Attachmate Corporation, USA V. ACIT Circke- 1(1)(1) International Taxxation, New Delhi

ITA 6/DEL/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9672 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Appeal Filed On: 04-01-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIBHA
• Keywords: Double taxation relief; TDS
• Section: 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘D’ NEW DELHI Before Sh. Saktijit Dey, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 06/Del/2021 : Asstt. Year : 2017-18 Attachmate Corporation, USA, C/o King & Partridge, Adv., No. 48, Lavelle Road, Bangalore, Karnataka Vs ACIT, Circle-1(1)(1), (Intl. Taxation), New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AALCA1395C Assessee by : Ms. Sumisha Murgai, CA & Ms. Vibha, CA Revenue by : Ms. Sapna Bhatia, CIT DR Date of Hearing: 07.07.2022 Date of Pronouncement: 29.09.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT(A)-42, New Delhi dated 13.06.2019. Royalty of Rs.5.4 Cr.: 2. The issue relates to payments from the Indian distributor/resellers towards the sale of software license and consideration towards ancillary support being treated as royalty. The relevant part of the order of the ld. DRP is as under: “The facts of the case are same as in AY 2015-16 and AY 2016- 17, for which directions were issued on 23.03.2018 and 01.05.2019 respectively. The issue has been discussed in ITA No. 06/Del/2021 Attachmate Corporation, USA 2 detailed from para iv. on page 3 of the directions to para xiii. In AY 2015-16. It was concluded therein as under: "xii. The Panel has considered the Draft assessment order, submissions of the assesses, the remand report and A's reply to the Remand Report, along with the order of the DRP for AY 2014-15. It is seen that the A' has now submitted the bifurcation of revenue from the sale of software license and the support services, which was not done during the assessment proceedings. The Panel therefore directs as under: a. that the sale of software license be assessed as 'Royalty ' as has been done by the AO in the draft assessment order which is upheld. b. that the revenue from Maintenance and Technical Support Services (MTSS) be assessed as FTS as has been done in AY 2014-15, and accepted in the remand report. c. the total of the two amounts may be taken INR 5,14,52,500/- (instead of INR 4,53,68,6941- which was taken in the draft assessment order). This is the equivalent of USD 8,28,170/- and the bifurcation is now submitted by the A’ which should be the amount taken by the AO in the final order.” 3.2 The facts of the case are same during this year also. The Panel directs that the AO tax the amounts as directed in a. and b. above, on the basis of the breakup of sale of software license and revenue from Maintenance and Technical Support Services (Support Services) as provided by the assessee.” ITA No. 06/Del/2021 Attachmate Corporation, USA 3 3. At the outset, it was brought to our notice that the similar issue in the assessee’s own case stands adjudicated by the Co- ordinate Bench of ITAT Delhi in ITA No.7379/Del/2019 for A.Y. 2016-17 and in ITA No. 4996/Del/2018 for A.Y. 2015-16 and ITA No. 6064/Del/2017 for A.Y. 2014-15. The relevant portion of the said order in ITA No. 6064/Del/2017 is as under: “13. On the above factual matrix, in our consider opinion, the quarrel /is squarely covered in favour of the assessee and against the Revenue by the decision of the Hon'ble Supreme Court in a land mark judgment in the case of Engineering Analysis Center of Excellence Pvt. Ltd. [2021] 432 ITR471 has laid down the following: "Given the definition of royalties contained in article 12 of the DTAAs 168 mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct 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 amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(1)(vi), along with Explanations 2 and 4 thereof), which deal with royalty, not being beneficial to the assessees, have no application in the facts of these cases. "Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non- resident computer s. manufacturers/suppliers, as consideration ITA No. 06/Del/2021 Attachmate Corporation, USA 4 for the resale/use of the computer software through EULAs/distribution agreements, is not the pay of royalty for the use of copyright in the computer software, and that same does not give rise to any income taxable in India, as a result of 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 enumerated by 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 rule the AAR in Citrix Systems (AAR) (supra) is set aside. The appeals from impugned judgments of the High Court of Delhi are dismissed." 14. The factual matrix involved in the case in hand, read with the ratio laid down by the Hon'ble Supreme Court [supra], we are of the considered view that no right in copy right is being transferred and accordingly, consideration received by the assessee cannot be brought to tax as per India - USA DTAA. 15. Incidentally, in Assessment Years 2018-19 and 2019-20, the Revenue has accepted the stand of the assessee. Considering the facts of the case in totality, in light of the decision of the Hon'ble Supreme Court [supra], we direct the Assessing Officer to delete the impugned addition. 4. Since, the matter stands covered in the earlier order of the Co-ordinate Bench of the Tribunal, the appeal of the assessee on this ground is allowed. ITA No. 06/Del/2021 Attachmate Corporation, USA 5 5. Ground No. 12 & 13, the assessee has taken up the issue of refund and levy of interest u/s 234D of the Act. The similar matter has been adjudicated in the case of Maruti Suzuki in ITA Nos. 2553 & 2641/Del/2013 for A.Y. 1999-00 and ITA Nos. 468 & 599/Del/2014 for A.Y. 1994-95 vide order dated 31.08.2020. The AO is directed to follow the ratio laid down in the said order. 6. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 29/09/2022. Sd/- Sd/- (Saktijit Dey) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 29/09/2022 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR