Cummins Inc., Pune V. Deputy Commissioner of Income-tax, Pune

ITA 331/PUN/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9750 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-12-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 30-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Double taxation relief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.331/PUN/2015 / ASSESSMENT YEAR : 2010-11 CUMMINS INC., C/O. CUMMINS INDIA OFFICE CAMPUS, 5 TH FLOOR, SURVEY NO.21, BALEWADI, PUNE PAN : AABCC6225D VS. DCIT (INTERNATIONAL TAXATION), CIRCLE-1, PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 15-01-2015 PASSED BY THE ASSESS ING OFFICER (AO) U/S.143(3) R.W.S.144C(13) OF THE INCOME-TA X ACT, 1961 (HEREINAFTER CALLED THE ACT) IN RELATION TO THE ASSESS MENT YEAR 2010-11. 2. GROUND NOS.1 & 2 ARE AGAINST THE TREATMENT OF AMOUNT RECEIVED BY THE ASSESSEE FOR PROVIDING USERS A RIGHT IN OF F-THE- ASSESSEE BY SHRI KETAN VED REVENUE BY SHRI T. VIJAYA BHASKAR REDDY DATE OF HEARING 06-01-2020 DATE OF PRONOUNCEMENT 07-01-2020 ITA NO.331/PUN/2015 CUMMINS INC., 2 SHELF SOFTWARE AND USE OF STANDARD FACILITIES AND SUPPORT SERVICES AS ROYALTY. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSE E IS A FOREIGN COMPANY WHICH FILED ITS RETURN DECLARING TOTAL INCOME OF RS.33,18,32,305/-. THE ASSESSING OFFICER (AO) TA XED THE AMOUNT RECEIVED BY THE ASSESSEE ON PROVIDING USERS RIGHT IN OFF- THE-SHELF SOFTWARE AS ROYALTY WHICH WAS TREATED BY THE ASSESSEE AS NOT CHARGEABLE TO TAX. THIS WAS HELD SO BY A PPLYING THE PROVISIONS OF SECTION 9(1)(VI) OF THE ACT READ WITH ARTICLE 12(3) OF THE DTAA BETWEEN INDIA AND USA. SIMILARLY, THE ASSESSEE HAD ALSO RECEIVED CERTAIN AMOUNT TOWARDS STANDARD FACILITIES AND SUPPORT SERVICES WHICH WAS CLAIMED AS NOT CHARGEABLE TO TAX. THE AO TREATED THE SAME ALSO AS ROYALTY UNDER THE ACT AS WELL AS ARTICLE 12(3) OF THE DTAA AND INCLUDED IT IN THE TOTAL INCOME. THE ASSESSEE IS AGGRIEVED B Y THE ADDITIONS. 4. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVA NT MATERIAL ON RECORD, IT IS OBSERVED THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE F OR EARLIER YEARS. IN ITS ORDER DATED 07-08-2019 FOR THE ASS ESSMENT ITA NO.331/PUN/2015 CUMMINS INC., 3 YEAR 2008-09 (ITA NO.2506/PUN/2012), THE TRIBUNAL, FOLLOWING ITS EARLIER ORDERS FOR THE ASSESSMENT YEARS 2004-0 5 AND 2006-07, HAS HELD THAT SUCH AMOUNT CANNOT BE TREATED A S ROYALTY CHARGEABLE TO TAX. A COPY OF SUCH ORDER HAS B EEN PLACED ON RECORD. RELEVANT DISCUSSION HAS BEEN MADE IN PARA 17 OF THE TRIBUNALS ORDER. BOTH THE SIDES ARE IN AGREEM ENT THAT THE FACTS AND CIRCUMSTANCES OF THE INSTANT YEAR ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE EARLIER YEAR. RESPECTFULLY FOLLOWING THE PRECEDENT, WE DELETE THE ADDITIONS. 5. GROUND NO.3 IS AGAINST THE ADDITION OF RS.3,38,37,109/ - TOWARDS REIMBURSEMENT OF COST FROM CUMMINS INDIA LIMITED B Y TREATING THE SAME AS FEES FOR TECHNICAL SERVICES (FTS). 6. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE REC EIVED RS.1.40 CRORE AND ODD FROM CUMMINS INDIA LIMITED AS PAYMENT FOR EXPAT CROSS CHARGES AND RS.1.97 CRORE A ND ODD AS `PAYMENT FOR REGIONAL CROSS CHARGES TOTALING RS.3.38 CRO RE. THE SAID AMOUNT WAS NOT OFFERED FOR TAXATION ON THE GROUN D THAT IT WAS IN THE NATURE OF REIMBURSEMENT OF COSTS. THE AO TAXED THE SAME AS ROYALTY OR FEES FOR TECHNICAL SERVICES UN DER THE DTAA ON THE GROUND THAT THE ASSESSEE DID NOT SUBMIT ANY ITA NO.331/PUN/2015 CUMMINS INC., 4 DOCUMENTARY EVIDENCE TO PROVE THAT THE ABOVE AMOUNT WAS REIMBURSEMENT OF COST AND DID NOT HAVE ANY PROFIT ELEMENT . 7. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVA NT MATERIAL ON RECORD, IT IS NOTICED THAT THE AO TAXED RS.3.38 CRORE AS CHARGEABLE TO TAX BY REJECTING THE ASSESSEES CONTENTION TH AT NO EVIDENCE WAS FURNISHED TO PROVE THAT THE SAME WAS IN THE NATURE OF REIMBURSEMENT OF COSTS. THE LD. AR CONTENDED THAT AMPLE EVIDENCE WAS AVAILABLE TO PROVE THE CASE AND ONE CH ANCE BE GIVEN TO THE ASSESSEE TO PLACE ON RECORD THE NECESSARY EVIDENCE TO THE SATISFACTION OF THE AO. IN VIEW OF THE FACTS AS OBTAINING IN THE INSTANT CASE, WE ARE OF THE CONSIDERED OPINIO N THAT THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS SET-ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO. WE ORDER ACCORDINGLY AND DIRECT HIM TO DE CIDE THIS ISSUE AFRESH AS PER LAW AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. NEEDLESS TO SAY, TH E ASSESSEE WILL BE AT LIBERTY TO LEAD ANY FRESH EVIDENCE IN S UPPORT OF ITS CASE. 8. GROUND NO.4 IS AGAINST THE ADDITION OF RS.16,84,833/-, BEING, THE DIFFERENCE AS PER FORM NO.3CEB OF CUMMINS IND IA ITA NO.331/PUN/2015 CUMMINS INC., 5 LIMITED AND THE RECEIPT SHOWN BY THE ASSESSEE TOWARDS OFF- THE- SHELF SOFTWARE CHARGES. 9. THE FACTS CONCERNING THIS GROUND ARE THAT THE AO NOTICED THAT THE AMOUNT OF TECHNICAL SERVICES PAYMENT AS PER FORM 3CEB OF CUMMINS INDIA LIMITED WAS AT VARIANCE WITH THE AMOUNT SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSEE FR OM CUMMINS INDIA LIMITED TO THE TUNE OF RS.16,84,833/-. HE TREATED THE SAME AS ROYALTY/FEES FOR TECHNICAL SERVICES UNDER THE ACT AS WELL AS UNDER THE DTAA AND ACCORDINGLY CHARGED THE SAME TO TAX AT 15%, AGAINST WHICH THE ASSESSEE HAS APPROACHED THE TRIBUNAL. 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING TH E RELEVANT MATERIAL ON RECORD, WE FIND THE ASSESSEE SHOWED THE RECEIPT FROM CUMMINS INDIA LTD. AT A FIGURE LOWER BY RS.16,84,833/-. IN THE ABSENCE OF THE ASSESSEE SHOWING ANY RECONCILIATION OF THE TWO AMOUNTS, IT HAS TO BE HELD THAT THE ASSESSEE REFLECTED LOWER RECEIPT. HOWEVER, IN VIEW OF THE OFF- THE-SHELF SOFTWARE RECEIPTS AND SUPPORT SERVICES CHARGES E TC. NOT CHARGEABLE TO TAX IN VIEW OF OUR DECISION ON GROUND NOS. 1 & 2, ITA NO.331/PUN/2015 CUMMINS INC., 6 WE HOLD THAT THE SAID SUM OF RS.16.84 LAKH, THOUGH INCLUDIBLE IN THE RECEIPTS, CANNOT BE CHARGED TO TAX. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH JANUARY, 2020. SD/- SD/- (S.S. VISWANETHRA RAVI) (R.S.SYAL ) JUDICIAL MEMBER VICE PR ESIDENT PUNE; DATED : 07 TH JANUARY, 2020 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. THE PR. CIT -5, PUNE 5. , , / DR C, ITAT, PUNE 6. / GUARD FILE / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO.331/PUN/2015 CUMMINS INC., 7 DATE 1. DRAFT DICTATED ON 06-01-2020 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 06-01-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *