MOBILEUM INC, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION-3(2)(2), MUMBAI

ITA 5115/MUM/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5389 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 02-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SRINIVASARAGHAVAN S IYENGAR
• Assessee Lawyers: NEERAJ SETH
• Keywords: Business income; Depreciation; Transfer pricing; Double taxation relief; International transaction; Permanent establishment; Wholly owned subsidiary; TDS; Set aside
• Section: 195; 13; 22; 92CA; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAVAN KUMAR G ADALE (JM) I.T.A. NO. 5115/MUM/2017 (ASSESSMENT YEAR 2012-13) MOBILEUM INC 20813 STEVENS CREEK BOULEVARD, SUITE#200 CUPERTINO CALIFORNIA-95014, USA PAN : AADCR2661L VS. DCIT(IT) - 3(2)(2) AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 ( RESPONDENT ( APPELLANT ) ASSESSEE BY SHRI NEE RAJ SETH DEPARTMENT BY SHRI SRINIVASARAGHAVAN S.IYENGAR DATE OF HEARING 29.06 .2021 DATE OF PRONOUNCEMENT 22 .0 9 .2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-57 DATED 30.03.2017 AND PERTAINS TO ASSESSMENT YEAR 20 12-13. 2. THE GROUNDS OF APPEAL READ AS UNDER : GROUND NO. 1: SUMMARY OF THE EFFECTS OF GROUNDS OF APPEAL 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEAL) - 57, MUMBAI [*T HE CIT(A)'] ER RED IN UPHOLDING THE ACTION OF THE LEARNED DY. COMMISSIONER OF INCOME-TAX, INTE RNATIONAL TAXATION - 3(2)(2), MUMBAI ('THE AO') OF DETERMINING THE TOTAL INCOME O F MOBILEUM INC ('THE APPELLANT' OR 'THE COMPANY') AT INR 2,18,99,797 (I.E. USD 4,31 ,863 CONVERTED USING CONVERSION RATE OF INR 50.71) AS AGAINST THE RETURNED INCOME O F INR 1,57,88,512 (I.E. USD 3,11,349 CONVERTED USING CONVERSION RATE OF INR 50. 71). GROUND NO. 2: TREATING MOBILEUM (INDIA) PRIVATE LIM ITED ('MIPL') AS DEPENDENT AGENT PERMANENT ESTABLISHMENT OF THE APPE LLANT IN INDIA 2.1 ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN CONSTITU TING MIPL AS DEPENDENT AGENT MOBILEUM INC. 2 PERMANENT ESTABLISHMENT ('DAPE') OF THE APPELLANT I N INDIA UNDER ARTICLE 5(4) OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA A ND UNITED STATES OF AMERICA ('INDIA-US TAX TREATY')- THE LEARNED CIT(A) ERRED I N IGNORING THE FACT THAT MIPL IS NEITHER AN AGENT OF THE APPELLANT (BUT A SERVICE PR OVIDER), NOR DEPENDANT ON THE APPELLANT AND THAT MIPL NEITHER HAS NOR EXERCISED A NY AUTHORITY TO CONCLUDE CONTRACTS ON BEHALF OF THE APPELLANT AND DO NOT BIN D THE APPELLANT IN ANY OTHER MANNER. GROUND NO. 3: ATTRIBUTION OF FURTHER PROFITS TO THE DAPE OF THE APPELLANT IN INDIA I.E. TO MIPL, OVER AND ABOVE THE ARMS'S LENGT H REMUNERATION PAID TO MIPL 3.1 WITHOUT PREJUDICE TO GROUND NO. 2, ON TH E FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLD ING THE ACTION OF THE AO IN ATTRIBUTING FURTHER PROFITS TO DAPE, THEREBY IGNORI NG THE FACT THAT MEPL HAS ALREADY BEEN COMPENSATED AT ARM'S LENGTH REMUNERATION. GROUND NO. 4: MAKING ADHOC ATTRIBUTION OF INCOME TO DAPE OF THE APPELLANT IN INDIA 4.1 WITHOUT PREJUDICE TO GROUND NOS. 2 AND 3, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UP HOLDING THE ACTION OF THE AO IN HOLDING THAT ENTIRE REVENUE EARNED BY THE APPELLANT ARISES THROUGH AND IS EFFECTIVELY CONNECTED TO SUCH DAPE OF THE APPELLANT IN INDIA AN D IN MAKING ADHOC ATTRIBUTION OF 50% OF ENTIRE REVENUE TO SUCH DAPE, WITHOUT EVEN CA LLING FOR THE FACTUAL DETAILS FROM THE APPELLANT. 4.2 ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C1T (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN CONSIDER ING ADHOC PROFITABILITY OF 80% FOR SUPPLY OF MOBILEUM SOFTWARE, THIRD PARTY SOFTWARE A ND FEES FOR TECHNICAL SERVICES AND ADHOC PROFITABILITY OF 20% FOR SUPPLY OF THIRD PARTY HARDWARE, WITHOUT EVEN CALLING FOR THE FACTUAL DETAILS FROM THE APPELLANT. GROUND NO. 5: TREATING THE REVENUE EARNED FROM INDI AN CUSTOMERS FROM SUPPLY OF MOBILEUM SOFTWARE AND THIRD PARTY SOFTWARE AS RO YALTY 5.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN CONCLUDING THA T REVENUE EARNED FROM SUPPLY OF MOBILEUM SOFTWARE CONSTITUTES 'ROYALTY' AS PER THE PROVISIONS OF ARTICLE 12(3) OF THE INDIA - US TAX TREATY. 