DASSAULT SYSTEMS SOLDWORKS CORPORATION, CHENNAI V. DDIT (IT) 2(1)(2), MUMBAI

ITA 936/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7980 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 14-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 10-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Retrospective amendment
• Section: 234B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUM BAI , , , , # BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.936/MUM/2015 ( $ % / ASSESSMENT YEAR: 2011-12) DASSAULT SYSTEMES SOLIDWORKS CORPORATION C/O. BMR & ASSOCIATES LLP 31, SUDHA CENTRE, 2 ND FLOOR, DR. RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI 600004 / VS. THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)- 2(1)(2) MUMBAI ./ ./PAN/GIR NO. : AAFCS8787E ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 14.02.2017 /DATE OF PRONOUNCEMENT: 28.02.2017 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ASSESSMENT ORDER DATED 08.12.2014 FOR THE A.Y.2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED ASSESSING OFFICER (AO) HAS ERRED IN LAW AND ON FACTS IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE AT RS.26,87,30,378/-. ASSESSEE BY: SHRI ANANTHA KRISHANAN N. REVENUE BY: SHRI JASBIR CHAUHAN (CIT-DR) ITA NO.936/M/2015 A.Y.2011-12 2 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED AO AND THE DISPUTE RESOLUTION PANEL (DRP) HAVE ERRED IN HOLDING THAT THE INCOME FROM SALE OF SHRIN K-WRAP SOFTWARE IS TAXABLE IN INDIA, BEING IN THE NATURE O F ROYALTY UNDER THE PROVISIONS OF SECTION 9(1)(VI) OF THE ACT AS WE LL AS ARTICLE 12(3) OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT ( DTAA) BETWEEN INDIA AND USA. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED AO AND THE DRP HAVE ERRED IN NOT APPRECIATI NG THAT THE PAYMENTS RECEIVED ON SALE OF SHRINK-WRAP SOFTWARE I S FOR SALE OF COPYRIGHTED ARTICLE AND NOT TRANSFER OF COPYRIGHT RIGHT AS THE END USERS IN INDIA OBTAINED ONLY A RIGHT TO USE THE SOFTWARE PRODUCTS AS AGAINST ANY COPYRIGHT RIGHT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED AO HAS ERRED IN HOLDING THAT SOFTWARE IS A PROCESS OR A PROPERTY SIMILAR TO PATENT, INVENTION, DESIGN, SECR ET FORMULA, PROCESS, ETC AS DEFINED UNDER EXPLANATION 2 TO SECT ION 9(1)(VI) OF THE INCOME TAX ACT, 1961 (ACT). 5. THE LEARNED AO HAS ERRED IN LAW IN STATING THAT THE RETROSPECTIVE AMENDMENT TO SECTION 9(1)(VI) OF THE ACT BY WAY OF INSERTION OF EXPLANATION 4 TO THE SAID SECTION THROUGH FINANCE A CT 2012 IS APPLICABLE ALSO TO THE DEFINITION OF ROYALTY UNDE R ARTICLE 12 OF THE DTAA. 6. THE HONOURABLE DRP HAS ERRED IN UPHOLDING THE DR AFT ASSESSMENT ORDER AFTER REJECTING THE APPELLANTS OB JECTIONS MERELY FOR THE REASON THAT THE ISSUE WAS DECIDED AG AINST THE APPELLANT BY THE DRP IN THE EARLIER YEARS, EVEN AS IT NOTED THAT THE BINDING DECISIONS OF THE JURISDICTIONAL MUMBAI BENCH OF THE INCOME TAX APPELLATE TRIBUNAL ON IDENTICAL ISSUE IN THE APPELLANTS OWN CASE FOR THE EARLIER ASSESSMENT YEA RS 2003-04, 2005-06 AND 2006-07 WERE CONCLUDED IN FAVOUR OF THE APPELLANT. 7. WITHOUT PREJUDICE TO THE OTHER GROUNDS, THE LEAR NED AO AND THE DRP HAVE ERRED IN COMPUTING THE TAX ON INCOME AT TH E RATE OF 15 PERCENT AFTER RECOGNIZING THE INCOME OF THE ASSESSE E AS ROYALTY INCOME, WHEREAS SECTION 115A OF THE ACT PRESCRIBES A RATE OF 10 PERCENT UNDER THE ACT ON ROYALTY INCOME. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE AO HAS ERRED IN LEVYING INTEREST AMOUNTING TO RS.1,81, 39,301/- UNDER SECTION 234B OF THE ACT AND THE DRP HAS ERRED IN ITA NO.936/M/2015 A.Y.2011-12 3 UPHOLDING THE SAME WITHOUT CONSIDERING THE OBJECTIO NS OF THE APPELLANT. 9. TO PASS SUCH OTHER ORDERS AS YOUR HONOURS MAY DE EM FIT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT A DRAFT ASS ESSMENT ORDER WAS PASSED U/S.143(3) R.W.S 144C(1) OF THE INCOME TAX A CT, 1961 ( IN SHORT THE ACT) ON 25.03.2014. THE ASSESSEE APPROACH THE DIS PUTE RESOLUTION PANEL I, MUMBAI (THE DRP) BY FILING THE OBJECTIONS AGAI NST THE DRAFT ASSESSMENT ORDER. THE DRP ISSUED DIRECTIONS UNDER 144C(5) OF THE ACT VIDE ITS ORDER DATED 12.11.2014 RECEIVED IN THIS OFFICE ON 21.11.2 014. THE PRESENT ORDER WAS ISSUED CONSEQUENT TO THE SAID DIRECTIONS GIVEN BY THE DRP. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME TO THE TUNE OF RS. NIL ON 29.09.2011. THE CASE WAS SELECTED FOR SCRUT INY AND NOTICE U/S.143(2) AND NOTICE U/S.142(1) OF THE ACT WERE ISSUED TO THE ASSESSEE. THE ASSESSEE WAS A COMPANY ENGAGED IN THE BUSINESS OF DEVELOPING AND MARKETING OF 3D MECHANICAL DESIGN SOLUTIONS ALL OVER THE WORLD. UN DER THE ORDER OF ASSESSMENT AN ASSESSEE HAS ENTERED INTO AGREEMENT W ITH RESELLERS IN INDIA FOR SALE OF SHRINK-WRAPPED SOLIDWORKS 2003 SOFTWARE TO CLIENTS IN INDIA AND HAS SOLD SOFTWARE IN INDIA THROUGH ITS DISTRIBU TOR / RESELLER AMOUNTING TO USD 6.05 MILLIONS. THE NOTICE WAS GIVEN TO THE ASS ESSEE AS TO WHY THE RECEIPT SHOULD NOT BE TREATED AS ROYALTY AND INCOME IN HANDS OF THE ASSESSEE. AFTER GETTING THE REPLY FROM THE ASSESSEE, THE ASSE SSING OFFICER AND THE DRP WERE OF THE VIEW THAT THE SAID INCOME FALLS IN THE DEFINITION OF ROYALTY AND ACCORDINGLY TAXED @15% TO THE TUNE OF RS.26,87, 30,378/-. SINCE THE ITA NO.936/M/2015 A.Y.2011-12 4 ASSESSEE WAS NOT SATISFIED THAT THE PROPOSAL AND DI RECTION OF THE DRP AS WELL AS ASSESSMENT, THEREFORE, THE PRESENT APPEAL H AS BEEN FILED BEFORE US. ISSUE NO.1 TO 7:- 4. ISSUE NO. 1 TO 7 ARE INTERCONNECTED, THEREFORE, ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION. UNDER THESE ISSUES, IT IS TO BE DETERMINED THAT THE RECEIPT FROM THE SALE OF SOFTWARE PRODUCTS TO CLIENTS IN INDIA THROUGH ITS DISTRIBUTOR / RESELLER AMOUNTING TO USD 6.05 MILLIONS IS IN THE NATURE OF ROYALTY OR NOT. THE LEARNED REPRESEN TATIVE OF THE ASSESSEE HAS ARGUED THAT THE CASE OF THE ASSESSEE HAS DULY B EEN COVERED BY THE DECISION OF THE HONBLE INCOME TAX APPELLATE TRIBUN AL IN THE ASSESSEES OWN CASE FOR THE A.Y.2002-03 IN ITA NO. 3095/MUM/2007 ORDER DATED 15 TH DECEMBER 2009 AND FOR THE A.Y.2005-06 IN ITA NO.5097/MUM/2008 ORDER DATED 1 ST APRIL 2010 AND FOR A.Y.2006-07 IN ITA NO.3219/MUM/2010 ORDER DATED 08.02.2012 AND FOR A.Y.2007-08 IN ITA NO.8721/MUM/2010 ORDER DATED 31. 03.2016 AND FOR A.Y.2009-10 IN ITA NO.7790/MUM/2012 ORDER DATED 31.03.2016. THEREFORE, IN THE SAID CIRCUMSTANCES, THE ORDER PAS SED BY THE ASSESSING OFFICER ON THE DIRECTION OF THE DRP IS WR ONG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE AND THE REC EIPT IS NOT LIABLE TO BE TREATED AS ROYALTY. IT IS ALSO ARGUED THAT WHEN NO PATENT RIGHT WAS SOLD HOWEVER COMPUTER PROGRAMS WERE SOLD WHICH COULD NOT BE TAXED IN VIEW OF THE PROVISION U/S.9(1) OF THE ACT THEREFORE IN THE SAID CIRCUMSTANCES THE AMOUNT IN QUESTION IS NOT LIABLE TO BE TREATED AS ITA NO.936/M/2015 A.Y.2011-12 5 ROYALTY. HOWEVER, ON THE OTHER HAND, THE LEARNED R EPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTIONS AND ARG UED THAT THE HONBLE KARNATAKA HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE REVENUE IN THE CASES OF CIT VS. SYNOPSIS INTERNATIO NAL OLD LTD., 212 TAXMAN 0454 (KAR. HC), DATED 03.08.2010, CIT V. SAM SUNG ELECTRONICS CO. LTD. & OTHERS, (2011) 345 ITR 0494, KAR HC, DATED 15.10.2011, CIT V. WIPRO LTD. (2011), 355 ITR 0284 (KAR) / 203 TAXMAN 621 (KAR.) HC, DATED 15.10.2011 AND CIT VS. CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTANTS (P) LTD., (2014) 48 TAXMANN.COM 264 (KAR), DATED 09.06.2014. IT IS ALS O SPECIFICALLY ARGUED THAT THE JURISDICTIONAL TRIBUNAL IN CASE OF THE DIT(IT) VS. RELIANCE INFOCOMM LTD. (MUM TRIB) DATED 06.09.2013 HAS FOLLOWED THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SYNOPSIS INTERNATIONAL OLD LTD., 212 TAXMAN 0454 (K AR. HC), DATED 03.08.2010 AND CIT VS. SAMSUNG ELECTRONICS CO. LTD. & OTHERS, (2011) 345 ITR 0494, KAR HC, DATED 15.10.2011. THE REFORE, IN THE SAID CIRCUMSTANCES THE ORDER PASSED BY THE ASSESSIN G OFFICER IS JUSTIFIABLE WHICH IS NOT LIABLE TO BE INTERFERE WIT H AT THIS APPELLATE STAGE. KEEPING IN VIEW OF THE ARGUMENT ADVANCED BY THE PARTIES AND PERUSED THE RECORD CAREFULLY, IT IS APPARENT ON REC ORD THAT THE SAID ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE H ONBLE INCOME TAX APPELLATE TRIBUNAL IN THE ASSESSEES OWN CASE FOR T HE A.Y.2002-03 IN ITA NO. 3095/MUM/2007 ORDER