Appeal Details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 1636 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 7 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-11-2016
Appeal Filed By
Assessee
Bench Allotted
L
Next Hearing Date
31-10-2016
Assessment Year
2008-2009
Appeal Filed On
24-04-2012
Judgement Text
, , L, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.2763/MUM/2012 ASSESSMENT YEAR: 2008-09 & ITA NO.5766/MUM/2012 ASSESSMENT YEAR: 2009-10 & ITA NO.2099/MUM/2014 ASSESSMENT YEAR: 2010-11 M/S. TTI TEAM TELECOM INTERNATIONAL LTD. C/O. SUDIT K.PAREKH & CO. BALLARD HOUSE, 2 ND FLOOR, ADI MARZBAN PATH, BALLARD PIER, FORT, MUMBAI-400001 / VS. A D IT (IT) - 2 ( 2 ) R.NO.116, 1 ST FL. SCINDIA HOUSE, BALLARD PIER, MUMBAI-38 ( APPELLANT ) (RESPONDENT ) P.A. NO. AACCT5300M APPELLANT BY SHRI VIJAY MEHTA & ANUJ KISNADWALA ( A R) REVENUE BY SHRI JASBIR S. CHAUHAN ( CIT - DR) / DATE OF HEARING: 01/11/2016 / DATE OF ORDER: 30/11/2016 / O R D E R TTI TEAM TELECOM. I. LTD. 2 PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THESE APPEALS PERTAIN TO SAME ASSESSEE INVOLVING IDENTICAL ISSUE FILED AGAINST SEPARATE ORDERS PASSE D BY THE COMMISSIONER OF INCOME TAX (APPEALS) FOR DIFFERENT YEARS. THEREFORE, THESE WERE HEARD TOGETHER AND BEING DISP OSED BY THIS COMMON ORDER. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI VIJAY MEHTA & ANUJ KISNADWALA, AUTHORISED REPRESENTATIVES (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI JASBIR S. CHAUHAN, DEPARTMENTAL REPRESENTATIVE (CIT -DR) ON BEHALF OF THE REVENUE. FIRST WE SHALL TAKE ASSESSEES APPEAL IN ITA NO.2763/MUM/2012 FOR A.Y. 2008-09 FILED ON THE FOLLOWING GROUNDS : I . GROUND NO. I - TAXABILITY OF SOFTWARE SUPPLY A S ROYALTY INSTEAD OF BUSINESS INCOME. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER OF DISREGAR DING THE APPELLANTS SUBMISSION AND IN HOLDING THAT THE CONSIDERATION FOR THE SUPPLY OF SOFTWARE BE TAXED @ 10% BY TREATING IT AS ROYALTY PAYMENT, WITHIN THE MEANI NG OF SECTION 9(1)(VI) OF INCOME TAX ACT 1961 AND ARTICLE 12 OF DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA & ISRAEL. 1.2. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT CONTENDS THAT EVEN IF THE CONSIDERATION RECEIVED FOR THE SUP PLY OF SOFTWARE ARE TREATED AS ROYALTY UNDER THE ACT, THE SAME CANNOT BE TREATED AS ROYALTY WITHIN THE MEANING OF ARTICLE 12 OF DTAA BETWEEN INDIA & ISRAEL. 1.3. THE APPELLANT CONTENDS THAT THE INCOME FROM SOFTWARE SUPPLY IS IN THE NATURE OF BUSINESS INCOME AND IN THE ABSENCE OF THE APPELLANT CONSTITUTING PERMAN ENT TTI TEAM TELECOM. I. LTD. 3 ESTABLISHMENT (PE) IN INDIA IN RESPECT OF SUCH INCO ME; IT IS NOT TAXABLE IN INDIA. 1.4. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT CONTENDS THAT EVEN IF SUCH INCOME IS TO BE REGARDED AS TAXABLE IN INDIA THE SAME WOULD BE TAXABLE ONLY IN THE YEAR OF RECEIPT AS PER ARTICLE 12(2) READ WITH ARTI CLE 12(1) AND 12(3) OF THE DTAA. 1.5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWI NG THE FAVORABLE DECISIONS OF THE HONORABLE TRIBUNAL IN TH E APPELLANT'S OWN CASE FOR A.Y. 2003-04 AND A.Y. 2006 -07 BY HOLDING THAT NEW FACTS HAVE COME TO LIGHT DURING THE YEAR UNDER CONSIDERATION. IN DOING SO, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE FACTS BEFORE THE LEARNED CIT(A) ARE SAME AS THE FACTS BEFORE THE HONORABLE T RIBUNAL IN THE EARLIER YEARS. 1.6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THA T THE APPELLANT HAS NOT SUPPLIED THE SOFTWARE TO KNOWN CL IENT IN OVERSEAS MARKET DISREGARDING THE SUBMISSION MADE BY THE APPELLANT IN THIS REGARD. 1.7. IN VIEW OF THE ABOVE, THE APPELLANT RESPECTFUL LY PRAYS THAT THE CONSIDERATION RECEIVED BY THE APPELLANT FR OM SUPPLY OF SOFTWARE BE TREATED AS BUSINESS INCOME AN D HELD TO BE NOT TAXABLE IN INDIA IN ABSENCE OF THE APPELLANT'S PE IN INDIA. II . GROUND NO. II - INDIAN SUBSIDIARY CONSIDERED AS PE OF THE APPELLANT 2.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER OF HOLDING TTI TEAM TELECOM SOFTWARE PVT. LTD. ('TTI INDIA') TO BE A DE PENDENT AGENT PE OF THE APPELLANT COMPANY IN INDIA WITHOUT APPRECIATING THE FACT THAT THE PROVISIONS OF THE DT AA ARE NOT FULFILLED. 2.2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) HAS ERRED CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER OF HOLDING THE AGREEMENTS BETWEEN THE APPELLANT AND RELIANCE COMMUNICATION LIMITED (RCL); AGREEMENT BETWEEN RCL AND TTI INDIA AND AGREEMENT BETWEEN TTI INDIA AND THE APPELLANT TO BE TTI TEAM TELECOM. I. LTD. 4 INTERCONNECTED WITHOUT APPRECIATING THE FACT THAT T HE SAME ARE INDEPENDENT IN NATURE AND ARE ENTERED INTO AT D IFFERENT DATES AND ON PRINCIPAL TO PRINCIPAL BASIS. 2.3. THE APPELLANT CONTENDS THAT ON FACTS THE LEARN ED CIT(A) HAS ERRED IN WRONGLY INTERPRETING THE FACTS AND AGREEMENTS AND DRAWN ERRONEOUS CONCLUSION. 2.4. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT FURTHER CONTENDS THAT LEARNED CIT(A) HAS ERRED IN APPLYING THE RULING OF THE DELHI HIGH COURT IN CASE OF ROLLS ROY CE PLC TO THE APPELLANTS CASE AND HOLDING THAT TTI INDIA CONSTITUTES A DEPENDENT AGENT PE OF THE APPELLANT. THE APPELLANT CONTENDS THAT THE FACTS OF THE APPELLANT' S CASE ARE NOT IDENTICAL TO ROLLS ROYCE PLC AND HENCE TTI INDIA DOES NOT CONSTITUTE DEPENDENT AGENT PE OF THE APPEL LANT COMPANY. 2.5. IN VIEW OF THE ABOVE, THE APPELLANT RESPECTFUL LY PRAYS THAT TTI INDIA BE HELD TO NOT CONSTITUTE THE APPELL ANTS PE IN INDIA. III. GROUND NO. III - REIMBURSEMENT OF EXPENSES CONSIDERED AS FEES FOR TECHNICAL SERVICES (FTS) TAXABLE AS BUSINESS INCOME CONSEQUENT TO HOLDING THAT INDIAN SUBSIDIARY IS A PE OF THE APPELLANT. 3.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER OF HOLDING THE REIMBURSEMENT OF EXPENSES AS FTS UNDER ARTICLE 13 O F INDIA - ISRAEL DTAA. 3.2. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT CONTENDS THAT EVEN IF THE REIMBURSEMENTS ARE TREATED AS FTS UNDER THE ACT, THE SAME CANNOT BE TREATED AS FTS WITHIN T HE MEANING OF ARTICLE 13 OF THE INDIA - ISRAEL DTAA RE AD WITH PROTOCOL TO THE INDIA-ISRAEL DTAA AND ARTICLE 12 OF INDIA- CANADA DTAA, SINCE SUCH REIMBURSEMENTS NEITHER MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKI LL, ETC NOR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR A TECHNICAL DESIGN. 3.3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CI T(A) HAS FURTHER ERRED IN CONFIRMING THE ACTION OF THE L EARNED ASSESSING OFFICER OF HOLDING THAT THESE PAYMENTS WO ULD BE CONSIDERED AS FTS UNDER ARTICLE 13 OF INDIA - ISRAE L DTAA TTI TEAM TELECOM. I. LTD. 5 AND CONSEQUENTLY, TTI INDIA BEING PE OF THE APPELLA NT IN INDIA, PAYMENT WOULD BE CONSIDERED AS BUSINESS INCO ME UNDER ARTICLE 7 READ WITH ARTICLE 13(4) OF INDIA - ISRAEL DTAA AND TAXED @ 42.23%. 3.4. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT CONTENDS THAT EVEN IF THE SAID AMOUNT IS TAXABLE IN INDIA AS BUSINESS PROFIT THEN THE EXECUTIVE AND GENERAL ADMINISTRATIVE EXPENSES INCURRED FOR EARNING THIS I NCOME IS TO BE ALLOWED AS A DEDUCTION IN ARRIVING AT THE TAXABLE INCOME. 3.5. THE APPELLANT CONTENDS THAT LEARNED CIT(A) HAS ALLOWED DEDUCTION OF TRAVELING EXPENSES OF INR 73,3 5,088 AND NOT SALARY EXPENSES OF INR 81,19,009 AND ONCE T HE SALARY EXPENSES OF INR 81,19,009 ARE ALLOWED AS DEDUCTION THE INCOME WILL BE NIL AND HENCE NO TAX L IABILITY. 3.6. IN VIEW OF THE ABOVE, THE APPELLANT RESPECTFUL LY PRAYS THAT THE CONSIDERATION RECEIVED FROM TTI INDIA BY T HE APPELLANT BE TREATED AS REIMBURSEMENT OF EXPENSES A ND NOT FTS. IV. GROUND NO. IV - INCORRECT ADDITION OF INCOME OF EARLIER YEARS 4.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING T HE LEARNED ASSESSING OFFICER TO VERIFY THE TAXABILITY OF THE REIMBURSEMENT OF EXPENSES, PERTAINING TO F.Y. 2003- 04 & 2005-06 RECEIVED IN THE YEAR UNDER CONSIDERATION, A S TAXABLE IN INDIA AS FTS ON CASH BASIS, DISREGARDING THE SUBMISSION MADE TO THE CIT(A) IN THIS REGARD. 4.2. THE LEARNED CIT(A) HAS DISREGARDED THE FACT TH AT THESE AMOUNTS HAVE ALREADY BEEN HELD AS TAXABLE ON ACCRUA L BASIS IN THE COURSE OF THE ASSESSMENT PROCEEDINGS I N THE RESPECTIVE YEARS AND SUBSEQUENTLY DELETED IN THE AP PEAL. 4.3. IN VIEW OF THE ABOVE, THE APPELLANT RESPECTFUL LY PRAYS THAT THE DOUBLE TAXATION OF THE REIMBURSEMENT OF EXPENSES, PERTAINING TO F.Y. 2003-04 & 2005-06, IN THE YEAR UNDER CONSIDERATION BE DELETED. V. GROUND NO. V - NO CREDIT OF TAX DEDUCTED AT SOURCE 5.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING T HE LEARNED ASSESSING OFFICER TO VERIFY THE CREDIT FOR THE TAXES DEDUCTED ON THE AMOUNTS RECEIVED TOWARDS SUPP LY TTI TEAM TELECOM. I. LTD. 6 OF SOFTWARE & REIMBURSEMENT OF EXPENSES WHILE COMPUTING THE TAX LIABILITY, DISREGARDING THE SUBMI SSION MADE TO THE CIT(A) IN THIS REGARD. 5.2. IT IS SUBMITTED BY THE APPELLANT THAT WHILE CO MPUTING THE TOTAL LIABILITY OF THE ASSESSMENT YEAR IN WHICH THE INCOME IS SOUGHT TO BE TAXED U/S 199, CREDIT FOR TH E TAXES DEDUCTED HAVE TO BE GIVEN. 5.3.IN VIEW OF THE ABOVE, THE APPELLANT RESPECTFULL Y PRAYS THAT THE CREDIT FOR THE TAXES DEDUCTED ON THE AMOUN TS RECEIVED TOWARDS SUPPLY OF SOFTWARE & REIMBURSEMENT OF EXPENSES BE GRANTED IN THE YEAR UNDER CONSIDERATION. VI. GROUND NO. VI - LEVY OF INTEREST UNDER SECTION 234B 6.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT, IN HOL DING THAT LEVY OF INTEREST UNDER SECTION 234B OF THE ACT IS CONSEQUENTIAL TO THE GRANT OF TAX CREDIT, DISREGARD ING THE FACT THAT THE APPELLANT IS A NON-RESIDENT APPELLANT AND ITS ENTIRE REVENUES/ RECEIPTS ARE SUBJECT TO TAX WI THHOLDING IN INDIA UNDER SECTION 195 OF THE ACT AND THE APPEL LANT IS NOT LIABLE TO PAY ADVANCE TAX IN RESPECT OF SUCH REVENUES. 6.2. THE APPELLANT RESPECTFULLY SUBMITS THAT, AS PE R THE PROVISIONS OF THE ACT, THE INTEREST UNDER SECTION 2 34B OF THE ACT IS NOT LEVIABLE AND THE LEARNED CIT(A) BE DIRECTED TO DELETE THE INTEREST LEVIED UNDER SECTIO N 234B. 3. DURING THE COURSE OF HEARING, LD. COUNSEL OF THE A SSESSEE DID NOT PRESS GROUND NO.4 & 5 AND THEREFORE THESE A RE DISMISSED AS NOT PRESSED. 4. GROUND NO.1: IT WAS STATED BY THE LD. COUNSEL DURING COURSE OF HEARING THAT ONLY GROUND NO.1.1 IS THE EF FECTIVE GROUND AND OTHERS SUB GROUNDS ARE SUPPORTING ARGUME NTS ONLY. IN THESE GROUNDS THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN HOL DING THAT THE CONSIDERATION FOR SUPPLY OF SOFTWARE SHOULD BE TAXE D @ 10% BY TREATING IT AS PAYMENT OF ROYALTY WITHIN THE MEAN ING OF SECTION TTI TEAM TELECOM. I. LTD. 7 9(1)(VI) OF THE ACT, AS WELL AS ARTICLE 12 OF DOUBL E TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA & ISRAEL. 4.1. DURING THE COURSE OF HEARING, IT WAS ARGUED BY THE LD. COUNSEL AT THE OUTSET THAT THE ISSUE INVOLVED IN TH IS CASE IS PERCOLATING DOWN FROM THE ASSESSMENT YEAR 2003-04 O NWARDS, AND THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR O F THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.YS. 2003- 04, 2005-06, 2006-07 & 2007-08 AND HE PLACED BEFORE US DETAILED ORDERS PASSED BY THE TRIBUNAL IN A.YRS. 20 03-04 & 2006-07 AND SUBMITTED THAT THE ISSUE STANDS COVERED AND LD. CIT(A) HAS GROSSLY ERRED IN REFUSING TO FOLLOW THE JUDGMENT OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS DESPITE THE FACT THAT THERE WAS NO CHANGE IN MATERI AL FACTS, AND HE REQUESTED THE BENCH TO FOLLOW THE ORDERS OF THE EARLIER YEARS. 4.2. PER CONTRA, LD. DR SUBMITTED THAT THE AMENDED AGREEMENT WAS PASSED DURING THE YEAR UNDER CONSIDER ATION BRINGING AN AMENDMENT TO THE BASE AGREEMENT WHICH W AS PASSED IN THE PERIOD RELEVANT TO A.Y. 2003-04 AND F URTHER THERE HAS BEEN JUDGMENTS FROM HONBLE KARNATAKA HI GH COURT IN THE CASE OF CIT V. SAMSUNG ELECTRONICS CO. LTD. 345 ITR 494 AND IN THE CASE OF CIT V. SYNOPSIS INTERNATIONAL OL D LTD. 212 TAXMAN 454 WHICH ARE AGAINST THE ASSESSEE ON THIS I SSUE, THEREFORE, LD. CIT(A) HAS RIGHTLY REFUSED TO FOLLOW THE EARLIER DECISIONS OF THE TRIBUNAL. 4.3. IN REJOINDER, THE LD. COUNSEL SUBMITTED THAT THE B ASE AGREEMENT REMAINED THE SAME, AND THE AMENDMENT AGRE EMENT WAS ONLY TO ACCOMMODATE UP-GRADATION IN MOBILE TECH NOLOGY, TTI TEAM TELECOM. I. LTD. 8 BUT OTHER MATERIAL TERMS AND CONDITIONS REMAINED TH E SAME. FURTHER, THERE HAS BEEN POSITIVE LEGAL DEVELOPMENT IN FAVOUR OF THE ASSESSEE ON THIS ISSUE FROM VARIOUS OTHER HIGH COURTS. IN HIS SUPPORT, HE RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF DIT V. NEW SKIES SATELLITE BV 383 ITR 114 (DEL). IT WAS REQUESTED THAT UNDER THESE CIRCUMSTAN CES, THE HONBLE BENCH SHOULD FOLLOW THE DECISION OF THE TRI BUNAL RENDERED IN ASSESSEES OWN CASE IN ALL THE EARLIER YEARS. 4.4. UNDER THESE CIRCUMSTANCES, BEFORE DECIDING THIS IS SUE INDEPENDENTLY ON MERITS, WE SHALL EXAMINE THE PRIMA RY ASPECT THAT WHETHER JUDGMENTS DELIVERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS WERE PASSED IN IDENTICAL FACTS AND LEGAL POSITION AS COMPARED TO THE YEAR BE FORE US. IF THE ANSWER TO THIS QUESTION IS YES, THEN, WE SHALL LIKE TO RESPECTFULLY FOLLOW THE DECISION OF THE TRIBUNAL RE NDERED IN EARLIER YEARS IN ASSESSEES OWN CASE. IF THE ANSWER TO THAT QUESTION WOULD BE NO, ONLY THEN AN EFFORT COULD BE MADE TO DECIDE THE ISSUE RAISED BEFORE US INDEPENDENTLY ON ITS MERITS. WE HAD ALSO EXPRESSED OUR VIEW IN THE OPEN COURT DU RING THE COURSE OF HEARING. THUS, WITH THIS UNDERSTANDING, W E PROCEED TO ANALYSE THE FACTS AS HAVE BEEN BROUGHT OUT BY BO TH THE PARTIES BEFORE US. 4.5. THE FACTS AS CULLED OUT FORM THE ASSESSMENT ORDER REVEALS THAT THE ASSESSEE COMPANY I.E. TTI TEAM TELECOM INT ERNATIONAL LTD. IS A COMPANY INCORPORATED IN ISRAEL AND ENGAGE D IN THE BUSINESS OF SUPPLY OF SOFTWARE. FURTHER FACTS NOTED BY AO IN THE ASSESSMENT ORDER ARE AS UNDER: DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMEN T YEAR 2003-04, THE ASSESSEE COMPANY HAD ENTERED INTO TTI TEAM TELECOM. I. LTD. 9 AN AGREEMENT FOR SUPPLY OF SOFTWARE WITH RELIANCE INFOCOMM LTD. (RIL), NOW MERGED WITH RELIANCE COMMUNICATIONS LTD (RELIANCE). DURING THE PREVIOUS YEAR RELEVANT TO AY 2008-09, THE ASSESSEE COMPANY HAD ENTERED INTO ANOTHER AGREEMENT ON 17 TH SEP. 2007 WHEREIN THE SCOPE WAS EXTENDED FOR SUPPLY OF ADDITIONAL SOFTWARE. THE CONSIDERATION FOR THIS WAS USD 1,810,433. OUT OF THE SAID AMOUNT INVOICES TO THE E XTENT OF USI) 1,084839 WAS RAISED BY THE ASSESSEE COMPANY . DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY WAS ALSO ENGAGED IN RENDERING TECHNICAL/CONSULTANCY SERVICES THROUGH ITS EMPLOYEE OUTSIDE INDIA TO TTI TEAM TELECOM SOFTWARE PRIVATE LTD., IT'S WHOLLY OWNED SUBSIDIARY. THE ASSESSEE CONTENDS THAT IT HAD INCUR RED A SUM OF RS.81 LACS TOWARDS COST OF ITS' EMPLOYEES AND RS: 73 LACS TOWARDS TRAVELLING EXPENSES WHICH HAS BEEN CLAIMED BACK AS REIMBURSEMENT. THE ASSESSEE HAS NOT OFFERED TO TAX THE SAID AMOUNT. ALSO IT MAINTAINS T HAT REFUND OF THE TAX DEDUCTED (RS.15.73 LACS) WILL BE CLAIMED IN THE YEAR OF RECEIPT. ON SIMILAR STAND TAKEN IN PAST YEARS THE ASSESSEE H AS CLAIMED REFUND OF TDS ON THE ALLEGED REIMBURSEMENT OF RS 1.72 CRORES PERTAINING TO FY 2003-04, 2004-05 AN D 2005-06. 6. IN THE EARLIER YEARS THE RECEIPTS OF THE ASSESSE E ON ACCOUNT OF SUPPLY OF SOFTWARE WAS TREATED AS ROYALT Y INCOME BY THE ASSESSING OFFICER IN AY 2003-04 AND A Y 2006-07. THE ASSESSEE MAINTAINS THAT THE SUPPLY OF SOFTWARE IS LIKE SUPPLY OF OTHER PRODUCT AND NOT ASSESSABLE TO TAX IN INDIA. THIS VIEW OF THE ASSESS EE WAS ACCEPTED BY THE HON'BLE ITAT IN AY 2003-04 AND CIT(A) IN AY 2006-07. 4.6. HAVING NOTED THIS BACKGROUND, IT WAS OBSERVED BY T HE AO THAT THERE WERE SOME NEW FACTS IN THE YEAR BEFORE U S. THE ANALYSIS MADE BY THE AO OF THE ALLEGED NEW FACTS AN D IMPLICATION OF THE SAME FOR DECIDING THESE ISSUES A S NOTED BY AO IN THE ASSESSMENT ORDER ARE REPRODUCED AS UNDER: 7. CERTAIN NEW FACTS HAVE COME TO LIGHT DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE CURRENT YE AR TTI TEAM TELECOM. I. LTD. 10 I.E. AL 2008-09 WHICH WERE NOT PRESENTED BEFORE THE ASSESSING OFFICER IN THE PAST YEARS. BASED ON THESE FACTS THE UNDERSTANDING OF THE CASE NEEDS REVISION AND THE FINDINGS OF THE HON'BLE ITAT AND LD. CIT(A) FOR THE EARLIER YEARS WILL NOT APPLY. A. THE ASSESSEE COMPANY ENTERED INTO A SOFTWARE SUPPLY & LICENSE AGREEMENT (SSLA) WITH RELIANCE INFOCOM LT D. (RELIANCE/RJL) ON 27.09.2002 FOR SUPPLY OF SOFTWARE, ACCEPTANCE TESTING, INSTALLATION AND ARRANGEMENTS FOR ANNUAL MAINTENANCE (ANNEXURE A) B. IN THE YEAR UNDER CONSIDERATION AN AMENDMENT TO THE SOFTWARE SUPPLY & LICENSE AGREEMENT (SSLA) WAS MADE ON 17.09.2007. C. THE AGREEMENT ALSO ENVISAGED TRANSFER OF SOURCE COD E OF THE SOFTWARE TO BE TRANSFERRED TO RELIANCE THROU GH AN ESCROW. D. THE ASSESSEE AFTER ENTERING INTO THE SAID AGREEMENT WITH RIL SET UP AN INDIAN SUBSIDIARY (RRI INDIA) ON 20.02.2003 AND ENTERED INTO A SERVICE AGREEMENT WIT H THE SAME ON 23.02.2003. (ANNEXURE B) E. SUBSEQUENTLY TTI INDIA ENTERED INTO AN AGREEMENT WITH RIL ON 28.05.2003 FOR PROVIDING SERVICES SUCH AS INSTALLATION, ACCEPTANCE TESTING (UAT), COMMISSIONING AND ANNUAL MAINTENANCE, WHICH OTHERWISE, WAS AN OBLIGATION OF THE ASSESSEE. (ANNEXURE C) F. THE ASSESSEE WAS ALSO A GUARANTOR IN THE SERVICE CONTRACT BETWEEN ITI INDIA AND RIL (CLAUSE 18 AND ANNEXURE F OF AGREEMENT DATED 28.05.2003 - ANNEXURE B) G. TTI INDIA IS THE ONLY COMPANY IN THE COUNTRY TO WIT H WHICH THE ASSESSEE HAS ENTERED INTO A SERVICE CONTR ACT AND WHICH IS CAPABLE OF PROVIDING SERVICES WITH RES PECT TO TELECOM SOFTWARE PURCHASED BY RIL. H. THE ONLY SOURCE OF REVENUE FOR 'ITI INDIA IS THE SE RVICE CONTRACT WITH RIL WHICH HAS BEEN GUARANTEED BY THE ASSESSEE. REVENUE'S STAND 8. BASED ON THE NEW FACTS FOUND DURING THE COURSE O F ASSESSMENT PROCEEDINGS, MOST OF WHICH WERE NOT BROU GHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER IN THE EA RLIER TTI TEAM TELECOM. I. LTD. 11 YEARS, IT IS THE CASE OF REVENUE THAT THE INDIAN SU BSIDIARY IS A DEPENDENT AGENT OF THE ASSESSEE COMPANY. THE INDI AN SUBSIDIARY OF THE ASSESSEE HAS UNDERTAKEN THE OBLIGATIONS WHICH WERE, OTHERWISE, A CONTRACTUAL RESPONSIBILITY OF THE ASSESSEE. THE CONTRACT BETWEE N ITI INDIA AND RIL WAS NOT DONE ON A PRINCIPAL TO PRINCI PAL BASIS. TI'I INDIA, IN CONCLUDING THE CONTRACT WITH R1L, ACTED AS AN AGENT AND REPRESENTATIVE OF THE ASSESSEE COMP ANY. THEREFORE TTI INDIA IS BUT A PE OF THE ASSESSEE. 9. IT IS ALSO CONTESTED BY THE REVENUE THAT SINCE S OURCE CODE OF THE SOFTWARE WAS TRANSFERRED TO THE BUYER, AS A NECESSARY CONDITION FOR THE SAID SUPPLY OF SOFTWARE , THERE IS A DEFINITE TRANSFER OF PROPRIETARY MATERIAL FROM THE ASSESSEE TO THE CLIENT. THE SPECIALIZED PRODUCT WAS DEVELOPED IN TANDEM WITH THE REQUIREMENTS AND FEEDBACK OF THE CLIENT (RELIANCE) AS IS ALSO ILLUST RATED BY THE UAT PROCESS. THE SOFTWARE SUPPLIED BY THE ASSES SEE WAS NOT A 'CANNED SOFTWARE' (NOT SPECIFICALLY CREAT ED FOR A PARTICULAR CONSUMER). IT DOES NOT HAVE A MARKET, EX CEPT A SELECT FEW CDMA TELECOM SERVICE PROVIDER ALL OVER T HE WORLD. THERE ARE NO KNOWN CLIENTS OF THE SAME SOFTWARE, EI THER IN INDIA OR OUTSIDE. ALL THE ABOVE FACTS ON TO STRE NGTHEN REVENUE'S CLAIM THAT THE RECEIPT FOR SUPPLY OF SOFT WARE THROUGH THE SSLA AND ITS SUBSEQUENT AMENDMENT IN TH E PREVIOUS YEAR CORRESPONDING TO THE ASSESSMENT YEAR UNDER CONSIDERATION IN A RECEIPTS IN THE NATURE OF ROYALT Y. 4.7. THEREAFTER, LD. AO MADE ANALYSIS OF VARIOUS CLAUSE S OF THE AGREEMENT AND TOOK NOTE OF A CLAUSE WITH REGARD TO TRANSFER OF SOURCE CODE OF THE SOFTWARE BY THE ASSESSEE TO M/S. RELIANCE COMMUNICATION LTD. (I.E. THE BUYER) AND HELD THAT T HE AMOUNT RECEIVED BY THE ASSESSEE FROM RELIANCE AMOUNTED TO PAYMENT FOR ROYALTY UNDER THE PROVISIONS OF ACT AS WELL A S ARTICLE 12 OF THE INDO ISRAEL DTAA, BY OBSERVING, INTER ALIA, AS UNDER: 38. THE INCOME TAX ACT, 1961 RECOGNIZES ROYALTY IN EXPLANATION 2 TO SECTION 9(1)(VI) AS TRANSFER OF AL L OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENSE). THE F ACT THAT LICENSE OF COMPUTER PROGRAMS SUPPLIED ALONG WITH COMPUTER UNDER SPECIFIED SCHEMES OF GOVERNMENT OF I NDIA TTI TEAM TELECOM. I. LTD. 12 ARE EXCLUDED FROM THE DEFINITION OF ROYALTY FURTHER ESTABLISHES THAT OTHER SOFTWARE LICENSES ARE INCLUD ED IN ROYALTY FOR THE PURPOSES OF SECTION 9. 39. RELIANCE DID NOT ONLY HAVE RIGHTS OVER THE MACH INE CODE I.E. THE BINARY FORMAT, BUT ALSO THE SOURCE CODE DEVELOPED BY THE ASSESSEE. THE CONTENTION OF THE ASSESSEE THAT IT HAS PURCHASED AN OFF-THE-SHELF PRO DUCT IS CONCLUSIVELY PROVED TO BE FALSE. SOURCE CODE IS THE INTELLECTUAL PROPERTY GENERATED BY THE ASSESSEE. IT IS A MATTER OF PUBLIC KNOWLEDGE THAT ONLY MACHINE CODE (OR EXECUTABLE COPY) IS TRANSFERRED/SOLD FOR USE OF SOFTWARE. SUCH COPY CAN NEVER BE READ, MODIFIED OR UNDERSTOOD IN ANY MANNER BY THE END USER. EXECUTABL E COPIES OF COMPUTER APPLICATION ARE LIKE MONOLITHIC BLACK BOXES WHICH CAN BE PUT TO USE BUT CANNOT BE UNDERST OOD OR MODIFIED UPON IN ANY WAY. THE FACT THAT ASSESSEE NOT ONLY PARTAKES WITH AN EXECUTABLE COPY BUT ALSO PARTAKES AWAY WITH THE SOURCE CODE (WHICH IS THE VERY CREATION OF PROGRAMMERS & DEVELOPERS) CLEARLY ESTABLISHES THAT THE INTELLECTUAL PROPERTY OF THE SOFTWARE SO DEVELOPED HAD ALSO BEEN EXPLICITLY TRANSFERRED TO RELIANCE THROUGH THE AGREEMENT. 40. INTERESTINGLY IT MAY BE NOTED THAT UNLIKE CLAUSE 2. 1 OF THE SSLA, WHICH SPEAKS OF THE TRANSFER OF SOFTWA RE BEING 'ROYALTY-FREE' THE TRANSFER OF SOURCE CODE IS NOT STATED TO BE ROYALTY FREE. THIS ALONE ESTABLISHED T HAT THE TRANSFER OF SOURCE CODE CANNOT BE SAID TO BE A 'ROY ALTY-FREE' AFFAIR. 41. TRANSFER OF SOURCE CODE WOULD AUTOMATICALL Y IMPLY TRANSFER OF EXECUTABLE PROGRAM. THE CONVERSE IS HOW EVER NOT TRUE. GIVEN THE SOURCE CODE THE ASSESSEE IS MER ELY REQUIRED TO COMPILE THE SAME INTO EXECUTABLE PROGRA MS WITH PUBLICALLY AVAILABLE SPECIALIZED COMPUTER PROG RAMS KNOWN AS 'COMPILERS'. HENCE SOURCE CODE IS INTRINSI CALLY MUCH MORE VALUABLE THAN THE BINARY EXECUTABLE GENERATED FROM THE SAME. 42. THE SALE CONSIDERATION, AS RECORDED IN THE SSLA , CONSISTS OF CONSIDERATION FOR TRANSFER OF INTELLECT UAL PROPERTY, COPY RIGHTED MATERIAL, CONDUCTION OF UAT, SUCCESSFUL INSTALLATION AND ASSURANCE OF ANNUAL MAINTENANCE. THE CONSIDERATION CANNOT BE DIVIDED IN TO TWO PARTS - ONE PART GIVEN FOR THE SOURCE CODE AND THE OTHER FOR TTI TEAM TELECOM. I. LTD. 13 THE EXECUTABLE. THE ONE WHO HAS THE SOURCE CODE CAN ALWAYS GENERATE THE EXECUTABLE MACHINE CODE AT WILL . NOT MUCH VALUE IS ADDED BY TRANSFER OF BINARY EXECUTABL E ONCE THE SOURCE CODE HAS ALREADY BEEN TRANSFERRED. THE ASSESSEE HAS MISLED THE DEPARTMENT BY CLAIMING THE SAME TO BE SALE CONSIDERATION IN LIEU OF TRANSFER OF GOO DS. WITH THE SOURCE CODE AND MACHINE CODE IN HAND THE ASSESSEE IS REQUIRED TO INSTALL THE SAME AND RUN THE USER ACCEP TANCE TESTS BEFORE IT CAN BE PUT TO COMMERCIAL USE. 43. IN VIEW OF THE ABOVE FACTS IT IS HELD THAT WHER E THE ASSESSEE HAS DEVELOPED AND SUPPLIED SOFTWARE, ALONG WITH THE SOURCE CODE, TO THE CLIENT THE CONSIDERATION RE CEIVED IS IN THE NATURE OF ROYALTY AND NOT FOR SALE OF GOODS. TH IS IS ESPECIALLY TRUE WHERE THE SOFTWARE HAS NO AVAILABLE MARKET OR ANOTHER KNOWN CLIENT IN THE COUNTRY OR ELSEWHERE. 44. THE INCOME FROM THE PURPORTED SALE OF GOOD HAS BEEN TREATED BY THE ASSESSING OFFICER IN THE PAST AS ROY ALTY INCOME IN AY 2003-04 ONWARDS. THERE HAVE BEEN NEW FINDINGS-NAMELY THE TERMS & CONDITIONS OF THE SSLA, THE ESCROW AGREEMENT FOR TRANSFER OF SOURCE CODE, AND T HE AGREEMENT BETWEEN RELIANCE & INDIAN SUBSIDIARY TTI INDIA ON THE GUARANTEE OF THE ASSESSEE. THESE NEW FINDING S CLEARLY EXPLICATE THE NATURE OF PAYMENT RECEIVED BY THE ASSESSEE. IT IS A MISCHIEF OF HIGHEST DEGREE ON THE PART OF THE ASSESSEE TO COLOR THE PAYMENTS RECEIVED FOR SUP PLY OF SOFTWARE AND ITS PROPRIETARY SOURCE CODE AS 'SALE O F GOODS'. 45. IT IS CONCLUSIVE THAT WHAT HAS BEEN PORTRAYED A S AN INNOCUOUS SALE OF GOODS IS IN FACT A TRANSFER OF IN TELLECTUAL PROPERTY AND SQUARELY COVERED AS ROYALTY. THE SAME IS TAXABLE UNDER ARTICLE 12 OF THE DTAA AT THE PRESCRI BED RATE OF 10%. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ARE INITIATED SEPARATELY FOR F URNISHING INACCURATE PARTICULARS OF INCOME. 4.8. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) AND SUBMITTED IN DETAIL THAT THERE WAS N O MATERIAL CHANGE IN FACT OR LEGAL POSITION. IT WAS ALSO ARGUE D THAT LD. CIT(A) WAS BOUND BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE OF EARLIER YEARS. BUT, LD. CIT(A) ENDORSED THE TTI TEAM TELECOM. I. LTD. 14 OBSERVATIONS OF THE AO RELYING UPON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF SAMSUNG ELECTRO NICS CO. LTD. (SUPRA). AFTER ANALYZING VARIOUS CLAUSES OF TH E AGREEMENTS AND VARIOUS JUDGMENTS AVAILABLE BEFORE HIM AT THE T IME OF PASSING OF THE ORDER, HE INDEPENDENTLY ANALYSED THE ISSUE AND CHOSE NOT TO FOLLOW THE ORDER OF THE TRIBUNAL IN AS SESSEES OWN CASE IN EARLIER YEARS AND DECIDED THIS ISSUE RAISED BY THE ASSESSEE INDEPENDENTLY ON FACTS. THE CRUX OF THE RE ASONING GIVEN BY THE LD. CIT(A) WAS THAT THE TERMS OF THE A GREEMENT ENTERED INTO BY THE ASSESSEE WITH RELIANCE INDICATE D THAT RIGHT IN COPYRIGHT OF THE SOFTWARE WAS TRANSFERRED BY THE ASSESSEE TO RELIANCE AND THEREFORE, PAYMENT FOR THE SAME FELL I NTO THE DEFINITION OF ROYALTY AS ENVISAGED UNDER THE ACT AS WELL AS TREATY. 4.9. STILL BEING AGGRIEVED, THE ASSESSEE FILED BEFORE T HE TRIBUNAL. DURING THE COURSE OF HEARING BEFORE US, L D. COUNSEL OF THE ASSESSEE SUBMITTED THAT THERE WAS NO CHANGE IN FACTS. IN SUPPORT OF HIS ARGUMENTS, HE DREW OUR ATTENTION ON THE AMENDED AGREEMENT DATED 17 TH SEPTEMBER, 2007 AND COMPARED IT WITH ORIGINAL AGREEMENT DATED 27 TH SEPTEMBER, 2002 TO DEMONSTRATE THAT THERE WAS NO MATERIAL CHAN GE IN THE TERMS AND CONDITIONS AND IN SUBSTANCE, THE AGREEMEN T REMAINS THE SAME., IT WAS FURTHER SUBMITTED THAT TH E LOWER AUTHORITIES WERE INFLUENCED MAINLY BY THE CLAUSE RE LATED TO TRANSFER OF SOURCE CODE. HE SUBMITTED THAT THE SAID CLAUSE SUGGESTED FOR ENTERING INTO ANOTHER ESCROW AGREEMEN T FOR TRANSFER OF SOURCE CODE BY THE ASSESSEE TO RELIANCE IN CERTAIN GIVEN CIRCUMSTANCES. IT WAS ALSO SUBMITTED THAT SOU RCE CODE TTI TEAM TELECOM. I. LTD. 15 WAS NEVER GIVEN TO ESCROW AGENT. OUR ATTENTION WAS DRAWN ON PAGE NO.156 WHICH IS A COPY OF THE DECLARATION SUBM ITTED BY THE ASSESSEE WHEREIN IT HAS BEEN AFFIRMED THAT THE ASSESSEE NEVER ENTERED INTO ANY ESCROW AGREEMENT AND THUS, T HE SOURCE CODE OF THE SOFTWARE UNDER QUESTION WAS NEVER DEPOS ITED WITH THE AGENT FOR THE BENEFIT OF RELIANCE. OUR ATTENTIO N WAS DRAWN ON COPIES OF THE JUDGMENTS OF THE TRIBUNAL PASSED I N ASSESSEES OWN CASE FOR A.Y. 2003-04 AND 2006-07 WH EREIN SAME AGREEMENT HAS BEEN CONSIDERED IN DETAIL BY THE TRIBUNAL BEFORE ISSUING DECISION IN FAVOUR OF THE ASSESSEE. HE ALSO RELIED UPON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL I N THE CASE OF DDIT V. RELIANCE INDUSTRIES LTD. (ORDER DAT ED 18.05.2016 IN ITA NO.1980/MUM/2008) WHEREIN SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. 4.10. PER CONTRA, LD. CIT-DR SUBMITTED IN DETAIL THAT LO WER AUTHORITIES HAVE NOT FOLLOWED THE DECISIONS OF EARL IER YEAR FOR THE REASONS MENTIONED IN DETAIL IN THEIR ORDERS BY THE AO AS WELL AS LD. CIT(A). HE SUBMITTED THAT IN THIS CASE MATERIAL CHANGE IN FACT WAS THAT THE NEW AGREEMENT CONTAINED CLAUSE WITH REGARD TO TRANSFER OF SOURCE CODE. IT WAS SUBM ITTED THAT SINCE SOURCE CODE WAS AGREED TO BE TRANSFERRED, THE REFORE IT IS CLEAR CASE OF TRANSFER OF COPYRIGHT. HE SUBMITTED A T THE CONCLUSION OF THE HEARING A BRIEF NOTE SUMMARISING HIS SUBMISSIONS AS UNDER: 1. ON THE ISSUE WHETHER THE AMENDMENTS/EXPLANATIONS INSERTED IN THE INCOME TAX ACT CAN BE READ INTO THE DTAA OR NOT, IN MY MOS T RESPECTFUL SUBMISSIONS, THE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT V. SIEMENS AKTIONGESELLSCHAFT, 310 ITR 320) (BORN HC) RENDERED TTI TEAM TELECOM. I. LTD. 16 IN THE FACTS PECULIAR TO THAT CASE HAS NOT BEEN APPRECIATED IN THE PROPER PERSPECTIVE IN VARIOUS DECISIONS OF THE DELHI HIGH COURT AND MUMBAI TRIBUNAL RELIED UPON BY THE ASSESSEE. WHILE APPRECIATING THE SIEMENS AG, SUPRA, THE FOLLOWING F ACTS MAY KINDLY BE KEPT IN MIND: I. THE EXACT QUESTION OF LAW BEFORE THE HON'BLE HIG H COURT WAS NOT THAT WHETHER AMENDMENTS IN THE I.T. ACT CAN BE READ INTO THE DTAA OR NOT AND THEREFORE, THE HON'BLE HIGH COURT CAN NOT BE SAID TO HAVE ANSWERED IT AS CLAIMED. II. IN THE SAID CASE, OLD DTAA (1960) BETWEEN INDIA AND GERMANY WAS UNDER CONSIDERATION IN WHICH 'ROYALTY' HAD NOT BEEN DEFINED.( PARA 15). III. 'ROYALTY' UNDER THE I.T. ACT HAS BEEN DEFINED IN EXPLANATION 2 TO S.9(1)(VI), INSERTED BY THE FINANC E ACT 1976 W.E.F 01-06-1976. IV. THE AGREEMENTS UNDER CONSIDERATION IN THE CASE OF SIEMENS AG, SUPRA WHICH GAVE RISE TO THE IMPUGNED INCOME WERE ENTERED INTO BEFORE 01-06-1976 WHEN THERE WAS NO DEFINITION OF 'ROYALTY' BOTH UNDER THE I.T. ACT AND UNDER THE DTAA. THE A.Y. UNDER CONSIDERATIO N IN SIEMENS AG, SUPRA WAS A.Y.1979-80. V. SECTION 9(1) (VI) UPTO AND INCLUDING EXPLANATION 2 ARE SUBSTANTIVE PROVISIONS AS INSERTED BY FINANCE ACT 1976 AND THEREAFTER, EXPLANATION 3 TO 6 AND EXPLANATION BELOW S.9(2) ARE ONLY CLARIFICATORY PRO VISIONS INSERTED SUBSEQUENTLY. VI. FOR THE PURPOSE OF THE PRESENT APPEAL, THE DEFINITION OF 'ROYALTY' AS APPLICABLE HAS BEEN DEFI NED BOTH UNDER THE DTAA AS WELL AS I.T. ACT AND THE ISS UE IS REGARDING THE APPLICATION OF EXPLANATIONS (CLARIFICATORY PROVISIONS) INSERTED IN THE ACT INTO THE DTAA BY VIRTUE OF ARTICLE 3(2) OF THE DTAA. VII. THE SAID DECISION IN THE CASE OF SIEMENS AG, SUPRA WAS RENDERED IN 2008 WHEN THE ONLY CLARIFICATORY PROVISION BY WAY OF EXPLANATION IN SE CTION 9 WAS THE EXPLANATION BELOW S.9(2) INSERTED BY THE FINANCE ACT 2007 DOING AWAY WITH THE REQUIREMENT OF PE FOR ROYALTY ETC. VIII. IN THE CASE OF SIEMENS AG, SUPRA, THE BASIC QUESTION BEFORE THE HON'BLE HC WAS WHETHER THE TTI TEAM TELECOM. I. LTD. 17 DEFINITION OF 'ROYALTY' AS PER EXPLANATION 2 TO S.9 INSERTED BY THE FINANCE ACT 1976 W.E.F. 01-06-1976 COULD BE IMPORTED INTO THE OLD DTAA (1960) WHEN AT THE RELEVANT POINT OF TIME OF APPLICATION OF TREATY , ' ROYALTY' WAS NOT DEFINED BOTH UNDER THE THEN DTAA AND THE I.T. ACT AND WHAT WAS THE CHARACTER OF PAYMENT UNDER THE DTAA. IX. IT IS NOT DISPUTED BY THE REVENUE THAT THE PROVISIONS OF DTAA, IF BENEFICIAL TO THE ASSESSE SH ALL PREVAIL OVER THE PROVISIONS OF THE I.T. ACT. 2.IN MY RESPECTFUL SUBMISSIONS, A PERUSAL OF BOMBAY HC DECISION IN THE CASE OF SIEMENS AG, SUPRA WOULD REVEAL THAT: I. IN THE OPERATIONAL PART (PARAS 27 TO 31) OF THE JUDGMENT IN THE CASE OF SIEMENS AG, SUPRA, NOWHERE IT IS MENTIONED THAT AMENDMENTS IN THE I.T. ACT CAN NOT BE READ INTO DTAA. II. THE NATURE OF SERVICES RENDERED IN THE SAID CAS E WERE FOUND TO BE NOT ROYALTY UNDER THE DTAA THOUGH FOUND TO BE ROYALTY UNDER THE ACT (POST 01-06- 1976). THOSE SERVICES WERE FOUND TO FALL UNDER THE EXPRESSION 'COMMERCIAL OR INDUSTRIAL PROFITS' AS PE R THE THEN DTAA (OLD) AND THEREFORE COULD NOT BE TAXE D IN INDIA IN ABSENCE OF PE. THUS, THE PROVISIONS OF DTAA BEING MORE BENEFICIAL TO THE ASSESSE WERE PREFERRED OVER THE PROVISIONS OF I.T. ACT. III. IN PARAS 13,22 AND 28 OF ITS ORDER, THE HON'BL E HC HAS APPROVED THE INSERTION OF EXPLANATION BELOW S.9(2) INSERTED BY THE FINANCE ACT 2007, THEREBY IMPLYING THAT THE CLARIFICATORY EXPLANATIONS COULD BE READ INTO MODERN DTAAS. IV. MUMBAI TRIBUNAL IN THE CASE OF VIACOM 18 MEDIA (P.) LTD.(2014) 162 TTJ 336 (MUM) HAS EXPLAINED THE IMPORT OF BOMBAY HC DECISION IN RIGHT PERSPECTIVE I N PARAS 16 AND 17 OF ITS ORDER WHILE REJECTING THE ASSESSEE'S ARGUMENT THAT THE HC HAS HELD THAT AMENDMENTS IN THE ACT CAN NOT BE READ INTO DTAAS. V. THE BOMBAY HC HAS APPROVED AMBULATORY APPROACH (PARA 22) TO INTERPRETATION OF TREATIES AG AINST STATIC APPROACH ADOPTED BY THE DELHI HC. KLAUS VOGE L IN COMMENTARY HAS ALSO ADVOCATED AMBULATORY APPROACH. TTI TEAM TELECOM. I. LTD. 18 4.11. FINALLY, LD. CIT-DR PRAYED THAT IN VIEW OF THE ABO VE SUBMISSIONS ORDERS PASSED BY THE TRIBUNAL IN EARLIE R YEARS SHOULD NOT BE FOLLOWED. 4.12. IN REJOINDER, LD. COUNSEL OF THE ASSESSEE SUBMITTE D THAT REVENUE HAS NOT PROPERLY APPRECIATED THE CRUCIAL FA CTS HERE. HE TOOK US THROUGH THE SUPPLEMENTARY AGREEMENT WHIC H WAS ENTERED DURING THE RELEVANT PERIOD TO SHOW THAT INT ENTION OF PROVIDING THE SOURCE CODE BY THE ASSESSEE TO RELIAN CE WAS NOT TO TRANSFER THE FULL RIGHTS IN THE SOFTWARE. BUT, I T WAS MEANT ONLY TO PROTECT THE BUYER IN CASE OF ANY DISASTER M ANAGEMENT SO AS TO ENABLE IT TO DO REQUISITE REPAIRS. IT WAS FURTHER SUBMITTED THAT IN ANY CASE, OBJECT CODE WAS NOT T RANSFERRED TO RELIANCE. THUS, EVEN IF SOME MODIFICATION WAS CONSI DERED NECESSARY BY RELIANCE IN THE SOURCE CODE UNDER ANY GIVEN CIRCUMSTANCES, THE RELIANCE WAS BOUND TO APPROACH T HE ASSESSEE FOR THE PURPOSE OF MAKING REQUISITE AMENDM ENTS IN THE OBJECT CODE. HE ALSO PLACED BEFORE US COPY OF INDO MALAYSIA TREATY TO SHOW THAT ARTICLE 12 OF THE TREA TY CLEARLY MAKE MENTION OF THE WORDS COMPUTER SOFTWARE PROGRA MME WHICH WERE SPECIFICALLY EXCLUDED SUBSEQUENTLY BY NO TIFICATION DATED 29.01.2013. HE THUS, SUBMITTED THAT SINCE THE INDO- MALAYSIA TREATY DOES NOT MAKE A MENTION OF ANY SUCH WORDS, IT CLEARLY SHOWS THE INTENTION OF BOTH THE PARTIES THA T WHEN THE TREATY WAS DRAFTED COMPUTER SOFTWARE PROGRAMME WA S NOT INTENDED TO BE INCLUDED. HE AGAIN DREW OUR ATTENTIO N TO THE DECLARATION SHOWING THAT SOURCE CODE WAS ACTUALLY N EVER PROVIDED BY THE ASSESSEE TO RELIANCE AND SUBMITTED THAT THIS VITAL FACT HAS NOT BEEN CONTRADICTED BY ANY AUTHORI TY SO FAR OR TTI TEAM TELECOM. I. LTD. 19 EVEN BY LD. CIT-DR DURING THE COURSE OF HEARING BEF ORE THE TRIBUNAL. HE PRAYED RELIANCE ON THE FOLLOWING JUDGM ENTS: I. DIT V. INFRASOFT LTD. 264 CTR 329(DEL) II. DIT V. NEW SKIES SATELLITE 382 ITR 114 (DEL) III. ADIT V. BAAN GLOBAL BV (ITA NO. 7048/MUM/2010 DATED 13.06.2016. HE REQUESTED FOR FOLLOWING THE ORDER OF THE TRIBUNA L PASSED IN THE EARLIER YEARS IN VIEW OF FACTS OF THIS CASE AND IN VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF RA DHASOAMI SATSANG V. COMMISSIONER OF INCOME-TAX 193 ITR 321(S C). 4.13. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWE R AUTHORITIES AS WELL AS SUBMISSIONS MADE BEFORE US B Y BOTH THE SIDES AND ALSO JUDGMENT OF THE TRIBUNAL PASSED IN A SSESSEES OWN CASE IN THE EARLIER YEARS. THE ONLY ISSUE TO BE DECIDED BY US IS WHETHER AMOUNT RECEIVED BY THE ASSESSEE ON AC COUNT OF SUPPLY OF SOFTWARE TO M/S. RELIANCE INFOCOM LTD.( S UBSEQUENTLY NAME CHANGED TO RELIANCE COMMUNICATION LTD.) CONSTI TUTED PAYMENT OF ROYALTY WITHIN THE MEANING OF SECTION 9(1)(VI) OF THE ACT AND ARTICLE 12 OF DTAA BETWEEN INDIA AND IS RAEL. IT IS NOTED BY US THAT AS DISCUSSED IN DETAIL ABOVE, THE IMPUGNED AMOUNTS HAVE BEEN RECEIVED IN PURSUANCE TO AN AGREE MENT BETWEEN THE ASSESSEE AND RELIANCE DATED 27 TH SEPTEMBER, 2002 (ENTERED INTO THE PERIOD RELEVANT TO A.Y. 2003 -04). THE AO HAS CONTENDED IN THE ORDER THAT AN AMENDMENT HAS BEEN MADE IN THE SAID AGREEMENT VIDE SUPPLEMENTARY AGREE MENT DATED 17 TH SEPTEMBER 2007, WHICH HAS BROUGHT OUT A MATERIAL CHANGE AND THAT IS WHY DECISION GIVEN BY THE TRIBUN AL IN EARLIER ORDERS NEEDS TO BE DEVIATED. WE HAVE ANALYS ED THIS TTI TEAM TELECOM. I. LTD. 20 CONTENTION VERY CAREFULLY. IT IS NOTED BY US THAT A GREEMENT DATED 27 TH SEPTEMBER 2002 HAS BEEN ANALYSED BY THE TRIBUNAL TWICE IN TWO SEPARATE ORDERS I.E. FOR A.Y. 2003-04 AND A.Y. 2006-07 AND DETAILED ORDERS WERE PASSED WHEREIN IT WAS OBSERVED, AFTER ANALYZING VARIOUS CLAUSES OF THE AG REEMENT AND POSITION OF LAW, THAT THE IMPUGNED AMOUNT DID NOT C ONSTITUTE ROYALTY IN THE HANDS OF THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE SHALL NOT REPEAT THE EXERCISE DON E BY THE COORDINATE BENCH IN ASSESSEES OWN CASE, NOR SHALL WE LIKE TO MODIFY THE CONCLUSION DRAWN BY THE COORDINATE BENCH AS FAR AS ANALYSIS OF THE ORIGINAL AGREEMENT IS CONCERNED. WE SHALL THEREFORE ANALYSE THE NATURE AND SCOPE OF AMENDMENT AGREEMENT DATED 17 TH SEPTEMBER 2007 IN THE LIGHT OF SOME OF THE RELEVANT CLAUSES OF THE ORIGINAL AGREEMENT DATE D 27 TH SEPTEMBER 2002, WHICH ARE REPRODUCED HEREUNDER: LICENSE GRANT. A) TTI HEREBY GRANTS TO RELIANCE AND ITS AFFILIATES (AND TO ANY THIRD PARTY TO WHOM RELIANCE OR ITS AFFILIATES HAVE CONTRACTED TO OPERATE THE WIRELESS RELIANCE NETWORK ON THEIR BEHALF WITHIN THE TERRITORY OF INDIA AND ONLY FOR THAT PURPOSE (AND TO THE EXTENT OF THE SAME UNDER A LIMI TED LINCENSE AS DEFINED HEREIN) A PERPETUAL IRREVOCABLE , NON- EXCLUSIVE, ROYALTY FREE, WORLDWIDE LICENSE TO INSTA LL, USE AND OPERATE AND COPY THE SOFTWARE AND THE DOCUMENTA TION LICENSED UNDER ANY APPROVED PURCHASE ORDER IN ACCORDANCE WITH THE TERMS AND CONDITIONS CONTAINED IN WIRELESS RELIANCE NETWORK WITHIN INDIA. AGREEMENT S OLELY FOR THE IMPLEMENTATION OPERATION, MANAGEMENT AND MAINTENANCE OF THE LICENSE DOES NOT GIVE RELIANCE T ITLE TO THE SOFTWARE, OR TO ANY TRADEMARK OR COPYRIGHT IN T HEM (TTI WILL BE THE OWNER OR THE LICENSE OF THE INTELLECTUA L PROPERTY RIGHTS IN THE SOFTWARE). RELIANCE MAY ONLY USE THE SOFTWARE IN MACHINE READABLE FORM. TTI TEAM TELECOM. I. LTD. 21 RELIANCE SHALL NOT (I) REVERSE ENGINEER, DECOMPILE OR DISASSEMBLE ANY PART OF THE SOFTWARE WITHOUT THE EX PRESS PRIOR WRITTEN CONSENT OF TTI; (II) RELIANCE SHALL N OT REMOVER, OBSCURE OR DEFACE ANY PROPRIETARY LEGEND RELATING T O THE SOFTWARE WITHOUT TTIS PRIOR WRITTEN CONSENT, AND FU RTHER, SHALL NOT DELETE ANY AND ALL SUCH PROPRIETARY LEGEN DS FOR SUCH COPIES AS ARE MADE. THE SOFTWARE IS TO BE LOCA TE AND USED AT THE DESIGNATED SITE/S SPECIFIED IN THE PURC HASE ORDER ONLY. (B) THE AFOREMENTIONED LICENSES SET FORTH ABOVE ARE HEREINAFTER BE REFERRED TO AS THE SOFTWARE LICENSE S. SUCH SOFTWARE LICENSES SHALL NOT BE SOLD TRANSFERRED, AS SIGNED, SUBLICENSED BY OR USED BY OUTSOURCEES OF RELIANCE W ITHOUT TTIS PRIOR WRITTEN CONSENT EXCEPT WITH RESPECT TO ( I) THE SALE OF THE WIRELESS RELIANCE NETWORK (OR ANY RELEVANT COMPONENT THEREOF) (II) THE FINANCING OF THE WIRELE SS RELIANCE NETWORK (OR ANY COMPONENT THEREOF) OR (III ) THE OUTSOURCING BY RELIANCE OF ANY OPERATING OR MAINTEN ANCE FUNCTIONS RELATED TO THE WIRELESS RELIANCE NETWORK, UNDER THE TERMS AND CONDITIONS OF THE LIMITED LICENSE AS SPECIFIED HEREIN; OR (IV) THE TRANSFER OR ASSIGNMENT BY RELIA NCE OF THE SOFTWARE LICENSES TO A RELIANCE AFFILIATE (OR VICE VERSA) IN CONJUNCTION WITH A TRANSFER OF A PORTION OF THE WIR ELESS RELIANCE NETWORK TO BE OPERATED IN THE TERRITORY OF INDIA ONLY, PROVIDED THAT IN EACH SUCH CASE SPECIFIED IN (I)-(IV) ABOVE, SUCH TRANSFEREE, ASSIGNEE, OR OUTSOURCEE AGR EES IN WRITING TO ABIDE BY ALL THE TERMS AND CONDITIONS SE T FORTH IN THE SOFTWARE LICENSES AND THE TTI IS INFORMED OF TH E SAME IN WRITING BY RELIANCE AND PROVIDED FURTHER THAT TH E RIGHTS TRANSFERRED, ASSIGNED OR GRANTED TO OUTSOURCES, AS THE CASE MAY BE SHALL BE THOSE REASONABLY NECESSARY, TO FULF ILL THE COMMERCIAL PURPOSES OF SUCH TRANSACTION. (C) NOTWITHSTANDING ANY STATEMENT IN THIS AGREEMENT TO THE CONTRARY, RELIANCE MAY PERMIT USE UNDER THE LIMITED LICENSE OF THE SOFTWARE (OR ANY PART THEREOF) UNDER THE TERMS OF ANY AGREEMENT BETWEEN RELIANCE AND ANY THI RD PARTY (CONTRACTOR AGREEMENT ) INCLUDING WITHOUT LIM ITATION, CONSULTANT PROGRAMMERS, SYSTEM INTEGRATORS, SYSTEM MAINTAINERS, OUTSOURCING OR DISASTER RECOVERY OR OT HER SERVICE SUPPLIERS (AUTHORIZED SUBCONTRACTORS) (RELI ANCE SHALL BE ENTITLED TO GRANT SUCH AUTHORIZED SUBCONTR ACTORS A LIMITED SUB LICENSE TO USE THE SOFTWARE SOLELY TO P ROVIDE TTI TEAM TELECOM. I. LTD. 22 SERVICES TO RELIANCE UNDER SUCH CONTRACTOR AGREEMEN T IN RESPECT OF THE SOFTWARE (THE LIMITED LICENSE). THE LIMITED LICENSE EXPRESSLY EXCLUDES ANY RIGHT FOR THE AUTHOR IZED SUB-CONTRACTORS. SUCH LIMITED LICENSE SHALL TERMINA TE ON TERMINATION OF THE CONTRACTOR AGREEMENT (OR IF LATE R, ON TERMINATION OF ANY OBLIGATION TO PROVIDE SERVICES CONSEQUENT UPON TERMINATION OF SUCH CONTRACTOR AGRE EMENT PROVIDED THAT (I) SUCH AUTHORIZED SUBCONTRACTOR EXE CUTES A NON DISCLOSURE AGREEMENT IN BETWEEN ITSELF RELIANCE AND TTI; AND (III) RELIANCE AGREES TO BE RESPONSIBLE FO R ANY BREACH OF THE NON DISCLOSURE AGREEMENT BY SUCH AUTHORIZED SUBCONTRACTOR. 