M/s. A B Sandvik Coromant, Pune V. Deputy Director of Income-tax,

ITA 84/PUN/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6991 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SNEHA PAI
• Keywords: Double taxation relief
• Section: 143(3); 142(1)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , ! ' , $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.84/PUN/2014 ' ' / ASSESSMENT YEAR : 2010-11 M/S. AB SANDVIK COROMANT C/O.SANDVIK ASIA PRIVATE LIMITED, MUMBAI PUNE ROAD, DAPODI, PUNE 411012. . / APPELLANT V/S DY.DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION) I, 3 RD FLOOR, B.O. BHAWAN, SATARA ROAD, PUNE 04. PAN : AABCA5161C . / RESPONDENT / APPELLANT BY : SMT. SNEHA PAI / RESPONDENT BY : SHRI RAJEEV KUMAR ( / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXA TION) I, PUNE DT.18.11.2013 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- / DATE OF HEARING : 07.03.2017 / DATE OF PRONOUNCEMENT: 10.03.2017 2 ITA NO.84/PUN/2014 AY.NO.2010-11 2.1 ASSESSEE IS A TAX RESIDENT OF SWEDEN UNDER THE DOU BLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND SWEDEN. ASSESSEE IS A NON-RESIDENT COMPANY INCORPORATED IN SWEDEN. IT IS STATED TO BE ENGAGED IN THE BUSINESS O F MANUFACTURING AND SALE OF CEMENTED CARBIDE AND HIGH SPEE D STEEL TOOLS FOR METAL WORKING IN EUROPE. ASSESSEE ELECTRO NICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 01.10.2010 DECLARING TOTAL INCOME AT RS.2,89,630/-. THEREAFTER IT REVIS ED ITS RETURN OF INCOME ON 30.03.2012 TO RECTIFY THE ERROR IN INTIMATING OF ORIGINAL RETURN. THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S 143(2) ALONG WITH 142(1) OF THE ACT DT.21.09.2011 WAS SE RVED ON ASSESSEE ON 23.09.2011. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, IT WAS NOTICED THAT ASSESSEE HAD RECEIVED AN AMOUNT OF RS.29,98,931/- TOWARDS LICENCE FEE FOR CAD/CAM FROM ITS ASSOCIATE CONCERN M/S. SANDVIK ASIA PRIVATE LIMIT ED (SAPL) AND THE AFORESAID RECEIPT WAS CLAIMED AS NOT TAXAB LE IN INDIA. DRAFT ASSESSMENT ORDER U/S 144C R.W.S. 143(3) OF T HE ACT WAS PASSED ON 31.12.2012 WHEREIN THE AFORESAID RECEIPT OF RS.29,98,931/- WAS ADDED TO THE INCOME BY CONSIDERING IT T O BE IN THE NATURE OF ROYALTY AND FEES FOR TECHNICAL SERVICES. ON RECEIPT OF DRAFT ASSESSMENT ORDER, ASSESSEE FILED OBJECTION AGAINST THE ORDER BEFORE DISPUTE RESOLUTION PANEL (DRP) WHO VIDE OR DER DT.06.09.2012 REJECTED THE OBJECTIONS RAISED BY THE ASSE SSEE. THEREAFTER ASSESSMENT WAS FRAMED ON 18.11.2013 U/S 144C (13) R.W.S. 143(3) OF THE ACT, WHEREIN IT WAS HELD THAT THE RECEIP T WAS IN NATURE OF ROYALTY AND FEE FOR TECHNICAL SERVICES AND ACC ORDINGLY TAXABLE IN INDIA AS PER ARTICLE 12 OF DTAA OF INDIA AND SWEDEN AS 3 ITA NO.84/PUN/2014 AY.NO.2010-11 WELL AS SEC.9(1)(VI) AND SEC.9(I)(VII) OF THE ACT AND THE TOTAL INCOME WAS ACCORDINGLY DETERMINED AT RS.32,88,560/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE IS NOW IN APPEAL B EFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1 . THE LEARNED DISPUTE RESOLUTION PANEL AND THE LEAR NED ASSESSING OFFICER HAVE ERRED IN HOLDING THAT THE RE CEIPTS FROM INDIAN AFFILIATE COMPANY FOR USE OF CAD/CAM APPLICATION AMOUNTING TO INR 29,98,931 IS IN THE NA TURE OF ROYALTY WITHIN THE MEANING OF ARTICLE 12 OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND SWEDEN. 2. THE LEARNED DISPUTE RESOLUTION PANEL AND THE LEA RNED ASSESSING OFFICER HAVE ERRED IN HOLDING THAT THE RE CEIPTS FROM INDIAN AFFILIATE COMPANY FOR USE OF CAD/CAM APPLICATION AMOUNTING TO INR 29,98,931 IS IN THE NA TURE OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF ARTICLE 12 OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN I NDIA AND SWEDEN READ WITH THE PROTOCOL THERETO. 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT THE IT SUPPORT SERVICES CANNOT BE TREATED AS ROYALTY AS IT IS NOT FOR EXPLOITATION OF A RIGHT / COPY RIGHT IN A LICENCE PRODUCT BUT IS ONLY FOR THE USE OF SOFTWARE SYSTEM AND THE PAYMENT IS NEITHER FEES FOR TECHNICAL SERVICES (FTS) NOR ROYALTY. LD.A.R. FURTH ER SUBMITTED THAT IDENTICAL ISSUE WITH RESPECT TO THE TAXING OF THE LICENCE FEE RECEIVED BY THE ASSESSEE AROSE IN A.YS. 2007- 08 AND 2009-10 AND THE CO-ORDINATE BENCH OF THE TRIBUNAL WHILE DECIDING THE ISSUE FOR A.Y. 2007-08 AND 2009-10 HAD DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE. SHE FURTHER SUBMITTED TH AT FACTS IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER Y EARS. SHE THEREFORE SUBMITTED THAT FOLLOWING THE DECISION OF THE C O- ORDINATE BENCH OF THE TRIBUNAL, THE MATTER BE DECIDED IN SIMILAR MANNER. LD. D.R. DID NOT OBJECT TO THE AFORESAID SUBMIS SIONS 4 ITA NO.84/PUN/2014 AY.NO.2010-11 MADE BY THE LD.A.R BUT HOWEVER SUPPORTED THE ORDER OF LOWER AUTHORITIES. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO THE TAXING OF RECEIPT OF LICENCE FEE RECEIVED BY ASSESSEE FROM ITS ASSOCIATE CONCERN. AO HAS CONSIDERED IT TO BE IN THE NA TURE OF ROYALTY AND FEE FOR TECHNICAL SERVICES AND ACCORDINGLY HELD IT TO BE TAXABLE IN INDIA. WE FIND THAT IDENTICAL ISSUE AROSE IN ASSE SSEE OWN CASE IN A.Y. 2007-08 AND 2009-10. WE FIND THAT THE C O- ORDINATE BENCH OF THE TRIBUNAL WHILE DECIDING THE ISSUE IN A .Y. 2009-10 FOLLOWED ITS DECISION FOR A.Y. 2007-08. IN A.Y. 2007- 08 THE ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH OF THE T RIBUNAL BY HOLDING AS UNDER : 11. IT HAS BEEN CONTENDED BEFORE US THAT THE ASSE SSEE HAS NOT GIVEN THE DETAILS OF THE MODIFICATIONS CARRIED OUT BY THE ASSESSEE EITHER BEFORE THE ASSESSING OFFICER OR THE DRP. WE FURTHER FIND THAT THE AUTHORITIES BELOW WHILE DECID ING THE ISSUE HAS NOT CONSIDERED THE AGREEMENT BETWEEN THE ASSESSEE AND SANDVIK ASIA PRIVATE LIMITED FOR THE US E OF PROGRAM. THUS, WE ARE OF THE CONSIDERED VIEW THAT T HIS ISSUE NEEDS A REVISIT TO THE FILE OF ASSESSING OFFI CER. THE ASSESSEE SHALL FURNISH THE DETAILS OF MODIFICATIONS /CHANGES CARRIED OUT BY THE ASSESSEE IN THE PROGRAM FOR STANDARDIZING THE SAME TO BE USED BY ALL THE GROUP CONCERNS AND ALSO THE TERMS AND CONDITIONS FOR THE USE OF PROGRAM BY SAPL. THE ASSESSING OFFICER AFTER CONSID ERING THE SAME SHALL DECIDE THE ISSUE AFRESH IN THE LIGHT OF DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN TH E CASE OF SANDVIK AUSTRALIA PTY. LTD. VS. DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION-II, PUNE (SUPRA). ACCOR DINGLY, THE GROUND NO. 2 RAISED IN THE APPEAL FOR ASSESSMEN T YEAR 2007-08 IS PARTLY ALLOWED IN THE AFORESAID TERMS. 5. BEFORE US, NO DISTINGUISHING FEATURE IN THE FACTS OF THE C ASE FOR THE YEAR UNDER CONSIDERATION AND THAT OF EARLIER YEAR S HAS BEEN POINTED BY EITHER OF THE PARTIES. WE THEREFORE FOLLOW ING THE 5 ITA NO.84/PUN/2014 AY.NO.2010-11 REASONING AS GIVEN BY THE CO-ORDINATE BENCH WHILE DECIDIN G THE APPEAL IN A.Y. 2007-08 AND FOR SIMILAR REASONS, RESTORE THE ISSUE BACK TO THE FILE OF AO TO DECIDE THE ISSUE IN ACCORDANCE W ITH LAW. NEEDLESS TO STATE THAT AO SHALL GRANT ADEQUATE OPPORT UNITY OF HEARING TO THE ASSESSEE. THUS, THE GROUNDS OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 10 TH DAY OF MARCH, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE; ! DATED : 10 TH MARCH, 2017. YAMINI ( ) *!+, -,! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. 6. DRP, PUNE. DIT (IT)-I, PUNE. #$% &&'(, * '(, / DR, ITAT, A PUNE; %+, - / GUARD FILE. ( / BY ORDER, //// // TRUE COPY // T / // TRUE COPY /// //TRUE // TRUE COPY // . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.