5.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN CONCLUDING THA T REVENUE EARNED FROM SUPPLY OF THIRD PARTY SOFTWARE CONSTITUTES 'ROYALTY' AS PER T HE PROVISIONS OF SECTION 9(L)(VI) OF THE ACT AND ARTICLE 12(3) OF THE INDIA - US TAX TRE ATY WITHOUT APPRECIATING THAT THE APPELLANT IS MERELY ACTING AS A TRADER OF THIRD PAR TY SOFTWARE. MOBILEUM INC. 3 GROUND NO. 6 - TREATING AFFAIRS OF THE APPELLANT AS A WAY TO AVOID PAYMENTS OF TAXES IN INDIA 6.1 ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN TREATING AFFAIRS OF THE APPELLANT AS A WAY TO AVOID PAYMENTS OF TAXES BY NON-SUBMITTING THE FA CT THAT THE APPELLANT HAS A PERMANENT ESTABLISHMENT IN INDIA AND THAT THE APPEL LANT HAS CIRCUMVENTED THE PROVISIONS OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE AS UNDER:- MOBILEUM INC (HEREINAFTER REFERRED TO AS 'THE APPEL LANT' OR 'MOBILEUM') IS A COMPANY INCORPORATED UNDER THE LAWS OF UNITED STATE S OF AMERICA ('USA') AND A TAX RESIDENT OF USA. THE APPELLANT IS ENGAGED IN THE BU SINESS OF DEVELOPING AND PROVIDING VOICE AND DATA ROAMING SOLUTION TO WORLDW IDE MOBILE OPERATORS. THE APPELLANT SELLS 'MOBILEUM SOFTWARE / MOBILEUM PRODU CT 1 ALONGWITH THIRD PARTY HARDWARE AND THIRD PARTY SOFTWARE TO MOBILE OPERATO RS ACROSS THE GLOBE AND ALSO PROVIDES INCIDENTAL SERVICES. THE APPELLANT HAS ENTERED INTO AGREEMENTS WITH VARI OUS CUSTOMERS IN INDIA FOR SUPPLY OF MOBILEUM PRODUCTS, THIRD PARTY HARDWARE A ND THIRD PARTY SOFTWARE AND PROVISION OF ALLIED SERVICES LIKE INSTALLATION, TRA INING, MAINTENANCE AND SUPPORT. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS EARNED FOLLOWING REVENUE FROM ITS CUSTOMERS IN INDIA: I) SUPPLY OF MOBILE URN SOFTWARE- USD 2,15,841; II) PROVISION OF INSTALLATION, TRAINING, MAINTENANC E AND SUPPORT SERVICES ('FEE FOR TECHNICAL SERVICES') - USD 3,11,349; III) SUPPLY OF THIRD PARTY SOFTWARE- USD 1,60,253; AND IV)SUPPLY OF THIRD PARTY HARDWARE- USD 15,68,864; THE REVENUE EARNED BY THE APPELLANT FROM ITS INDIAN CUSTOMERS DURING THE YEAR UNDER CONSIDERATION TOWARDS INSTALLATION, TRAI NING, MAINTENANCE AND SUPPORT HAS BEEN OFFERED TO TAX BY THE APPELLANT IN ITS RETURN OF INCOME AS FEES FOR TECHNICAL SERVICES ON GROSS BASIS AT THE RATE OF 10.506% (INC LUDING SURCHARGE AND EDUCATION CESS) AS PER THE PROVISIONS OF SECTION USA OF THE A CT. THE REVENUE EARNED BY THE APPELLANT FROM ITS INDIAN CUSTOMERS DURING THE YEAR UNDER CONSIDERATION FROM SUPPLY OF MOBILEUM SOFTWARE, THI RD PARTY SOFTWARE AND THIRD PARTY HARDWARE CONSTITUTED THE APPELLANT'S BUSINESS INCOM E WHICH IN ABSENCE OF PERMANENT ESTABLISHMENT ('PE') OF THE APPELLANT IN INDIA WAS NOT OFFERED TO TAX BY THE APPELLANT IN ITS RETURN OF INCOME FILED IN INDIA. THE AO MADE CERTAIN ADDITION IN THE ASSESSMENT WHICH WERE CONFIRMED BY THE LD.CIT(A). ASSESSEE HA S FILED THIS APPEAL AS A CONSEQUENCE. MOBILEUM INC. 4 4. APROPOS GROUND NO.1 THIS GROUND IS GENERAL. 5. APROPOS GROUND NO.2,3 AND 4 BRIEF FACTS OF THE ISSUES ARE AS UNDER:- THE ASSESSING OFFICER, WITH REGARD TO THE ISSUE OF DEPENDENT AGENT PERMANENT ESTABLISHMENT (DAPE) HAS MENTIONED IN THE ASSESSMENT ORDER THAT THE MIPL IS WHOLLY DEPENDENT ON THE ASSESSEE AND ACTS A S SUPPORT CENTRE FOR THE CLIENTS OF THE ASSESSEE IN INDIA AND APART FROM DEVELOPING SOF TWARE FOR THE ASSESSEE, IT ALSO PROVIDED INSTALLATION, MAINTENANCE AND SUPPORT SERV ICES TO THE INDIAN CUSTOMERS OF THE ASSESSEE. THAT THE ASSESSEE ALSO PROVIDED TRAINING TO THE CUSTOMERS, THESE TRAINING PROGRAMMES ARE PROVIDED IN INDIA WHICH SHOW THAT TH E SALE OF PRODUCTS GETS CONCLUDED IN INDIA, AS THE CUSTOMERS WOULD NOT BE A BLE TO USE THE PRODUCTS WITHOUT EFFECTIVE TRAINING BEING PROVIDED TO THEM. THE ASSE SSING OFFICER HAS ALSO MENTIONED THAT SHRI. SRINIVASAN WHO WAS A COMMON DIRECTOR OF THE ASSESSEE AND MIPL, IN THE INITIAL YEARS, HAD VISITED INDIA. IN VIEW OF THE AB OVE THE ASSESSING OFFICER HELD THAT MIPL CONSTITUTES DAPE OF THE ASSESSEE IN INDIA. THE ASSESSEE CONTENDED THAT MIPL DOES NOT MAINTAIN ANY STOCK OF MOBILEUM SOFTWARE/PRODUCT IN INDIA, DOES NOT SECURE ANY ORDE RS AND MR. SRINIVASAN WAS NO LONGER IN THE COMPANY. THESE SUBMISSIONS WERE CONSI DERED BY LD.CIT(A). BUT, HE HELD THAT, THE FACTS OF THE CASE AS MENTIONED BY TH E ASSESSING OFFICER, LIKE, THERE IS NO SEPARATE WEBSITE FOR MIPL AND IT IS SHOWN AS PART/E NTITY/DEPENDENT AGENT OF MOBILEUM INC. AS PER THE WEBSITE. THAT IT IS ALSO A FACT THAT ASSESSEE I.E. MOBILEUM, INC. WOULD NOT HAVE EARNED INCOME FROM INDIA BUT FO R ITS INDIAN AGENT MIPL, SINCE ALL THE OPERATIONS SUCH AS INSTALLATION, MAINTENANCE ET C ARE/WERE DONE BY MIPL. THAT, FURTHER, MOST IMPORTANT ASPECT IS THE BRAND NAME US ED BY THE ASSESSEE IS SAME AS THAT OF ITS AGENT IN INDIA. HENCE, LD.CIT(A) HELD THAT T HUS, IT IS UNDERSTOOD THAT A FOREIGN ENTERPRISE IS VIRTUALLY PROJECTED INTO THE TERRITOR Y OF ANOTHER COUNTRY, IN ANY MANNER; IT CONSTITUTES A PE IN THAT COUNTRY. ACCORDINGLY, HE A GREED WITH THE ASSESSING OFFICER THAT THERE IS A DAPE IN INDIA. FURTHER, THE ASSESSING OFFICER HAS REJECTED THE ASS ESSEE'S ARGUMENTS THAT THE MIPL WAS COMPENSATED AT ARM'S LENGTH PRICE FOR THE REASON THAT TRANSFER PRICING ASSESSMENT IN THE CASE OF APPELLANT HAS NOT BEING C ARRIED OUT. THE ASSESSING OFFICER HAS ALSO RELIED ON THE FACT OF THE WITHDRAWAL OF CI RCULAR NO. 23 OF 1969 BY THE CBTD. THE TPO HAS ATTRIBUTED 50% OF THE REVENUE RECEIVED BY THE APPELLANT FROM ITS INDIAN CUSTOMERS HAS SINCE DETAILS OF EXPENDITURE WERE NOT PROVIDED BY THE ASSESEE; THE TPO MOBILEUM INC. 5 HAS ESTIMATED 80% IN CASE OF INCOME FROM SALE OF SO FTWARE AND TECHNICAL FEES, AND PROFITABILITY OF 20% ON SALE OF THIRD PARTY HARDWAR E. BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED THAT T HE TRANSFER PRICING ASSESSMENT WAS DONE IN THE CASE OF MIPL, THE ASSOCI ATE ENTERPRISE OF THE ASSESSEE, FURTHER THE WITHDRAWAL OF CIRCULAR NO. 23 OF 1969 D OES NOT HAVE ANY EFFECT SINCE CIRCULAR NO. 5 OF 2004 ENUMERATES WHERE BPO UNIT RE NDERS SERVICE AT ALP THEN THERE WOULD BE NO FURTHER ATTRIBUTION. THE ASSESSEE ALSO OBJECTED FOR THE ARBITRARY ESTIMATION OF AMOUNT WITHOUT CONSIDERING THE DETAIL S OF EXPENDITURE. HOWEVER, LD.CIT(A) REJECTED THE CONTENTION. HE HELD THAT THE TRANSFER PRICING ASSESSMENT IN THE CASE OF THE ASSESSEE WHICH WAS NO T CARRIED OUT IS VERY SIGNIFICANT AND IN THE ABSENCE OF THE SAME THE DETERMINATION OF ALP IN TRANSACTIONS WITH THE AE'S IS VERY DIFFICULT THEREFORE, THE VIEW OF THE A SSESSING OFFICER ESTIMATING THE REVENUE IS CONFIRMED. HE FURTHER HELD THAT IT IS NOTICED THAT THE AO HAS TREATED THE ROYALTY INCOME, THIRTY PARTY HARDWARE AND FEES FOR TECHNICAL SERVIC E AGGREGATING TO RS. 1,57,88,512/- AS BUSINESS INCOME OF THE ASSESSEE RE LYING ON THE NEW CBDT CIRCULAR NO. 7/2009 (F NO. 500/135/2005-FTD-I) DATED 22.10.2 009, WHEREIN THE CBDT HAS WITHDRAWN THE OLD CIRCULAR NO. 23 DATED 23.07.1969 WHICH HAD SPECIFIED IN PARA 3(6)(C) THAT WHERE A NON-RESIDENT'S SALES TO INDIAN CUSTOMERS ARE SECURED THROUGH THE SERVICES OF AN AGENT IN INDIA, THE ASSESSMENT IN IN DIA OF THE INCOME ARISING OUT OF THE TRANSACTION WILL BE LIMITED TO THE AMOUNT OF PROFIT WHICH IS ATTRIBUTABLE TO THE AGENT'S SERVICES, PROVIDED THAT (I) THE NON-RESIDENT PRINCI PAL'S BUSINESS ACTIVITIES IN INDIA ARE WHOLLY CHANNELLED THROUGH HIS AGENTS, (II) THE CONTACTS TO SELL ARE MADE OUTSIDE INDIA, A ND (III) THE SALES ARE MADE ON A PRINCIPAL-TO-PRINCIPAL BASIS. THEREFORE, ON THE BAC KGROUND OF THE WITHDRAWAL OF THE SAID CBDT CIRCULARS NO. 23 OF 1961, THE AO WAS CORR ECT IN DISALLOWING THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE COMPANY'S PE IN INDI A HAD BEEN FINANCIALLY COMPENSATED AT ARM'S LENGTH PRICE FOR THE SERVICES PROVIDED BY RIPL (NOW KNOWN AS MIPL) AND THEREFORE, NO FURTHER ATTRIBUTION OF ANY PROFITS TO THE DAPE OF THE ASSESSEE COMPANY IN INDIA COULD BE MADE. THE ASSESSEE'S RELIANCE ON CIRCULAR NO. 5 DT. 28,09.2004 IS MISPLACED, BECAUSE IT IS ACTUALLY NOT ON THE ISSUE OF ATTRIBUTION OF P ROFITS FOR A PE BUT IT IS FOR THE ENTITIES WHICH ARE NOT HAVING ANY BUSINESS CONNECTION AND AL SO A PERMANENT ESTABLISHMENT, THEREFORE, THE ASSESSEE'S CONTENTION IS NOT ACCEPTE D. AS REGARDS THE QUANTUM OF ATTRIBUTION OF REVENUE THE ASSESSING OFFICER'S VIEW HAS TO BE UPHELD IN THE ABSENCE OF DETAILS OF EXPENDITURE. THE ASSESSEE EVEN DURING AP PELLATE PROCEEDING HAS NOT GIVEN THE DETAILS. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 6. APROPOS GROUND NO.5 MOBILEUM INC. 6 GROUND NO. 5: THIS ISSUE RELATES TO TREATMENT OF RECEIPT FROM IND IAN CUSTOMERS FROM SUPPLY OF MOBILEUM SOFTWARE AND THIRD PARTY SOFTWARE AS ROYAL TY. THE LD.CIT(A) HELD THAT THE ASSESSEE, THOUGH STATED THAT LIMITED RIGHTS HAVE BE EN GIVEN TO THE CUSTOMERS TO ENABLE THE USER TO OPERATE THE PROGRAMME BUT IT IS GIVEN W ITH SAME RIGHTS TO THE END USER. HENCE, HE WAS IN AGREEMENT WITH THE AO, AS, IN SUBS TANCE THE LICENSE IS GRANTED PERMITTING THE ULTIMATE USER TO COPY AND DOWNLOAD T HE SOFTWARE, THE CD WOULD NOT BE HELPFUL TO THE END USER AND ACCORDINGLY, IT CONSTIT UTES ROYALTY UNDER THE PROVISIONS OF SECTION 9(1)(VI) OF THE ACT AND ARTICLE 12(3) OF TH E INDIA-US TAX TREATY. THAT, THEREFORE, ANY CONSIDERATION MADE FOR THE USE OF A PROCESS WOULD CONSTITUTE ROYALTY AND SINCE THE DEFINITIONS OF TERM 'ROYALTY' AS APPE ARING IN EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT AND PARAGRAPH 3 OF ARTICLE 12 O F INDIA-US DTAA ARE IDENTICAL, PAYMENT RECEIVED BY THE ASSESSEE IS TAXABLE IN INDI A AS ROYALTY. THAT BASED ON THE PRINCIPLES LAID DOWN IN THE ABOVE RULINGS, HON'BLE KARNATAKA HIGH COURT IN CASE OF CIT VS. SAMSUNG ELECTRONICS CO LTD AND OTHERS (SUPR A) AND AS PER THE TERMS AND CONDITIONS OF THE AGREEMENTS ENTERED INTO WITH THE INDIAN CUSTOMERS AS WELL AS MANNER OF SUPPLY OF SOFTWARE, IN MY VIEW CONSIDERAT ION RECEIVED BY THE ASSESSEE FROM SUPPLY OF ROAMWARE/MOBILEUM SOFTWARE AND THIRD PARTY SOFTWARE TO ITS INDIAN CUSTOMERS CONSTITUTES 'ROYALTY' BOTH UNDER SECTION 9(1)(VI) OF THE ACT AND ARTICLE 12 OF INDIA-US TAX TREATY AND CHARGEABLE TO TAX ACCORD INGLY. THAT IN VIEW OF THE ABOVE, THE 'AO' IS CORRECT IN CONCLUDING THAT AMOUNT RECEI VED BY THE ASSESSEE AMOUNTS TO ROYALTY. 7. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ISSUES ARE COVERED IN FAVOU R OF THE ASSESSEE. HE HAS SUMMARIZED HIS SUBMISSIONS AS UNDER:- 3. GIST OF SUBMISSIONS MADE ON BEHALF OF THE APPELL ANT AT THE TIME OF HEARING: SUBMISSIONS WITH RESPECT TO GROUND NO 2,3 AND 4: 3.1 IT WAS SUBMITTED WITH REFERENCE TO GROUND NO. 3 THAT, IRRESPECTIVE OF WHETHER OR NOT MI PL CONSTITUTED A DAPE OF THE APPELLANT, SINC E THE TPO HAD ACCEPTED THE REMUNERATION RECEIVED BY MIPL TO BE AT ARM'S LENGTH , NO FURTHER PROFITS COULD BE ATTRIBUTED TO THE APPELLANT. IN THIS CONNECTION, AT TENTION OF THE HON'BLE BENCH WAS INVITED TO THE TRANSFER PRICING ORDER DATED 28 JANU ARY 2016 PASSED IN CASE OF MIPL FOR AY 20I2-13UNDER SECTION 92CA(3)OF THE INCOME-TA X ACT, 1961 [REF: PG. 1-4 OF PAPER BOOK]. MOBILEUM INC. 7 3.2 RELIANCE WAS PLACED ON VARIOUS JUDICIAL PRECE DENTS WITH REFERENCE TO THE PAPER BOOK FILED BEFORE THE HON'BLE ITAT WHEREIN IT HAS B EEN HELD THAT IF PE IS REMUNERATED AT ALP, THEN THERE CANNOT BE ANY FURTHE R ATTRIBUTION TO THE NON-RESIDENT ASSESSEE. 3.3 IT IS RESPECTFULLY SUBMITTED THAT IF GROUND N O. 3 IS DECIDED IN FAVOUR OF THE APPELLANT, GROUNDS NO. 2 AND 4 WOULD BECOME ACADEMI C AND WOULD NOT REQUIRE ADJUDICATION. SUBMISSIONS WITH RESPECT TO GROUND NO. 5: 3.4 THE AO INTER ALIA PLACED RELIANCE ON THE DECISI ON OF HON'BLE KARNATAKA HIGH COURT IN CASE OF CIT VS. SAMSUNG ELECTRONICS CO LTD AND OTHERS (ITA 2802/2005) AND TREATED THE REVENUE EARNED BY THE APPELLANT FRO M SUPPLY OF OFF THE SHELF COMPUTER SOFTWARE TO INDIAN CUSTOMERS AS ROYALTY UN DER ARTICLE 12 OF INDIA-USA TAX TREATY. THE SAID VIEW WAS UPHELD BY THE CIT(A). 