Appeal details
Counselvise Citation
[2018] 121 COUNSELVISE.COM (IT) 5262 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-04-2018
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Assessment Year
2009-2010
Appeal Filed On
14-11-2017
Judgement Text
, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER & SHRI S. JAYARAMAN , ACCOU NTANT MEMBER ./ I.T.A.NO. 2743/CHNY/2017 / ASSESSMENT YEAR :2009 - 10 THE DEPUTY COMMISSIONER OF INCOME TAX, LTU - 1, AAYAKAR BHA W AN, 121, MAHATMA GANDHI ROAD, CHENNAI 600 034. VS. M/S. COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT LTD., ST. MARY S ROAD, CHENNAI 600 086. [PAN:AA A C D3312M] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI N. MADHAVAN, ADDL. CIT / RESPONDENT BY : SHRI N.V. BALAJI, ADVOCATE / DATE OF HEARING : 05 . 0 4 .201 8 / DATE OF P RONOUNCEMENT : 27 . 0 4 .201 8 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) 17 , C HENNAI DATED 31 . 0 8 .201 7 RELEVANT TO THE ASSESSMENT YEAR 2009 - 10 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT NO TDS WAS DEDUCTIBLE BY THE ASSESSEE UNDER SECTION 195 OF THE I NCOME TAX I.T.A. NO . 27 43 /M/ 1 7 2 ACT, 1961 [ ACT IN SHORT] ON THE PAYMENT MADE TOWARDS ACQUISITION OF SOFTWARE LICENSE FROM NON - RESIDENTS. 2. IT WAS THE SUBMISSION OF THE LD. DR THAT THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION, USA AND A LEADING PROVIDER OF INFORMATION TECHNOLOGY, CONSULTING AND BUSINESS PROCESS OUTSOURCING SERVICES. SINCE IT WAS NOTICED THAT TDS WAS NOT MADE ON THE REMITTANCES MADE TOWARDS EXAM FEES, SOFTWARE LICENSE TO NON - RESIDENTS, ETC., AN ORDER UNDER SECTION 2 01(1)/201(1A) OF THE ACT DATED 26.03.2015 WAS PASSED RAISING A DEMAND OF .50,55,940/ - . IT WAS THE SUBMISSION OF THE LD. DR THAT THE PAYMENTS CLAIMED TO BE MADE BY THE ASSESSEE COMPANY TOWARDS SOFTWARE LICENSE ARE HELD AS ROYALTY FOR USAGE OF SOFTWARE AND TAXABLE IN THE HANDS OF THE NON - RESIDENT S. SINCE THE ASSESSEE DID NOT AF FECT THE TDS WHILE PAYING THE SAID AMOUNT, THE ASSESSING OFFICER OBSERVED THAT THE SAID PAYMENTS CONSTITUTE ROYALTY AND THEREBY INVOKED THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. IT WAS THE SUBMISSION THAT ON APPEAL, THE LD. CIT(A) HELD THAT NO TDS WAS DEDUCTIBLE BY THE ASSESSEE IN CONNECTION WITH ACQUISITION OF SOFTWARE LICENSES BY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE S OWN CASE. IT WAS A SUBMISSION THAT THE SOFTWARE LICENSE PAYMENTS ARE COVERED UNDER THE EXC LUSION PROVIDED IN SUB - CLAUSE (B) TO CLAUSE (VI) OF SECTION 9(1) OF THE ACT I.T.A. NO . 27 43 /M/ 1 7 3 WHICH WAS INSERTED WITH RE TROSPECTIVE EFFECT AND PLEADED THAT THE ORDER OF THE L D.CIT(A) BE REVERSED AND THAT OF THE A SSESSING O FFICER RESTORED. 3 . IN REPLY, THE L D. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE I S NOW SQUARELY COVERED BY THE DECISION OF THE CO - ORDINATE BENCH ES OF THIS TRIBUNAL IN THE AS SESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10 PASSED A COMBINED ORDER IN ITA NO. 1799/MDS/2014 AND ITA NO.1 798 /MDS/201 4 D ATED 1 5 .0 7 .201 6 . HE VEHEMENTLY SUPPORTED THE ORDER OF THE L D.CIT(A). 4 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS , PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW . AS IT IS NOTICED THAT THE L D.CIT(A) HAS FOLLOWE D THE JUDICIAL DISCIPLINE IN FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10 , WHEREIN THE COORDINATE BENCHES OF THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 25. THE LAST ISSUE REL ATES TO THE ADDITION OF RS.1.95 CRS (ROUNDED OF) U/S.40(A)(I) OF THE ACT. ASSESSEE PAID THE SAID AMOUNT TO THE RESIDENTS OF SINGAPORE AND USA. THE SAME WAS PAID IN CONNECTION WITH THE PURCHASE OF OFF THE SHELF SOFTWARE . ASSESSEE DID NOT AFFECT THE TDS WH ILE PAYING THE SAID AMOUNT. IN THE SCRUTINY ASSESSMENT, AO NOTICED THE ABOVE AND OBSERVED THAT THE SAID PAYMENTS CONSTITUTE ROYALTY AS CONTAINED IN EXPHNATION - 2 READ WITH EXPLANATION - 3 TO SECTION 9(1)(VI) OF THE ACT. AO INVOKED THE PROVISIONS OF SECTION 40 (A)(I) OF THE ACT. 26. DURING THE FIRST APPELLATE PROCEEDINGS, CIT (A) OBSERVED THAT THE SAID PURCHASES OF COPYRIGHTED ARTICLE AND COPYRIGHT OF THE SOFTWARE DO NOT CONSTITUTE ROYALTY AND THEREFORE, THERE IS NO LIABILITY TO DEDUCT TAX ON PAYMENTS. CIT (A ) NOTICED THAT THE BENEFICIAL PROVISIONS OF DTAA I.T.A. NO . 27 43 /M/ 1 7 4 SHOULD BE TAKEN INTO ACCOUNT. FURTHER, HE MENTIONED THAT AN INSERTION OF EXPLANATION 4 TO SECTION 9(1)(I) IN THE ABSENCE OF AMENDMENT TO DEFINITION OF ROYALTY IN THE RELEVANT DTAA, THE PAYMENT FOR COPYRIG HTED ARTICLE SHALL NOT BE CONSIDERED AS ROYALTY . FOR THIS PROPOSITION, CIT (A) RELIED ON THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF DIT VS. NOKIA NETWORK OY (358 ITR 259). AGGRIEVED WITH THE ABOVE, REVENUE RAISED THE GROUND NO.6 WITH IT S SUB - GROUNDS AND ARGUED THAT THE SAID DELHI HIGH COURT JUDGMENT IN THE CASE OF NOKIA NETWORK OY (SUPRA) WILL NOT BE ACCEPTED BY THE REVENUE AS THE SAME IS IN APPEAL BEFORE THE APEX COURT. IT IS THE REQUIREMENT OF THE REVENUE THAT THE ISSUE SHOULD BE RAISE D BEFORE THE TRIBUNAL TO KEEP THE ISSUE ALIVE FOR FUTURE. 27. THEY ALSO RAISED ARGUMENTATIVE GROUNDS SAYING THAT THE AMENDED PROVISIONS TO SECTION 9 OF THE ACT HAS RETROSPECTIVE EFFECT FROM 1.6.1976 AS THE AMENDMENTS ARE CLARIFICATORY IN NATURE. REBUTTING THE SAME, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GOVERNMENT IS AGAINST THE RETROSPECTIVE AMENDMENTS AND THE SAME WAS REPEATEDLY ASSERTED BY THE FINANCE MINISTER IN THE FLOOR OF THE HOUSE. WHEN THERE ARE PAYMENTS LIKE THIS TO THE TAX RESIDENTS ABRO AD ARE INVOLVED, WHERE DTAA EXISTS WITH SINGAPORE AND USA, THE BENEFICIAL PROVISIONS APPLY AND NOT THE DOMESTIC LAWS AND THE AMENDMENTS IF ANY TO THE DOMESTIC LAWS. LD COUNSEL FOR THE ASSESSEE MENTIONED NUMBER OF DECISIONS ON THE ISSUES RELATING TO THE COP YRIGHTED ARTICLE V/S COPYRIGHT OF THE SOFTWARE; THE RETROSPECTIVE EFFECT OF THE EXPLANATIONS TO SECTION 9 ETC. IN ANY CASE, SIMILAR ISSUES WERE THE SUBJECT MATTER OF FAVOURABLE DECISIONS OF THE TRIBUNAL IN THE EARLIER ASSESSMENT YEA RS IN THE ASSESSEE S OWN CASE. IN OUR OPINION, CIT (A) MERELY COMPLIED WITH THE DIRECTION OF THE TRIBUNAL. THEREFORE, IN OUR OPINION THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THIS GROUN D RAISED BY THE REVENUE IS DISMISSED. SINCE THE LD. CIT(A) HAS FOLLOWED THE ABOVE DECISION OF THE TRIBUNAL IN HIS ORDER WHILE HOLDING THAT NO TDS WAS DEDUCTIBLE BY THE ASSESSEE IN CONNECTION WITH ACQUISITION OF SOFTWARE LICENSES, WE FIND NO REASON TO IN TERFERE IN THE ORDER OF THE L D.CIT(A). CONSEQUENTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. I.T.A. NO . 27 43 /M/ 1 7 5 5 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED ON THE 27 TH APRIL , 201 8 AT CHENNAI. SD/ - SD/ - ( S. JAYARAMAN ) ACCOUNT ANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 27 . 0 4 .201 8 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.
