND BANKS IN INDIA WITH THE ASS ESSEE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 36 COMPANY ON A NEED BASED ARRANGEMENT. THE SUPPLY O F THE PRODUCTS ARE MADE BY THE NON-RESIDENT COMPANIES ONL Y AFTER APPROVING THE TECHNICALITY OF THE SOFTWARE MODULE A ND OTHER NECESSARY PARTICULARS. THE SOFTWARE PRODUCTS ARE D ELIVERED TO THE ASSESSEE ON A CD/ANY OTHER MEDIA SPECIFIED IN T HE INVOICES. IT IS SEEN THAT THE ASSESSEE DOES NOT HAVE OWNERSHI P IN THE COPYRIGHT SUPPLIED BY THE NON-RESIDENT COMPANIES. IT IS ALSO TO BE SEEN THAT THE ASSESSEE DOES NOT HAVE ANY RIGHT T O MAKE COPIES OF SOFTWARE OR USE THE SOFTWARE ANYWHERE ELS E. THE SOFTWARE IS CAREFULLY MARKED FOR THAT PARTICULAR CU STOMER TO WHOM THE ASSESSEE HAS SOLD THE SOFTWARE PRODUCT. FROM T HE ABOVE FEATURES, IT IS CLEAR THAT THE RELATIONSHIP SUBSIST ED BETWEEN THE ASSESSEE COMPANY AND THE NON-RESIDENT COMPANIES WA S ON A PRINCIPAL-TO-PRINCIPAL BASIS. THE RISK OF THE FAI LURE OF THE SOFTWARE PRODUCT IS BORNE BY THE ASSESSEE COMPANY. THE ASSESSEE COMPANY DOES NOT HAVE ANY RIGHT TO MAKE CH ANGES IN THE SOFTWARE SUPPLIED BY ACI SINGAPORE AND IRPL AUS TRALIA. THE ASSESSEE COMPANY IS PERMITTED TO MAKE ONLY NOMINAL/ COSMETIC MODIFICATIONS FOR THE PURPOSE OF INSTALLING THE SOF TWARE AND RUNNING THE SOFTWARE PRODUCT IN THE SYSTEM OF CUSTO MERS. THE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 37 SOFTWARE TRANSFERRED BY THE NON-RESIDENT COMPANIES IS A STANDARD SOFTWARE. 49. THE SERVICES RENDERED BY THE ASSESSEE IN INSTAL LING THE SOFTWARE PRODUCTS IN THE SYSTEM OF ITS CUSTOMERS AR E IN THE NATURE OF MAKING THE SOFTWARE COMPATIBLE TO THE ENV IRONMENT OF THE INDIVIDUAL CUSTOMERS. THE ASSESSEE COMPANY NEV ER BECOMES THE OWNER OF THE SOFTWARE. THE INTELLECTUA L PROPERTY IN THE SOFTWARE PRODUCTS ALWAYS REMAINS WITH THE ACI S INGAPORE AND IRPL AUSTRALIA. 50. THE DECISIONS CITED BY THE LEARNED COUNSEL APPE ARING FOR THE ASSESSEE SUPPORT THE ABOVE STATED POSITION OF T HE CASE. IN THE DECISIONS OF DASSAULT SYSTEMS KK, 322 ITR 125(A AR), CIT VS. DYNAMIC VERTICAL SOFTWARE INDIA (P) LTD., 332 I TR 222, DIT VS. ERICSSON AB, 343 ITR 470, THE COURTS HAVE HELD THAT WHERE THE ASSESSEE IS PURCHASING SOFTWARE FROM THE VENDO R AND SELLING THE SAME FURTHER IN INDIAN MARKET, THE CONSIDERATIO N PAID FOR SUCH PURCHASE COULD NOT BE TERMED AS ROYALTY. IT IS HELD THAT IN ORDER TO CONSTITUTE ROYALTY, WHAT IS CONTEMPLATED, IS A PAYMENT THAT IS DEPENDING ON USER OF COPYRIGHT AND NOT A LU MP SUM PAID FOR THE ACQUISITION OF COPYRIGHTED ARTICLE. - - ITA NOS.2190 TO 2197 & 2199/MDS/13 38 51. IN THE PRESENT APPEALS ALSO, WHAT HAS BEEN PURC HASED BY THE ASSESSEE FROM ACI SINGAPORE AND IRPL AUSTRALIA WAS ONLY COPYRIGHTED ARTICLES AND NOT COPYRIGHT, PROPER. W ITHIN THE MEANING OF INDIAN COPYRIGHT ACT, 1957, A COPYRIGHT IS AN EXCLUSIVE RIGHT TO REPRODUCE SOFTWARE INCLUDING STO RAGE OF THE SAME IN ELECTRONIC MACHINES WITH EXCLUSIVE RIGHT TO SELL IT. IN THE PRESENT CASE, THE ASSESSEE DOES NOT HAVE OWNERSHIP OF THE SOFTWARE AND DOES NOT HAVE RIGHT TO REPRODUCE THE SAID SOFTWARE. IT IS IN FACT ONLY PROCURING COPYRIGHTED SOFTWARE P RODUCT MEANT FOR A PARTICULAR CUSTOMER IN INDIA. THE TECHNICAL ROLE OF THE ASSESSEE IS LIMITED IN INSTALLING AND RUNNING THE S OFTWARE PRODUCT IN THE SYSTEM OF CUSTOMERS IN INDIA. THEREFORE, WE FIND THAT THE ASSESSEE IS RIGHT IN ITS CONTENTION THAT THE PAYMEN TS MADE BY THE ASSESSEE COMPANY IN THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEARS UNDER APPEAL TO NON-RESIDENT COMPA NIES ARE ONLY PURCHASE CONSIDERATION FOR PROCURING COPYRIGHT ED SOFTWARE PRODUCTS. THEY WERE NOT IN THE NATURE OF ROYALTY. 52. THE LEARNED COMMISSIONER, IN THE COURSE OF HIS ARGUMENTS, HAS STATED THAT ALL THE ABOVE JUDGMENTS RELIED ON BY THE ASSESSEE WERE RENDERED BEFORE THE RETROSPECTIVE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 39 AMENDMENT BROUGHT IN SEC.9(1)(VI) BY FINANCE ACT, 2 012. BEFORE THE AMENDMENT BROUGHT IN BY FINANCE ACT, 2012, ROYA LTY HAS BEEN DEFINED AS CONSIDERATION FOR THE TRANSFER OF A LL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING FIL MS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION OR TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING, BUT NOT INCLUDING CONSIDER ATION FOR THE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS. THE AMENDMENT BROUGHT IN SEC. 9(1)(VI) IS AN EXPLANATIO N FOR THE PURPOSE OF REMOVING DOUBTS. IT IS CLARIFIED THAT C ONSIDERATION FOR THE TRANSFER OF ALL OR ANY RIGHT FOR USE OR RIGHT T O USE A COMPUTER SOFTWARE (INCLUDING GRANTING OF A LICENCE) IRRESPEC TIVE OF THE MEDIUM THROUGH WHICH SUCH RIGHT IS TRANSFERRED, CON STITUTES ROYALTY. 53. ON A COMPARATIVE READING OF THE EXPRESSION ROY ALTY, BEFORE AND AFTER THE AMENDMENT MADE BY THE FINANCE ACT, 2012, WE ARE NOT ABLE TO FIND ANY PARADIGM SHIFT IN THE M EANING OF TERM ROYALTY, FROM THE OLD ONE TO NEW ONE. IN BOTH TH E EXPRESSIONS, ROYALTY MEANS BASICALLY THE CONSIDERATION MADE F OR THE TRANSFER OF ALL OR ANY RIGHTS OF SOMETHING. IN THE NEW AMENDED - - ITA NOS.2190 TO 2197 & 2199/MDS/13 40 EXPRESSION ALSO IT IS THE SAME THAT THE TRANSFER OF ALL OR ANY RIGHTS OF SOMETHING. THE ONLY CLARIFICATION MADE BY THE A MENDMENT IS THAT SUCH ALL OR ANY RIGHTS INCLUDED TRANSFER OF AL L OR ANY RIGHTS IN RESPECT OF A COMPUTER SOFTWARE ALSO. IT MEANS THE CLARIFICATION HAS INCLUDED THE SOFTWARE PRODUCTS ALSO IN THE AMBI T OF OTHER ITEMS LIKE LITERARY, ARTISTIC OR SCIENTIFIC WORK IN CLUDING FILMS ETC. IT IS EASILY SEEN THAT THE CLARIFICATION HAS BEEN BROU GHT ONLY TO INCLUDE COMPUTER SOFTWARE ALSO IN THE AMBIT OF TRAN SFER OF ALL OR ANY RIGHTS SO AS TO DETERMINE THE NATURE OF PAYMENT . THEREFORE, THERE IS NO CHANGE IN THE CONCEPT OF ROY ALTY EITHER BEFORE OR AFTER THE AMENDMENT. 54. ANYHOW, EVEN IF THE AMENDMENT BROUGHT IN SEC. 9(1)(VI) BY FINANCE ACT, 2012, IS CONSIDERED AS A MILESTONE, THE JUDGMENT RENDERED BY THE HONBLE DELHI HIGH COURT I N THE CASE OF INFRASOFT LTD., 264 CTR 329, REALLY SUPPORTS T HE ARGUMENT OF THE ASSESSEE. IN THE SAID DECISION, EVEN AFTER THE AMENDMENT, THE HONBLE DELHI HIGH COURT HAS HELD THAT THE AMOU NT RECEIVED BY THE ASSESSE FROM A NON-RESIDENT COMPANY FOR GRAN TING LICENSE TO USE COPYRIGHT SOFTWARE TO ITS OWN BUSINESS PURP OSES COULD NOT BE BROUGHT TO TAX AS ROYALTY UNDER ARTICLE 12(3 ) OF INDO-US - - ITA NOS.2190 TO 2197 & 2199/MDS/13 41 DTAA. THE COURT OBSERVED THAT WHERE IT IS A CASE OF MERE TRANSFER OF RIGHT TO USE COPYRIGHTED MATERIAL LIKE SOFTWARE PROGRAMME, THE CONSIDERATION PAID BY THE ASSESSEE D OES NOT GIVE RISE TO ROYALTY IN THE HANDS OF VENDEES. THE J UDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INFRASOFT L TD. ITSELF SUPPORTS THE VIEW THAT NO CHANGE HAS BEEN BROUGHT I N SEC. 9(1)(VI) BY FINANCE ACT, 2012, IN THE CONCEPT OF RO YALTY. 55. THE LEARNED COMMISSIONER RELIED ON A RECENT DE CISION OF ITAT, MUMBAI BENCH, RENDERED IN THE CASE OF RELIANC E INFOCOM LTD., 98 DTR (MUMBAI)(TRIB) 66, WHEREIN THE TRIBUNA L HAS HELD THAT THE PAYMENTS MADE TO SUPPLIERS FOR THE SOFTWAR E CAN BE SAID TO BE PAYMENTS FOR THE USE OR RIGHT TO USE COPYRIGH TS AND, THEREFORE, SUCH PAYMENTS AMOUNT TO ROYALTY AND LIAB LE FOR DEDUCTION OF TAX AT SOURCE UNDER SEC. 195. IN THE SAID CASE, WHAT HAS BEEN ACQUIRED BY THE INDIAN COMPANY IS A C OMPUTER SOFTWARE I.E. SOFTWARE PROPER. IT IS NOT A CASE, WHERE INDIAN COMPANY HAD ACQUIRED A SOFTWARE PRODUCT IN THE NATU RE OF COPYRIGHTED ARTICLE. THEREFORE, THERE IS A FUNDAM ENTAL DIFFERENCE IN THE SUBJECT MATTER OF TRANSACTION CONSIDERED IN THE CASES CITED BY THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE A ND THE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 42 TRIBUNAL DECISION RELIED ON BY THE LEARNED COMMISSI ONER. WE, THEREFORE, FIND THAT THE DECISION OF ITAT, MUMBAI B ENCH, IN THE CASE OF RELIANCE INFOCOM LTD. STANDS ON A DIFFEREN T FOOTING AND DOES NOT APPLY TO THE PRESENT CASE. 56. AS WE HAVE ALREADY REACHED A CONCLUSION THAT TH E ASSESSEE HAS PROCURED COPYRIGHTED ARTICLES FROM THE NON- RESIDENT COMPANIES, ACI SINGAPORE AND IRPL AUSTRALI A AND PAYMENTS MADE BY THE ASSESSEE COMPANY TO THOSE COMP ANIES WERE NOT IN THE NATURE OF ROYALTY, WITHIN THE PROVI SIONS OF INDIAN INCOME-TAX ACT ITSELF, WE DO NOT FIND IT NECESSARY TO DWELL UPON THE DETAILED ARGUMENTS MADE BY THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE, TO EXAMINE THE ISSUE IN THE LIGHT OF THE PROVISIONS OF THE ACT VIS--VIS TERMS OF INDO-SINGA PORE DTAA AND INDO-AUSTRALIA DTAA. 57. ANYHOW, WE WOULD LIKE TO EXAMINE A SPECIFIC ARG UMENT ADVANCED BY THE LEARNED COUNSEL APPEARING FOR THE A SSESSEE THAT NO DISALLOWANCE UNDER SEC. 40(A)(I) ON ACCOUNT OF RETROSPECTIVE AMENDMENT COULD BE MADE, AS THE ASSES SE WAS TRANSACTING BUSINESS IN THE RELEVANT PREVIOUS YEAR PERIOD. IN THE LIGHT OF THE LAW, AS IT STOOD AT THAT TIME, IT WAS NOT POSSIBLE FOR THE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 43 ASSESSEE TO FORESEE ANY AMENDMENT THAT WOULD BE BRO UGHT IN THE FUTURE. THE AMENDMENT IN SEC. 9(1)(VI) WAS BROU GHT BY FINANCE ACT, 2012, WHEREAS THE LATEST PREVIOUS YEAR IN THE PRESENT CASE ENDED ON 31.3.2010. THE AMENDMENT HAS BEEN BROUGHT CLEARLY AFTER TWO YEARS FROM THE END OF THE PREVIOUS YEAR OF THE LAST ASSESSMENT YEAR INVOLVED IN THESE APPEA LS. FOR THIS PROPOSITION, THE LEARNED COUNSEL HAS RELIED ON THE DECISION OF ITAT, MUMBAI BENCH, RENDERED IN THE CASE OF CHANNEL GUIDE INDIA LTD. VS. ACIT, 139 ITD 49. ON SIMILAR FACTS, IT WAS HELD IN THE SAID DECISION THAT AN ASSESSEE COULD NOT BE HEL D LIABLE TO DEDUCT TAX AT SOURCE RELYING ON SUBSEQUENT AMENDMEN T IN THE ACT WITH RETROSPECTIVE EFFECT. THE TRIBUNAL OBSERVE D THAT THE ASSESSEE CANNOT FORESEE FUTURE CHANGE OF LAW AND TH EREFORE, THERE IS AN IMPOSSIBILITY OF PERFORMANCE ON THE PAR T OF THE ASSESSEE AS ON THE DATE OF INCURRING SUCH EXPENDITU RE. 58. WE FIND MUCH FORCE IN THE ABOVE CONTENTION ADVA NCED BY THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE. HE RE ALSO, IT IS A SUBSEQUENT AMENDMENT WITH RETROSPECTIVE EFFECT. AS HELD BY ITAT, MUMBAI BENCH, IN SUCH CASES, THE ASSESSEE IS CONSTRAINED BY IMPOSSIBILITY OF PERFORMANCE. THE D ICTUM - - ITA NOS.2190 TO 2197 & 2199/MDS/13 44 IMPOSSIBILIUN NULLA OBLIGATION EST, STATES THAT THERE IS NO OBLIGATION TO DO IMPOSSIBLE THINGS. IT IS TO BE SE EN THAT THE LAW DOES NOT COMPEL TO DO THE IMPOSSIBLE AS ENSHRINED I N THE PRINCIPLE LEX NON COGIT AD IMPOSSIBILIA. THE JURISPRUDENCE HAS ALSO ACCEPTED AS A BASIC DICTUM, IMPOTENTIA EXCUSAT LEGEM, THAT IMPOSSIBILITY IS AN EXCUSE IN LAW. 59. WHEN THE ASSESSEE IS CONSTRAINED WITH THE IMPOS SIBILITY OF PERFORMANCE, IT IS FUTILE TO ARGUE THAT THE ASSE SSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE IN THE ASSESSMENT YEARS EARLIER TO AMENDMENT BROUGHT IN SEC.9(1)(VI) BY FINANCE ACT, 2 012. IT IS NOT POSSIBLE TO DO OR UNDO OR TO BELL OR UNBELL THE PAST. 60. THEREFORE, IN THE LIGHT OF ABOVE DISCUSSIONS, W E FIND THAT THERE WAS NO REQUIREMENT ON THE PART OF THE ASSESSE E COMPANY TO DEDUCT TAX AT SOURCE AS PROVIDED UNDER SEC.195 O F THE ACT. ACCORDINGLY, WE HAVE TO HOLD THAT THE ASSESSING AUT HORITY IS NOT JUSTIFIED TO INVOKE SEC.40(A)(I) AND MAKE DISALLOWA NCE IN RESPECT OF THE AMOUNTS PAID BY THE ASSESSEE COMPANY TO ACI SINGAPORE AND IRPL AUSTRALIA. THE DISALLOWANCES ARE THEREFOR E, DELETED. - - ITA NOS.2190 TO 2197 & 2199/MDS/13 45 61. THIS SECOND ISSUE RAISED BY THE ASSESSEE FOR AL L THE ASSESSMENT YEARS REGARDING THE DISALLOWANCE UNDER S EC.40(A)(I) IS DECIDED IN FAVOUR OF THE ASSESSEE. 62. THE THIRD ISSUE RAISED BY THE ASSESSEE COMPANY, COMMON TO ALL THE ASSESSMENT YEARS, EXCEPT THE ASSE SSMENT YEAR 2006-07, IS THAT THE LOWER AUTHORITIES ERRED I N CONCLUDING THAT ACI SINGAPORE AND IRPL AUSTRALIA HAVE PERMANEN T ESTABLISHMENT(PE) IN THE INDIA AND DESPITE THE CONT ROVERSY REGARDING THE PAYMENT AS ROYALTY OR NOT, THOSE NON- RESIDENT COMPANIES ARE LIABLE TO TAX IN INDIA AND AS SUCH, T HE ASSESSEE COMPANY WAS LIABLE FOR DEDUCTING TAX AT SOURCE 63. THE BUSINESS MODEL FOLLOWED BY THE ASSESSEE COM PANY HAS ALREADY BEEN EXPLAINED IN EARLIER PARAGRAPHS WH ILE CONSIDERING THE ISSUE RELATING TO THE NATURE OF PAY MENTS MADE BY THE ASSESSEE COMPANY TO NON-RESIDENT COMPANIES. TH E ASSESSEE COMPANY, FIRST OBTAINS PURCHASE ORDERS FRO M INDIAN CUSTOMERS AND THE ASSESSEE COMPANY PLACES ORDERS B EFORE THE FOREIGN SUPPLIERS. ONCE THE FOREIGN SUPPLIERS APPR OVE THE REQUIREMENTS, COPYRIGHTED PRODUCTS ARE SUPPLIED BY THEM AND INVOICES ARE RAISED ON THE ASSESSEE COMPANY. IN TU RN, THE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 46 ASSESSEE COMPANY RAISES INVOICES ON CUSTOMER BANKS AND DELIVER THE SOFTWARE PRODUCTS TO THEM AS END USERS. IT IS STATED IN THE RELEVANT DTAAS THAT AN ENTERPRISE OF ONE OF THE CONTRACTING STATES SHALL NOT BE DEEMED TO HAVE A PE IN THE OTHER CONTRACTING STATE MERELY BECAUSE IT CARRIES ON BUSI NESS IN THAT OTHER STATE THROUGH A BROKER, GENERAL COMMISSION AG ENT OR ANY OTHER AGENT OF AN INDEPENDENT STATUS, WHERE THAT PE RSON IS ACTING IN THE ORDINARY COURSE OF THE PERSONS BUSINESS AS SUCH A BROKER OR AGENT. ANOTHER CRITERIA TO BE CONSIDERED IS WHE THER THE ENTREPRENEURIAL RISKS ARE TO BE BORNE BY THE PERSON OR BY THE ENTERPRISE THE PERSON REPRESENTS. IN THE PRESENT C ASE, THE ASSESSEE COMPANY IS CARRYING ON BUSINESS ON ITS OWN STATUS AS AN INDEPENDENT ENTITY AND THE TRANSACTIONS ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND NON-RESIDENT COMPANIES ARE ON A PRINCIPAL-TO-PRINCIPAL BASIS. IT IS ALREADY STATED IN EARLIER PARAGRAPHS OF THE ORDER THAT THE ASSESSEE COMPANY B EARS THE RISK OF FAILURE OF THE CONTRACTS. THE ASSESSEE FUN CTIONS ON AN INDEPENDENT BASIS. THE NON-RESIDENT COMPANIES TRAN SFER ALL THE RISK AND REWARDS ASSOCIATED WITH SOFTWARE TO THE AS SESSEE COMPANY. AS PER THE AGREEMENT, THE ASSESSEE DOES NOT HAVE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 47 ANY AUTHORITY TO PROCURE/CONCLUDE CONTRACTS ON BEHA LF OF ACI SINGAPORE AND IRPL AUSTRALIA. THE ASSESSEE COMPANY IS ALSO NOT ENGAGED IN IDENTIFYING CUSTOMERS OR SECURING CO NTRACTS IN INDIA FOR FOREIGN SUPPLIERS. 64. IN THE ABOVE CIRCUMSTANCES, IT IS VERY DIFFICUL T TO HOLD THAT THE ASSESSEE IS A DEPENDENT AGENT OF ACI SINGAPORE AND IRPL AUSTRALIA. THE RESULT IS THAT THE ASSESSEE COMPANY DOES NOT CREATE A PE IN INDIA FOR ACI SINGAPORE AND IRPL AUS TRALIA. 65. THUS, THE ISSUE OF PE IS DECIDED IN FAVOUR OF T HE ASSESSEE BY HOLDING THAT SINGAPORE COMPANY AND AUSTRALIAN CO MPANY DO NOT MAINTAIN ANY PE IN INDIA THROUGH THE MEDIUM OF THE ASSESSEE COMPANY. 66. THE FOURTH ISSUE RAISED BY THE ASSESSEE SPECIFI CALLY FOR THE ASSESSMENT YEAR 2004-05 IS THAT THE LOWER AUTHO RITIES HAVE ERRED IN DENYING 100% DEPRECIATION ON THE EXPENSES INCURRED BY THE ASSESSEE IN PROVIDING INTERIOR FACILITIES IN IT S OFFICE. AT THE TIME OF HEARING, THE LEARNED COUNSEL STATED BEFORE US THAT THE SAID GROUND IS NOT PRESSED ANY MORE. ACCORDINGLY, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. - - ITA NOS.2190 TO 2197 & 2199/MDS/13 48 67. THE FIFTH ISSUE RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2004-05, 2009-10 AND 2010-11 IS THAT THERE IS A SHORT FALL IN THE CREDITS GRANTED TO THE ASSESSEE COMPANY AGAI NST TAX DEDUCTED AT SOURCE. IN THE ASSESSMENT YEAR 2004-05 , THE RELEVANT INCOME WAS ACCOUNTED ON ACCRUAL BASIS. TH E ASSESSEE HAD ACCOUNTED FOR ` 24 LAKHS AND ` 2 LAKHS AS PART OF RECEIVABLE FROM UTI BANK ON ACCRUAL BASIS FOR THE ASSESSMENT Y EARS 2002- 03 AND 2003-04 BUT DID NOT PASS ANY ENTRY FOR TDS, NOR ANY CLAIM WAS MADE THROUGH TDS AT THE TIME OF ACCRUAL B ECAUSE UTI BANK DEDUCTS TAX AT SOURCE ONLY AT THE TIME OF PAYM ENT. IN THE ASSESSMENT YEAR 2004-05 OUT OF THE ABOVE STATED A MOUNT, THE ASSESSEE COMPANY HAS WRITTEN OFF ` 25 LAKHS AND OFFERED ONLY ` 1,00,000/- AS INCOME. TDS CREDIT OF ` 30,750/- WAS CLAIMED ON ` 1,00,000/-. BUT IN THE ASSESSMENT, THE ASSESSING O FFICER HAS WITHDRAWN THE TDS CREDIT OF ` 1,28,125/- ON THE WRITTEN OFF AMOUNT OF ` 25 LAKHS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE NEVER CLAIMED CREDIT FOR THE SAID TDS AMO UNT. WE FIND THAT IF THE ASSESSEE HAS NOT CLAIMED THE CREDI T FOR THE TDS ON THE AMOUNT OF ` 25 LAKHS WRITTEN OFF BY THE ASSESSEE COMPANY, THERE IS NO JUSTIFICATION ON THE PART OF T HE ASSESSING - - ITA NOS.2190 TO 2197 & 2199/MDS/13 49 OFFICER TO WITHDRAW THE TDS AMOUNT OF ` 1,28,125/-. AS FAR AS THE ASSESSMENT YEAR 2009-10 IS CONCERNED, THE ASSES SEE COMPANY HAS CLAIMED TDS CREDIT OF ` 11,67,79,891/- IN ITS RETURN OF INCOME. BUT THE ASSESSING OFFICER RESTRICTED TH E GRANT OF CREDIT TO ` 11,06,13,380/- ON THE GROUND THAT THE CREDIT AS PE R FORM 26AS IS REFLECTED TO THAT EXTENT ALONE. ONCE DIFFERENCE IS RECONCILED, IT IS TO BE SEEN THAT THE ASSESSEE IS E NTITLED FOR THE CREDIT ON FULL AMOUNT OF TDS. LIKEWISE, IN THE ASS ESSMENT YEAR 2010-11 ALSO, THERE IS DIFFERENCE BETWEEN THE AMOUN T OF TDS AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE AND THE CREDIT REFLECTED IN FORM 26AS. HERE ALSO, ONCE DIFFERENCE IS RECONCILED, THE ASSESSEE IS ENTITLED FOR THE CREDIT ON FULL AMOUNT OF TDS. IN THIS REGARD, THE ASSESSEE HAS RELIED ON INSTRUCTION NO.5/2013 DATED 8 TH JULY, 2013 ISSUED BY THE CBDT STATING THAT WHEN AN ASSESSEE APPROACHES THE ASSESSING AUTHORITY WITH REQUISITE DETAILS AND PARTICULARS IN THE FORM OF WI THHOLDING TAX CERTIFICATE AS EVIDENCE FOR ANY MISMATCHED AMOUNT, THE ASSESSING OFFICER SHOULD VERIFY WHETHER OR NOT THE DEDUCTOR HAS MADE PAYMENT OF THE WITHHOLDING TAX TO THE GOVERNME NT ACCOUNT - - ITA NOS.2190 TO 2197 & 2199/MDS/13 50 AND IF THE PAYMENT HAS BEEN MADE, CREDIT OF THE SAM E SHOULD BE GIVEN TO THE ASSESSEE. 68. IN THE ABOVE CIRCUMSTANCES, WE DIRECT THE ASSES SING OFFICER TO GIVE THE APPROPRIATE WITHHOLDING TAX CRE DIT TO THE ASSESSEE COMPANY ON THE BASIS OF WITHHOLDING TAX CE RTIFICATE PRODUCED BY THE ASSESSEE. THE ASSESSING OFFICER IS ALSO DIRECTED TO MAKE NECESSARY ENQUIRIES IN THIS REGARD AND GRANT APPROPRIATE RELIEF TO THE ASSESSEE COMPANY. 69. THIS ISSUE IS TREATED AS ALLOWED FOR STATISTICA L PURPOSES. 70. NEXT, WE HAVE TO CONSIDER PARTIAL DISALLOWANCE MADE BY THE ASSESSING OFFICER IN COMPUTING RELIEF UNDER SEC .10A/10B. 71. THE FIRST SET OF SUCH DISALLOWANCES INCLUDED TH E EXPENSES RELATING TO TRAVEL AND COMMUNICATION. IN VIEW OF I TAT, SPECIAL BENCH DECISION IN THE CASE OF ITO V. SAK SOFT LTD., 121 TTJ 865(CHENNAI)(SB), SUCH DEDUCTIONS MADE FROM THE EXP ORT TURNOVER SHOULD BE CORRESPONDINGLY MADE FROM THE TO TAL TURNOVER SO AS TO MAINTAIN THE PARITY OF THE TURNOVER SEGMEN TS. IN VIEW OF THAT, WE DIRECT THE ASSESSING OFFICER TO REDUCE THE EXPENSES ALSO FROM THE TOTAL TURNOVER OF THE RESPECTIVE ASSESSMEN T YEARS. THIS ISSUE OF TRAVEL AND COMMUNICATION EXPENSES ARE RAIS ED FOR THE - - ITA NOS.2190 TO 2197 & 2199/MDS/13 51 ASSESSMENT YEARS 2007-08, 2008-09, 2009-10 AND 2010 -11. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE COM PANY. 72. THE OTHER ISSUE RAISED BY THE ASSESSEE WITH RE FERENCE TO SEC.10A/10B IS THE DISALLOWANCE OF DEDUCTION OF FOR EIGN EXCHANGE LOSS FROM THE EXPORT TURNOVER. THIS CONTE NTION OF THE ASSESSEE IS REJECTED IN VIEW OF VARIOUS DECISIONS AGAINST THE ASSESSEE. 73. THE NEXT ITEM WITH REFERENCE TO DISALLOWANCE OF DEDUCTION UNDER SEC.10A/10B IS THE UNREALIZED FOREIGN EXCHANG E. THIS ISSUE ARISES FOR THE ASSESSMENT YEARS 2007-08, 2008 -09, 2009- 10 AND 2010-11. THE ASSESSING OFFICER HAS EXCLUDED THE UNREALIZED FOREIGN EXCHANGE FROM THE EXPORT TURNOVE R WITHOUT MAKING CORRESPONDING DEDUCTION IN THE TOTAL TURNOVE R OF THE ASSESSEE COMPANY. WHEN THE FOREIGN EXCHANGE IS NO T REALIZED AND CORRESPONDING EXPORT TURNOVER IS ALREADY REDUCE D, IT IS A COROLLARY THAT THE TOTAL TURNOVER IS REDUCED TO THA T EXTENT FOR THE REASON THAT THE TOTAL TURNOVER INCLUDES EXPORT TURN OVER AS WELL. IN VIEW OF VARIOUS DECISIONS INCLUDING THAT OF SAK SOF T LTD. 121 TTJ 865, WE DIRECT THE ASSESSING OFFICER TO GIVE CORRES PONDING - - ITA NOS.2190 TO 2197 & 2199/MDS/13 52 DEDUCTION FROM THE TOTAL TURNOVER AS WELL. THIS IS SUE IS PARTLY ALLOWED. 74. IN RESULT, THE APPEALS FILED BY THE ASSESSEE CO MPANY ARE PARTLY ALLOWED. ORDERS PRONOUNCED ON THURSDAY, THE 05 TH OF JUNE, 2014 AT CHENNAI. SD/- SD/- ( ! ' ) ( #$ . . . % (VIKAS AWASTHY) (D R. O.K.NARAYANAN) & '(' /JUDICIAL MEMBER )*+ /VICE-PRESIDENT ,& /CHENNAI, -( /DATED, THE 5 TH JUNE, 2014. MPO* (.'' /!'0! /COPY TO: ' 1. /APPELLANT 2. /RESPONDENT 3. ' 1'2% /CIT(A)-II, CHENNAI 4. ' 1 /CIT, CHENNAI 5. !34' 5 /DR 6. 4#'6 /GF.