3.5 IT IS SUBMITTED THAT THE AMOUNT IN QUESTION CA NNOT BE BROUGHT TO TAX IN INDIA FOR THE FOLLOWING REASONS A. SINCE ONE PROCEEDS ON THE FOOTING THAT THERE EXISTS A PE OF THE APPELLANT IN INDIA, THEN, AS PER THE PROVISIONS OF ARTICLE 12(6) OF IND IA-US DTAA, THE ALLEGED ROYALTY, WHICH WOULD BE EFFECTIVELY CONNECTED WITH THE SO-CA LLED PE, WOULD BE DEALT WITH AS PER 'ARTICLE 7 - BUSINESS PROFITS' AND NOT AS PER ' ARTICLE 12 - ROYALTIES AND FEES FOR INCLUDED SERVICES*. THE CONSEQUENCE WOULD BE THAT S INCE THE SO-CALLED PE IS ALREADY REMUNERATED AT AN ARM'S LENGTH, ' NEITHER THE ROYAL TY NOR ANY OTHER INCOME WOULD BE CHARGEABLE TO TAX IN THE APPELLANT'S HANDS FT IS SU BMITTED THAT IF THIS SUBMISSION IS UPHELD, THEN, IT WOULD NOT BE NECESSARY TO GO INTO THE QUESTION AS TO WHETHER OR NOT THE AMOUNTS IN QUESTION ARE IN THE NATURE OF ROYALT Y. B. IN ANY EVENT, THE DECISION OF KARNATAKA HIGH COURT RELIED ON BY THE AO HAS BEEN OVERRULED BY THE HON'BLE SUPREME COURT IN CASE OF E NGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED V. CIT AND ANR (CIVIL AP PEAL NOS. 8733-8734 OF 2018) [REF: PG. 87-312 OF PAPER BOOK FILED ON 26 MARCH 20 21 ], BY VIRTUE OF WHICH THE AMOUNT CANNOT BE REGARDED AS ROYALTY. 3.6 IN VIEW OF THE ABOVE SUBMISSIONS, IT IS MOST RE SPECTFULLY SUBMITTED THAT IT BE HELD THAT: A. THE SO-CALLED AGENT HAVING BEEN REMUNERATED AT ARM' S LENGTH, NO INCOME (INCLUDING BUSINESS PROFITS AND THE ALLEGED ROYALTY ) CAN BE BROUGHT TO TAX IN THE HANDS OF THE APPELLANT. B. IN ANY EVENT, THE REVENUES FROM SUPPLY OF SOFT WARE CANNOT BE REGARDED AS ROYALTY. MOBILEUM INC. 8 9. PER CONTRA LD. DR COULD NOT DISPUTE THE PROPOSIT ION THAT THE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE. 10. UPON CAREFUL CONSIDERATION, AS REGARDS GROUNDS 2,3 & 4, THE ISSUE OF FURTHER ATTRIBUTION TO THE NON-RESIDENT ENTITY, WE NOTE THA T THE SAME IS COVERED IN FAVOUR OF THE ASSESSEE INASMUCH AS THE PE IS FOUND TO BE REM UNERATED AT A.L.P. THE LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT WITHOUT PREJUDICE TO THE FACT THAT ASSESSEE DOES NOT CONSTITUTE DAPE IN INDIA, IF SUCH ALLEGED DAPE IS REMUNERATED AT ALP, THEN THERE IS NO QUESTION OF ANY FURTHER ATTRIBUTION O F PROFIT TO SUCH ALLEGED DAPE OF THE ASSESSEE IN INDIA. IN THIS REGARD, ASSESSEES COUNS EL HAS REFERRED TO FOLLOWING CASE LAWS. I) ZEE TV USA INC. DCIT, ADIT(IT) [ITA NO. 8862/MU M/2010(MUMBAI TRIBUNA)] FOR AY 2007-08 II) ADIT(IT) V. ZEE TV USA INC [ITA NO.5608/MUM/200 8(MUMBAI TRIBUNAL FOR AY 2005-06 III) ATL MEDIA LIMITED V. DCIT(IT) [ITA NO.6659/MUM /2017(MUMBAI TRIBUNAL)] FOR AY 2012-13 IV) NGC NETWORK ASIA LLC V. DIT(IT) [ITA NO.8671/MU M/2004 AND OTHER APPEALS(MUMBAI TRIBUNAL) V) CELLTICK TECHNOLOGIES LTD. V. DCIT [ITA NO.4167/ MUM/2017 (MUMBAI TRIBUNAL)] FOR AY 2014-15 11. IN THIS REGARD, HE MAY GAINFUL REFER TO THE ORD ER OF ITAT IN THE CASE OF ZEE TV USA INC.(SUPRA) ITAT HAS ADJUDICATED THE SAME ISSUE BY REFERENCE TO HONBLE SUPREME COURT DECISION IN THE CASE OF CIT V. E-FUND S I.T. SOLUTIONS INC., IN CIVIL APPEAL NO. 6082 OF 2015 DATED 24.10.2017, ORDER OF THE CO-ORDINATE BENCH ON THIS ISSUE READS AS UNDER:- MOBILEUM INC. 9 THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET SUB MITTED THAT THE ISSUE RAISED IN THE CROSS OBJECTION BY THE ASSESSEE THAT, EVEN IF IT IS HELD THAT THE ASSESSEE HAS PERMANENT ESTABLISHMENT IN INDIA ITS INCOME IS NOT TAXABLE IN INDIA AS IT HAS PAID ARMS LENGTH REMUNERATION/COMMISSION TO ITS AGENT IN INDIA WHICH IS TAXED IN INDIA AND THEREFORE NO ADJUSTMENT TO BE MADE IN THE HANDS OF THE ASSESSEE, IS DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08 BY THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO. 8862/MUM/2010 BY ORDER DATED 17.11.2017 FOL LOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. E-FUNDS I.T. SOLUTIONS INC., IN CIVIL APPEAL NO. 6082 OF 2015 DATED 24.10.2017. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT FOLLOW ING THE DECISION OF THE HONBLE SUPREME COURT, THE COORDINATE BENCH HELD THAT ONCE NO INCOME IS CHARGEABLE TO TAX IN INDIA IS ATTRIBUTABLE TO THE ASSESSEE FOR THE REASO N THAT THE TRANSACTION BETWEEN THE ASSESSEE AND ITS AE HAS BEEN FOUND AT ARMS LENGTH PRICE, NO FURTHER INCOME CHARGEABLE TO TAX IN INDIA CAN BE SAID TO BE ATTRIBUTABLE ON A CCOUNT OF PE. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE ORDER PASSED BY THE TRANS FER PRICING OFFICER U/S. 92CA (3) OF THE ACT FOR THE A.Y. 2005-06 IN THE CASE OF M/S. ZEE TE LEFILMS LTD., WHICH IS THE AGENT OF THE ASSESSEE, IT IS SUBMITTED THAT THE TPO ACCEPTED THE TRANSACTIONS ARE AT ARMS LENGTH AND NO ADJUSTMENT HAS BEEN MADE TO THE INTERNATIONAL TRANS ACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES. THEREFORE, IT IS SU BMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH I N ASSESSEES OWN CASE FOR THE A.Y. 2007-08 AND THE SAID ORDER MAY BE FOLLOWED FOR THIS ASSESSMENT YEAR. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSES SING OFFICER. ON HEARING BOTH THE PARTIES AND PERUSING THE ORDER S OF THE AUTHORITIES BELOW AND THE COORDINATE BENCH DECISION, WE FIND THAT SIMILAR ISS UE CAME UP BEFORE THE COORDINATE BENCH FOR THE A.Y. 2007-08 WHEREIN THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT INCOME OF THE ASSESSEE IS NOT CHARGEABLE TO TAX IN INDIA AS THE ASSESSEE HAS PAID ARMS LENGTH REMUNERATION/COMMISSION TO ITS AGENT IN INDI A WHICH WAS TAXED IN INDIA, HAS BEEN ACCEPTED FOLLOWING THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF CIT V. E- FUNDS I.T. SOLUTIONS INC., (SUPRA) WHILE HOLDING SO THE COORDINATE BENCH OBSERVED AS UNDER:- THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT N O ADJUSTMENT ON ACCOUNT OF ALP OF SPACE SELLING IS CONSIDERED BY TPO AND ONCE, NO TRA NSFER PRICING ADJUSTMENT IS MADE, NO FURTHER INCOME CHARGEABLE TO TAX IN INDIA CAN BE AT TRIBUTABLE TO THE ASSESSEE FOR THE REASON THAT THE TRANSACTION BETWEEN THE ASSESSEE AND AE HA S BEEN FOUND AT ARMS LENGTH PRICE. FOR THIS THE LEARNED COUNSEL FOR THE ASSESSEE RELIE D ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ADIT VS. E-FUNDS IT SOLUTION I NC. IN CIVIL APPEAL NO. 6082 OF 2015 VIDE ORDER DATED 24.10.2017 WHEREIN VIDE PARA 22 READS AS UNDER: - SHRI GANESH HAS REFERRED TO AND RELIED UPON AN ORD ER OF THE ADDITIONAL TAXATION COMMISSIONER, WHO IS THE TRANSFER PRICING OFFICER. THE SAID ORDER IS DATED 22ND FEBRUARY, 2006 AND STATES AS UNDER: THE TAXPAYER C OMPANY FILED ITS RETURN OF INCOME WITH ACIT CIRCLE 11(1), NEW DELHI. A REFERENCE WAS RECEIVED FROM THE ASSESSING OFFICER TO DETERMINE THE ARMS LENGTH PRICE U/S 9 2CA(3) IN RESPECT OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE DURING T HE F.Y. 2002-03. IN RESPONSE TO NOTICE MOBILEUM INC. 10 U/S 92CA, SHRI VIJAY IYER, CA OF S.R. BATLIBOI & CO . CHARTERED ACCOUNTANTS, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FORM TIME T O TIME. THE DOCUMENTATION PRESCRIBED UNDER RULE 10D OF THE INCOME TAX RULES WAS SUBMITTE D AND PLACED ON RECORD. THE TAXPAYER COMPANY IS ENGAGED IN PROVIDING IT ENABLED SERVICES WHICH INCLUDE BACK OFFICE SERVICES AND CALL CENTRE SERVICES. IT ALSO H AS A SOFTWARE DESIGN CENTER FOR DEVELOPMENT OF SOFTWARE FOR CALL CENTRES. EFUNDS IN TERNATIONAL (INDIA) PVT. LTD. IS A WHOLLY OWNED SUBSIDIARY OF IDLX HOLDINGS BV, NETHER LANDS. IDLX IS A WHOLLY OWNED SUBSIDIARY OF EFUNDS CORP. THE MAJOR INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE DURING THE YEAR IS GIVEN BELOW: SL.NO DESCRIPTION OF TRANSACTION METHOD VALUE (IN RS.) 1 FINANCIAL SHARED SERVICES (BACK OFFICE) TNMM 33.9 CR. 5 2 CALL CENTER SERVICES (SHARED SERVICE CENTRE) TNMM 88.03 CR. 3. 3 SOFTWARE DEVELOPMENT (OFFSHORE FOR CALL CENTRES) TNMM 57.58 CR IN ADDITION TO THE ABOVE THE ASSESSEE HAS ALSO PROV IDED SOFTWARE DEVELOPMENT SERVICES TO OVERSEAS EFUNDS GROUP ENTITIES. THE INTERNATIONAL T RANSACTIONS UNDERTAKEN BY THE ASSESSEE WERE EXAMINED VISA-VIS THE METHOD APPLIED BY THE AS SESSEE FOR ARRIVING AT THE ARMS LENGTH PRICE. THE ASSESSEE HAS RELIED ON THE TRANSA CTIONAL NET MARGIN METHOD (TNMM) IN RESPECT OF ALL THE MAJOR INTERNATIONAL TRANSACTI ONS. AFTER EXAMINATION OF THE DOCUMENTATION AND DISCUSSI ON WITH THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, NO ADVERSE INFERENC E IS DRAWN IN RESPECT OF THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTION S, AS DECLARED BY THE ASSESSEE IN FORM 3CEB, ANNEXED TO THE RETURN OF THE INCOME. SHRI GANESH IS CORRECT IN STATING THAT AS THE ARMS LENGTH PRINCIPLE HAS BEEN SATISFIED IN THE PRESENT CASE, NO FURTHER PROFITS WOULD BE ATTRI BUTABLE EVEN IF THERE EXISTS A PE IN INDIA. THIS WAS SPECIFICALLY HELD IN MORGAN STANLEY (SUPRA) AS FOLLOWS: 32. AS REGARDS DETERMINATION OF PROFITS ATTRIBUTAB LE TO A PE IN INDIA (MSAS) IS CONCERNED ON THE BASIS OF ARMS LENGTH PRINCIPLE WE HAVE QUOTED ARTICLE 7(2) OF DTAA. ACCORDING TO AAR WHERE THERE IS AN INTERNATIONAL TR ANSACTION UNDER WHICH A NONRESIDENT COMPENSATES A PE AT ARMS LENGTH PRICE, NO FURTHER PROFITS WOULD BE ATTRIBUTABLE IN INDIA. IN THIS CONNECTION, AAR HAS RELIED UPON CIRCULAR NO . 23 OF 1969 ISSUED BY CBDT AS WELL AS CIRCULAR NO. 5 OF 2004 ALSO ISSUED BY CBDT. THIS IS THE KEY QUESTION WHICH ARISES FOR DETERMINATION IN THESE CIVIL APPEALS. (A T PAGE 25). XXX XXX XXX 35. THE OBJECT BEHIND ENACTMENT OF TRANSFER PRICING REGULATIONS IS TO PREVENT SHIFTING OF PROFITS OUTSIDE INDIA. UNDER ARTICLE 7(2) NOT ALL P ROFITS OF MSCO WOULD BE TAXABLE IN INDIA BUT ONLY THOSE WHICH HAVE ECONOMIC NEXUS WITH PE IN INDIA. A FOREIGN ENTERPRISE IS LIABLE TO BE TAXED IN INDIA ON SO MUCH OF ITS BUSIN ESS PROFIT AS IS ATTRIBUTABLE TO THE PE IN MOBILEUM INC. 11 INDIA. THE QUANTUM OF TAXABLE INCOME IS TO BE DETER MINED IN ACCORDANCE WITH THE PROVISIONS OF THE IT ACT. ALL PROVISIONS OF THE IT ACT ARE APPLICABLE, INCLUDING PROVISIONS RELATING TO DEPRECIATION, INVESTMENT LOSSES, DEDUCT IBLE EXPENSES, CARRYFORWARD AND SET-OFF LOSSES, ETC. HOWEVER, DEVIATIONS ARE MADE BY DTAA I N CASES OF ROYALTY, INTEREST, ETC. SUCH DEVIATIONS ARE ALSO MADE UNDER THE IT ACT (FOR EXAMPLE SECTIONS 44-BB, 44-BBA, ETC.) UNDER THE IMPUGNED RULING DELIVERED BY AAR, REMUNE RATION TO MSAS WAS JUSTIFIED BY A TRANSFER PRICING ANALYSIS AND, THEREFORE, NO FURTHE R INCOME COULD BE ATTRIBUTED TO THE PE (MSAS). IN OTHER WORDS, THE SAID RULING EQUATES AN ARMS LENGTH ANALYSIS (ALA) WITH ATTRIBUTION OF PROFITS. IT HOLDS THAT ONCE A TRANSF ER PRICING ANALYSIS IS UNDERTAKEN, THERE IS NO FURTHER NEED TO ATTRIBUTE PROFITS TO A PE. THE I MPUGNED RULING IS CORRECT IN PRINCIPLE INSOFAR AS AN ASSOCIATED ENTERPRISE, THAT ALSO CONS TITUTES A PE, HAS BEEN REMUNERATED ON AN ARMS LENGTH BASIS TAKING INTO ACCOUNT ALL THE RISK TAKING FUNCTIONS OF THE ENTERPRISE. IN SUCH CASES NOTHING FURTHER WOULD BE LEFT TO BE ATTR IBUTED TO PE. THE SITUATION WOULD BE DIFFERENT IF TRANSFER PRICING ANALYSIS DOES NOT ADE QUATELY REFLECT THE FUNCTIONS PERFORMED AND THE RISKS ASSUMED BY THE ENTERPRISE. IN SUCH A SITUATION, THERE WOULD BE A NEED TO ATTRIBUTE PROFITS TO PE FOR THOSE FUNCTIONS/RISKS T HAT HAVE NOT BEEN CONSIDERED. THEREFORE, IN EACH CASE THE DATA PLACED BY THE TAXPAYER HAS TO BE EXAMINED AS TO WHETHER THE TRANSFER PRICING ANALYSIS PLACED BY THE TAXPAYER IS EXHAUSTI VE OF ATTRIBUTION OF PROFITS AND THAT WOULD DEPEND ON THE FUNCTIONAL AND FACTUAL ANALYSIS TO BE UNDERTAKEN IN EACH CASE. LASTLY, IT MAY BE ADDED THAT TAXING CORPORATES ON T HE BASIS OF THE CONCEPT OF ECONOMIC NEXUS IS AN IMPORTANT FEATURE OF ATTRIBUTABLE PROFI TS (PROFITS ATTRIBUTABLE TO PE). (AT PAGES 27-28) THE LEARNED COUNSEL ALSO RELIED IN ITATS DECISION IN THE CASE OF TAJ TV LTD. VS ADIT (INTERNATIONAL TAXATION) (2017) 162 ITD 674 (MUMTRI B.) 18. AS REGARDS GROUND NO.1 OF THE REVENUE'S APPEAL , IT IS ADMITTED FACT THAT, SIMILAR TO GROUND WHICH HAS BEEN DECIDED IN THE ASSESSMENT YEA R 2007-08. THEREFORE, IN VIEW OF THE FINDING GIVEN THERE IN, WE HOLD THAT NO FURTHER INCOME CHARGEABLE TO TAX IN INDIA CAN BE SAID TO BE ATTRIBUTABLE TO THE ASSESSEE FOR THE REASONS THAT THE TRANSACTION BETWEEN THE ASSESSEE AND PE HAS BEEN FOUND AT ARM'S LENGTH PRIC E AND FOR THIS YEAR ALSO THE TPO'S ORDER IN CASE OF THE ASSESSEE AND TAJ INDIA HAS BEE N PLACED ON RECORD WHEREIN THE TRANSACTION HAS BEEN ACCEPTED AT ARM'S LENGTH PRICE . THUS, GROUND NO. 1 IS DISMISSED. IN VIEW OF THE ABOVE, THE LEARNED COUNSEL FOR THE A SSESSEE ARGUED THAT IN CASE ALTERNATE ARGUMENTS OF THE ASSESSEE IS ACCEPTED THAT NO FURTH ER INCOME CHARGEABLE TO TAX IN INDIA CAN BE SAID TO BE ATTRIBUTABLE TO THE ASSESSEE FOR THE REASON THAT THE TRANSACTION BETWEEN THE ASSESSEE AND ITS AE HAS BEEN FOUND AT ARMS LEN GTH PRICE IN THE PRESENT CASE ON THE ISSUE OF AGENT FOR SPACE SELLING, THERE IS NO REQUI REMENT FOR DEALING WITH THE ISSUE OF, WHETHER THERE IS PE OR NOT AND NO ADDITION ON THIS COUNT CAN BE MADE IN THE CASE OF ASSESSEE. WHEN THESE FACTS WERE CONFRONTED TO THE L EARNED CIT DEPARTMENTAL REPRESENTATIVE, HE FAIRLY CONCEDED THE POSITION AS REGARDS TO ALTERNATIVE CONTENTION OF THE ASSESSEE. AFTER HEARING RIVAL CONTENTIONS AND GONE THROUGH T HE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ALTERNATIVE CONTENTION MADE BY THE ASSESSEE THAT ONCE NO INCOME CHARGEABLE TO TAX IN INDIA IS ATTRIBUTABLE TO THE A SSESSEE FOR THE REASON THAT THE TRANSACTION MOBILEUM INC. 12 BETWEEN THE ASSESSEE AND ITS AE HAS BEEN FOUND AT A RMS LENGTH PRICE, NO FURTHER INCOME CHARGEABLE TO TAX IN INDIA CAN BE SAID TO BE ATTRIB UTABLE ON ACCOUNT OF PE. ACCORDINGLY, THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSE E BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF EFUNDS IT SOLUTION INC. (SUPRA ) AND ALSO CO-ORDINATE BENCH DECISION IN THE CASE OF TAJ TV LTD. (SUPRA). RESPECTFULLY FO LLOWING THE SAME WE ALLOW THE APPEAL OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDIN ATE BENCH, WE HOLD THAT SINCE TRANSACTIONS BETWEEN THE ASSESSEE AND ITS AE HAVE B EEN FOUND AT ARMS LENGTH PRICES NO FURTHER INCOME CHARGEABLE TO TAX IN INDIA CAN BE SA ID TO BE ATTRIBUTABLE FOR THE PE OF THE ASSESSEE. HENCE THIS GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE. SINCE WE HAVE DECIDED ISSUE ON THE PRELIMINARY POINT, WE ARE NOT INCLINED TO GO INTO THE MERITS OF OTHER GROUNDS. 12. WE FIND THAT THE ABOVE RATIO IS FULLY APPLICABL E ON THE FACTS OF THE PRESENT CASE SINCE, IT IS NOT DISPUTED THAT THE AE HAS NOT BEEN REMUNERATED AT ALP, NO FURTHER INCOME CHARGEABLE TO TAX IN INDIA CAN BE SAID TO BE ATTRIBUTABLE FOR THE PE OF THE ASSESSEE. SINCE, WITHOUT PREJUDICE TO THE GROUND I S ADJUDICATED IN FAVOUR OF THE ASSESSEE, WE ARE NOT ADJUDICATING OTHER GROUNDS IN THIS REGARD. 13. AS REGARDS GROUND NO.5, THE ISSUE OF TREATMENT OF ROYALTY, WE NOTE THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE HON BLE SUPREME COURT DECISION AS ABOVE IN THE CASE OF ENGINEERING ANALYSIS CENTRE O F EXCELLENCE PRIVATE LIMITED V. CIT AND ANR [CIVIL APPEAL NOS. 8733-8734 OF 2018 (S UPREME COURT)]. IN THE SAID DECISION HONBLE SUPREME COURT HAS HELD THAT THE DE CISION OF SAMSUNG ELECTRONICS COMPANY LTD. (SUPRA) WHICH HAS BEEN RELIED UPON BY THE CIT(A) IS NOT GOOD LAW. HONBLE SUPREME COURT HAD CONCLUDED AS UNDER:- GIVEN THE DEFINITION OF ROYALTIES CONTAINED IN ART ICLE 12 OF THE DTAAS MENTIONED IN PARAGRAPH 41 OF THIS JUDGMENT, IT IS CLEAR THAT THE RE IS NO OBLIGATION ON THE PERSONS MENTIONED IN SECTION 195 OF THE INCOME TAX ACT TO D EDUCT TAX AT SOURCE, AS THE DISTRIBUTION AGREEMENTS/EULAS IN THE FACTS OF THESE CASES DO NOT CREATE ANY INTEREST OR RIGHT IN SUCH DISTRIBUTORS/END-USERS, WHICH WOULD A MOUNT TO THE USE OF OR RIGHT TO USE ANY COPYRIGHT. THE PROVISIONS CONTAINED IN THE INCOME T AX ACT (SECTION 9(1)(VI), ALONG WITH EXPLANATIONS 2 AND 4 THEREOF, WHICH DEAL WITH ROYAL TY, NOT BEING MORE BENEFICIAL TO THE ASSESSEES, HAVE NO APPLICATION IN THE FACTS OF THES E CASES. OUR ANSWER TO THE QUESTION POSED BEFORE US, IS THA T THE AMOUNTS PAID BY RESIDENT INDIAN END-USERS/DISTRIBUTORS TO NON-RESIDENT COMPUTER SOF TWARE MANUFACTURERS/SUPPLIERS, AS MOBILEUM INC. 13 CONSIDERATION FOR THE RESALE/USE OF THE COMPUTER S OFTWARE THROUGH EULAS/DISTRIBUTION AGREEMENTS, IS NOT THE PAYMENT OF ROYALTY FOR THE U SE OF COPYRIGHT IN THE COMPUTER SOFTWARE, AND THAT THE SAME DOES NOT GIVE RISE TO A NY INCOME TAXABLE IN INDIA, AS A RESULT OF WHICH THE PERSONS REFERRED TO IN SECTION 195 OF THE INCOME TAX ACT WERE NOT LIABLE TO DEDUCT ANY TDS UNDER SECTION 195 OF THE INCOME TAX ACT. THE ANSWER TO THIS QUESTION WILL APPLY TO ALL FOUR CATEGORIES OF CASES ENUMERAT ED BY US IN PARAGRAPH 4 OF THIS JUDGMENT. THE APPEALS FROM THE IMPUGNED JUDGMENTS OF THE HIGH COURT OF KARNATAKA ARE ALLOWED, AND THE AFORESAID JUDGMENTS ARE SET ASIDE. THE RULI NG OF THE AAR IN CITRIX SYSTEMS (AAR) (SUPRA) IS SET ASIDE. THE APPEALS FROM THE IM PUGNED JUDGMENTS OF THE HIGH COURT OF DELHI ARE DISMISSED. 14. RESPECTFULLY FOLLOWING THE ABOVE, WE SET ASID E THE ORDER OF THE LD.CIT(A) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22.09.2021 SD/- SD/- (PAVAN KUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 22/09/2021 SR.PS. THIRUMALESH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) ITAT, MUMBAI