DATED 15 TH DECEMBER 2009 AND FOR THE A.Y.2005-06 IN ITA NO.5097/MUM/2008 ORDER DATED 1 ST APRIL 2010 ITA NO.936/M/2015 A.Y.2011-12 6 AND FOR A.Y.2006-07 IN ITA NO.3219/MUM/2010 ORDER D ATED 08.02.2012 AND FOR A.Y.2007-08 IN ITA NO.8721/MUM/2 010 ORDER DATED 31.03.2016 AND FOR A.Y.2009-10 IN ITA NO.7790 /MUM/2012 ORDER DATED 31.03.2016. ON APPRAISAL OF THE LATEST ORDER FOR THE A.Y.2009-10, WE FOUND THAT THE HONBLE INCOME TAX A PPELLATE TRIBUNAL CONSIDERED THE ORDER PASSED BY THE HONBL E KARNATAKA HIGH COURT WHICH WAS FAVOUR OF THE ASSESSEE. IN THE SA ID ORDER, THE DISCUSSION IN THIS REGARD IS HEREBY REPRODUCED BELO W:- 5. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. TH ERE IS NOTHING MUCH THAT WE CAN ADD TO SUCH A W ELL RESEAR CHED AND ERUDITE ORDER EITHER. THE DECISIONS OF NON JURISDICTIONAL HIGH COURTS, IN FAVOUR OF THE REVENU E ON THIS POINT, HAVE ALREADY BEEN DEALT WITH IN THIS OR DER. AS TO WHAT SHOULD BE DONE IN A SITUATION IN WHICH THER E ARE CONFLICTING VIEWS OF HONBLE NON JURISDICTIONAL HIG H COURTS AND IN WHICH WE DO NOT HAVE THE BENEFIT OF GUIDANCE FROM HONBLE JURISDICTIONAL HIGH COURT, WE CAN ONLY ADD, WITH RESPECTFUL CONCURRENCE, THE VIEWS EXPRESSED BELOW BY THE COORDINATE BENCHES: ..IT WILL BE WHOLLY INAPPROPRIATE FOR US TO CHOOSE VIEWS OF ONE OF THE HIGH COURTS BASED ON OUR PERCEPTIONS ABOUT REASONABLENESS OF THE RESPECTIVE ITA NO.936/M/2015 A.Y.2011-12 7 VIEWPOINT, AS SUCH AN EXERCISE WILL BE DE FACTO AMOUNT TO SITTING IN JUDGMENT OVER THE VIEWS OF THE HIGH COURTS SOMETHING DIAMETRICALLY OPPOSED TO THE VERY BASIC PRINCIPLES OF HIERARCHICAL JUDICIAL SYSTEM. WE HAVE TO, WITH OUR HIGHEST RESPECT OF BOTH THE HONLE HIGH COURTS, ADOPT AN OBJECTIVE CRITERION FOR DECIDING AS TO WHICH OF THE HONBLE HIGH COURT SHOULD BE FOLLOWED BY US. 8. WE FIND GUIDANCE FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. 1973 CTR (SC) 177 : (1972) 88 ITR 192 (SC). HONBLE SUPREME COURT HAS LAID DOWN A PRINCIPLE THAT IF TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED. THIS PRINCIPLE HAS BEEN CONSISTENTLY FOLLOWED BY THE VARIOUS AUTHORITIES AS ALSO BY THE HONBLE SUPREME COURT ITSELF. IN ANOTHER SUPREME COURT JUDGMENT PETRON ENGG. CONSTRUCTION (P.) LTD. & ANR. VS. CBDT & ORS. (1998) 75 CTR (SC) 20: (1989) 175 ITR 523 (SC), IT HAS BEEN REITERATED THAT THE ABOVE PRINCIPLE OF LAW IS WELL ESTABLISHED AND THERE IS NO DOUBT ABOUT THAT. ITA NO.936/M/2015 A.Y.2011-12 8 HONBLE SUPREME COURT HAD, HOWEVER, SOME OCCASIONS TO DEVIATE FROM THIS GENERAL PRINCIPLE OF INTERPRETATION OF TAXING STATUTE WHICH CAN BE CONSTRUED AS EXCEPTIONS TO THIS GENERAL RULE. IT H AS BEEN HELD THAT THE RULE OF RESOLVING AMBIGUITIES IN FAVOUR OF TAX-PAYER DOES NOT APPLY TO DEDUCTIONS, EXEMPTIONS AND EXCEPTIONS WHICH ARE ALLOWABLE ONLY WHEN PLAINLY AUTHORIZED. THIS EXCEPTION, LAIN DOWN IN LITTMAN VS BARRON 1952(2) AIR 393 AND FOLLOWED BY APEX COURT IN MANGALORE CHEMICALS & FERTILIZERS LTD. VS DY. COMMR. OF CT (1992) SUPPL. (1) SCC 21 AND NOVOPAN INDIA LTD. VS CCE & C 1994 (73) ELT 769 (SC), HAS BEEN SUMMED UP IN THE WORDS OF LORD LOHEN, IN CASE OF AMBIGUITY, A TAXING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF A TAX-PAYER DOES NOT APPLY TO A PROVISION GIVING TAX-PAYER RELIEF IN CERTAIN CASES FROM A SECTION CLEARLY IMPOSING LIABILITY. THIS EXCEPTION , IN THE PRESENT CASE, HAS NO APPLICATION. THE RULE OF RESOLVING AMBIGUITY IN FAVOUR OF THE ASSESSEE DOES NOT ALSO APPLY WHERE THE INTERPRETATION IN FAVOUR O F ASSESSEE WILL HAVE TO TREAT THE PROVISIONS UNCONSTITUTIONAL, AS HELD IN THE MATTER OF STATE OF ITA NO.936/M/2015 A.Y.2011-12 9 M.P. VS DADABHOYS NEW CHIRMIRY PONRI HILL COLLIERY CO. LTD. AIR 1972 (SC) 614. [TEJ INTERNATIONAL PVT. LTD. VS. DCIT (2000) 69 TTJ 650 (DEL)] 52. EVEN OTHERWISE, THE REVENUE HAS NOT CITED ANY DIRECT CASE LAW OF THE JURISDICTIONAL HIGH COURT OF BOMBAY BEFORE US. IN THE CASE LAWS CITED BY THE REVENUE OF THE HOMLE KARNATAKA HIGH COURT IN THE MATTER OF CIT VS. SAMSUNG ELECTRONICS COMPANY LTD. (SUPRA) AND CIT VS. SYNOPSIS INTERNATIONAL OLD LTD. (SUPRA) THOUGH A VIEW IN FAVOUR OF THE REVENUE HAS BEEN TAKEN, BUT, THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. INFRASOFT LTD. (SUPRA) WHICH IS A LATTER DECISION A ND HAS DISCUSSED THE SAMSUNG CASE ALSO HAS TAKEN THE VIEW IN FAVOUR OF THE ASSESSEE. THE HONBLE DELHI HIGH COURT HAS TAKEN THE IDENTICAL VIEW FAVOURING THE ASSESSEE IN THE CASE OF DIT VS. NOKIA NETWORK (SUPRA) AND IN THE CASE OF DIT VS. ERICSON A.B. (SUPRA) ALSO. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF THE ADDL. COMMISSIONER OF SALES TAX VS/ M/S. ANKIT INTERNATIONAL, SALES TAX APPEAL NO.9 OF 2011 VIDE ORDER DATED 15 TH SEPTEMBER, ITA NO.936/M/2015 A.Y.2011-12 10 2011 WHILE RELYING UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE COMMISSIONER OF INCOME TAX V. VEGETABLE PRODUCT LTD. (1973) 88 ITR 192 AND IN MAURI YEAST INDIA PVT. LTD. VS. STTE OF U.P. (2008) 14 VST 259 (SC) : (2008) 5 S.C.C. 680 HAS HELD THAT, IF TWO VIEWS IN REGARD TO THE INTERPRETATION OF A PROVISION ARE POSSIBLE, THE COURT WOULD BE JUSTIFIED IN ADOPTING THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE. RELIANCE CAN ALSO BE PLACED IN THIS REGARD ON THE DECISION O F HONBLE SUPREME COURT IN BIHAR STATE ELECTRICITY BOARD AND ANOTHER VS. M/S. USHA MARTIN INDUSTRIES AND ANOTHER : (1997) 5 SSC 289. WE ACCORDINGLY ADOPT THE CONSTRUCTION IN FAVOUR OF THE ASSESSEE. [CAPGEMINI BUSINESS SERVICES INDIA LTD. VS. ACIT (TS 100 ITAT 2016 (MUM)] 6. IN VIEW OF THE ABOVE DISCUSSION AND HAVING NOTED THAT THERE IS NO MATERIAL DIFFERENCE IN THE FACTS OF THE CASE FOR THIS YEAR VIS--VIS THE FACTS OF THE ASSESSMENT YEAR 2006-07 AS DISCUSSED ABOVE, RESPECTFULLY FOLLOWING THE VIEWS OF THE COORDINATE BENCHES, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE. IT IS, THEREFORE, HELD THAT THE RECEIPTS OF ITA NO.936/M/2015 A.Y.2011-12 11 RS.19,20,14,000/- ON ACCOUNT OF RECEIPTS FOR SOFTWARE ARE NOT EXIGIBLE TO TAX IN INDIA. THE ASSESSING OFFICER IS, THEREFORE, DIRECTED TO DELETE THE IMPUGNED ADDITION OF RS.19,20,14,000/-. 7. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 31 ST DAY OF MARCH, 2016. 5. HOWEVER, THE PRESENT CASE HAS BEEN DECIDED IN VI EW OF THE LATEST LAW SETTLED BY THE HONBLE DELHI HIGH COURT IN CASE OF ERICSSON AV (343 ITR 470) (DEL.) ON APPRAISAL OF THE ABOVE MENT IONED FINDING, IT CAME INTO THE NOTICE THAT THE HONBLE D ELHI HIGH COURT IN CASE OF DIT VS. INFRASOFT LTD. 264 CTR 329 (DEL.) A ND IN CASE OF CIT VS. VEGETABLE PRODUCTS LTD. 88 ITR 192 (SC) HAS DEC IDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. SINCE, THE MATTER HAS ALSO BEEN CONSIDERED BY THE HONBLE INCOME TAX APPELLATE TRIBUNAL AND DECID ED THIS ISSUE IN FAVOUR OF THE ASSESSEE SPECIFICALLY FOR THE A.Y.200 2-03 IN ITA NO. 3095/MUM/2007 ORDER DATED 15 TH DECEMBER 2009 AND FOR THE A.Y.2005-06 IN ITA NO.5097/MUM/2008 ORDER DATED 1 ST APRIL 2010 AND FOR A.Y.2006-07 IN ITA NO.3219/MUM/2010 ORDER D ATED 08.02.2012 AND FOR A.Y.2007-08 IN ITA NO.8721/MUM/2 010 ORDER DATED 31.03.2016 AND FOR A.Y.2009-10 IN ITA NO.7790 /MUM/2012 ORDER DATED 31.03.2016 IN WHICH THE RECEIPT ON ACCO UNT OF SALE OF SHRINK-WRAP SOFTWARE IS NOT IN THE NATURE OF ROYALT Y HENCE IS NOT LIABLE ITA NO.936/M/2015 A.Y.2011-12 12 IN INDIA UN VIEW OF THE PROVISION OF SECTION 9(1)(I V) OF THE ACT AS WELL AS ARTICLE 12(3) OF THE DOUBLE TAXATION AVOIDANCE A GREEMENT BETWEEN INDIA AND U.S.A. IN VIEW OF THE SAID CIRC UMSTANCES, WE ARE OF THE VIEW THAT THE CASE OF THE ASSESSEE IS FULLY COVERED BY THE ABOVE MENTIONED DECISIONS AND THE FINDING OF THE ASSESSIN G OFFICER IS BASED UPON THE DRP DIRECTION IS WRONG AGAINST LAW AND FAC TS AND IS HEREBY ORDERED TO BE SET ASIDE ON THIS ISSUE. IT IS THERE FORE HELD THAT RECEIPT TO THE TUNE OF RS.26,87,30,378/- ON ACCOUNT OF THE REC EIPT FOR SALE OF SHRINK-WRAP SOFTWARE IS NOT LIABLE TO TAX IN INDIA. THEREFORE, THE ASSESSING OFFICER IS HEREBY DIRECTED TO DELETE THE FULL ADDITION. ACCORDINGLY, THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2017 . SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 28 TH , 2017 MP ITA NO.936/M/2015 A.Y.2011-12 13 &! '%! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. , , , , / DR, ITAT, MUMBAI 6. + -. / GUARD FILE. / BY ORDER, # # //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI