M/S. SERVIONT GLOBAL SOLUTIONS LTD., CHENNAI V. ACIT, CC-6(1), CHENNAI

ITA 756/CHNY/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7519 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 02-09-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ALLOWING ITS CLAIM DEDUCTION PURCHASE
• Keywords: Non-deduction of tax; TDS; Set aside
• Section: 143(3); 115A

Judgement Text

आयकर अपीलीय अिधकरण, ‘डी’ यायपीठ, चे ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ी महावीर सह, उपा य एवं ी िगरीश अ वाल, लेखा सद य के सम BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 756/CHNY/2020 िनधा"रण वष" /Assessment Year: 2010 - 2011 M/s. Serviont Global Solutions Limited, No.4/600 & 4/197, 7 th Street, Dr. VSI Estate, Phase-II, Thiruvanmiyur, Chennai – 600 041. PAN : AAACI 0947 F Vs. The Assistant Commissioner of Income Tax, Corporate Circle – 6(1), Chennai – 600 034. Tamil Nadu (अपीलाथ /Appellant) ( यथ /Respondent) अपीलाथ क ओर से/Appellant by : Mr. S.P. Chidambaram, Advocate यथ क ओर से/Respondent by : Mr. G. Johnson, Addl. CIT सुनवाई क तारीख/Date of Hearing : 01.03.2022 घोषणा क तारीख/Date of Pronouncement : 04.03.2022 आदेश आदेशआदेश आदेश / // /O R D E R PER MAHAVIR SINGH, VP: This appeal by the Assessee is arising out of the order of the learned Commissioner of Income Tax (Appeals)-16, Chennai in ITA No.41/CIT(A)-16/2014-15; dated 28.02.2020 against the Assessment Order framed by the Deputy Commissioner of Income Tax, Company Circle – VI(2), Chennai, dated 18.03.2014 for the Assessment Year 2010 – 2011 u/s.143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’). 2 I.T.A. No. 756/Chny/2020 2. The appeal of the Assessee is delayed by 128 days in filing the appeal due to the outbreak of “Covid-19” pandemic. From the perusal of the impugned order of Ld. CIT(A) dated 28.02.2020, it is evident that the limitation period was under lock-down because of pandemic which had posed serious challenges before all in making the required compliances. This has been taken note of the Miscellaneous Application No. 665 of 2021, 21 of 2022 and 29 of 2022 [in Suo Motto Writ Petition (c) No.3 of 2020] of the order of the Hon’ble Supreme Court (Civil Original Jurisdiction), vide order dated 10.01.2022; wherein the Hon’ble Apex Court has given the direction to condone the delay and waive the limitations across the Board, i.e. Courts, Tribunals of India. Accordingly, the delay in filing the present appeal before the Tribunal is condoned. 3. The sole issue involved in the present appeal before us relates to disallowance of payments made towards purchase of software by the Assessee u/s. 40(a)(i) of the Act amounting to Rs.2,77,70,700/- for non-deduction of tax at source u/s.195 of the Act. 3 I.T.A. No. 756/Chny/2020 4. Brief facts of the case are that the Assessee is in the business of development and export of software. Assessee company filed its return of income for the Assessment Year 2010 – 2011 on 14.10.2010 reporting income as “NIL” and book profit of Rs.3,46,71,759/- u/s.115JB of the Act. The case was selected for scrutiny u/s. 143(3) of the Act and statutory notices were issued. During the course of the assessment proceedings, the learned Assessing Officer found that the Assessee has purchased software licenses from M/s. Acqueon Technologies, USA amounting to Rs.2,77,70,700/- and claimed the same as expenses in the profit and loss account. The learned Assessing Officer noted that, according to the provisions of Section 9(1)(vi) of the Act, transfer of license of software has to be treated as royalty and the consideration paid for such transfer amounts to income deemed to accrue or arise in India. The Assessing Officer held that since the Assessee has not deducted tax as required u/s.195 of the Act, therefore the provisions of Section 40(a)(i) are attracted to disallow the said payment. 5. During the course of assessment proceedings, the Assessee submitted that the payment under reference is not subject to TDS, since the purchase of software license is in the 4 I.T.A. No. 756/Chny/2020 nature of goods under the Sales Tax / VAT Act. However, the submissions of the Assessee were not accepted by the learned Assessing Officer who held that the payments of the Assessee towards the use of license for a software is a taxable income in the hands of the non-resident as it is a royalty income as per the Section 9(1)(vi) r.w.s. 115A of the Act and since the deduction of tax at source was not done on the payment made, provisions of Section 40(a)(i) of the Act becomes applicable. Accordingly, the learned Assessing Officer disallowed the claim of deduction for the impugned payment. 6. Aggrieved, the Assessee carried the matter before the learned Commissioner of Income Tax (Appeals) who after considering the detailed submissions made by the Assessee passed his decision on the basis of the immediately preceding year, i.e. Assessment Year 2009 – 2010; wherein his predecessor had sustained disallowance for a similar payment towards purchase of software from M/s. Acqueon Technologies, USA by holding that there is no change in facts. Aggrieved, by the decision of the learned Commissioner of Income Tax (Appeals), the Assessee is in appeal before the Tribunal. 5 I.T.A. No. 756/Chny/2020 7. We have heard the rival contentions, perused the records and submissions made by the Assessee. At the outset, the learned Counsel for the Assessee, Mr. S.P. Chidambaram, Advocate, relied upon the order passed by the co-ordinate bench in the Assessee’s own case for the immediately preceding Assessment Year i.e. 2009 – 2010 in I.T.A. No.1974/Chny/2016 dated 12.02.2020 and took us through the order; wherein in paragraph no.5, it has been held that the purchase of copyrighted articles does not fall within the scope of section 9(1)(vi) of the Act and in the absence of any findings from the Revenue that M/s. Acqueon Technologies Inc. USA was paid over and above the purchase price, its treatment that the impugned transaction falls u/s.9(1)(vi) of the Act is not valid and the corresponding ground of the Assessee was allowed. 8. We find that the present appeal before us on the identical facts is covered by the decision of the co-ordinate bench in the Assessee’s own case of the immediately preceding Assessment Year 2009 – 2010, which had dealt with the very basis for sustaining the disallowance by the learned Commissioner of Income Tax (Appeals) in the first appeal and had held in favor of the assessee by allowing its claim for deduction for purchase 6 I.T.A. No. 756/Chny/2020 of software license from M/s. Acqueon Technologies Inc. USA. IT is noted that in the present appeal before us, the assessee has purchased the software license from the same vendor i.e. M/s. Acqueon Technologies Inc. USA. 9. Further, the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Limited Vs. Commissioner of Income Tax reported in [2021] 125 taxmann.com 42 (SC), vide order dated 2 nd March, 2021 has held that “the amount paid by the resident Indian end-user / distributors to non-resident computer software manufacturers / suppliers, as consideration for resale / use of computer software through EULAs / distribution agreement, is not a payment of royalty for use of copyright in computer software, and thus, same does not give rise to any income taxable in India”, which squarely covers the issue before us in respect of the payment made for purchase of software license by the Assessee from the non-resident M/s. Acqueon Technologies Inc. USA. 10. Respectfully following the decision of the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Limited Vs. CIT (supra) and also the decision of the Co- ordinate Bench of the Tribunal in the Assessee’s own case 7 I.T.A. No. 756/Chny/2020 (supra) on the identical set of facts, we set aside the order of the learned Commissioner of Income Tax (Appeals) and delete the addition made by the learned Assessing Officer in respect of disallowance of Rs. 2,77,70,700/- made towards payment of software license fee u/s.40(a)(i) of the Act. 11. In terms of the above discussions the appeal of the Assessee is allowed. 12. In the result, the appeal of the Assessee is allowed. Order pronounced in the court on 4 th March, 2022 at Chennai. Sd/- Sd/- (िगरीश अ वाल) (GIRISH AGRAWAL) लेखा सद य /ACCOUNTANT MEMBER (महावीर िसंह ) (MAHAVIR SINGH) उपा य /VICE PRESIDENT चे ई/Chennai, दनांक/Dated, the 4 th March, 2022 IA, Sr. PS आदेश की ितिलिप अ ेिषत/Copy to: 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड" फाईल/GF