Sai Consulting Engineers Pvt. Ltd., Ahmedabad V. The Income Tax Officer, (International Taxation )-III, Ahmedabad

ITA 656/AHD/2014

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5471 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 06-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY MAJMUDAR
• Keywords: Double taxation relief; TDS; Set aside
• Section: 201(1); 195; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NOS. 655 & 656/AHD/2014 (ASSESSMENT YEARS : 2010-11 & 2011-12) SAI CONSULTING ENGINEERS PVT. LTD. BLOCK-A, SAI HOUSE, SATYAM CORPORATE SQUARE, B/H RAJPATH CLUB, AHMEDABAD-380 059. VS. INCOME TAX OFFICER (INTERNATIONAL TAXATION)-III, AHMEDABAD. [ PAN NO. AADCS 0481 P ] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SANJAY MAJMUDAR, A.R. RESPONDENT BY : SHRI VINOD TANWANI, SR. D.R. DATE OF HEARING 08.08.2019 DATE OF PRONOUNCEMENT 16.10.2019 O R D E R PER MS. MADHUMITA ROY - JM: BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)- GANDHINAGAR, AHMEDABAD BOTH DATED 04.12.2013 UNDER SECTION 201(1 ) & 201(1A) R.W.S. 195 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED A S TO THE ACT) ARISING OUT OF THE ORDER DATED 27.02.2012 PASSED BY THE ITO (IN TL. TAXN.)-III, AHMEDABAD FOR THE ASSESSMENT YEARS 2010-11 & 2011-12. SINCE BOTH THE APPEALS RELATE TO THE SAME ASSESSEE AND IDENTICAL ISSUES ARE INVOLVED THOSE ARE HEARD ANALOGOUSLY AND ARE BE ING DISPOSED OF BY A COMMON ORDER. ITA NOS. 655 & 656/AHD/2014 SAI CONSULTING ENGINEERING PVT. LTD. VS. ITO (INTL. TAXATION) ASST.YEARS 2010-11 & 2011-12 - 2 - 2. THE APPELLANT-COMPANY PURCHASED INFOWORKS CS SOF TWARE FROM WILLINGFORD SOFTWARE, UK WHICH WAS DELIVERED BY CD AND DONGLE. THE REMITTANCE TOWARDS PURCHASE OF THE SAID SOFTWARE, W AS ACCORDING TO THE LEARNED AO IN THE NATURE OF ROYALTY WITHIN THE MEAN ING OF PROVISION OF SECTION 9(1)(VI) OF THE ACT AND THUS THE ASSESSEE O UGHT TO HAVE DEDUCTED THE TAX AT THE TIME OF REMITTING THE SAME AS WAS THE OPINIO N OF THE LEARNED AO. SINCE THE ASSESSEE FAILED TO DEDUCT TAX AS PER THE PROVIS ION OF SECTION 195 OF THE ACT WHILE REMITTING 9765 (GBP) TO WALLINGFORD SOFTWARE LTD, UK NOTICE U/S 201 & 201(1A) DATED 05.01.2012 WAS ISSUED ASKING THE APPE LLANT TO EXPLAIN AS TO WHY THE ASSESSEE SHOULD NOT BE TREATED AS THE ASSESSEE IS DEFAULT INTER ALIA EXPLAINING WITHIN THE MEANING OF SECTION 201(1) OF THE ACT AND AS TO WHY TAX SHOULD NOT BE RECOVERED WITH INTEREST U/S 201(1A) OF THE ACT. THE ASSESSEES CASE IS THIS THAT THE PAYMENT IS NOT MADE FOR USE OF ANY COPYRIG HT BUT FOR ACQUISITION OF COPYRIGHT ARTICLE. THE SAME IS NEITHER FOR TRANSFER OF ANY RIGHT NOR GRANTING OF LICENSE NOR FOR USE OF ANY COPYRIGHT. THE COMPUTER SOFTWARE WHEN PUT INTO MEDIA AND SOLD BECOMES GOODS AND AMOUNT PAID CANNOT BE TREATED AS ROYALTY AS THE CASE MADE OUT BY THE ASSESSEE BEFORE THE LEARNE D AO; THEREFORE, THE PURCHASE WILL NOT FALL WITHIN THE PURVIEW OF THE DE FINITION OF ROYALTY AS PER SECTION 9(1)(VI) AS WELL AS ARTICLE 13 OF DTAA BETW EEN INDIA AND UK AND RESULTANTLY SECTION 195 IS NOT APPLICABLE. HOWEVER, SUCH PLEA OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE AND TAX PAYMENT BY THE ASS ESSEE WORKED OUT AT RS.1,19,326/- BY AND UNDER THE ORDER PASSED U/S 201 (1) AND 201(1A) R.W.S 195 OF THE ACT DATED 27.02.2012 WHICH WAS, IN TURN, FUR THER CONFIRMED BY THE LEARNED CIT(A). HENCE, THE INSTANT APPEAL BEFORE US . 3. AT THE TIME OF HEARING OF THE INSTANT APPEAL, TH E LEARNED REPRESENTATIVE OF THE ASSESSEE SUBMITTED BEFORE US THAT THE WILLIN GFORD SOFTWARE DEVELOPS LEADING WATER RESOURCE MANAGEMENT SOFTWARE FOR THE WORLDWIDE WATER INDUSTRY. ITA NOS. 655 & 656/AHD/2014 SAI CONSULTING ENGINEERING PVT. LTD. VS. ITO (INTL. TAXATION) ASST.YEARS 2010-11 & 2011-12 - 3 - IT IS THE ONLY SUPPLIER OF SUCH SOFTWARE TO OFFER I NTEGRATED SOLUTIONS TO SUPPORT PLANNING AND OPERATIONS ACROSS THE DISCIPLINES OF W ATER SUPPLY, WASTEWATER, RIVER AND COASTAL MANAGEMENT. THE SAID SOFTWARE HAS BEEN DELIVERED TO THE APPELLANT THROUGH THE INTERNET AND THE HARDWARE LOC K (KEY - DINGAL) SENT THROUGH T & T PRIVATE LIMITED ON 31.07.2009. THIS I S ONLY A HARDWARE KEY AND ONE CD WHICH IS BEARING NO COMMERCIAL VALUE. IN THI S ASPECT HE HAS TAKEN US TO THE RELEVANT MATERIAL AVAILABLE AT PAGE 18 & 19 OF THE PAPER BOOK ON RECORD BEFORE US. SUCH SUBMISSIONS IS SUPPORTED BY THE SAI D DOCUMENTS BEING THE INVOICE DATED 31.07.2009 ISSUED BY THE WILLINGFORD SOFTWARE TO THE ASSESSEE. THE LEARNED AR HAS FURTHER STATED BEFORE US THAT TH IS SOFTWARE PROCURED BY THE ASSESSEE IS PACKED FOR 2 TO 5 YEARS AND THE WORK PA CK IN RELATION TO WATER & SEWERAGE BELOW GROUND ASSETS, DESIGN SERVICES IN TE RMS OF AN AGREEMENT ENTERED INTO ON 01 ST APRIL, 2010 BY AND BETWEEN THE ASSESSEE BEING THE SERVICE PROVIDER AND THE SOUTHERN WATER SERVICES LIMITED WH ICH HAS ALSO BEEN RELIED UPON. HOWEVER, THE LEARNED AR CONCEDED BEFORE US TH AT THIS PARTICULAR AGREEMENT HAS NOT BEEN PLACED BEFORE THE AUTHORITIE S BELOW WHICH IS RELEVANT TO THE ISSUE INVOLVED IN THIS MATTER SO AS TO ASCER TAIN WHETHER THE REMITTANCE GIVEN TO THE COMPANY IS A ROYALTY OR OTHERWISE AND AS TO WHETHER THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S 195 OF THE ACT. HENCE, HE PRAYED BEFORE US FOR REMITTING THE ISSUE TO THE FILE OF THE LEARNED AO T O ADJUDICATE THE MATTER AFRESH ON THE BASIS OF SUCH AGREEMENT DATED 01.04.2010. TH E LEARNED DR AS WITH USUAL FAIRNESS HAS NOT SUBMITTED ANYTHING CONTRARY TO SUCH SUBMISSIONS RENDERED BY THE LEARNED AR IN THIS RESPECT. 4. WE HAVE HEARD THE RESPECTIVE PARTIES, WE HAVE AL SO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORDS. WE FIND THAT THE CO NTENTION MADE BY THE ASSESSEE HAS SUBSTANCE SO AS TO RESOLVE THE ISSUE B Y THE AUTHORITIES BELOW. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE LE ARNED AO WITH A DIRECTION ITA NOS. 655 & 656/AHD/2014 SAI CONSULTING ENGINEERING PVT. LTD. VS. ITO (INTL. TAXATION) ASST.YEARS 2010-11 & 2011-12 - 4 - UPON HIM TO ADJUDICATE THE MATTER AFRESH UPON TAKIN G INTO CONSIDERATION THE AGREEMENT DATED 01.04.2010 ENTERED INTO BY AND BETW EEN THE ASSESSEE AND THE SOUTHERN WATER SERVICES LIMITED (SOUTHERN WATER) AND ANY OTHER EVIDENCE WHICH THE ASSESSEE MAY CHOOSE TO FILE AT THE TIME O F HEARING OF THE MATTER. IT IS FURTHER DIRECTED THAT THE ASSESSEE BE GIVEN AN OPPO RTUNITY OF BEING HEARD TO REPRESENT HIS CASE BEFORE THE LEARNED AO. APART FRO M THAT WE FURTHER DIRECT THE LEARNED AO TO ASCERTAIN AS TO WHETHER THIS SOFTWARE IS USED FOR ANY PURPOSES OTHER THAN WATER & SEWERAGE WORK AS CLAIMED BY THE ASSESSEE AND TO PASS ORDERS STRICTLY IN ACCORDANCE WITH LAW. IT IS NEEDL ESS TO MENTION THAT THE IMPUGNED ORDER U/S 201(1) & 201(1A) R.W.S. 195 THER EFORE QUASHED. 5. IN THE RESULT, BOTH THE ASSESSEES APPEALS ARE A LLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 16/10/2019 SD/- SD /- ( WASEEM AHMED) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 16/10/2019 PRITIYADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-GANDHINAGAR, AHMEDABAD. 5. , ! ', #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) !, #$ / ITAT, AHMEDABAD