4.14. PERUSAL OF THE AFORESAID CLAUSES CLEARLY REVEALS T HAT THE ASSESSEE WOULD CONTINUE TO REMAIN OWNER OF THE INTE LLECTUAL PROPERTY RIGHTS EMBEDDED IN THE SOFTWARE AND RELIAN CE WOULD BE ABLE TO USE SOFTWARE ONLY IN MACHINE READABLE FO RM. RELIANCE WAS NOT PERMITTED TO REVERSE ENGINEER, ALT ER, SOFTWARE PROGRAMME OR TINKER WITH PROPRIETARY LEGENDS OF THE SAID SOFTWARE. THE SOFTWARE WAS PERMITTED TO BE LOCATED AND USED ONLY AT THE SITES DESIGNATED IN THE PURCHASE ORDER ISSUED BY RELIANCE. FURTHER, SUCH SOFTWARE WAS NOT PERMITTED TO BE FREELY SOLD BY RELIANCE EXCEPT FOR STRICT USAGES FOR WIREL ESS RELIANCE NETWORK ONLY, AS PERMITTED IN THE AGREEMENT. THE AO NOTED THAT IN THE SAID AGREEMENT, THERE WERE CERTAIN CLAU SES WITH REGARD TO TRANSFER OF SOURCE CODE BY THE ASSESSEE T O RELIANCE. IT IS NOTED BY US THAT SECTION 11 OF THE SAID AGREEMEN T DEALS WITH ESCROW OF SOURCE CODE WHICH IS REPRODUCED HEREUNDER FOR READY REFERENCE AND FURTHER DISCUSSION: SECTION 11: ESCROW OF SOURCE CODE 11.1. ESCROW, CONCURRENT WITH THE EXECUTION OR THIS AGREEMENT, THE PARTIES WILL DULY EXECUTE AND DELIVE R THE ESCROW AGREEMENT, AND TTI, UPON ACCEPTANCE OF THE SOFTWARE, WILL DELIVER TO THE ESCROW AGENT A COMPLE TE MASTER, REPRODUCIBLE COPY OF ALL SOURCE CODE RELATI NG TO THE TTI TEAM TELECOM. I. LTD. 23 SOFTWARE. TTI PROMPTLY WILL UPDATE THE SOURCE CODE IN ESCROW TO REFLECT ALL REVISIONS, MODIFICATIONS AND ENHANCEMENTS TO THE SOFTWARE THAT ARE PROVIDED TO R ELIANCE HEREUNDER. IN THE EVENT THAT THE ESCROW AGREEMENT H AS NOT BEEN EXECUTED AND THE SOURCE CODE DELIVERED TO ESCR OW AGENT WITHIN THIRTY (30) DAYS AFTER ACCEPTANCE OF T HE SOFTWARE, THEN UNTIL SUCH EVENTS HAVE OCCURRED RELI ANCE SHALL BE ENTITLE TO TERMINATIVE THIS AGREEMENT BY W RITTEN NOTICE PROVIDED THAT RELIANCE HAS GIVEN WRITTEN NOT ICE AND DETAILS OF SUCH BREACH TO TTI AND HAS ADVISED TTI O F ITS INTENTION TO TERMINATE AND TTI HAS FAILED TO DELIVE R THE SOURCE CODE TO THE ESCROW AGENT WITHIN THIRTY (30) DAYS FROM RELIANCES NOTICE THEREOF NO PAYMENT OBLIGATIO N WITH RESPECT TO SUCH SOFTWARE OR NAY SUPPORT SERVICES (A ND IF RELIANCE HAS PREVIOUSLY PAID ANY SUMS IN RESPECT TH EREOF, TTI WILL PROMPTLY REFUND ALL SUCH SUMS TO RELIANCE) . 11.2. RELEASE OF SOURCE CODE. UPON OCCURRENCE OF TH E CONDITIONS DESCRIBED IN THE ESCROW AGREEMENT (EACH, A RELEASE CONDITION) THE SOURCE CODE PLACED IN ESCR OW WILL BE DELIVERED TO RELIANCE FOR US, COPYING IN CONNECT ION WITH RELIANCES USE, MAINTENANCE AND SUPPORT OF THE SOFT WARE IN ACCORDANCE WITH ITS RIGHTS UNDER THIS AGREEMENT. 11.3 LICENSE; OWNERSHIP. TTI HEREBY GRANTS AND AGRE ES TO GRANT TO RELIANCE A PERPETUAL, NON-EXCLUSIVE, WORLD WIDE LICENSE TO USE, COPY, AND CREATE DERIVATIVE WORKS T HE PURPOSES SPECIFIED IN SECTION 11.2 (THE DERIVATIVE WORKS). RELIANCE WILL BE THE EXCLUSIVE OWNER OF ANY MODIFIC ATIONS TO OR DERIVATIVE WORKS OF THE SOURCE CODE CREATED BY O R FOR RELIANCE UNDER THIS TERMS AND CIRCUMSTANCES SECTION 11. 4.15. IT WAS CONTENDED BY THE LD. COUNSEL THAT THE LOWER AUTHORITIES MISLEAD THEMSELVES BY MAKING INCOMPLETE READING OF THE SAID CLAUSE WITH REGARD TO SOURCE CODE. IT W AS CONTENDED BY LD. COUNSEL THAT THERE WAS NO ABSOLUTE TRANSFER OF SOURCE CODE OF THE ASSESSEE TO RELIANCE. IN FACT, SOURCE C ODE WAS MEANT TO BE PROVIDED FOR THE LIMITED PURPOSE OF ENA BLING RELIANCE FOR MAINTENANCE SUPPORT OF THE SOFTWARE IN ACCORDANCE WITH ITS RIGHTS GRANTED UNDER THE SAID A GREEMENT. THUS, SOURCE CODE WAS NOT INTENDED TO BE TRANSFERRE D SO AS TO TTI TEAM TELECOM. I. LTD. 24 TRANSFER FULL-FLEDGED RIGHT EMBEDDED IN THE SOFTWAR E BY THE ASSESSEE TO RELIANCE. IT HAS BEEN FURTHER BROUGHT T O OUR NOTICE THAT IN ANY CASE, NO ESCROW AGREEMENT HAS BEEN ENTE RED INTO BETWEEN THE ASSESSEE AND RELIANCE AND THEREFORE THE RE WAS NO QUESTION OF PROVIDING THE SOURCE CODE BY THE ASSESS EE TO RELIANCE. IT WAS FURTHER SUBMITTED THAT IN ANY CASE , AFORESAID AGREEMENT HAS BEEN DISCUSSED AND ANALYSED IN DETAIL BY THE TRIBUNAL IN THE ORDER PASSED FOR A.Y. 2003-04 AND 2 006-07 AND THEREAFTER ONLY DECISION HAS BEEN TAKEN WHICH S HOULD BE FOLLOWED BY US. WE AGREE WITH THE ARGUMENT OF LD. C OUNSEL THAT AS FAR AS THIS AGREEMENT IS CONCERNED, WE ARE BOUND TO RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL ON TH IS ISSUE. 4.16. WITH REGARD TO SUPPLEMENTARY AMENDMENT AGREEMENT DATED 17 TH SEPTEMBER 2007, IT IS NOTED BY US WITH THE ASSISTANCE OF THE PARTIES THAT THIS AGREEMENT WAS E NTERED INTO BY THE PARTIES MAINLY FOR THE PURPOSE OF WIDENING TH E SCOPE OF WIRELESS RELIANCE NETWORK FOR WHICH SOFTWARE WAS PR OVIDED BY THE ASSESSEE TO RELIANCE. THE ORIGINAL AGREEMENT PE RMITTED USAGES OF SOFTWARE FOR THE WIRELESS RELIANCE NETWOR K FOR THE MOBILES PHONES USING CDMA TECHNOLOGY. BUT, SUBSEQUE NTLY MOBILE PHONES BASED ON GSM TECHNOLOGY WERE ALSO INC LUDED UNDER THE AFORESAID AMENDMENT AGREEMENT. THUS, IN B RIEF, MAIN OBJECTIVE OF THE AFORESAID AMENDMENT AGREEMENT WAS TO INCLUDE MOBILE PHONES USING NEW TECHNOLOGY. 4.17. THUS, THIS SUPPLEMENTARY AGREEMENT HAS BEEN ENTERE D INTO IN CONTINUATION WITH THE EARLIER AGREEMENT DAT ED 27 TH SEPTEMBER 2002 FOR PURCHASE OF ADDITIONAL SOFTWARE BY RELIANCE FROM THE ASSESSEE TO BE USED IN TECHNOLOGI CALLY TTI TEAM TELECOM. I. LTD. 25 UPDATED WIRELESS RELIANCE NETWORK (I.E. CDMA OR GSM ETC.). THUS, VIDE THIS SUPPLEMENTARY AGREEMENT, THOUGH SCO PE OF USAGES OF THE SOFTWARE FOR RELATIVELY WIDER RANGE O F PRODUCTS HAS BEEN INCREASED, BUT ALL OTHER TERMS AND CONDITI ONS REMAINED SAME. WE DO NOT FIND ANY CHANGE MUCH LESS ANY MATERIAL CHANGE IN THE TERMS AND CONDITIONS OF THE ORIGINAL AGREEMENT WHICH MAY HAVE ANY BEARING ON THE DECISIO N WHICH HAS BEEN TAKEN BY THE TRIBUNAL IN EARLIER YEARS. ON E OF THE MAIN OBJECTIONS WHICH HAD BEEN PROMINENTLY DISCUSSE D BY THE LOWER AUTHORITIES IS WITH RESPECT TO TRANSFER OF SO URCE CODE BY THE ASSESSEE TO RELIANCE. IT IS NOTED BY US THAT FI RSTLY, AS DISCUSSED ABOVE, THE SOURCE CODE WAS INTENDED TO BE PROVIDED BY THE ASSESSEE TO RELIANCE ONLY FOR THE LIMITED PU RPOSE OF ENABLING IT MAINTENANCE AND SUPPORT OF SOFTWARE IN ACCORDANCE WITH ITS RIGHTS UNDER THE SAID AGREEMENT . SECONDLY, IN ANY CASE, IT HAS BEEN INFORMED THAT THE AFORESAI D ESCROW AGREEMENT WAS NEVER ENTERED INTO AND THEREFORE, THE RE WAS NO QUESTION OF PROVIDING ANY SOURCE CODE BY THE ASSESS EE TO RELIANCE IN THIS REGARD. THE ASSESSEE HAD SUBMITTED ON RECORD A COPY OF DECLARATION WHICH READS AS UNDER: DECLARATION TO WHOMSOEVER IT MAY CONCERN 1. EXHIBIT C OF THE ORIGINAL SOFTWARE SUPPLY AND LI CENSE AGREEMENT (SSLA) DATED 27 TH SEPTEMBER 2002 EXECUTED BETWEEN TTI TEAM TELECOM INTERNATIONAL LTD. (TTI) A ND RELIANCE INFOCOMM LTD. (NOW KNOWN AS RELIANCE COMMUNICATIONS LTD. (RCL) HAS NEVER BEEN EXECUTED. 2. THE ORIGINAL SSLA DATED 27 TH SEPTEMBER, 2002 BETWEEN TTI AND RCL CONTAINED A CLAUSE FOR THE TRANSFER OF SOURCE CODE TO RCL IN AN ESCROW ACCOUNT. HOWEVER, TTI AND RCL DID NOT ENTER ANY ESCROW AGREEMENT AND THE SOURCE C ODE TTI TEAM TELECOM. I. LTD. 26 OF TTIS SOFTWARE WAS NEVER DEPOSITED AT RCL OR WIT H AN ESCROW FOR THE BENEFIT OF RCL. FOR TTI TEAM TELECOM INTERNATIONAL LIMITED EITAN NAOR CEO 4.18. THESE FACTS HAVE NOT BEEN DISPUTED BEFORE US. UNDE R THESE CIRCUMSTANCES, THE ISSUE OF SOURCE CODE BECOM ES ACADEMIC. UNDER THESE CIRCUMSTANCES, WE FIND THAT T HERE IS NO CHANGE IN FACTS WHICH COULD HAVE PERMITTED OR COMPE LLED US TO DEVIATE FROM DECISION OF THE TRIBUNAL RENDERED IN E ARLIER YEARS. THUS, UNDER THESE CIRCUMSTANCES, WE ARE BOUND TO RESPECTFULLY FOLLOW ORDERS OF THE TRIBUNAL PASSED I N EARLIER YEARS. IT IS NOTED BY US THAT THE TRIBUNAL HAS IN I TS ORDER FOR A.Y. 2006-07 IN ASSESSEES OWN CASE VIDE ORDER DATE D 26.08.2011 IN ITA NO.3939/MUM/2010 ANALYSED ALL THE FACTS IN DETAIL AND DECIDED THIS ISSUE IN FAVOUR OF THE A SSESSEE, AFTER ANALYZING PROVISIONS OF THE ACT AS WELL AS PROVISIO NS OF TREATY AT GREAT LENGTH. RELEVANT PART OF THE ORDER IS REPR ODUCED HEREUNDER: 13. IN VIEW OF THE ABOVE DISCUSSIONS, AS LONG AS THE ASSESSEE CANNOT BE SUBJECTED TO TAX ON THE IMPUGNED RECEIPTS IN TERMS OF THE PROVISIONS OF INDO-ISRAEL TAX TREATY, THE ASSESSEE WILL NOT HAVE TAX LIABILITY IN INDIA. THE PROVISIONS OF THE IT ACT, 1961, CANNOT BE PUT INTO SERVICE IN SUCH A SITUATION, BECAUSE, AS WE HAVE NOTICED EARLI ER, THESE PROVISIONS CAN APPLY ONLY WHEN THEY ARE MORE BENEFICIAL TO THE ASSESSEE VIS-A-VIS THE PROVISIONS OF THE APPLICABLE TAX TREATY. 14. IT IS AN ADMITTED POSITION THAT THE ASSESSEE DID N OT HAVE ANY PE IN INDIA IN TERMS OF THE PROVISIONS OF ART. 5 OF THE TAX TREATY, AND, ACCORDINGLY, THE ASSESSEE CANN OT BE HELD LIABLE TO BE TAXED IN RESPECT OF BUSINESS PROF ITS, UNDER TTI TEAM TELECOM. I. LTD. 27 ARTICLE 7, ON SUPPLY OF SOFTWARE IN QUESTION. THE C ASE OF THE REVENUE REALLY RESTS ON TAXABILITY UNDER ART. 12 WH ICH PROVIDES AS FOLLOWS: 'ROYALTIES 1. ROYALTIES ARISING IN A CONTRACTING STATE AND PAI D TO A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TAXE D IN THAT OTHER STATE. 2. HOWEVER, SUCH ROYALTIES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE, AND ACCORDIN G TO THE LAWS OF THAT STATE, BUT IF THE RECIPIENT IS THE BEN EFICIAL OWNER OF THE ROYALTIES, THE TAX SO CHARGED SHALL NO T EXCEED 10 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES. 3. THE TERM ROYALTIES AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FO R THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITER ARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, A NY PATENT, TRADEMARK, DESIGN OR MODEL, PLAN, SECRET FO RMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. 4. THE PROVISIONS OF PARAS 1 AND 2 SHALL NOT APPLY IF THE BENEFICIAL OWNER OF THE ROYALTIES, BEING A RESIDENT OF A CONTRACTING STATE, CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE IN WHICH THE ROYALTIES ARISE, THR OUGH A PE SITUATED THEREIN, OR PERFORM IN THAT OTHER STATE INDEPENDENT PERSONAL SERVICES FROM A FIXED BASE SIT UATED THEREIN, AND THE RIGHT OR PROPERTY IN RESPECT OF WH ICH THE ROYALTIES ARE PAID IS EFFECTIVELY CONNECTED WITH SU CH PE OR FIXED BASE. IN SUCH CASE, THE PROVISIONS OF ART. 7 OR ART. 15, AS THE CASE MAY BE, SHALL APPLY. 5. ROYALTIES SHALL BE DEEMED TO ARISE IN A CONTRACT ING STATE WHEN THE PAYER IS THAT STATE ITSELF, A POLITI CAL SUB- DIVISION, A LOCAL AUTHORITY OR A RESIDENT OF THAT S TATE. WHERE, HOWEVER, THE PERSON PAYING THE ROYALTIES, WH ETHER HE IS A RESIDENT OF A CONTRACTING STATE OR NOT, HAS IN A CONTRACTING STATE A PE OR A FIXED BASE IN CONNECTIO N WITH WHICH THE LIABILITY TO PAY THE ROYALTIES WAS INCURR ED, AND SUCH ROYALTIES ARE BORNE BY SUCH PE OR FIXED BASE, THEN SUCH ROYALTIES SHALL BE DEEMED TO ARISE IN THE STAT E IN WHICH THE PE OR FIXED BASE IS SITUATED. 6. WHERE, BY REASON OF A SPECIAL RELATIONSHIP BETWE EN THE PAYER AND THE BENEFICIAL OWNER OR BETWEEN BOTH OF T HEM AND SOME OTHER PERSON, THE AMOUNT OF THE ROYALTIES, HAVING TTI TEAM TELECOM. I. LTD. 28 REGARD TO THE USE, RIGHT OR INFORMATION FOR WHICH T HEY ARE PAID, EXCEEDS THE AMOUNT WHICH WOULD HAVE BEEN AGRE ED UPON BY THE PAYER AND THE BENEFICIAL OWNER IN THE A BSENCE OF SUCH RELATIONSHIP, THE PROVISIONS OF THIS ARTICL E SHALL APPLY ONLY TO THE LAST MENTIONED AMOUNT. IN SUCH CA SE, THE EXCESS PART OF THE PAYMENTS SHALL REMAIN TAXABLE ACCORDING TO THE LAWS OF EACH CONTRACTING STATE, DU E REGARD BEING HAD TO THE OTHER PROVISIONS OF THIS CONVENTION.' 15. IN TERMS OF THE PROVISIONS OF ART. 12(3) OF THE IN DO- ISRAEL TAX TREATY, ROYALTY IS DEFINED, FOR THE PURP OSES OF THIS TAX TREATY, AS 'PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, ANY PATENT, TRADEMARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFO RMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE'. THE QUESTION THEN ARISES WHETHER A PAYMENT FOR COMP UTER SOFTWARE CANNOT BE A PAYMENT FOR USE OF OR RIGHT TO USE OF A COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WO RK, INCLUDING CINEMA PHOTOGRAPHIC FILM, AND, WHILE EXAMINING THI S QUESTION, IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT THERE IS A SPECIFIC MENTION ABOUT THE USE 'OF' COPYRIGHT. THE ONLY OTHER CLAUSE IN WHICH PAYMENT FOR SOFTWARE COULD PO SSIBLY FALL IS 'CONSIDERATION FOR USE OF, OR RIGHT TO USE OF, A 'PROCESS'. LET US EXAMINE THESE TWO ASPECTS OF THE DEFINITION OF ROYALTY UNDER THE INDIA-ISRAEL TAX TREATY. 16. AS REGARDS THE QUESTION WHETHER THE PAYMENT FOR SOFTWARE COULD BE TREATED AS PAYMENT FOR 'USE OF, O R THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC O R SCIENTIFIC WORK', WE FIND THAT THIS ISSUE DIRECTLY CAME UP FOR CONSIDERATION OF A SPECIAL BENCH OF THIS TRIBUNAL I N THE CASE OF MOTOROLA INC. (SUPRA). THAT WAS A CASE IN W HICH THE SPECIAL BENCH HAD AN OCCASION TO DECIDE WHETHER PAY MENT FOR SOFTWARE AMOUNTS TO ROYALTY, FOR THE PURPOSES OF INDIA SWEDEN TAX TREATY [(1998) 229 ITR (ST) 11] WHICH INCIDENTALLY IS THE SAME AS IN INDO-ISRAEL TAX TREA TY AND WHICH ALSO DEFINES ROYALTY AS 'PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTI FIC WORK INCLUDING CINEMATOGRAPH FILMS, ANY PATENT, TRADEMAR K, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, O R FOR TTI TEAM TELECOM. I. LTD. 29 INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE'. THE SPECIAL BENCH, AFTER A VERY ERUDIT E DISCUSSION ON VARIOUS FACETS OF THE ISSUE BEFORE TH EM, CONCLUDED THAT 'WE HOLD THAT THE SOFTWARE SUPPLIED WAS A COPYRIGHTED ARTICLE AND NOT A COPYRIGHT RIGHT, AND THE PAYMENT RECEIVED BY THE ASSESSEE IN RESPECT OF THE SOFTWARE CANNOT, THEREFORE, BE CONSIDERED AS ROYALT Y EITHER UNDER THE IT ACT OR THE DTAA'. RIGHT NOW WE ARE ONL Y CONCERNED WITH THE PROVISIONS OF THE TAX TREATY, AN D WE HAVE NOTICED THAT THE PROVISIONS OF TAX TREATY AS B EFORE THE SPECIAL BENCH ARE EXACTLY THE SAME AS BEFORE US IN THIS CASE. THE ISSUE, THEREFORE, AS TO WHETHER PAYMENT F OR SUPPLY OF SOFTWARE CAN BE VIEWED AS A PAYMENT FOR COPYRIGHT OR NOT IS NO LONGER RES INTEGRA. THE SPEC IAL BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE, A ND THE VIEWS SO EXPRESSED BY THE SPECIAL BENCH, BEING FROM A HIGHER FORUM THAN THIS DIVISION BENCH, ARE BINDING ON US. IN ANY CASE, AS THE PROVISIONS OF ART. 12(3) SPECIF ICALLY PROVIDE, WHAT IS LIABLE TO BE TREATED AS ROYALTY IS PAYMENT FOR 'USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK', AND THE CONNOTATIONS OF 'USE OF COPYRIGHT' OF A WORK ARE DISTINCT FROM THE USE OF A COPYRIGHTED ARTICLE. THE MEANING OF 'USE OF COPYRIG HT OF A WORK' CANNOT BE TREATED AS EXTENDING TO 'USE OF A COPYRIGHTED WORK' AS WELL, AS IT WOULD AMOUNT TO DO ING CLEAR VIOLENCE TO THE WORDS EMPLOYED BY THE TREATY. COPYRIGHT IS ONE THING, AND COPYRIGHTED ARTICLE IS QUITE ANOTHER THING. TO GIVE A SIMPLE EXAMPLE, WHEN A PER SON IS USING A MUSIC COMPACT DISC, THAT PERSON IS USING TH E COPYRIGHTED ARTICLE, I.E. THE PRODUCT ITSELF, AND N OT THE COPYRIGHT IN THAT PRODUCT. AS HELD BY THE SPECIAL B ENCH IN MOTOROLAS CASE (SUPRA), THE FOUR RIGHTS WHICH, IF ACQUIRED BY THE TRANSFEREE, CONSTITUTE HIM THE OWNER OF A CO PYRIGHT RIGHT, AND THESE RIGHTS ARE : (I) THE RIGHT TO MAKE COPIES OF THE COMPUTER PROGRA MME FOR PURPOSES OF DISTRIBUTION TO THE PUBLIC BY SALE OR O THER TRANSFER OF OWNERSHIP, OR BY RENTAL, LEASE, OR LEND ING. (II) THE RIGHT TO PREPARE DERIVATIVE COMPUTER PROGR AMMES BASED UPON THE COPYRIGHTED COMPUTER PROGRAMME. (III) THE RIGHT TO MAKE A PUBLIC PERFORMANCE OF THE COMPUTER PROGRAMME. (IV) THE RIGHT TO PUBLICLY DISPLAY THE COMPUTER PRO GRAMME. TTI TEAM TELECOM. I. LTD. 30 17. IT IS NOT EVEN REVENUES CASE THAT ANY OF THESE RI GHTS HAVE BEEN TRANSFERRED BY THE ASSESSEE, ON THE FACTS OF THIS CASE, AND, FOR THIS REASON, THE PAYMENT FOR SOFTWAR E CANNOT BE TREATED AS PAYMENT FOR USE OF COPYRIGHT I N THE SOFTWARE. AS WE HOLD SO, WE MAY MENTION THAT IN THE CASE OF GRACEMAC (SUPRA), A CONTRARY VIEW HAS BEEN TAKEN BUT THAT CONCLUSION IS ARRIVED AT IN THE LIGHT OF THE P ROVISIONS OF CL. (V) IN EXPLN. 2 TO S. 9(1)(VI) WHICH ALSO COVER S CONSIDERATION FOR 'TRANSFER OF ALL OR ANY RIGHTS (I NCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRI GHT, LITERARY, ARTISTIC OR SCIENTIFIC WORK' A PROVISION WHICH IS CLEARLY LARGER IN SCOPE THAN THE PROVISION OF ART. 12(3) OF THE INDO-ISRAEL TAX TREATY. THE WORD 'OF' BETWEEN COPY RIGHT AND LITERARY, ARTISTIC OR SCIENTIFIC WORK' IS ALSO MISSING IN THE STATUTORY PROVISION. THE TREATY PROVISION THAT WE ARE DEALING WITH ARE THUS CERTAINLY NOT IN PARI MATERIA WITH THIS STATUTORY PROVISION, AND, BY THE VIRTUE OF S. 90(2) OF THE ACT, THE PROVISIONS OF INDIA ISRAEL TAX TREATY CLEA RLY OVERRIDE THIS STATUTORY PROVISION. IN GRACEMAC DECI SION (SUPRA), THE CO-ORDINATE BENCH WAS OF THE VIEW THAT THE PROVISIONS OF THE APPLICABLE TAX TREATY AND THE IT ACT ARE 'IDENTICAL'A POSITION WHICH DOES NOT PREVAIL IN TH E SITUATION BEFORE US. WE, THEREFORE, SEE NO REASONS TO BE GUIDED BY GRACEMAC DECISION (SUPRA). THE NEXT ISSUE THAT WE NEED TO CONSIDER IS WHETHER A PAYMENT FOR SOFTWA RE CAN BE SAID TO BE A PAYMENT FOR 'PROCESS' AS A COMP UTER PROGRAM IS NOTHING BUT A SET OF INSTRUCTION LYING I N THE PASSIVE STATE AND THIS EXECUTION OF INSTRUCTIONS IS A PROCESS OR A SERIES OF PROCESSES. NO DOUBT, IN T ERMS OF THE PROVISIONS OF S. 2(FFC) OF THE INDIAN COPYRIGHT ACT, 1957, A COMPUTER PROGRAM, I.E. SOFTWARE, HAS BEEN DEFINED AS 'A SET OF INSTRUCTIONS EXPRESSED IN WORDS, CODES, SCHE MES OR IN ANY OTHER FORM, INCLUDING A MACHINE READABLE MED IUM, CAPABLE OF CAUSING A COMPUTER TO PERFORM A PARTICUL AR TASK OR ACHIEVE A PARTICULAR RESULT', BUT THE MOOT QUEST ION IS AS TO WHAT IS THAT A CUSTOMER PAYS FOR WHEN HE BUYS, O R TO PUT IT IN TECHNICAL TERMS OBTAINS LICENCE TO USE THE SOFTWAREFOR THE PROCESS OF EXECUTING THE INSTRUCTI ONS IN THE SOFTWARE, OR FOR THE RESULTS ACHIEVED ON ACCOUN T OF USE OF THE SOFTWARE. TO DRAW AN ANALOGY, IT IS AKIN TO A SITUATION IN WHICH A PERSON HIRES A VEHICLE, AND TH E QUESTION COULD BE AS TO WHAT DOES HE PAY FORFOR TH E USE TTI TEAM TELECOM. I. LTD. 31 OF THE TECHNICAL KNOW-HOW ON THE BASIS OF WHICH VEH ICLE OPERATES, OR FOR THE USE OF A PRODUCT WHICH CARRIES PASSENGERS OR GOODS FROM ONE PLACE TO ANOTHER. THE ANSWER IS OBVIOUS. WHEN YOU PAY FOR USE OF VEHICLE, YOU ACTUALLY PAY FOR A PRODUCT WHICH CARRIES THE PASSEN GERS OR GOODS FROM ONE PLACE TO ANOTHER AND NOT THE TECHNIC AL KNOW-HOW ON THE BASIS OF WHICH SUCH A PRODUCT OPERA TES. SAME IS THE CASE WITH THE SOFTWARE, WHEN SOMEONE PA YS FOR THE SOFTWARE, HE ACTUALLY PAYS FOR A PRODUCT WH ICH GIVES CERTAIN RESULTS, AND NOT THE PROCESS OF EXECU TION OF INSTRUCTIONS EMBEDDED THEREIN. AS A MATTER OF FACT, UNDER STANDARD TERMS AND CONDITIONS FOR SALE OF SOFTWARE, THE BUYER OF SOFTWARE IS NOT EVEN ALLOWED TO TINKER WIT H THE PROCESS ON THE BASIS OF WHICH SUCH SOFTWARE RUNS OR TO EVEN WORK AROUND THE TECHNICAL LIMITATIONS OF THE S OFTWARE. IN ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. VS. D Y. CIT (2003) 78 TTJ (DEL) 489, A CO-ORDINATE BENCH OF THI S TRIBUNAL DID TAKE THE VIEW THAT WHEN AN ASSESSEE PA YS FOR TRANSPONDER HIRE, HE ACTUALLY PAYS FOR THE PROCESS INASMUCH AS TRANSPONDER AMPLIFIES AND SHIFTS THE FREQUENCY OF EACH SIGNAL, AND, THEREFORE, PAYMENT F OR USE OF TRANSPONDER IS IN FACT A PAYMENT FOR PROCESS LIA BLE TO BE TREATED AS ROYALTY WITHIN MEANING OF THAT EXPRESS ION UNDER EXPLN. 2 TO S. 9(1)(VI) OF THE IT ACT. HOWEVE R, WHEN THIS DECISION CAME UP FOR SCRUTINY OF HONBLE DELHI HIGH COURT, IN THE CASE REPORTED AS ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. VS. DIRECTOR OF IT (201 1) 238 CTR (DEL) 233 : (2011) 51 DTR (DEL) 1 : (2011) 332 ITR 340 (DEL), THEIR LORDSHIPS, AFTER A VERY ERUDITE AND DE TAILED DISCUSSION, CONCLUDED THAT 'WE ARE UNABLE TO SUBSCR IBE TO THE VIEW TAKEN BY THE TRIBUNAL IN THE IMPUGNED JUDG MENT ON THE INTERPRETATION OF S. 9(1)(VI) OF THE ACT'. I T CANNOT, THEREFORE, BE OPEN TO US TO APPROVE THE STAND OF TH E REVENUE TO THE EFFECT THAT THE PAYMENT FOR SOFTWARE IS DE FACTO A PAYMENT FOR PROCESS. THAT IS A HYPER-TECHNI CAL APPROACH TOTALLY DIVORCED FROM THE GROUND BUSINESS REALITIES. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT THE EXPRESSION PROCESS APPEARS IMMEDIATELY AFTER, AND IN THE COMPANY OF, EXPRESSIONS 'ANY PATENT, TRADEMARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS'. WE FIND THAT THESE EXPRESSIONS ARE USED TOGETHER IN THE TRE ATY AND AS IT IS WELL-SETTLED, AS NOTED BY MAXWELL IN INTER PRETATION TTI TEAM TELECOM. I. LTD. 32 OF STATUTES AND WHILE ELABORATING ON THE PRINCIPLE OF NOSCITUR A SOCIIS, THAT WHEN TWO OR MORE WORDS WHIC H ARE SUSCEPTIBLE TO ANALOGOUS MEANING ARE USED TOGETHER THEY ARE DEEMED TO BE USED IN THEIR COGNATE SENSE. THEY TAKE, AS IT WERE, THEIR COLOURS FROM EACH OTHER, THE MEAN ING OF MORE GENERAL BEING RESTRICTED TO A SENSE ANALOGOUS TO THAT OF LESS GENERAL. THIS PRINCIPLE OF INTERPRETATION O F STATUTES, IN OUR CONSIDERED VIEW, HOLDS EQUALLY GOOD FOR INTERPRETATION OF A TREATY PROVISION. EXPLAINING TH IS PRINCIPLE IN MORE GENERAL TERMS, A VERY DISTINGUISH ED FORMER COLLEAGUE OF OURS HONBLE SHRI M.K. CHATURVE DI, HAD, IN AN ARTICLE INTERPRETATION OF TAXING STATUT ES (AIFTP JOURNAL: VOL. 4 NO. 7, JULY, 2002, AT P. 7), PUT IT IN HIS INIMITABLE WORDS AS FOLLOWS : 'LAW IS NOT A BROODING OMNIPOTENCE IN THE SKY. IT I S A PRAGMATIC TOOL OF THE SOCIAL ORDER. THE TENETS OF L AW BEING ENACTED ON THE BASIS OF PRAGMATISM. SIMILARLY, THE RULES RELATING TO INTERPRETATION ARE ALSO BASED ON COMMON SENSE APPROACH. SUPPOSE A MAN TELLS HIS WIFE TO GO OUT AN D BUY BREAD, MILK OR ANYTHING ELSE SHE NEEDS, HE WILL NOT NORMALLY BE UNDERSTOOD TO INCLUDE IN THE TERMS ANY THING ELSE SHE NEEDS A NEW CAR OR AN ITEM OF JEWELLERY. THE DICTUM OF EJUSDEM GENERIS REFERS TO SIMILAR SITUATI ON. IT MEANS OF THE SAME KIND, CLASS OR NATURE. THE RULE I S THAT WHEN GENERAL WORDS FOLLOW PARTICULAR AND SPECIFIC W ORDS OF THE SAME NATURE, THE GENERAL WORDS MUST BE CONFI NED TO THE THINGS OF SAME KIND AS SPECIFIED. NOSCITUR A SO CIIS IS A BROADER VERSION OF THE MAXIM EJUSDEM GENERIS. A MAN MAY BE KNOWN BY THE COMPANY HE KEEPS AND A WORD MAY BE INTERPRETED WITH REFERENCE TO THE ACCOMPANYING WORD S. WORDS DERIVE COLOUR FROM THE SURROUNDING WORDS.' 18. VIEWED IN THIS PERSPECTIVE, AND TAKING NOTE OF LOWEST COMMON FACTORS IN ALL THE ITEMS COVERED BY DEFINITI ON OF THE EXPRESSION ROYALTY IN ART. 12(3), THE PROCESS H AS TO BE IN THE NATURE OF KNOW-HOW AND NOT A PRODUCT. IN THIS V IEW OF THE MATTER, AND IN VIEW OF HONBLE DELHI HIGH COURT S DECLINING TO UPHOLD THE CO-ORDINATE BENCHS DECISIO N IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO LTD. (S UPRA), WE ARE OF THE CONSIDERED VIEW THAT THE PAYMENT FOR SOFTWARE, BY NO STRETCH OF LOGIC, CAN BE TREATED AS A PAYMENT FOR 'A PROCESS' LIABLE TO BE TAXED AS ROYAL TY. THIS IS PRECISELY WHAT WAS HELD BY A CO-ORDINATE BENCH O F THIS TTI TEAM TELECOM. I. LTD. 33 TRIBUNAL IN THE CASE OF SONATA INFORMATION TECHNOLO GY (SUPRA), THOUGH FOR DIFFERENT REASONS. 19. ON THIS ASPECT OF THE MATTER ALSO, GRACEMAC DECISI ON (SUPRA) HAS COME TO A DIFFERENT CONCLUSION BY OPINI NG THAT PAYMENT FOR SOFTWARE IS IN FACT A PAYMENT FOR A PRO CESS, BUT THE VIEW SO EXPRESSED, BEING CONTRARY TO EARLIE R DECISIONS OF THE OTHER CO-ORDINATE BENCHES AND IN ACCORDANCE WITH THE LAW LAID DOWN BY HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. B.R. CONSTRUCTIONS (1993) 113 CTR (AP) 1 : (1993) 202 IT R 222 (AP) DOES NOT CONSTITUTE A BINDING JUDICIAL PRECEDE NT. IN OUR CONSIDERED VIEW, EVEN A CO-ORDINATE BENCH DECISION, WHICH IS ADMITTEDLY CONTRARY TO EARLIER PRECEDENTS ON THAT ISSUE FROM OTHER CO-ORDINATE BENCHES, DOES NOT BIND THE SUBSEQUENT CO-ORDINATE BENCHES. WE HAVE ALL THE RES PECT AND ADMIRATION FOR THE CO-ORDINATE BENCH DECISION, BUT, IN OUR CONSIDERED VIEW, THIS DECISION DOES NOT CONSTIT UTE A BINDING JUDICIAL PRECEDENT, AND WE LEAVE IT AT THAT . THE OTHER ASPECT OF THE MATTER IS THAT THE ISSUE OF TAX ABILITY OF SOFTWARE, AS A COPYRIGHTED ARTICLE, IS DIRECTLY COV ERED BY A SPECIAL BENCH OF THIS TRIBUNAL AND THE SAID DECISIO N, COMING FROM A BENCH OF LARGER STRENGTH, PREVAILS OV ER THE DIVISION BENCH DECISION. AS LAID DOWN BY THE APEX C OURT IN THE CASE OF AMBIKA PRASAD MISHRA VS. STATE OF UP AI R 1980 SC 1762 (P. 1764 OF AIR 1980 SC ) 'EVERY NEW DISCOVERY NOR ARGUMENTATIVE NOVELTY CANNOT UNDO OR COMPEL RECONSIDERATION OF A BINDING PRECEDENT. A DE CISION DOES NOT LOSE ITS AUTHORITY MERELY BECAUSE IT WAS B ADLY ARGUED, INADEQUATELY CONSIDERED OR FALLACIOUSLY REASONED....'. THEREFORE, WHATEVER BE THE POINTS, R IGHT OR WRONG, WHICH CAN BE PUT AGAINST THE SPECIAL BENCH DECISIONS, THE SPECIAL BENCH DECISION CONTINUES TO HAVE A BINDING FORCE ON THIS DIVISION BENCH. IN OUR HUMBLE UNDERSTANDING, THE SPECIAL BENCH DECISION IN MOTORO LAS CASE (SUPRA) BINDS US AND WE HAVE TO RESPECTFULLY F OLLOW THE SAME. RESPECTFULLY FOLLOWING THIS SPECIAL BENCH DECISION, AS ALSO A SERIES OF OTHER DIVISION BENCH DECISIONS ON THE SAME LINES, WE MUST APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A). 20. IN VIEW OF THE ABOVE DISCUSSIONS, RESPECTFULLY FOLLOWING SPECIAL BENCH DECISION IN MOTOROLAS CASE (SUPRA) A S ALSO A LARGE NUMBER OF DIVISION BENCH DECISIONS ON THE ISS UE, TTI TEAM TELECOM. I. LTD. 34 INCLUDING IN ASSESSEES OWN CASE FOR ONE OF THE PRE CEDING ASSESSMENT YEARS, WE APPROVE THE CONCLUSIONS ARRIVE D AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTE R. 21. IN THE RESULT, THE APPEAL IS DISMISSED 4.19. THUS, IN VIEW OF THE JUDGMENT OF HONBLE SUPREME C OURT IN THE CASE OF RADHASOAMI SATSANG (SUPRA), WE RESPE CTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR A.YS. 2003-04 & 2006-07 AND HOLD THAT THE PAYMENT RECEIVED BY THE ASSESSEE ON ACCOUNT OF SUPPLY OF SOFTWARE BY THE ASSESSEE TO RE LIANCE IN PURSUANCE TO AGREEMENTS MADE BETWEEN BOTH THE PARTI ES DATED 27 TH SEPTEMBER, 2002 READ WITH SUPPLEMENTARY AGREEMENT 17 TH SEPTEMBER, 2007 IS NOT IN THE NATURE OF ROYALTY W ITHIN THE MEANING OF ARTICLE 12 OF DTAA BETWEEN INDIA AND ISR AEL AND THEREFORE NOT LIABLE TO TAX AS SUCH, BUT ASSESSABL E AS BUSINESS INCOME OF THE ASSESSEE SUBJECT TO OTHER PROVISIONS OF THE ACT AND DTAA. THUS, GROUND NO. 1.1 IS DECIDED IN FAVOUR OF THE ASSESSEE. 5. GROUND NO.2: THIS GROUND DEALS WITH THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE ACTION OF THE AO IN HOLDING THAT M/S. TTI TEAM TELECOM SOFTWARE PVT. LTD. (TTI INDIA) WAS DEPENDENT AGENT PERMANENT ESTABLISHMENT (DAPE) OF T HE ASSESSEE COMPANY IN INDIA. IN THIS GROUND AO ALLEGE D THAT THE AFORESAID COMPANY (IN SHORT REFERRED TO AS TTI INDI A) WAS A PERMANENT ESTABLISHMENT OF THE ASSESSEE COMPANY IN INDIA. THE AO HAS NOTED THAT TTI INDIA UNDERTOOK TO DELIVE R ALL TECHNICAL AND COMMERCIAL DOCUMENTATION, MAINTENANCE AND OPERATIONAL PROCESS, REPORTS, DRAWI NG FOR EXECUTION OF SERVICES MENTIONED IN THE STATEMENT OF WORK TO THE CUSTOMER RELIANCE FOR AND ON BEHALF OF THE ASSE SSEE. TTI INDIA HAS ALSO CONDUCTED USER ACCEPTANCE TEST F OR TTI TEAM TELECOM. I. LTD. 35 THE SOFTWARE INSTALLATION, COMMISSIONING AND MAINTENANCE SERVICES ON BEHALF OF THE ASSESSEE. REL IANCE IS THE ONLY CLIENT IN INDIA TO WHOM THE SOFTWARE HA S BEEN SUPPLIED. THE ASSESSEE HAS GUARANTEED ALL THE SERVI CES PROVIDED BY TTI INDIA TO RELIANCE UNDER AGREEMENT W ITH ASSESSEE. TTI INDIA HAS NO SUPPORT AGREEMENT WITH T HE RELIANCE AND ALSO TTI INDIA HAS NOT PROVIDED ANY SE RVICE TO ANY OTHER CUSTOMER EXCEPT RELIANCE. THEREFORE, TTI INDIA IS WHOLLY DEPENDENT ON ASSESSEE AND THE ASSESSEE ALSO IS WHOLLY DEPENDENT ON TTI INDIA FOR PROVIDING ITS SER VICES TO RELIANCE. TTI INDIA HAS NO OTHER INDEPENDENT BUSINE SS. ON THESE FACTS, THE AO HAS ALSO REFERRED TO USER ACCEP TANCE TEST CLAUSES AND PARENT GUARANTEE CLAUSE OF THE AGR EEMENT AND HAS ALSO HELD THAT TTI INDIA AND THE ASSESSEE H AS CLOSE AND INVISIBLE NEXUS FOR PROVIDING THE SERVICE S. RELIANCE HAS ALSO BEEN PLACED UPON THE FACT THAT EX PENSES TO THE TUNE OF RS. 154 LAKHS HAVE BEEN REIMBURSED T O THE PARENT COMPANY AT COST, IMPLYING THEREBY THAT THE EMPLOYEES OF THE ASSESSEE HAVE BEEN TRAVELING TO IN DIA TO RENDER THE SERVICES AND THAT TTI INDIA IS NOT CAPAB LE FOR RENDERING NECESSARY SERVICES INDEPENDENTLY. 5.1. BEING AGGRIEVED, THE ASSESSEE CONTESTED THIS ISSUE BEFORE LD. CIT(A) AND SUBMITTED IN DETAIL THAT TTI INDIA S HOULD NOT HAVE BEEN HELD AS DAPE OF THE ASSESSEE BECAUSE IT W AS NEITHER AN AGENT OF THE ASSESSEE NOR IT WAS DEPENDENT UPON THE ASSESSEE AND NOR IT HAD AUTHORITY TO CONCLUDE CONTR ACTS ON BEHALF OF THE ASSESSEE. BUT, LD. CIT(A) DID NOT AGR EE WITH THE SUBMISSION OF THE ASSESSEE; HE RELIED UPON THE JUDG MENT OF TTI TEAM TELECOM. I. LTD. 36 HONBLE DELHI HIGH COURT IN THE CASE OF ROLLS ROYCE PLC DATED 30.08.2011 AND HELD THAT THE AFORESAID INDIAN SUBSIDIARY WAS DAPE OF THE ASSESSEE. LD. CIT(A) SIM PLY REPRODUCED THE AFORESAID JUDGMENT AND CONCLUDED THA T THE AFORESAID COMPANY BEING INDIAN SUBSIDIARY OF THE AS SESSEE CONSTITUTED ITS PE IN INDIA. 5.2. STILL BEING AGGRIEVED, THE ASSESSEE CONTESTED THIS ISSUE BEFORE THE TRIBUNAL. DURING THE COURSE OF HEARING, IT WAS SUBMITTED BY THE LD. COUNSEL THAT LOWER AUTHORITIES HAVE NEITHER UNDERSTOOD NOR DISCUSSED THE FACTS PROPERLY WHILE UPHOLDING TTI INDIA AS DAPE OF THE ASSESSEE. IT WAS SUBMITTED BY THE LD. COUNSEL THAT AS PER SECTION 12 OF AGREEM ENT DATED 27 TH SEPTEMBER 2002, BETWEEN THE ASSESSEE AND RELIANCE, IT WAS AGREED THAT A SEPARATE AGREEMENT WOULD BE ENTER ED INTO FOR PROVIDING ANNUAL MAINTENANCE SERVICES BY THE AS SESSEE TO RELIANCE BUT THIS AGREEMENT WAS NEVER ENTERED INTO. SUBSEQUENTLY, ASSESSEES SUBSIDIARY I.E. TTI INDIA ENTERED INTO A SEPARATE AGREEMENT WITH RELIANCE FOR VERIFICATION OF AMC DATED 28 TH MAY 2003. IT WAS SUBMITTED THAT THE SAID AGREEMENT WAS EXECUTED INDEPENDENTLY BY TTI INDIA A S INDEPENDENT TERMS AND CONDITIONS AND ON PRINCIPAL TO PRINCIPAL BASIS, AND ASSESSEE WAS NOT PART TO THE SAID AGREEMENT. IT WAS FURTHER SUBMITTED THAT ARTICLES O F INDO ISRAEL DTAA HAVE NOT BEEN REFERRED TO AT ALL WHILE DECIDIN G THIS ISSUE AGAINST THE ASSESSEE. IT WAS ALSO SUBMITTED THAT DE PENDENT AGENCY PRINCIPLES WERE NOT APPLICABLE IN THIS CASE. IT WAS ALSO SUBMITTED THAT IN A.Y. 2006-07, THE TRIBUNAL HAS AL READY EXAMINED ALL THE FACTS AND HELD THAT ASSESSEE DID N OT HAVE ANY TTI TEAM TELECOM. I. LTD. 37 PE IN INDIA, AND THUS HE REQUESTED FOR FOLLOWING OR DER OF THE TRIBUNAL. IT WAS ALSO SUBMITTED THAT LD. CIT(A) HAS RELIED UPON THE CASE OF ROLLS ROYCE PLC WITHOUT COMPARING FAC TS AT ALL. PER CONTRA, LD. CIT-DR RELIED UPON THE ORDERS OF TH E LOWER AUTHORITIES. 5.3. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWE R AUTHORITIES. IT IS NOTED BY US THAT IT IS SIXTH YEA R OF THE TRANSACTIONS; WHICH HAVE ALWAYS BEEN ACCEPTED BY TH E REVENUE IN ALL THE EARLIER YEARS. IT IS FURTHER NOT ED THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2006-07 CLE ARLY HELD THAT ASSESSEE HAD NO PERMANENT ESTABLISHMENT IN IND IA. IT IS FURTHER NOTED THAT TTI INDIA HAS ENTERED INTO THE A GREEMENT ON INDEPENDENT BASIS. NO FACTS HAVE BEEN DISCUSSED BY THE LD. CIT(A) TO SHOW THAT HOW THE JUDGMENT OF ROLLS ROYCE PLC WAS APPLICABLE IN THE PREFERENCE OF THE DECISIONS OF TH E TRIBUNAL RENDERED IN ASSESSEES OWN CASE. UNDER THESE CIRCUM STANCES, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE ORDER OF THE TRIBUNAL OF THE EARLIER YEARS. THUS, RESPECTFULLY F OLLOWING THE ORDER OF THE TRIBUNAL FOR A.Y. 2006-07, WE DECIDE T HIS ISSUE IN FAVOUR OF THE ASSESSEE. THUS, GROUND NO.2 IS ALLOWE D. 6. GROUND NO.3: IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION O F AO IN HOLDING REIMBURSEMENT OF EXPENSES AS FEES FOR TECHN ICAL SERVICES (FTS) AS PER ARTICLE 13 OF INDO-ISRAEL DTA A. IT IS NOTED THAT LD. CIT(A) HAS DECIDED THIS GROUND AS CONSEQUE NTIAL TO GROUND NO.2 AND HELD THAT SINCE ASSESSEE HAS A PERM ANENT ESTABLISHMENT IN INDIA, THEREFORE REIMBURSEMENT EXP ENSES WAS NOTHING BUT BUSINESS INCOME OF THE ASSESSEE IN INDIA. TTI TEAM TELECOM. I. LTD. 38 DURING THE COURSE OF HEARING BEFORE US, IT WAS STAT ED BY THE LD. COUNSEL THAT IN A.Y. 2005-06, LD. CIT(A) DECIDE D THIS ISSUE IN FAVOUR OF THE ASSESSEE WHEREIN IT WAS HELD THAT AMOUNT OF REIMBURSEMENT OF EXPENSES (WHICH WERE SIMILAR TO E XPENSES REIMBURSED IN THE IMPUGNED YEAR) COULD NOT BE TAXED AS FTS IN THE HANDS OF ASSESSEE AND THIS ISSUE WAS NOT CON TESTED BY THE REVENUE AND THUS ATTAINED FINALITY. BUT, IN A.Y . 2006-07 AND 2007-08, THIS ISSUE HAD REACHED BEFORE THE TRIB UNAL WHEREIN, TAKING SUPPORT FROM THE ORDER OF THE LD. C IT(A) OF A.Y. 2005-06, THE TRIBUNAL VIDE ITS ORDER DATED 11.09.20 15 FOR AY 2006-07 HELD AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CI TED PRECEDENTS AND THE DECISIONS OF THE TRIBUNAL AND AL SO THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF T HE ORDER OF THE CIT (A) FOR AY 2005-06 IN GENERAL AND PARAS 3.6 TO 3.8 IN PARTICULAR, WE FIND THE SAME ARE RELEVANT IN THIS REGARD, AND THEREFORE, THE SAID PARAS ARE EXTRACTED AS FOLLOWS: '3.6. THE PAYMENTS RECEIVED BY THE APPELLANT ARE NO T IN RESPECT OF SERVICES THAT MAKE AVAILABLE ANY TECHNIC AL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW OR PROCESS. AS PER THE MOU OF INDIA-US TREATY, GENERALLY TECHNOLOG Y WILL BE CONSIDERED 'MAKE AVAILABLE' WHEN THE PERSON ACQUIRING THE SERVICE IS ENABLED TO APPLY THE TECHN OLOGY. IN THE PRESENT CASE, THE APPELLANT HAS PROVIDED SER VICES TO RELIANCE INFOCAM LTD (RIL) UNDER AN AGREEMENT WI TH TTI-INDIA IN CONNECTION WITH ENGINEERING, INSTALLAT ION, COMMISSIONING AND ACCEPTANCE OF NETWORK SERVICES, GUIDANCE AND CONSULTANCY, IT DOES NOT MAKE AVAILABL E TECHNICAL SERVICES, WHICH WILL ENABLE TTI-INDIA TO APPLY THE SAME IN FUTURE ON ITS OWN INDEPENDENTLY. HENCE, IT DOES NOT SATISFY THE 'MAKE AVAILABLE' CRITERIA. THE ASSESSEE-COMPANY HAS CITED EXAMPLE 7 OF THE MOU BETWEEN INDIA-US DTAA WHICH ALSO SUPPORTS ITS VIEW. THE LD AR HAS ALSO PLACED RELIANCE ON BOSTON TTI TEAM TELECOM. I. LTD. 39 CONSULTING GROUP P LTD (94 TD 31) (MUM) AND OTHER JUDICIAL CITATIONS REFERRED TO ABOVE WHICH SAYS THA T 'THE PERIOD OF MOU CLEARLY REVEALED THAT FOR A FEES TO BE CALLED AS FEES FOR TECHNICAL SERVICES RENDERED, IT IS ESSENTIAL THAT TECHNICAL KNOWLEDGE, SKILL, KNOWHOW SHOULD BE MADE AVAILABLE TO THE ASSESSEE SHOULD BE AT LIBERTY TO USE THEM IN HIS OWN RIGHT. THE SERVICES REFERRED TO IN THE INSTANT CASE DID NOT RESULT IN M AKING AVAILABLE ANY KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HO W OR PROCESS TO THE ASSESSEE. THAT WAS ESSENTIAL BEFO RE IT COULD BE SAID THAT THE PAYMENT MADE TO THE ASSESSEE WERE FEES FOR TECHNICAL SERVICES RENDERED.' 3.7 THUS, THE SERVICES RENDERED BY THE ASSESSEE- COMPANY DOES NOT FALL WITHIN THE AMBIT OF FEES FOR TECHNICAL SERVICES AS DEFINED IN ARTICLE 13(3) OF T HE INDO- ISRAEL TREATY READ WITH CLAUSE 4 OF ARTICLE 12 OF I NDIA- CANADA TAX TREATY. THEREFORE, I AM OF THE CONSIDERE D OPINION, THAT THE APPELLANT MERELY RENDERED SERVICE S WITHOUT IMPARTING ANY KNOWLEDGE, SKILLS, ETC TO TTI - INDIA. CONSEQUENTLY, THE SERVICES ARE NOT IN THE NA TURE OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING O F ARTICLE 13(3) OF THE INDO-ISRAEL TREATY READ WITH C LAUSE 2 OF THE PROTOCOL DATED29.01.1996. 3.8 I HAVE ALSO CONSIDERED THE CASES RELIED BY THE AO IN HIS ORDER DATED 19.12.2008 AND MENTIONED ABOVE. I HAVE PERUSED THE SAME IT IS NOTICED THAT THESE DECI SIONS RELIED UPON BY THE ASSESSING OFFICER ARE IN THE CON TEXT OF TAXABILITY OF REIMBURSEMENT OF EXPENSES UNDER TH E CONTEXT OF INCOME TAX ACT IE THE DOMESTIC LAW AND T HERE IS NO REFERENCE TO THE TAX TREATIES THEREFORE, THES E ARE NOT APPLICABLE TO THE PRESENT CASE UNDER CONSIDERAT ION. IN VIEW OF THESE FACTS, THE GROUND NO.2 IS ALLOWED IN FAVOUR OF THE ASSESSEE.' 9. FURTHER, WE HAVE ALSO GONE THROUGH THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SEIMENS AKTIONGESELLSCHAFT (SUPRA) AND FIND PARA 33 OF THE SAID JUDGMENT IS RELEVANT IN THIS REGARD AND THE RELEVAN T PORTION OF THE SAID PARA IS EXTRACTED AS FOLLOWS: '33. THE LAST CONTENTION WHETHER THE AMOUNTS BY WAY OF REIMBURSEMENTS ARE LIABLE TO TAX. TO ANSWER THAT ISSUE, WE MAY GAINFULLY REFER TO THE JUDGMENT OF A DIVISION BENCH OF THE DELHI HIGH COUR T IN TTI TEAM TELECOM. I. LTD. 40 INDUSTRIAL ENGINEERING PROJECTS (P) LTD'S CASE (SUP RA). THE LD DIVISION BENCH OF THE DELHI HIGH COURT WAS PLEASED TO HOLD THAT REIMBURSEMENT OF EXPENSES CAN, UNDER NO CIRCUMSTANCES, BE REGARDED AS A REVENUE RECEIPT AND IN THE PRESENT CASE THE TRIBUNAL HAS FO UND THAT THE ASSESSEE RECEIVED NO SUMS IN EXCESS OF EXPENSES INCURRED .' 10. WE HAVE ALSO PERUSED THE ORDER OF THE CIT (A) F OR THE AY 2005-06, AND FIND PARAS 1.5.1 TO 1.5.3 OF THE SA ID FAA ORDER ARE RELEVANT IN THIS REGARD. IN THE SAID FAA ORDER FOR THE AY 2005-06, DATED30.1.2008, THE CIT (A) HELD TH AT SINCE THE ASSESSEE MERELY RENDERED SERVICES WITHOUT IMPARTING ANY KNOWLEDGE, SKILLS ETC TO TTI-INDIA, T HEREFORE, THE SAID SERVICES ARE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF ARTICLE 13(3) OF IND IA-ISRAEL TAX TREAT READ WITH CLAUSE 2 OF THE PROTOCOL DATED 29.01.1996. WE ALSO FIND THAT ON IDENTICAL FACTS, T HE CIT (A)'S DECISION FOR THE AY 2005-06 WAS ACCEPTED BY T HE REVENUE AND NO APPEAL IS FILED AGAINST THE SAID ORD ER OF THE CIT (A). WHEN THE FACTS ARE IDENTICAL, AND THE DIFFERENCE IS ONLY IN FIGURES, DEVIATING FROM THE DECISION OF THE EARLIER AY'S ORDER OF THE CIT (A) IN THE ABSENCE OF ANY VAL ID REASON IS NOT SUSTAINABLE IN LAW AND THE SAME AGAINST THE PRINCIPLES OF CONSISTENCY. 6.1. SIMILAR DECISION AS TAKEN BY THE TRIBUNAL IN A.Y. 2007-08 IN ITA NO.9008/MUM/2010. DURING THE COURSE OF HEARI NG, LD. CIT-DR FAIRLY AGREED THAT NATURE OF EXPENSES INCURR ED IN THIS YEAR IS SIMILAR, AND FACTS & CIRCUMSTANCES OF THE C ASE AND LEGAL POSITION ALSO REMAINS THE SAME. UNDER THESE CIRCUMS TANCES, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, W E DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND HOLD THAT THE I MPUGNED EXPENSES COULD NOT BE TAXED AS FEES FOR TECHNICAL S ERVICES IN THE HANDS OF ASSESSEE. 7. GROUND NO.6: THIS GROUND IS WITH REGARD TO LEVY OF INTEREST U/S 234B. IT WAS FAIRLY STATED BY THE LD. CIT-DR TH AT INTEREST UNDER SECTION 234B WAS NOT LEVIABLE UPON THE ASSESS EE BEING TTI TEAM TELECOM. I. LTD. 41 NON-RESIDENT, IN VIEW OF THE JUDGMENT OF HONBLE BO MBAY HIGH COURT IN THE CASE OF DIT V. NGC NETWORK ASIA LLC 31 3 ITR 187 (BOM). THUS, IN VIEW OF JUDGMENT OF HONBLE BOMBAY HIGH COURT, THIS GROUND IS ALSO DEICED IN FAVOUR OF ASSE SSEE AND IT IS HELD THAT INTEREST U/S 234B WAS NOT LEVIABLE IN THE HANDS OF ASSESSEE. 8. WITH RESPECT TO APPEAL FOR A.YRS. 2009-10 AND A.Y. 2010-11, IT WAS JOINTLY STATED BY BOTH THE PARTIES THAT GROU NDS RAISED THEREIN ARE IDENTICAL AND FACTS AND CIRCUMSTANCES O F THE CASE AS WELL AS LEGAL POSITION REMAINS THE SAME. UNDER T HESE CIRCUMSTANCES, THE AO IS DIRECTED TO FOLLOW OUR ORD ER WITH RESPECT TO EACH GROUND IN ACCORDANCE WITH OUR DIREC TIONS GIVEN IN OUR ORDER FOR A.Y. 2008-09, WHICH SHALL BE APPLI CABLE MUTATIS MUTANDIS . 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PAR TLY ALLOWED IN TERMS OF OUR DIRECTIONS AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2016. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 30/11/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -. / (01 , * % 012 , / DR, ITAT, MUMBAI TTI TEAM TELECOM. I. LTD. 42 6. / 34 5 / GUARD FILE. / BY ORDER, ) -% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
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