Cognyte Technologies Israel Ltd.(formerly known as Verint Systems Limited), Gurgaon V. ACIT Circle-3(1)(1) Int. Tax., New Delhi

ITA 342/DEL/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9464 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 29-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; FORM 26AS
• Section: 148; 234B; 264

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘D’ BENCH, NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA No. 341/DEL/2021 [A.Y 2011-12) ITA No. 342/DEL/2021 [A.Y 2012-13) M/s Cognyte Technologies Israel Ltd Vs. The A.C.I.T [Formerly known as Verint Systems Ltd] Circle – 3(1)(1) 2 nd Floor, Tower –A, Building No. 8 Inttl. Taxation DLF Cyber City, Phase - 2 New Delhi Gurgaon, Haryana PAN: AADCV 2314 E (Applicant) (Respondent) Assessee By : Shri Kanchun Kaushal, FCA Department By : Shri R.D. Burman, CIT- DR Date of Hearing : 29.09.2022 Date of Pronouncement : 03.10.2022 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- These two separate appeals by the assessee are preferred against two separate orders dated 31.12.2020 framed u/s 144C(1) r.ws. 147/148 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to Assessment Years 2011-12 and 2012-13. 2 2. Since common grievances are involved in both these appeals, they were heard together and are disposed of by this common order for the sake of convenience and brevity, though the quantum in the impugned issues may differ. 3. For the sake of convenience, we are taking up the grounds for Assessment Year 2011-12, which read as under: “1. Based on facts and circumstances of the case and in law, the Learned Assessing officer (Ld. AO)/Dispute Resolution Panel ('DRP') has erred in holding that amount of INR 37,74,58,451 received by the Appellant from Indian Customers on account of sale of software/license charges is taxable as royalty under Article 12(3) of India-Israel Double Taxation Avoidance Agreement ('DTAA') and as per section 9(l)(vi) of the Act. 1.1 That Ld. AO has erred in not appreciating the fact that non- exclusive, non-transferable and terminable license has been granted by Appellant to Indian customers. 1.2 That Ld. AO failed to appreciate that sale of such 'off shelf software’ by the Appellant is merely a sale of copyrighted article and has not resulted in transfer of any right in relation to a 'copyright' embedded in the said software and therefore, 3 payments received by the Appellant do not constitute 'royalty' 1.3 That Ld. AO/DRP erred in disregarding the facts that the definition of 'royalty' as per the DTAA is restricted, since it treats only consideration for 'use of or the right to use any copyright of literary, artistic or scientific work as royalty and does not include those cases where there is only use of a 'copyrighted article'. 1.4 That the Ld. AO/DRP erred in disregarding the decisions rendered by the jurisdictional Delhi High Court in DIT v. Infrasoft Ltd [20131 39 taxmann.com 88, which have clearly held that there is a clear distinction between royalty paid on transfer of 'copyright' and consideration for transfer of 'copyrighted article' 2. Without prejudice to the above ground, based on the facts and circumstances of the case and in law, Ld. AO/DRP has erred in making addition of INR 15,44,738 received from Wipro Limited (included in above mentioned receipts of 37,74,58,451), which is in addition to the receipts appearing in Form 26AS, on the ground of reconciliation with the figures appearing in Form 26AS, without providing sufficient documents to reconcile such receipts from amounts in USD. 4 3. Based on the facts and circumstances of the case and in law, Ld. AO/DRP has erred in capping the grant of tax credit amounting to INR 4,02,99,083 upto the tax liability of the Appellant i.e. INR 3,77,45,845 and not providing the refund of excess taxes deducted at source. 4. Based on the facts and circumstances of the case and in law, the Ld. AO/DRP has erred in proposing charging interest under section 234A, 234B and 234C of the Act. The above grounds of appeal are independent and without prejudice to one another. The Appellant prays for leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the appeal.” 4, Briefly stated, the facts of the case are that the assessee had received a sum of Rs. 15,44,738/- for sale of software to Wipro Limited relevant to Assessment Year 2011-12. In spite of this receipt, the assessee did not file return of income, and accordingly, notice u/s 148 of the Act was issued and served upon the assessee, in response to which the assessee filed its return of income. 5 5. During the course of scrutiny assessment proceedings and drawing support from the definition of ‘Royalty’ given in Section 9(1)(vi) of the Act r.w. Article 12 of the India – Israel DTAA, the Assessing Officer formed a belief that total income of the assessee has to be taxed as royalty @ 10% as per India – Israel DTAA and, accordingly, completed the assessment proceedings. 6. Objections raised before the DRP were of no avail. 7. Before us, the ld. counsel for the assessee, at the very outset, drew our attention to the decision of the co-ordinate bench given in Assessment Year 2010-11 in ITA No. 7111/DEL/2019 order dated 23.08.2022 and pointed out that similar quarrel arose which was decided by this Tribunal in favour of the assessee and against the Revenue by following the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt Ltd 432 ITR 471. 8. The ld. DR could not bring any distinguishing decision in favour of the Revenue. 6 9. We have given thoughtful consideration to the orders of the authorities below. We find force in the contention of the ld. counsel for the assessee. The issue raised in the present appeals was also there in Assessment Year 2010-11 and the co-ordinate bench in ITA No. 7111/DEL/2019 has held as under: “5. We have heard boththe parties and perused the records. Ld. Counsel for the assessee submitted that this issue is squarely covered by the decision of the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited vs CIT 432 ITR 471 (SC). 6. Per contra, Ld. DR would not dispute this proposition. 7. Accordingly, we holdthat this issue is covered in this issue is squarely covered in favour of the assessee and against the Revenue. The relevant findings of the co-ordinate bench read as under: of the assessee by the decision of the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited (supra) and also by the decision of theHon’ble Delhi High Court in the case of DIT vs Intrasoft Ltd. 264 ITR329 (Del.). Accordingly, ground nos. l to 5 are allowed.” 6. Respectfully following the decision of the co-ordinate bench [supra], Ground No. 1 with its sub-grounds is decided in favour of the 7 assessee. With this finding, issues raised vide Ground No. 2 become academic and, therefore, needs no separate adjudication. 7. Quarrel raised vide Ground No. 3 relates to grant of tax credit without considering the provisions of section 240 of the Act 8. Having heard the rival contentions, we have carefully perused the orders of the authorities below. We find that while giving appeal effect, the Assessing Officer should have considered the provisions of section 240 of the Act. We, therefore, direct the Assessing Officer to consider the provisions of section 240 of the Act while giving appeal effect to our order. 9. In the result, the appeals of the assessee in ITA No. 341 & 342/DEL/2021 are allowed. The order is pronounced in the open court on 03.10.2022. Sd/- Sd/- [SAKTIJIT DEY] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 03 rd October, 2022. 8 VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order