DCIT, Circle-2(1)(1) Int. Taxation, New Delhi V. Inflow Technologies (Singapore) PTE. Ltd., Singapore

ITA 397/DEL/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3926 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-02-2024
• Assessment Year: 2019-2020
• Appeal Filed On: 20-02-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; TDS
• Section: 142(1); 143(2); 139(4)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘D’ : NEW DELHI) BEFORE SHAMIM YAHYA, ACCOUNTANT MEMBER AND SH. YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 397/Del/2023, A.Y. 2019-20 Deputy Commissioner of income Tax, Circle 2(1)(1) (international Taxation), New Delhi Vs. M/s. inflow Technologies (Singapore) Pte. Ltd. 06/-46 1003, Bukit Merah Central, Singapore, Foreign PAN : AACCI2888K Appellant Respondent Assessee by Ms. Richa Bakiwala, CA Revenue by Shri Vizay b. Vasanta, CIT-DR Date of Hearing 07/02/2024 Date of Pronouncement 09/02/2024 ORDER PER YOGESH KUMAR U.S., JM: This appeal is filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)-43, New Delhi [“Ld. CIT(A)”, for short], dated 26/12/2022 for the Assessment Year 2019-20. Grounds of the Revenue are as under :- “1. Whether on the facts and circumstances of the case, the ld. CIT(A) erred in holding that re-sale of hardware and software products in India by M/s. Inflow Technologies (Singapore) Pte. Ltd. Is not taxable in India as ‘Royalty’ u/s. 9(1)(vi) of the Income Tax Act, 1961 r/w Article 12 of India- Singapore DTAA. ITA No.397/Del./2023. 2 2. Whether on the facts and circumstances of the case, the ld. CIT(A) erred in holding that taxability of income from sale of software to independent distributors is not taxable as royalty u/s 9(1)(vi) of the I.T.Act, 1961 in absence of PE in India. 3. The appellanht craves to add, amend, modify or alter any grounds of appeal at any time or befoe the hearing of appeal.” 2. Brief facts of the case as mentioned in the order of Ld. CIT(A) are as under :- “ The appellant is a company incorporated in the Republic of Singapore and is engaged in the business of distribution of information management and unified communication products relating to Information Security, Storage Management, networking, Enterprise Mobility and Services. 2. The appellant is a non-exclusive authorized distributor of these products in the specified territories. Its vendors include Cisco, McAfee, D- Link, Net app, Aruba, Zebra etc. These products are shrink-wrap products without any customization. The Assessee distribute these products to various customers in its domestic market i.e. Singapore as well exports it to other countries including India. 3. The Assessee filed its return of income for the Assessment Year 2017-18 on 31-Dec-2019 under section 139(4) declaring nil income and claiming a refund of Rs. 35,54,570/- on account of TDS deducted. 4. Notice under section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) dated 31-Mar-2021 was issued to the Appellant intimating that the return filed has been selected for scrutiny. ITA No.397/Del./2023. 3 5. Further, notices uis 142(1) of the Act along with detailed questionnaire was issued electronically time to time. In response to various notices issued through the assessment module of ITBA compliances/submissions were made by the appellant company electronically. 6. A Show Cause notice was issued on 19-Sept-2021 questioning why the assessment proceedings for the year under consideration shall not be completed on the same lines as last Assessment year (AY 2017-18). 7. In response to the said Show Cause Notice, the Appellant made a detailed submission to the Assessing Officer providing all the information requested in connection with the Assessment. 8. Subsequently a draft Assessment Order was passed under section 144C of the Act. treating the revenue received of Rs 223,43,40,992/- (USD3,21,11,828) as per the submission of the assessee is adjudged as Income from Royalty and taxed accordingly as per Article 12 of India Singapore DTAA and Income Tax Act 1961. 9. Although aggrieved with the draft Assessment Order, the Appellant requested the ACIT (International Taxation), Circle 2(1)(1), Delhi ACIT (International Taxation) to pass the final order, preferring to file an appeal before your Ld. Authority. 10. Consequently, the final Assessment order was passed on 27 th November, 2021.” 3. Aggrieved by the assessment order dated 27/11/2021, the Assessee preferred an appeal before the Ld. CIT(A). By relying on the Judgment of the Hon’ble Supreme Court the case of Engineering Analysis Centre of Excellence (P.) ltd. Vs. CIT [2021] 125 taxmann.com ITA No.397/Del./2023. 4 42, deleted the addition. Aggrieved by the order of the ld. CIT(A), the department of Revenue preferred the present appeal. 4. The Ld. DR submitted that order impugned of the ld. CIT(A) is erroneous and further relying on the findings of the A.O. sought for reversal of the order of the Ld. CIT(A). 5. Per contra, ld. AR submitted that the issue involved in the appeal has been decided by the ld. CIT(A) by relying on the Supreme Court Judgment in the case of Engineering Analysis Centre of Excellence (P.) ltd. (Supra) therefore, sought for dismiss of the present appeal. 6. We have heard the parties and perusal the material available on record. The ld. CIT(A) while deleting the addition, relied on the ratio laid down by the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) ltd. (Supra) in following manner. ITA No.397/Del./2023. 5 ITA No.397/Del./2023. 6 7. Considering the fact that the Ld. CIT(A) after verifying the material on record found that Assessee is a pure non-exclusive distributor of hardware and software products, which is authorized by distribution agreement to re-sale hardware and software products in India and other neighboring countries and as the assessee is not engaged into the sale of any customized software or providing any technical solutions to the customer, applied the ratio laid down by the Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) ltd. deleted the addition. Thus, in the absence of any error pointed out by the Revenue regarding the finding of fact or applying the ratio of the Hon'ble Supreme Court , we find no error and infirmity in the order of ld. CIT(A). Accordingly, the grounds of appeal of the Revenue are falls. ITA No.397/Del./2023. 7 8. In the result the appeal of Revenue are dismissed. Order pronounced in the open court on 09 th February, 2024. Sd/- Sd/- (SHAMIM YAHYA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 09.02.2024 *Binita/R,N, SR.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI