ALLCATEL US INTERNATIONAL MARKETING INC. ( NOW KNOWN AS ALCATEL LUCENT USA INC.), MUMBAI V. DDIT (IT) 1(1), MUMBAI

ITA 7299/MUM/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0506 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 04-04-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 26-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P J PARDIWALA; MADHUR AGGARWALDR
• Assessee Lawyers: JASBIR CHOUHAN
• Keywords: Double taxation relief; Retrospective amendment; Question of law
• Section: 14A; 6

Judgement Text

, INCOME-TAX APPE LLATE TRIBUNAL -LBENCH MUMBAI , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./7299/MUM/2010, /ASSESSMENT YEAR: 2005-06 ./I.T.A./7300/MUM/2010, /ASSESSMENT YEAR: 2007-08 ALCATEL - LUCENT USA INC. (EARLIER ALCATEL USA INTERNATIONAL MARKETING INC. ) ALCATEL-LUCENT INDIA LTD. 14 TH FLOOR, TOWER C. DLF CYBER GREEN, DLF CITY, PHASE-III,GURGAON. PAN:AAECA 4907 H VS. DDIT, - (INTL. TAXATION) - 1(1) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) ./I.T.A./1131/MUM/2010, /ASSESSMENT YEAR: 2006-07 DDIT, - (INTL. TAXATION) - 1(1) MUMBAI. VS. ALCATEL - LUCENT USA INC. (EARLIER ALCATEL USA INTERNATIONAL MARKETING INC. )GURGAON. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: S/SHRI P.J. PARDIWALA & MADHUR AGGARWAL-DR ASSESSEE BY: SHRI JASBIR CHOUHAN-CIT-DR / DATE OF HEARING: 04.04.2017 / DATE OF PRONOUNCEMENT: 24.05.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS OF THE ASSESSING OFFICERS(AO .S),PASSED IN PURSUANCE OF THE DIRECTION OF THE DISPUTE RESOLUTION PANEL(DRP)/ORDERS THE CIT (A )-10,MUMBAI THE ASSESSING OFFICER(AO) AND THE ASSESSEE HAVE FILED APPEALS FOR THE ABOVE M ENTIONED THREE ASSESSMENT YEARS (AY. S). ASSESSEE-COMPANY IS INCORPORATED IN AND A TAX RESID ENT OF USA.AS THE ISSUE INVOLVED IN ALL THESE APPEALS ARE ALMOST SIMILAR,SO,WE ARE PASSING A COMM ON ORDER TO ADJUDICATE THEM.THE DETAILS OF DATES OF FILING OF RETURNS,RETURNED INCOMES,ASSESSM ENT DATES CAN BE SUMMARISED AS UNDER: AY. ROI FILED ON RETURNED INCOME ASSTT. DATE ASSESSED INCOME 2005 - 06 31.10.2005 NIL 25.11.2009 RS. 19,89,04,807 / - 2006 - 07 28.11.2006 NIL 10.12. 2008 RS. 9,70,07,680 / - 2007 - 08 25.10.2007 RS.5,10,242/ - 25.11.2009 RS.2,69,34,122/ - ITA/7299/MUM/2010-AY.2005-06: 2. EFFECTIVE GROUND OF APPEAL,FILED BY THE ASSESSEE,DE ALS WITH NATURE OF PAYMENT RECEIVED BY IT FROM SUPPLY OF SOFTWARE I.E.AS TO WHETHER SAME IS I N NATURE OF ROYALTY UNDER THE PROVISIONS OF THE ACT AND UNDER ARTICLE 12 OF THE DOUBLE TAXATION AVO IDANCE AGREEMENT (DTAA/TAX TREATY) ENTERED IN TO BY INDIA AND USA. 1131+2-ALCATEL INTL.05-06 TO 07-08) 2 DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD SUPPLIED SOFTWARES TO RELIANCE INFOCOM LTD.,THAT IT HAD RAISED BILLS WORT H RS. 19.89 CRORE, THAT IN THE NOTES ENCLOSED WITH THE RETURN OF INCOME IT WAS CLAIMED THAT THE P AYMENTS RECEIVED BY IT WERE NOT TAXABLE IN INDIA. THE AO DIRECTED THE ASSESSEE TO GIVE REASONS FOR CLAIMING THE CONSIDERATION RECEIVED FROM RELIANCE AS NOT TAXABLE IN INDIA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DATED 07/09/ 2009 AND 22/09/2009,THE AO HELD THAT THE ASSESSEE H AD MAINLY LAID EMPHASIS ON THE DEFINITIONS RATHER THAN THE SUBJECT MATTER,THAT IN THE AY.2003- 04,THE THEN AO HAD TAXED REVENUE/RECEIPTS FROM THE SOFTWARE PROVIDED BY THE ASSESSEE TO RELIA NCE AS ROYALTY. HE REFERRED TO THE RULING OF AAR IN THE CASE OF AIRPORT AUTHORITY OF INDIA AND H ELD THAT RECEIPT FROM SALE/SUPPLY OF SOFTWARE WAS NOTHING BUT INCOME FROM ROYALTY AND THAT SAME W AS TAXABLE IN INDIA. HE ALSO REFERRED TO THE REPLY TO THE NOTICE ISSUED BY HIM UNDER SECTION 133 (6) TO RELIANCE,FOR THE AY.2006-07AND OBSERVED THAT THE PAYER HAD ACCEPTED THAT PAYMENTS MADE BY IT TO THE ASSESSEE WERE TO BE TREATED AS ROYALTY UNDER ARTICLE 12 OF THE TAX TREATY WITH USA,THAT REVENUE FROM SUPPLY OF SOFTWARE BY THE ASSESSEE WAS INCOME FROM ROYALTY AND NOT SALE A S CLAIMED BY THE ASSESSEE, THAT SAME WAS TAXABLE IN INDIA. 3. ABOVE-MENTIONED OBSERVATIONS OF THE AO,IN THE DRAFT ORDER,WERE CHALLENGED BY THE ASSESSEE BEFORE THE DRP BY FILING OBJECTIONS.VIDE ITS DIRECT IONS, DATED 06/086 2010, THE DRP OBSERVED THAT THE ASSESSEE HAD FAILED TO PROVIDE THE REQUISI TE INFORMATION TO DECIDE THE ISSUE AS TO WHETHER THE SOFTWARE TRANSFERRED BY IT WAS IN THE NATURE OF GOODS SOLD OR IN THE NATURE OF COPYRIGHT ALONG WITH SECRET CODE FOR CREATING MULTIPLE SOFTWARE COP IES TO BE USED BY THE PAYING, THAT RELIANCE HAD EXPENDED ITS BUSINESS TO LARGE NUMBER OF SITES AND USE NUMBER OF SOFTWARES WHICH WAS FAR MORE IN NUMBER THAN SOLD BY THE ASSESSEE,THAT THE NATURA L INFERENCE WAS THAT THE BUYER HAD RIGHT TO CREATE COPIES BY USING THE SECRET CODES OF THE ASSE SSEE, THAT THE NATURE OF PAYMENT BY RELIANCE WAS CORRECTLY TAKEN AS ROYALTY.IN PURSUANCE OF THE DIRECTIONS OF THE DRP,THE AO FINALISED ASSESSMENT AND TREATED THE CONSIDERATION RECEIVED B Y THE ASSESSEE FROM RELIANCE AS ROYALTY AND TAXED IT ACCORDINGLY. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE(AR)CONTENDED THAT THE AMOUNTS RECEIVED FROM THE SUPPLIER OF SOFTWARE TO R ELIANCE WERE NOT IN THE NATURE OF ROYALTY UNDER THE PROVISIONS OF ARTICLE 12 OF THE INDIA-USA TAX TREATY,THAT THE ASSESSEE WAS NOT LIABLE TO PAY TAX IN INDIA,THAT IDENTICAL ISSUE WAS DECIDED I N FAVOUR OF THE ASSESSEE BY THE TRIBUNAL WHILE ADJUDICATING APPEALS FOR THE AY.S.2003-04 AND 2004- 05. HE RELIED UPON THE CASES OF 1131+2-ALCATEL INTL.05-06 TO 07-08) 3 (I) INFRASOFT LTD. (220 TAXMAN 273) (II) QAD EUROPE B.V. (53 ITR(T) 259) (III) COLGATE PALMOLIVE MARKETING SDN BHD, ITA NO.2 129-2130/8311/MUM/2004 (IV) VINZAS SOLUTIONS INDIA (P.) LTD. (392 ITR 155) (V) BAAN GLOBAL BV (49 ITR (T) 73) (VI) FIRST ADVANTAGE (P.) LTD. (77 TAXMANN.COM 195) (VII) GALATEA LTD. (46 ITR (T) 690) (VIII) DATAMINE INTERNATIONAL LTD. (68 TAXMAN.COM) (IX) RELIANCE INDUSTRIES LTD. (69 TAXMAN.COM 311) (X) ERICSSON A.B. (16 TAXMAN.COM 371) (XI) SOLID WORKS CORPORATION (51 20T 34) (XII) FINANCIAL SOFTWARE & SYSTEM (P.) LTD. (47 TAX MAN.COM 140) (XIII) ANTWERP DIAMOND BANK NV ENGINEERING CENTRE (65 SOT 23) (XIV) ASPECT SOFTWARE INC. (61 TAXMAN.COM 36) (XV) TII TEAM TELECOM INTERNATIONAL (P.) LTD. (12 I TR (T) 688 AND STATED THAT CONSIDERATION RECEIVED BY THE ASSES SEE FROM SUPPLY OF SOFTWARE WAS NOT IN THE NATURE OF ROYALTY,THAT AMENDMENT OF THE ACT COULD N OT BE READ INTO THE ACT,THAT THE DECISION OF THE HIGH COURT IN THE CASE OF SIEMENS DID NOT HOLD THAT AMENDMENTS THE ACT COULD BE READ INTO TREATY.FOR THIS PROPOSITION BE RELIED UPON THE CASE S OF NEW SKIES SATELLITE BV (282 ITR 114) SOFTWARE & SYSTEM(P) LTD (47 TAXMAN.COM 140).HE STA TED THAT IN THE CASE OF ANTWERP DIAMOND BANK NV(ITA/5498/ MUM/2014DTD.26.10.2016)THE TRIBUN AL HAD SPECIFICALLY DEALT WITH ALL THE ARGUMENTS ADVANCED BY THE DR,THAT THE TRIBNAL HAD A LSO HELD THAT AMENDMENT IN THE ACT CANNOT BE READ IN TO DTAA WHILE INTERPRETING THE PROVISION S OF THE DTAA,THAT IN CASE OF DIVERGENT VIEWS OF HONOURABLE HIGH COURTS VIEW FAVOURING THE ASSESSEE HAD TO BE ADOPTED,THAT CASES OF L&T AND GLOBAL TELESYSTEM WERE SENT BACK DUE TO PEC ULIAR FACTS OF THOSE CASES. 4.1. THE DEPARTMENTAL REPRESENTATIVE(DR)ARGUED THAT THE ASSESSEE HAD REFERRED TO THE ORDERS OF THE TRIBUNAL FOR THE AY.S 2003-04 AND 2004-05, THAT THE ORDER OF THE TRIBUNAL CAME MUCH BEFORE THE INSERTION OF EXPLANATION 4 TO SECTION 9 (1) (VI ) BY THE FINANCE ACT, 2012 RETROSPECTIVELY WITH EFFECT FROM 01/06/1976,THAT IF THE SAID EXPLANATION WAS APPLIED RETROSPECTIVELY TO THE CASE OF THE ASSESSEE THE PAYMENTS RECEIVED BY IT FOR SUPPLY OF SOFTWARE WOULD CONSTITUTE ROYALTY UNDER THE ACT AS WELL AS UNDER THE TAX TREATY,THAT IN SOME OF THE CASES THE TRIBUNAL HAD DECIDED THE ISSUE OF PURCHASE/SUPPLY OF SOFTWARE WHETHER SHRINK WRAP OR EMBEDDED SOFTWARE,IN FAVOUR OF THE ASSESSEE BY HOLDING THE CONSIDERATION PAID FOR PURCHASE/ LEA SE/SUPPLY OF SOFTWARE AS NOT ROYALTY UNDER THE RELEVANT TAX TREATIES,THAT WHILE HOLDING SO THE TRI BUNAL HAD RELIED UPON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INFRASOFT L TD(264CTR329),NOKIA NETWORKS OY(358 ITR259),ERICSSON AB(343ITR470),THAT THE TRIBUNAL HA D HELD THAT UNLESS TAX TREATIES WERE 1131+2-ALCATEL INTL.05-06 TO 07-08) 4 AMENDED THE AMENDMENTS IN THE ACT COULD NOT READ IN TO TREATIES UNDER THE DTAA AND THAT SUCH CONSIDERATION WOULD NOT AMOUNT TO ROYALTY,THAT THE HONBLE KARNATAKA HIGH COURT HAD DECIDED THE ISSUE IN FAVOUR OF THE DEPARTMENT IN THE CASES OF SYNOPSIS INTERNATIONAL OLD LTD.(212 TAXMAN 454)SAMSUNG ELECTRONICS CO LTD(345 ITR 494),WIPRO L TD.(355ITR284),THAT THE HONBLE KARNATAKA HIGH COURT HAD DECIDED THE ISSUE OF SOFTW ARE ROYALTY BOTH BEFORE THE INSERTION OF EXPLANATIONS 4,5 AND 6 TO SECTION 9 (1) (VI) OF THE ACT BY THE FINANCE ACT, 2012 AND EVEN AFTER THEIR INSERTION,THAT THE INSERTION HAD NOT ALTERED THE VIEWS OF HONBLE HIGH COURT OF KARNATAKA, THAT THE MUMBAI TRIBUNAL WHILE DEALING WITH THE ISS UE OF SOFTWARE ROYALTY IN THE CASE OF RELIANCE INFOCOMM LTD. HAD DECIDED THE ISSUE IN FAVOUR OF TH E REVENUE,THAT LATER ON THE TRIBUNAL RECORD ITS ORDER ON A MISCELLANEOUS APPLICATION FILED BEFORE I T,THAT THE DEPARTMENT WAS CONSIDERING FILING A PETITION AGAINST THE RECALLING OF THE ORDER,THAT TH E ASSESSEE BEING A PAYEE HAVING RECEIVED CONSIDERATION FROM RELIANCE,THE HIGH COURT ORDER IN THE PETITION WOULD HAVE BEARING ON THE PRESENT APPEAL,THAT THE APPEAL MAY BE AHJOURNED TIL L THE DECISION OF AFORESAID WRIT PETITION. HE FURTHER REFERRED TO THE PROVISIONS OF EXPLANATION 4 TO SECTION 9 (1) (VI) AND STATED THAT EXPLANATION WAS OF CLARIFICATORY NATURE,THAT SAME WAS INSERTED RETROSPECTIVELY,THAT IF THE EXPLANATION WAS APPLIED TO THE ASSESSEES CASE THE CONSIDERATION RE CEIVED BY IT WOULD BE NATURE OF ROYALTY BOTH UNDER THE ACT AND UNDER THE TAX TREATY,THAT THE HON BLE BOMBAY HIGH COURT IN THE CASE OF SIEMENS(310ITR320)HAD IMPLIEDLY HELD THAT CLARIFICA TORY EXPLANATIONS COULD BE READ INTO MODERN TAX TREATIES,THAT IT HAD APPROVED AMBULATORY APPROACH TO INTERPRETATION OF TREATIES AGAINST STATIC APPROACH, THAT IN THE CASE OF VAICOM 18 MEDI A PRIVATE LTD (162 TTJ 336),THE TRIBUNAL HAD HELD THAT AMENDMENTS IN THE ACT COULD READ INTO TAX TREATIES.HE FINALLY STATED THAT MATTER COULD BE RESTORED BACK TO THE FILE OF THE REVENUE AUTHORITIE S.IN THAT REGARD HE REFERRED TO THE CASES OF GLOBAL TELESYSTEMS LTD. (ORDER DATED 20/04/2016) AN D L &T LTD. (152 ITD 873). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE BASIC ISSUE TO BE DECIDED IS AS TO WHETHER THE PAYMENTS R ECEIVED BY THE ASSESSEE FROM RELIANCE CAN BE TAXED AS ROYALTY IN VIEW OF THE AMENDMENT TO SECTIO N 9(1)OF THE ACT.IT IS SAID THAT A DTAA IS A RESULT OF NEGOTIATIONS BETWEEN TWO COUNTRIES AS TO THE EXTENT TO WHICH SPECIAL CONCESSIONAL TAX PROVISIONS CAN BE MADE NOTWITHSTANDING THAT THERE M IGHT BE A LOSS OF REVENUE.A PLAIN READING OF SECTION 90(2) OF THE ACT MAKES IT CLEAR THAT THE PR OVISIONS OF THE DTAA WOULD PREVAIL OVER THE ACT UNLESS THE ACT IS MORE BENEFICIAL TO THE ASSESS EE.THEREFORE, EXCEPT TO THE EXTENT A PROVISION OF THE ACT IS MORE BENEFICIAL TO IT,THE DTAA WILL O VERRIDE THE ACT.THIS IS IRRESPECTIVE OF WHETHER 1131+2-ALCATEL INTL.05-06 TO 07-08) 5 THE ACT CONTAINS A PROVISION THAT CORRESPONDS TO TH E TREATY PROVISION.IN OUR OPINION, INTERNATIONAL- TAXATION ISSUES HAVE TO BE DECIDED KEEPING IN MIND THE ABOVE BROAD PRINCIPLES. 5.1. IT IS FOUND THAT ALL THE ISSUES RAISED BY THE DR,BE FORE US,HAVE BEEN DEALT WITH BY THE TRIBUNAL IN THE CASE OF ANTWERP DIAMOND(SUPRA).WE ARE REPROD UCING THE ARGUMENTS OF THE REPRESENTATIVES OF BOTH THE SIDES AND THE RELEVANT PORTION OF THAT ORDER AND IT READS AS UNDER: 2. AT THE OUTSET, THE LD. COUNSEL, MR. K. K. VED S UBMITTED THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ASSESSEE S OWN CASE RIGHT FROM THE ASSESSMENT YEARS 2004-05, 2005-06 AND 2008-09. THE SECOND ISSUE RELA TING TO DISALLOWANCE OF INTEREST PAID TO THE HEAD OFFICE ALSO HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE SPECIAL BENCH IN SUMITOMO MITSUI BANKING CORPN., WHEREIN, THE ASSESSEE WAS ON E OF THE PARTY. 3. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON T HE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT, SO FAR AS DATA PROCESSING COST IS C ONCERNED, THE SAME IS IN THE NATURE OF ROYALTY AND IN SUPPORT HE HAS STRONGLY RELIED UPO N THE TWO KARNATAKA HIGH COURT DECISIONS IN THE CASE OF :- I) CIT VS. WIPRO LTD., REPORTED IN 3 55 ITR 284; II) CIT VS. CGI INFORMATION SYSTEMS & MANAGEMENT CONSULTANTS (P) LTD., 226 TAXMAN 319 T HE ISSUE WHETHER THE AMENDMENT BROUGHT BY FINANCE ACT 2012 IN SECTION 9(1)(VI) BY WAY OF E XPLANATIONS INSERTED IN THE INCOME-TAX ACT WITH RETROSPECTIVE EFFECT CAN BE READ INTO DTAA OR NOT HAS TO BE SEEN IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V S IEMENS AKTIONGESELLSCHAFT, REPORTED IN 310 ITR 320 (BOM HC) ACCORDINGLY, HE SUBMITTED THAT OTH ER DECISIONS RENDERED BY THE DELHI HIGH COURT AND THE TRIBUNAL MAY NOT BE APPLICABLE. WHILE APPRECIATING THE SIEMENS AG (SUPRA) HE SUBMITTED THAT, IT MAY KIND BE BORNE IN MIND THAT: I) THE QUESTION OF LAW BEFORE THE HONBLE HIGH COURT WAS NOT THAT WHETHER AMENDMENTS IN THE INCOME -TAX ACT CAN BE READ INTO THE DTAA OR NOT; II) IN THE SAID CASE, OLD DTAA (1960) BETWEEN INDIA AND GERMANY WAS UNDER CONSIDERATION; III) THE SAID DECISION WAS RENDERED IN 20008 WHEN THE ON LY CLARIFICATORY PROVISION BY WAY OF EXPLANATION IN SECTION 9 WAS THE EXPLANATION BELOW S.9(2) INSERTED BY THE FINANCE ACT, 2007 DOING WITH THE REQUIREMENT OF PE FOR ROYALTY; IV) T HAT AMENDMENTS/EXPLANATIONS IN THE INCOME- TAX ACT ARE BEING SOUGHT TO BE READ INTO DTAA BY VI RTUE OF ARTICLE 3(12) OF THE MODERN TREATIES; V) SECTION 9(1)(VI) UP TO AND INCLUDING EXPLANATION 2 ARE SUBSTANTIVE PROVISIONS AS INSERTED BY FINANCE ACT 1976 AND THEREAFTER, EXPLANATION 3 TO 6 ARE ONLY CLARIFICATORY PROVISIONS INSERTED SUBSEQUENTLY; AND VI) IT IS NOT DISPUTED BY THE REV ENUE THAT THE PROVISIONS OF DTAA IF BENEFICIAL TO THE ASSESSEE SHALL BE PREFERRED OVER THE PROVISIONS OF THE INCOME-TAX ACT. HE FURTHER SUBMITTED THAT, THE HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF SIEMENS AKTIONGESELLSCHAFT (SUPRA) WOULD REVEAL THAT, I) NOWHERE IN THE SAID ORDER, TH E HIGH COURT HAS HELD THAT AMENDMENTS/EXPLANATIONS CANNOT BE READ INTO DTAA AS IT WAS NOT QUESTION BEFORE THE HONBLE HIGH COURT; II) THE NATURES OF SERVICES RENDERED IN THE SAID CASE WERE FOUND TO BE NOT ROYALTY UNDER THE DTAA THOUGH FOUND TO BE ROYALTY UNDER THE ACT. THOSE SERVICES WERE FOUND TO FALL UNDER THE EXPRESSION COMMERCIAL OR INDUSTRIAL PROF ITS AS PER THE THEN DTAA (OLD) AND THEREFORE COULD NOT BE TAXED IN INDIA IN ABSENCE OF PE. THE PROVISIONS OF DTAA BEING THE BENEFICIAL TO THE ASSESSEE WERE PREFERRED OVER THE PROVISIONS OF THE INCOME-TAX ACT; III) IN PARAS 13, 22 AND 28 OF ITS ORDER, THE HONBLE HIGH COURT HAS APPROVED THE INSERTION OF EXPLANATION BELOW SECTION 9(2) INSERTED BY THE FINANCE ACT 2007 , THEREBY IMPLYING THAT THE EXPLANATIONS INSERTED BY FA 2007 COULD BE READ INTO MODERN DTAAS ; IV) MUMBAI TRIBUNAL IN THE CASE OF VIACOM 18 MEDIA (P.) LTD. [2014] 162 TTJ 336 (MUM) HAS EXPLAINED THE IMPORT OF BOMBAY HIGH COURT DECISION IN RIGHT PERSPECTIVE IN PARAS 16 AND 17 OF ITS ORDER WHILE REJECTING THE ASSESSEES ARGUMENT THAT THE HC HAS HELD THAT AMENDMENTS IN TH E ACT CANNOT BE READ INTO DTAAS; AND V) THE BOMBAY HIGH COURT HAS APPROVED AMBULATORY APPRO ACH (PARA 22) TO INTERPRETATION OF TREATIES AGAINST STATIC APPROACH ADOPTED BY THE DEL HI HIGH COURT. SO FAR AS THE INTEREST PAID BY 1131+2-ALCATEL INTL.05-06 TO 07-08) 6 THE BRANCH OFFICE TO THE HEAD OFFICE INCOME OF HEAD QUARTER, HE SUBMITTED THAT, EXPENDITURE INCLUDING INTEREST ATTRIBUTABLE OF EARNING OF INCOM E WHICH DOES NOT FORM PART OF THE TOTAL INCOME HAS TO BE DISALLOWED UNDER SECTION 14A IF IT HAS TO BE HELD THAT IN VIEW OF THE SPECIAL BENCH DECISION IN THE CASE OF THE ASSESSEE, THE INTEREST PAID BY THE BRANCH OFFICE TO THE HEAD OFFICE IS NOT THE COMMISSION OF THE HEAD OFFICE. IN SUPPORT, HE RELIED UPON THE DECISION OF OMAN INTERNATIONAL BANK AG ON THE ADMISSIBILITY OF THE B ELIEF, HE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NTPC VS. CIT, REPORTED IN 229 ITR 383. 4. AFTER CONSIDERING THE AFORESAID SUBMISSIONS AND ON PERUSAL OF THE IMPUGNED ORDERS, WE FIND THAT SO FAR AS THE ISSUE RAISED VIDE GROUND NO.1 TO 3 IS CONCERNED IT IS A RECURRING ISSUE IN THE CASE OF THE ASSESSEE RIGHT FROM THE EARLIER YEARS. THE LD. CIT (A) TOO HAS FOLLOWED THE CIT(A)S ORDERS FOR THE ASSESSMENT YEARS 2003-04 TO 2004-05, 2005-06 AND 2008-09. THE TRIBUNAL IN THE ASSESSMENT YEAR 2004-05 IN ITA NO.7347/MUM/2007 ON THE ISSUE OF DISALLOWANCE OF DATA PROCESSING COST HAS DEALT AND DECIDED THIS ISSUE IN THE FOLLOWING MANNER:- 15. NOW, COMING TO THE MAIN ISSUE I.E., WHETHER T HE REIMBURSEMENT OF DATA PROCESSING COST OF RS.34,03,734, AMOUNTS TO ROYALTY OR NOT, WE FIND FROM THE RECORD THAT THE ASSESSEE IS ENGAGED IN THE BANKING BUSINESS AND OPERATES IN INDIA THROUGH BRANCH IN MUMBAI. IT HAS ACQUIRED BANKING APPLICATION SOFTWARE NAMED AS FLEXCUBE FROM AN INDIAN SOFTWARE COMPANY WHICH IS EXCLUSIVELY USED FOR THE BANKING P URPOSE BY THE ASSESSEE ALL OVER THE WORLD. WHEN THE MUMBAI BRANCH WAS SETUP, THE BRANC H WAS ALLOWED TO USE THE SAID SOFTWARE BY MAKING IT ASSESSABLE THROUGH SERVERS LO CATED AT BELGIUM. THE BRANCH SENDS ITS DATA TO THE BELGIUM SERVER FROM WHERE THE DATA GETS PROCESSED AS PER THE REQUIREMENT OF THE BANKING OPERATIONS. AS PER THE TERMS OF AGRE EMENT BETWEEN THE BRANCH AND THE HEAD OFFICE FOR THE USAGE OF SOFTWARE BY THE BRANCH , WHICH HAS BEEN INCORPORATED ABOVE, IT IS EVIDENT THAT THE HEAD OFFICE ONLY HAS THE NON EXCLUSIVE NONTRANSFERRABLE RIGHTS TO USE THE COMPUTER SOFTWARE BROUGHT FOR PERSONAL USE AND CLAUSE 16 OF THE SAID AGREEMENT SPECIFICALLY PROVIDES THAT THE HEAD OFFICE DOES NOT HAVE ANY RIGHT TO ASSIGN, SUBLICENSE OR OTHERWISE TRANSFER THE LICENSE OF THIS AGREEMENT . THUS, THE PAYMENT BY THE BRANCH FOR USE OF COMPUTER SOFTWARE IS NOT THE RIGHT IN THE CO PY RIGHT BUT ONLY FOR DOING THE WORK FROM THE SAID SOFTWARE WHICH SUBSIST IN THE COPY RI GHT OF THE SOFTWARE. THE BRANCH IS USING THE COMPUTER SOFTWARE AND THE I.T. RESOURCES INSTALLED AT BELGIUM FOR WHICH THE PAYMENT IS MADE BY THE HEAD OFFICE TOWARDS THE USE OF SUCH SOFTWARE LICENSE. SINCE THE BRANCH IS USING THE SAME SOFTWARE FOR THE PURPOSE O F BUSINESS OPERATIONS, THE HEAD OFFICE ALLOCATES THE SAID EXPENDITURE ON A PRORATA BASIS FOR THE USE OF THE SAID RESOURCES WHICH IS BEING REIMBURSED BY THE BRANCH TO THE HEAD OFFICE. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS SOUGHT THE BENEFIT OF TREATY BETWEEN I NDIA AND BELGIUM AND HAD SPECIFICALLY RELIED UPON THE DEFINITION OF ROYALTY AS GIVEN IN THE ARTICLE 12. CLAUSE (A) OF PARA3 OF ARTICLE12, WHICH DEFINES THE TERM ROYALTY IN THE FOLLOWING MANNER: 3(A) THE TERM ROYALTIES AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, ANY PATENT, TRADE MA RK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING I NDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. 16. THE ABOVE DEFINITION OF ROYALTY T HUS PROVIDES THAT, WHEN THE PAYMENT OF ANY KIND IS RECEIVED AS A CONSIDERATION FOR USE O F OR THE RIGHT TO USE OF ANY OF THE COPY RIGHT OF ANY ITEM OR FOR VARIOUS TERMS USED IN THE SAID ARTICLE, THEN ONLY IT CAN BE HELD TO BE FOR THE PURPOSE OF ROYALTY. THE SAID D EFINITION OF ROYALTY IS EXHAUSTIVE AND NOT INCLUSIVE AND, THEREFORE, IT HAS TO BE GIVEN TH E MEANING AS CONTAINED IN THE ARTICLE ITSELF AND NO OTHER MEANING SHOULD BE LOOKED UPON. IF THE ASSESSEE IS CLAIMING THE APPLICATION OF THE DTAA, THEN THE DEFINITION AND SC OPE OF ROYALTY GIVEN IN THE DOMESTIC LAW, IN THE PRESENT CASE, SECTION 9(1)(VI) SHOULD N OT BE READ INTO OR LOOKED UPON. THE CHARACTER OF PAYMENT TOWARDS ROYALTY DEPENDS UPON T HE INDEPENDENT USE OR THE RIGHT TO USE OF THE COMPUTER SOFTWARE, WHICH IS A KIND OF C OPY RIGHT. IN THE PRESENT CASE, THE 1131+2-ALCATEL INTL.05-06 TO 07-08) 7 PAYMENT MADE BY THE BRANCH IS NOT FOR USE OF OR RIGHT TO USE OF SOFTWARE WHICH IS BEING EXCLUSIVELY DONE BY THE HEAD OFFICE ONLY, INS TALLED IN BELGIUM. THE BRANCH DOES NOT HAVE ANY INDEPENDENT RIGHT TO USE OR CONTROL OV ER SUCH MAIN FRAME OF THE COMPUTER SOFTWARE INSTALLED IN BELGIUM, BUT IT SIMPLY SENDS THE DATA TO THE HEAD OFFICE FOR GETTING IT PROCESSED. INSOFAR AS THE BRANCH IS CONCERNED, I T IS ONLY REIMBURSING THE COST OF PROCESSING OF SUCH DATA TO THE HEAD OFFICE, WHICH H AS BEEN ALLOCATED ON PRORATA BASIS. SUCH REIMBURSEMENT OF PAYMENT DOES NOT FALL WITHIN THE AMBIT OF DEFINITION OF ROYALTY WITHIN THE ARTICLE 12(3)(A). TO FALL WITHIN ITS AMB IT, THE BRANCH SHOULD HAVE EXCLUSIVE AND INDEPENDENT USE OR RIGHT TO USE THE SOFTWARE AND FO R SUCH USAGE, PAYMENT HAS TO BE MADE IN CONSIDERATION THEREOF. IT IS NOT THE CASE OF THE REVENUE THAT THE HEAD OFFICE HAS PROVIDED ANY COPY RIGHT OF SOFTWARE OR ANY COPYRIGH TED ARTICLE DEVELOPED BY THE HEAD OFFICE FOR THE EXCLUSIVE USE OF THE ASSESSEE FOR, W HICH THE ASSESSEE IS MAKING THE PAYMENT ALONG WITH THE MARKUP EXCLUSIVELY FOR THE PURPOSE OF ROYALTY. IF THE PAYMENT FOR LICENSE FOR THE SOFTWARE WHICH IS INSTALLED IN THE HEAD OFF ICE IS BEING MADE BY THE HEAD OFFICE, THEN ANY ALLOCATION OF COST AND REIMBURSEMENT THERE OF BY THE BRANCH TO THE HEAD OFFICE CANNOT BE TERMED AS INDEPENDENT PAYMENT FOR THE PUR POSE OF ROYALTY. TO FALL WITHIN THE AMBIT OF ROYALTY UNDER ARTICLE, THE PAYMENT SHOUL D BE EXCLUSIVELY QUA THE USE OR THE RIGHT TO USE THE SOFTWARE EXCLUSIVELY BY THE BRANCH . THE CHARACTER OF THE PAYMENT UNDER THE ROYALTY TRANSACTIONS DEPENDS UPON THE RIGHTS TH AT THE TRANSFEREE ACQUIRES IN RELATION TO THE USE AND EXPLOITATION OF THE SOFTWARE PROGRAMME. HERE, THERE IS NO SUCH RIGHT WHICH HAS BEEN ACQUIRED BY THE BRANCH IN RELATION TO THE USAGE OF SOFTWARE, BECAUSE THE HEAD OFFICE ALONE HAS THE EXCLUSIVE RIGHT OF THE LICENSE TO USE THE SOFTWARE. THUS, THE REIMBURSEMENT OF THE DATA PROCESSING COST TO THE HE AD OFFICE DOES NOT FALL WITHIN THE AMBIT OF DEFINITION OF ROYALTY UNDER ARTICLE 12(3 )(A). 17. THE LEARNED COMMISSIONER (APPEALS) AND THE LEAR NED SENIOR COUNSEL HAVE STRONGLY RELIED UPON THE DECISION OF THE CO ORDINATE BENCH OF THE TRIBUNAL IN KOTAK MAHINDRA PRIMUS LTD. (SUPRA). ON A PERUSAL OF THE SAID DECIS ION, IT IS SEEN THAT THE CONCLUSION DRAWN BY THE TRIBUNAL, IS DIRECTLY APPLICABLE TO THE FACT S OF THE ASSESSEES CASE ALSO, WHICH IS EVIDENT FROM THE FOLLOWING OBSERVATIONS AND CONCLUS IONS DRAWN BY THE TRIBUNAL: 11. THE CONSIDERATION OF PAYMENT IS ONLY THIS DATA PROCESS WORK. NO PART OF THIS PAYMENT CAN BE SAID TO BE FOR THE USE OF SPECIALIZE D SOFTWARE ON WHICH DATA IS PROCESSED OR FOR THE USE OF MAINFRAME COMPUTER BECAUSE THE IN DIAN COMPANY DOES NOT HAVE ANY INDEPENDENT RIGHT TO USE THE COMPUTER OR EVEN PHYSI CAL ACCESS TO THE MAINFRAME COMPUTER, SO AS TO USE THE MAINFRAME COMPUTER OR TH E SPECIALIZED SOFTWARE. ALL THAT THE RIGHT IS FOR PROCESSING OF DATA, AND THE USE OF MAI NFRAME COMPUTER IS PERMITTED ONLY FOR THAT PURPOSE. THE INDIAN COMPANY CAN FEED THE RAW D ATA IN THE MAINFRAME COMPUTER IN AUSTRALIA, WITH THE HELP OF THE TELECOMMUNICATION L INK, AND THE OUTPUT DATA, AFTER DUE PROCESSING IS TRANSMITTED BACK TO THE INDIAN COMPAN Y. THERE IS NO PRIVILEGE OR RIGHT GRANTED TO THE INDIAN COMPANY BY THE AUSTRALIAN COM PANY. THE CONTROL OF THE INDIAN COMPANY IS ONLY ON THE INPUT TRANSMISSION AND THE R IGHT IS TO GET THE OUTPUT PROCESSED DATA BACK. THE ACTUAL PROCESSING OF DATA IS THE EXC LUSIVE CONTROL OF THE AUSTRALIAN COMPANY AND IT IS FOR THIS WORK THAT THE AUSTRALIAN COMPANY GETS PAID. IN OUR CONSIDERED VIEW, THEREFORE, IN ESSENCE THE IMPUGNED PAYMENT IS MADE TO THE AUSTRALIAN COMPANY IN CONSIDERATION OF ITS PROCESSING OF DATA BELONGING T O THE INDIAN COMPANY.AS FAR AS THE SCOPE OF ARTICLE 12(3)(A) IS CONCERNED, WE FIND THA T IT COVERS ONLY A PAYMENT FOR THE USE OF, OR THE RIGHT TO USE OF, ANY COPYRIGHT, PATENT, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, TRADEMARK, OR OTHER LIKE PROPERTY OR RIGHT . THE CASE OF THE REVENUE IS THAT THE PAYMENT IS MADE FOR THE USE OF SPECIALIZED SOFTWARE WITH THE HELP OF WHICH DATA IS PROCESSED. WE ARE NOT PERSUADED. AS WE HAVE CONCLUD ED EARLIER IN THIS ORDER, ON THE FACTS OF THIS CASE, THE PAYMENT MADE BY THE INDIAN COMPAN Y IS NOT FOR THE USE OF, OR RIGHT TO USE OF, SOFTWARE, THE PAYMENT IS FOR DATA PROCESSING. B E THAT AS IT MAY, EVEN IF STAND OF THE 1131+2-ALCATEL INTL.05-06 TO 07-08) 8 REVENUE IS TO BE UPHELD AND IT IS TO BE CONCLUDED T HAT THE PAYMENT IS MADE FOR SOFTWARE PER SE, THAT DOES NOT LEAD TO TAXABILITY OF RECEIPT IN THE .HANDS OF THE AUSTRALIAN COMPANY EITHER. IT IS ALSO BY NOW SETTLED THAT THE PAYMENT FOR SOFTWARE IS FOR A COPYRIGHTED ARTICLE AND NOT COPYRIGHT PER SE, AND, THEREFORE, IS NOT CO VERED BY THE SCOPE OF PAYMENT FOR COPYRIGHT. THE AUTHORITY FOR THIS PROPOSITION IS CO NTAINED IN SPECIAL BENCH DECISION IN THE CASE OF MOTOROLA INC. V. DY. CIT (2005) 95 ITD 269 (DEL)(SB), SAMSUNG ELECTRONICS COMPANY LTD. V. ITO (2005) 94 ITD 91 (BANG), AND LU CENT TECHNOLOGIES HINDUSTAN LTD. V. ITO (2005) 92 ITD 366 (BANG). IT IS NOT EVEN THE REVENUES CASE THAT THE PAYMENT IN QUESTION IS NOT (SIC) FOR THE USE OF, OR RIGHT TO U SE OF, PATENT, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR TRADE MARK. IN ANY EVENT, HA VING PERUSED THESE CLASSIFICATIONS AND HAVING CONSIDERED THE FACTS BEFORE US, WE ARE OF TH E CONSIDERED VIEW THAT THE PAYMENT DOES NOT FIT INTO ANY OF THESE CLASSIFICATIONS. IT IS, HOWEVER, CONTENDED THAT THE IMPUGNED PAYMENT IS COVERED BY THE RESIDUARY CLAUSE, I.E., ' OTHER LIKE PROPERTY OR RIGHT'. IT IS CONTENDED THAT BY MAKING PAYMENT OF US $ 60,000 PER ANNUM, THE INDIAN COMPANY GETS A VALUABLE PROPERTY AND RIGHT AS THE PAYMENT CANNOT B E SAID TO. HAVE BEEN MADE IN VACUUM AND WITHOUT ANY CONSIDERATION. THIS PLEA ALSO DOES NOT IMPRESS US. IT IS NOT EVERY PROPERTY OR RIGHT WHICH CAN BE COVERED BY THESE EXPRESSIONS APPEARING IN THE END OF ARTICLE 12(3)(A), BECAUSE, FOLLOWING THE PRINCIPLES OF EJUS DEM GENERIS MEANING OF THE GENERAL WORDS FOLLOWING THE SPECIFIC WORDS HAVE TO TAKE COL OUR FROM THE SPECIFIC WORDS PRECEDING IT. WHEN THAT PROPERTY OR RIGHT, EVEN IF IT SO EXIS TS, IS NOT OF THE NATURE OF ANY OF THE SPECIFIC CATEGORIES SET OUT IN ARTICLE 12(3)(A), IT CANNOT BE COVERED BY THE GENERAL WORDS FOLLOWING THOSE CATEGORIES EITHER. FOR ALL THESE RE ASONS, WE ARE OF THE CONSIDERED VIEW THAT PROVISIONS OF ARTICLE 12(3)(A) CANNOT BE INVOKED ON THE FACTS OF THE CASE BEFORE US. THAT TAKES US TO THE QUESTION WHETHER THE PROVISIONS OF ARTICLE 12(3)(B), AS RELIED UPON BY THE REVENUE AUTHORITIES, CAN BE INVOKED ON THE FACTS OF THE PRESENT CASE. ARTICLE 12(3)(B) CAN APPLY ONLY WHEN THE PAYMENT IN QUESTION CAN BE HELD TO BE PAYMENT FOR 'THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTI FIC EQUIPMENT'. THIS CONDITION CAN ONLY BE SATISFIED WHEN IT IS ESTABLISHED THAT THE IMPUGN ED PAYMENT IS MADE FOR THE USE OF, OR RIGHT TO USE OF, MAINFRAME COMPUTER. THE INDIAN COM PANY DOES NOT HAVE ANY CONTROL OVER, OR PHYSICAL ACCESS TO, THE MAINFRAME COMPUTER IN AUSTRALIA. THERE CANNOT, THEREFORE, BE ANY QUESTION OF PAYMENT FOR USE OF THE MAINFRAME COMPUTER. IT IS INDEED TRUE THAT THE USE OF MAINFRAME COMPUTER IS INTEGRAL TO THE DATA P ROCESSING BUT WHAT IS IMPORTANT TO BEAR IN MIND IS THE FACT THAT THE PAYMENT IS NOT FOR THE USE OF MAINFRAME COMPUTER PER SE, THAT THE INDIAN COMPANY DOES NOT HAVE ANY CONTROL OVER T HE MAINFRAME COMPUTER OR PHYSICAL ACCESS TO THE MAINFRAME COMPUTER, AND THAT THE PAYM ENT IS FOR ACT OF SPECIALIZED DATA PROCESSING BY THE AUSTRALIAN COMPANY. USE OF MAINFR AME COMPUTER IN THE COURSE OF PROCESSING OF DATA IS ONE OF THE IMPORTANT ASPECTS OF THE WHOLE ACTIVITY BUT THAT IS NOT THE PURPOSE OF, AND CONSIDERATION FOR, THE IMPUGNED PAY MENT BEING MADE TO AUSTRALIAN COMPANY. THE PAYMENT, AS WE HAVE OBSERVED EARLIER, IS FOR THE ACTIVITY OF SPECIALIZED DATA PROCESSING. IT IS NEITHER PRACTICABLE, NOR PERMISSI BLE, TO ASSIGN MONETARY VALUE TO EACH OF THE SEGMENT OF THIS ECONOMIC ACTIVITY AND CONSIDER THAT AMOUNT IN ISOLATION, FOR THE PURPOSE OF DECIDING CHARACTER OF THAT AMOUNT. THERE FORE, NEITHER THE IMPUGNED PAYMENT CAN BE SAID TO BE TOWARDS USE OF, OR RIGHT TO USE O F, THE MAINFRAME COMPUTER, NOR IS IT PERMISSIBLE TO ALLOCATE A PART OF THE IMPUGNED PAYM ENT, AS ATTRIBUTABLE TO USE OF, OR RIGHT TO USE OF, MAINFRAME COMPUTER. ACCORDINGLY, THE PRO VISIONS OF ARTICLE 12(3)(B) CANNOT HAVE ANY APPLICATION IN THE MATTER. 18. INSOFAR AS THE RELIANCE PLACED BY THE LEARNED D EPARTMENTAL REPRESENTATIVE ON THE DECISIONS OF THE MADRAS HIGH COURT AND ALSO THE SCOPE OF ROYALT Y AS GIVEN IN EXPLANATION 4 AND 5 TO SECTION 9(1)(VI) BROUGHT IN STATUTE BY THE FINANCE ACT, 2012 ARE CONCERNED, WE FIND THAT THE SAME IS NOT TENABLE FOR THE REASON THAT ONCE THE ASSESSE E HAS OPTED FOR THE BENEFIT OF THE DTAA, THEN THERE IS NO REQUIREMENT FOR RESORTING TO THE DEFINI TION AND THE SCOPE OF ROYALTY AS GIVEN IN 1131+2-ALCATEL INTL.05-06 TO 07-08) 9 SECTION 9(1)(VI). THE SAID AMENDMENT CANNOT BE READ INTO THE TREATY AND WILL NOT INFLUENCE THE DEFINITION OF ROYALTY, AS GIVEN IN ARTICLE 12(3). THIS PROPOSITION IS SQUARELY COVERED BY THE DECISION OF THE BOMBAY HIGH COURT IN SIEMENS AKTION GESELLSCHAFT (SUPRA), THE DECISION OF DELHI HIGH COURT IN NOKIA NETWORK (SUPRA) AND DIT V/S ERI CSON AB, [2012] 343 ITR 470. EVEN THE DECISIONS OF MADRAS HIGH COURT AS RELIED UPON BY TH E LEARNED DEPARTMENTAL REPRESENTATIVE IS NOT APPLICABLE WHICH IS EVIDENT FROM THE ISSUE INVO LVED AS IS EVIDENT FROM THE SUBSTANTIAL QUESTION OF LAW WHICH WERE FORMULATED BY THE HIGH COURT FOR ADJUDICATION. HENCE, THE SAID DECISIONS ARE NOT APPLICABLE. 19.THUS, IN VIEW OF THE AFORESAID REASONS, WE HOLD THAT THE IMPUGNED PAYMENT MADE BY THE BRANCH TO THE H.O. TOWARDS REIMBURSEMENT OF COST OF DATA PROCESSING CANNOT BE HELD TO BE COVERED WITHIN THE SCOPE OF EXPRESSION ROYALTY UN DER ARTICLE 12(3)(A) OF THE INDIA BELGIUM DTAA. ACCORDINGLY, THE CONCLUSION DRAWN BY THE LEAR NED COMMISSIONER (APPEALS) IS AFFIRMED. 20. SINCE WE HAVE ALREADY HELD THAT THE DATA PROCES SING COST PAID BY THE ASSESSEE DOES NOT AMOUNT TO ROYALTY, CONSEQUENTLY, THERE IS NO REQUIR EMENT FOR DEDUCTING TAX AT SOURCE ON SUCH PAYMENT. THEREFORE, THE PROVISIONS OF SECTION 40(A) (I) WILL NOT APPLY. ACCORDINGLY, THE ISSUE ARISING OUT OF GROUND NO.1 AND 2 IS DISMISSED. THI S DECISION OF THE TRIBUNAL HAVE BEEN FOLLOWED IN THE SUBSEQUENT YEARS BY THE TRIBUNAL, I.E., IN A Y 2006-07 AND 2007-08. IN THE AFORESAID DECISION OF THE TRIBUNAL, THE DECISION OF BOMBAY HI GH COURT IN THE CASE OF SIEMENS AKTIONGESELLSCHAFT (SUPRA) AND DELHI HIGH COURT DEC ISION IN THE CASE OF NOKIA NETWORK, REPORTED IN [2012] 253 CTR (DE) 417 AND DIT V SONY ERICSON A B, REPORTED IN [2012] 343 ITR 470 HAVE BEEN TAKEN NOTE OF. THUS, THIS ISSUE HAS BEEN DECID ED IN FAVOUR OF THE ASSESSEE AFTER DETAIL ANALYSIS AND DISCUSSION. MOREOVER, WE FIND THAT IN THE LATEST DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. NEWS SKY SATELLITE BV PASSED IN ITA 473/2012, ORDER DATED 8.02.2016 HAVE EXPLAINED THE RATIO AND PRINCIPLE OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SIEMENS AKTIONGESELLSCHAFT (SUPRA). THE RELEVANT OB SERVATION OF THE HONBLE DELHI HIGH COURT IN THE SAID CASE READS AS UNDER:- 48 IN COMMISSIONER OF INCOME TAX V. SEIMENS AKTION GESSELLSCHAFT, [2009] 310 ITR 320 (BOM), THE BOMBAY HIGH COURT CITING R V. MELFOR D DEVELOPMENTS INC. HELD THAT 'THE RATIO OF THE JUDGMENT, IN OUR OPINION, WOULD M EAN THAT BY A UNILATERAL AMENDMENT IT IS NOT POSSIBLE FOR ONE NATION WHICH IS PARTY TO AN AGREEMENT TO TAX INCOME WHICH OTHERWISE WAS NOT SUBJECT TO TAX. SUCH INCOME WOULD NOT BE SUBJECT TO TAX UNDER THE EXPRESSION 'LAWS IN FORCE'. WHILE CONSIDERING THE DOUBLE TAX AVOIDANCE AGREEMENT THE EXPRESSION 'LAWS IN FORCE' WOULD NOT ONLY INCLUDE A TAX ALREADY COVERED BY THE TREATY BUT WOULD ALSO INCLUDE ANY OTHER TAX AS TAXES OF A SUBS TANTIALLY SIMILAR CHARACTER SUBSEQUENT TO THE DATE OF THE AGREEMENT AS SET OUT IN ARTICLE 1(2). CONSIDERING THE EXPRESS LANGUAGE OF ARTICLE 1(2) IT IS NOT POSSIBLE TO ACCEPT THE BROAD PROPOSITION URGED ON BEHALF OF THE ASSESSEE THAT THE LAW WOULD BE THE LAW AS APPLICABL E OR AS DEFINE WHEN THE DOUBLE TAX AVOIDANCE AGREEMENT WAS ENTERED INTO.' 49. IT IS ESSENTIAL TO NOTE THE CONTEXT IN WHICH TH IS JUDGMENT WAS DELIVERED. THERE, THE COURT WAS CONFRONTED WITH A SITUATION WHERE THE WOR D ROYALTY WAS NOT DEFINED IN THE GERMAN DTAA. FOLLOWING FROM OUR PREVIOUS DISCUSSION ON THE BIFURCATION OF TERMS WITHIN THE TREATY, IN SITUATIONS WHERE WORDS REMAIN UNDEFINED, ASSISTANCE IS TO BE DRAWN FROM THE DEFINITION AND IMPORT OF THE WORDS AS THEY EXIST IN THE DOMESTIC 'LAWS IN FORCE'. IT WAS IN THIS CONTEXT THAT THE BOMBAY HIGH COURT H ELD THAT THEY WERE UNABLE TO ACCEPT THE ASSESSE'S CONTENTION THAT THE LAW APPLICABLE WO ULD BE THE LAW AS IT EXISTED AT THE TIME THE DOUBLE TAX AVOIDANCE AGREEMENT WAS ENTERED INTO . THIS IS THE CONTEXT IN WHICH THE AMBULATORY APPROACH TO TAX TREATY INTERPRETATION WA S NOT REJECTED. THE SITUATION BEFORE THIS COURT HOWEVER IS MATERIALLY DIFFERENT AS THERE IS IN FACT A DEFINITION OF THE WORD ROYALTY UNDER ARTICLE 12 OF BOTH DTAA, THUS DISPENS ING WITH THE NEED FOR RECOURSE TO ARTICLE 3. 1131+2-ALCATEL INTL.05-06 TO 07-08) 10 50. THERE ARE THEREFORE TWO SETS OF CIRCUMSTANCES. FIRST, WHERE THERE EXISTS NO DEFINITION OF A WORD IN ISSUE WITHIN THE DTAA ITSELF, REGARD I S TO BE HAD TO THE LAWS IN FORCE IN THE JURISDICTION OF THE STATE CALLED UPON TO INTERPRET THE WORD. THE BOMBAY HIGH COURT SEEMS TO ACCEPT THE AMBULATORY APPROACH IN SUCH A SITUATI ON, THUS ALLOWING FOR SUCCESSIVE AMENDMENTS INTO THE REALM OF 'LAWS IN FORCE'. WE EX PRESS NO OPINION IN THIS REGARD SINCE IT IS NOT IN ISSUE BEFORE THIS COURT. THIS COURT'S FINDING IS IN THE CONTEXT OF THE SECOND SITUATION, WHERE THERE DOES EXIST A DEFINITION OF A TERM WITHIN THE DTAA. WHEN THAT IS THE CASE, THERE IS NO NEED TO REFER TO THE LAWS IN FORC E IN THE CONTRACTING STATES, ESPECIALLY TO DEDUCE THE MEANING OF THE DEFINITION UNDER THE DTAA AND THE ULTIMATE TAXABILITY OF THE INCOME UNDER THE AGREEMENT. THAT IS NOT TO SAY THAT THE COURT MAY BE INCONSISTENT IN ITS INTERPRETATION OF SIMILAR DEFINITIONS. WHAT THAT DO ES IMPLY HOWEVER, IS THAT JUST BECAUSE THERE IS A DOMESTIC DEFINITION SIMILAR TO THE ONE U NDER THE DTAA, AMENDMENTS TO THE DOMESTIC LAW, IN AN ATTEMPT TO CONTOUR, RESTRICT OR EXPAND THE DEFINITION UNDER ITS STATUTE, CANNOT EXTEND TO THE DEFINITION UNDER THE DTAA. IN OTHER WORDS, THE DOMESTIC LAW REMAINS STATIC FOR THE PURPOSES OF THE DTAA. 5.THUS, ON THE FACTS OF THE PRESENT CASE, WE ARE BO UND TO FOLLOW THE JUDICIAL PRECEDENCE IN ASSESSEES OWN CASE FOR THE EARLIER YEARS AND IN VI EW OF THE FINDING GIVEN THEREIN, WE UPHELD THE ORDER OF THE CIT (A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. ACCORDINGLY, GROUNDS NO.1, 2 & 3 ARE DISMISSED. 5.2. AS FAR AS FILING OF WRIT PETITION TO BE FILED BEFOR E THE HONBLE HIGH COURT IS CONCERNED IF WOULD BE SUFFICIENT TO MENTION THAT NOTHING WAS BRO UGHT ON RECORD TO PROVE THAT WRIT HAD BEEN FILED AND HEARD.HAD THE FINAL HEARING TAKEN PLACE,I T WOULD HAVE BEEN A DIFFERENT SITUATION.SO,IN ANTICIPATION OF FILING OF A WRIT-PETITION,WE ARE NO T INCLINED TO DEFER THE DECISION ESPECIALLY WHEN SAME IS COVERED BY THE ORDERS FOR THE EARLIER YEARS . CONSIDERING THE ABOVE AND RESPECTFULLY FOLLOWING TH E ORDERS OF THE TRIBUNAL IN THE CASES OF ANTWERP DIAMOND BANK NV ENGINEERING CENTRE(SUPRA)AN D ANTWERP DIAMOND BANK NV(SUPRA), WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. ITA/1131/MUM/2010-AY.2006-07. 6. WHILE DECIDING THE APPEAL,FILED BY THE ASSESSEE,FOR THE AY.2005-06,THE FIRST APPELLATE AUTHORITY (FAA)HELD THAT PAYMENT (RS.9.70 CRORES) R ECEIVED BY IT FROM RELIANCE WAS NOT ROYALTY AND CANNOT BE TAXED IN ITS HANDS.THE AO HAD CHALLENGED THE FINDINGS OF THE FAA.FOLLOWING OUR ORDER FOR THE EARLIER YEAR, WE UP HOLD THE ORDER OF THE FAA AND DECIDE THE EFFECTIVE GROUND AGAINST THE AO. ITA/7300/MUM/2010-AY.2007-08: 1131+2-ALCATEL INTL.05-06 TO 07-08) 11 IN PURSUANCE OF THE DIRECTIONS OF THE DRP,THE AO HE LD THAT PAYMENT RECEIVED BY THE ASSSESSEE WAS TAXABLE AS ROYALTY AS PER THE PROVISIONS OF SEC TION 9(1)OF THE ACT.FOLLOWING OUR ORDER FOR THE AY 2005-06,WE ALLOW THE APPEAL FILED BY THE ASSESSE E. AS A RESULT,APPEALS FILED BY THE ASSESSEE ARE ALLOW ED AND THE APPEAL OF THE AO STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY, 2017. 24 , 201 7 SD/- SD/- ( / RAM LAL NEGI) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 24.05.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.