Cummins Inc., Pune V. Deputy Commissioner of Income-tax,(International Taxation), Pune

ITA 889/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9417 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-12-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 12-04-2017
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER ITA NOS.524/PUN/2016, 889/PUN/2017, 2978/PUN/2017, 1555/PUN/2018 AND 1639/PUN/2019 / ASSESSMENT YEARS : 2011-12 TO 2015-16 CUMMINS INC., C/O. CUMMINS INDIA OFFICE CAMPUS, 5 TH FLOOR, SURVEY NO.21, BALEWADI, PUNE PAN : AABCC6225D VS. DCIT/ACIT (INTERNATIONAL TAXATION), CIRCLE-1, PUNE APPELLANT RESPONDENT / ORDER PER BENCH : THESE FIVE APPEALS BY THE ASSESSEE RELATING TO THE ASSESSMENT YEARS 2011-12 TO 2015-16 INVOLVE SOME COMMON ISSUES. WE ARE, THEREFORE, PROCEEDING TO DISPOSE THEM O FF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ASSESSEE BY SHRI KETAN VED REVENUE BY SHRI T. VIJAYA BHASKAR REDDY DATE OF HEARING 08-01-2020 DATE OF PRONOUNCEMENT 09-01-2020 CUMMINS INC., A.YRS. 2011-12 TO 2015-16 2 A.Y. 2011-12 : 2. THE FIRST TWO GROUNDS OF THE APPEAL ARE AGAINST THE TREATMENT OF AMOUNT RECEIVED BY THE ASSESSEE FROM PROVIDIN G USERS A RIGHT IN OFF-THE-SHELF SOFTWARE AND USE OF STANDA RD FACILITIES AND SUPPORT SERVICES AS ROYALTY. 3. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. BOTH THE SIDES ARE IN AGREEME NT THAT THE FACTS AND CIRCUMSTANCES OF THESE TWO GROUNDS ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE PRECEDING YEARS INCLUDING THE IMMEDIATELY PRECEDING YEAR, NAMELY, THE ASSESSMENT YEAR 2010-11, WHICH HAS BEEN RECENTLY DISPOSE D OF BY THE TRIBUNAL VIDE ITS ORDER DATED 07-01-2019 (ITA NO.331/PUN/2015). BOTH SUCH GROUNDS HAVE BEEN ALLOWED B Y THE TRIBUNAL FOLLOWING THE ORDERS OF THE EARLIER YEARS. IN VIE W OF THE ABOVE, WE ALLOW THESE TWO GROUNDS. 4. GROUND NO. 3 IS AGAINST THE RATE OF TAX AT WHICH SOFTWA RE AND STANDARD FACILITY INCOME SHOULD BE CHARGED TO TAX. THE ASSESSING OFFICER CHARGED THE TAX @ 40%. CUMMINS INC., A.YRS. 2011-12 TO 2015-16 3 5. IN VIEW OF OUR DECISION ON GROUNDS NOS. 1 & 2 A BOUT NON- TAXABILITY OF THESE AMOUNTS, THIS GROUND HAS BEEN RENDERED INFRUCTUOUS. SINCE THE INCOME ITSELF IS NOT CHARGEABLE TO TAX, THERE CAN BE NO QUESTION OF RATE OF TAX AT WHICH SUCH INCO ME SHOULD BE CHARGED. 6. THE LAST GROUND IS AGAINST THE INCLUSION OF SURCHARGE AN D EDUCATION CESS IN THE AMOUNT OF TAX CHARGED BY THE AO UND ER THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). 7. THE ASSESSING OFFICER INCLUDED SURCHARGE AND EDUCATION CESS IN THE AMOUNT OF TAX DETERMINED BY HIM UNDER THE DTAA , AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIAL ON RECORD. FROM THE COMPUTATION OF INCO ME, IT CAN BE SEEN THAT THE INCOME OF THE ASSESSEE WHICH HAS BE EN CHARGED TO TAX UNDER THE REGULAR PROVISIONS HAS ALSO BEEN SUBJECTED TO SURCHARGE AND EDUCATION CESS. IN SO FAR AS THE TAXABILITY OF INCOME UNDER THE DTAA IS CONCERNED, THERE ARE SPECIFIC RATES ON WHICH SUCH INCOMES ARE CHARGEABLE TO TAX . CUMMINS INC., A.YRS. 2011-12 TO 2015-16 4 SUCH RATES CANNOT BE FURTHER ENHANCED BY SURCHARGE AND EDUCATION CESS AS HAS BEEN HELD IN THE SEVERAL DECISIONS INCLUDING THE ONE DATED 30-11-2015 RELIED BY THE LD. AR IN DDIT (IT) VS. THE BOC GROUP LIMITED (ITA NO.571/KOL/2013) . WE, THEREFORE, OVERTURN THE IMPUGNED ORDER AND DIRECT NO T TO CHARGE SURCHARGE AND EDUCATION CESS ON THE RATES OF TAX U NDER THE DTAA. THIS GROUND IS ALLOWED. 9. THE LAST GROUND ABOUT THE LEVY OF INTEREST U/S 234B IS CONSEQUENTIAL. 10. IN THE RESULT, THE APPEAL IS ALLOWED. A.Y. 2012-13 : 11. THE FIRST TWO GROUNDS ARE AGAINST THE TREATMENT OF AMO UNT RECEIVED BY THE ASSESSEE FROM PROVIDING USERS A RIGHT IN O FF-THE- SHELF SOFTWARE AND USE OF STANDARD FACILITIES AND SUPPORT SERVICES AS ROYALTY. 12. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THESE TWO GROUNDS ARE AD MITTED TO BE MUTATIS MUTANDIS SIMILAR TO GROUND NOS. 1 & 2 FOR THE CUMMINS INC., A.YRS. 2011-12 TO 2015-16 5 ASSESSMENT YEAR 2011-12 DEALT WITH SUPRA . FOLLOWING THE VIEW TAKEN HEREINABOVE, WE ALLOW THESE TWO GROUNDS ON THE TAXABILITY OF OFF-THE-SHELF SOFTWARE AND FEES FOR STANDARD FACILITIES. 13. GROUND NO.3 IS AGAINST THE ADDITION ON ACCOUNT OF EXPAT CROSS CHARGES BY TREATING THE SAME AS ROYALTY. 14. THE LD. AR FAIRLY SUBMITTED THAT SIMILAR ISSUE CAME UP F OR CONSIDERATION BEFORE THE TRIBUNAL IN ITS ORDER FOR THE ASSESS MENT YEAR 2010-11 AND THE MATTER HAS BEEN RESTORED TO THE FILE O F AO WITH CERTAIN DIRECTIONS. 15. WE HAVE GONE THROUGH THE ORDER PASSED BY THE TR IBUNAL FOR THE ASSESSMENT YEAR 2010-11. RELEVANT DISCUSSION HAS BEEN MADE IN PARA 7 THROUGH WHICH THE MATTER HAS BEEN RESTORED TO THE AO WITH CERTAIN DIRECTIONS. FOLLOWING THE PRECEDENT, WE SET-ASIDE THE IMPUGNED ORDER ON THIS SCORE AND REMIT THE M ATTER TO THE FILE OF THE AO FOR DECIDING IT AFRESH IN THE LIGHT OF THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE AFORENOTED ORDER. CUMMINS INC., A.YRS. 2011-12 TO 2015-16 6 16. GROUND NO.4 IS AGAINST THE LEVY OF SURCHARGE AND EDUCATION CESS ON THE AMOUNT OF INCOME CHARGED UNDER THE DTAA. 17. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THOSE OF GROUND NO.4 OF THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2011- 12. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE DIRECT NOT TO LOAD SURCHARGE AND EDUCATION CESS ON THE AMOUNT OF TAX AS DETERMINED UNDER THE DTAA. 18. GROUND NO.5 IS AGAINST LEVY OF INTEREST U/S.234D. THE LD. AR SUBMITTED THAT THE ASSESSEE WAS NOT GRANTED ANY INTIMATION OF REFUND U/S. 143(1) OF THE INCOME-TAX ACT, 1961 (HER EINAFTER ALSO CALLED `THE ACT), WHICH ULTIMATELY TURNED OUT TO BE NOT REFUNDABLE. THE ASSESSING OFFICER IS DIRECTED TO VERIFY TH E FACTUAL SCENARIO IN THIS REGARD AND DECIDE THE ISSUE AFRESH AS PER LAW. 19. GROUND NO. 6 IS AGAINST ALLOWING LESSER CREDIT OF TDS. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE CORRECT CUMMINS INC., A.YRS. 2011-12 TO 2015-16 7 AMOUNT OF TDS AS PER CERTIFICATES AND GRANT NECESSARY CRED IT AS PER LAW AFTER ALLOWING REASONABLE OPPORTUNITY TO THE ASSESSEE. 20. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. A.Y. 2013-14 : 21. THE FIRST TWO GROUNDS ARE AGAINST THE TREATMENT OF AMO UNT RECEIVED BY THE ASSESSEE FROM PROVIDING USERS A RIGHT IN O FF-THE- SHELF SOFTWARE AND USE OF STANDARD FACILITIES AND SUPPORT SERVICES AS ROYALTY. 22. HERE AGAIN, THESE TWO GROUNDS ARE ADMITTEDLY MUTATIS MUTANDIS SIMILAR TO GROUND NOS. 1 & 2 FOR THE ASSESSMENT YEAR 2011-12. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE ALLOW THESE TWO GROUNDS ON THE TAXABILITY OF OFF-THE-SHELF SOFTWAR E AND FEES FOR STANDARD FACILITIES. 23. GROUND NO.3 IS AGAINST THE ERRONEOUS LEVY OF INTEREST U/S.234A. THE CASE OF THE ASSESSEE IS THAT THE RETURN WAS FILED ON DUE DATE AND HENCE THERE SHOULD NOT HAVE BEEN ANY LEV Y OF INTEREST U/S.234A. CUMMINS INC., A.YRS. 2011-12 TO 2015-16 8 24. WE FIND FROM THE RECORDING IN THE ASSESSMENT ORDER THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30-11-2013. TH E ASSESSING OFFICER IS DIRECTED TO VERIFY IF THE DUE DATE IS DIFFERENT FROM THE DATE ON WHICH THE ASSESSEE FILED THE RETUR N. IN CASE THE ASSESSEE FILED ITS RETURN BEFORE THE DUE DATE U /S. 139(1) OF THE ACT, THEN NO INTEREST U/S.234A SHOULD BE CHAR GED. 25. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. A.Y. 2014-15 : 26. THE FIRST TWO GROUNDS ARE AGAINST THE TREATMENT OF AMO UNT RECEIVED BY THE ASSESSEE FROM PROVIDING USERS A RIGHT IN O FF-THE- SHELF SOFTWARE AND USE OF STANDARD FACILITIES AND SUPPORT SERVICES AS ROYALTY. 27. THESE TWO GROUNDS ARE ADMITTEDLY MUTATIS MUTANDIS SIMILAR TO GROUND NOS. 1 & 2 FOR THE ASSESSMENT YEAR 2 011-12. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE ALLOW THESE TWO GROUNDS IN FAVOUR OF THE ASSESSEE. CUMMINS INC., A.YRS. 2011-12 TO 2015-16 9 28. GROUND NO.3 IS AGAINST ALLOWING SHORT CREDIT OF TDS/TCS. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE FACTS AND ALLO W NECESSARY CREDIT AS PER LAW. 29. GROUND NO.4 IS AGAINST ERRONEOUS LEVY OF INTEREST U/S . 234B OF THE ACT. THIS GROUND HAS BEEN CLAIMED AS CONSEQUENTIAL AND ACCORDINGLY ALLOWED. 30. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. A.Y. 2015-16 : 31. THE FIRST TWO GROUNDS ARE AGAINST THE TREATMENT OF AMO UNT RECEIVED BY THE ASSESSEE FROM PROVIDING USERS A RIGHT IN O FF-THE- SHELF SOFTWARE AND USE OF STANDARD FACILITIES AND SUPPORT SERVICES AS ROYALTY. 32. THESE TWO GROUNDS ARE AGAIN ADMITTEDLY MUTATIS MUTANDIS SIMILAR TO GROUND NOS. 1 & 2 FOR THE ASSESSMENT YEAR 20 11-12. FOLLOWING THE DECISION TAKEN FOR THE A.Y. 2011-12, WE ALLOW THESE TWO GROUNDS IN FAVOUR OF THE ASSESSEE. CUMMINS INC., A.YRS. 2011-12 TO 2015-16 10 33. GROUND NO.3 IS AGAINST ALLOWING SHORT CREDIT OF TDS/TCS. THE ASSESSING OFFICER IS DIRECTED TO VERIFY AND ALLOW NECESS ARY CREDIT TO THE ASSESSEE AS PER LAW. 34. GROUND NO.4 IS AGAINST THE ERRONEOUS LEVY OF INTEREST U/S.234D. THIS GROUND IS SIMILAR TO THE GROUND NO.5 FOR THE ASSESSMENT YEAR 2012-13. FOLLOWING THE VIEW, THE ASSESSING OFFICER IS DIRECTED TO CARRY OUT NECESSARY VERIFICATION IN TER MS OF DIRECTION GIVEN ABOVE. 35. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH JANUARY, 2020. SD/- SD/- (S.S. VISWANETHRA RAVI) (R.S.SYAL ) JUDICIAL MEMBER VICE PR ESIDENT PUNE; DATED : 09 TH JANUARY, 2020 CUMMINS INC., A.YRS. 2011-12 TO 2015-16 11 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. THE PR. CIT -5, PUNE 5. , , / DR C, ITAT, PUNE 6. / GUARD FILE / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 08-01-2020 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 08-01-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *