SIEMENS AKTIENGESELLSCHAFT,MUMBAI V. DDIT (IT) 2(1), MUMBAI

ITA 7779/MUM/2012

AI Insights

Siemens Aktiengesellschaft, a non-resident company incorporated in Germany, appealed against the final assessment order for the assessment year 2008-09, which was passed under sections 143(3) and 144C(13) of the Income Tax Act, following the directions of the Dispute Resolution Panel (DRP). The main issues contested included the taxation basis of income from royalty and FTS, characterization of software supply as royalty, and various transfer pricing adjustments. The Tribunal referenced several precedents, including decisions from the Bombay High Court and earlier Tribunal orders, which supported the assessee's position that such incomes should be taxed on a receipt basis and not as royalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 652828 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Other Referred Cases: Engineering Analysis Centre of Excellence Private Limited vs. CIT, Ampacet Cyprus Ltd. Vs DCIT, Motorola Inc. Vs. DCIT
• Laws Referred To: Income Tax Act, India-Germany DTAA
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAVIN SALUNKHE
• Assessee Lawyers: NITESH JOSHI AW
• Keywords: Transfer pricing; International transaction; TDS; Initiation of penalty proceedings; Double taxation relief
• Section: 271(1)(c); 234B; 12; 10B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘H’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER ITA No.7779/Mum/2012 (Assessment Year :2008-09) Siemens Aktiengesellschaft C/o. B S R & Co. Lodha Excelus, 1st Floor, Apollo Mills Compound N.M. Joshi Marg Mahalakshmi, Mumbai – 400 011 Vs. Deputy Director of Income Tax (International Taxation)-2(1), Mumbai PAN/GIR No.AABCS8516K (Appellant) .. (Respondent) Assessee by Shri Nitesh Joshi a/w. Shri Bhavin Sangoi & Shri Siddhesh Chaugule Revenue by Shri Pravin Salunkhe, Sr. DR Date of Hearing 12/06/2025 Date of Pronouncement 16/06/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against final assessment order dated 22/10/2012 for the quantum of assessment passed u/s.143(3) r.w.s. 144C(13) in pursuance of directions given by the ld. DRP dated 04/09/2012 for the A.Y.2008-09. ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 2 2. In various grounds of appeal assessee has mainly challenged the following issues:- Ground no I; General ground Ground no 2; Income by way of Royalty and FTS taxed on accrual basis as against receipt basis. Offered to tax on cash basis INR 109 33 Crores Assessed to tax on accrual basis INR 156 Crores Amount Addition taxed of INR 46.67 Crores Ground no 3 & 4. Income from supply of software treated as Royalty - Rs. INR 34.10 Crore Ground no 5 (without prejudice ground) Credit for TDS on accrual basis when the income has been sad to as an actual basis - short TDS of Rs. 5.64 crores Ground no 6 to 11 TP grounds Ground no 12 Penalty u/s 271G Ground no 13 Levy of interest u/s 234B Ground no. 14 Initiation of penalty proceedings under Section 271(1)(c) Additional GOA Additional Grounds 1 & 2 Filed on 06 March 2020 (basis Vendata) Additional Grounds filed on 24 Nov 2022 (basis Roca Bathroom) 3. Ground No.12 & 13 are being dismissed as pre-mature and ground No. 13 is consequential in nature. ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 3 4. At the outset, it had been stated that all the issues raised from ground No.2-11 are squarely covered by the decision of the Tribunal for the earlier years and some of the issues are also covered by the decision of the Hon’ble Bombay High Court in the case of the assessee. Even the AO has merely followed earlier years only. Copies of the decisions of the Tribunal have been filed alongwith the chart and it had been submitted that in the order for A.Y.2009-10 dated 07/06/2024, all these issues have been discussed in detail. 5. Ld. DR also admitted that all the issues are covered because ld. AO has relied upon the earlier year orders. 6. In so far as taxability of income by way of royalty fees for technical services whether these to be taxed on accrual basis or on receipt basis as raised in ground No.2., the brief fats are that assessee is a non-resident company incorporated in Germany having income taxable in India as ‘royalty’ and fees from technical services. In the return of income assessee has offered the said income on receipt basis relying upon India-Germany DTAA. This issue is coming from last several years whether the income of the assessee is to be taxed on receipt basis as against accrual basis. The stand of the ld. AO has consistently been that income has to be determined on accrual basis. We find that this issue has been covered by the decision of the Hon’ble Bombay High Court and the Tribunal for the earlier years, the details of which are as under:- ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 4 AY ITA No. Date of Order 2003-04 1183 of 2011 10.01.2013 2001-02 1458 of 2010 22.10.2012 1997-98 1033 of 2011 20.11.2012 1996-97 124 of 2010 22.10.2012 1986-87 to 1992-93 Bombay High Court in ITA No. 2356, 2357,2384,2386, 2387, 2428, 2429 of 2011 07.03.2013 2006-07 8094/ Mum/20 10 06.05.2014 2005-06 11 747 Mum/20 10 30.05.2014 2004-05 4502/Mum/2009 18.05.2012 1998-99 and 1999- 00 6133/Mum/2002 7589/Mum/2003 07.12.2009 1994-95 1499/M/1998 27.06.2005 1990-91 and 1991- 92 1764/MUM/2001 and 1765/MUM/2001 04.07.2005 7. In subsequent year i.e. in A.Y.2009-10, the ld. DRP has held that assessee’s income is to be taxed on receipt basis and Revenue had come in appeal before the Tribunal. Accordingly, Department had preferred an appeal before the ITAT against the final assessment order. The Mumbai Tribunal, while adjudicating ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 5 on the said issue for AY 2009-10 (ITA No. 2153/MUM/2014 & 2179/MUM/2014) has also decided this issue by its order dated 07.06.2024 in favour of the assessee and has upheld that the said income is to be taxed on receipt basis. The relevant extract of the Tribunal order is as under: - \"79.The Id. DRP held that Hon'ble Bombay high Court in assessee's own case has accepted the contentions of the assessee in A. Y. 1986-87 to 1992-93, 1996-97, 1997-98 and 2001-02 wherein the Hon'ble Bombay High Court has considered the various ITAT decisions in assessee's own case and the stand of the assessee has been upheld that the receipt is to be taxed on actual receipts. Therefore, the AO is directed not to bring tax the income on account of royalty and ITS on accrual basis but to tax the same on receipt basis. After considering the submissions and decisions of the Tribunal and the Hon’ble Bombay High Court in the case of the Tribunal, this issue is decided in favour of the assessee that income on account of Royalty and FTS can be taxed only on receipt basis. 80. Even otherwise Article-12 of India-German tax treaty used the word \"paid, payments of any kind received and payments of any amount\". The Article 12 of India-Germany Tax Treaty which has been reproduced below: -\"ARTICLE 12-Royalties and fees for technical services - 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2........ 3. The term \"royalties' as used in this Article means payments of any kind received as a consideration for the use....................... 4. The term 'fees for technical services \" as used in this Article means payments of any amount inconsideration and so on 5........ 6. ........ 7.......... (emphasis supplied) ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 6 81. Thus, as per the tax treaty, Royalty and fees for technical services income should be taxable only upon payment i.e.- on receipt basis. If this position has been accepted by the Tribunal in assessee's own case for the earlier years and also by the Hon'ble Bombay High Court, the details of which are as under:- Hon'ble Bombay High Court: AY IT A No. Date of Order 2003-04 11 83 of 20 11 10.01.2013 2001-02 1458 of 2010 22.10.2012 1997-98 103 3 of 20 11 20.11.2012 1996-97 124 of 20 10 22.10.2012 1986-87 to 1992- 93 2356, 2357, 2384, 2386, 2387, 2428, 2429 of 2011 07.03.2013 Hon'ble Mumbai 1TA T: AY IT A No. Date of Order 2006-07 8094/ Mum/20 10 06.05.2014 2005-06 1174/Mum/2010 30.05.2014 2004-05 4502/Mum/2009 18.05.2012 1998-99 and 1999-00 6133/Mum/2002 7589/Mum/2003 07.12.2009 1994-95 1499/M/1998 27.06.2005 1990-91 and 1991-92 1764/MUM/2001 and 1765/MUM/2001 04.07.2005 82. Hence, we do not find any reason to take any different position. Before us the Id. DR had submitted that there is a ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 7 reference in the case of Ampacet Cyprus Ltd. Vs DCIT reported in (2020) 119 Taxmann.com 277 (Mum Trib) wherein the Tribunal has referred the matter to special Bench. In the context of the India-Cyprus Tax treaty where the issue is whether interest received should be taxed on receipt basis or on accrual basis. Since in assessee’s own case this issue stands settled by the Tribunal and by the Hon'ble Bombay High Court which is binding on us and therefore, reliance placed by the Id. DR in the aforesaid matter to refer to the Special Bench is declined. Thus, this ground raised by the Revenue is dismissed. 8. Thus, following the earlier year precedence and that now this issue is covered by the decision of the Hon’ble Bombay High Court, we hold that the income from ‘royalty and FTS’ shall be taxable on receipt basis. Accordingly, ground No.2 raised by the assessee is allowed. 9. Regarding charecterisation of receipt towards software as royalty which has been raised in ground No. 3 & 4, the facts are that the assessee received amount of Rs. 29,64,46,087 as consideration for supply of software to Siemens Ltd. and its other affiliate entities. 10. It has been stated that the software supplied forms an integral part of the equipment supplied and, therefore, partakes the character of supply of equipment and mere supply of equipment without the software would amount to supply of incomplete machinery, as the machinery cannot function without the software. The software supplied by the assessee can only be used on the equipment / hardware supplied by the assessee. Therefore, it has been stated that these software have no other utility except on its own equipments. The ld. AO like in the ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 8 previous years has alleged that consideration for supply of software could be considered as ‘roylaty’ under the Act as well as tax treaty. This issue has been decided in favour of the assessee in the earlier years, the details of which are as under:- AY ITA No. Date of Order 2006-07 8094/Mum/2010 06.05.2014 2005-06 1174/Mum/2010 30.05.2014 2004-05 4502/Mum/2009 18.05.2012 2003-04 2520/Mum/2008 09.07.2010 2002-03 2099/Mum/2007 and 188/Mum/2007 10.12.2008 2001-02 1957/Mum/2007and 187/Mum/2007 08.12.2008 13. In A.Y.2009-10, the Tribunal after considering the entire facts and the reasoning of the ld. AO had observed and held as under:- 10. After considering the relevant finding given in the impugned orders and the case made out by the assessee before the authorities below and also before us that consideration received for supply of software cannot be deemed to be royalty for the reasons that - - Firstly, the software provided are standard off-the-shelf software Secondly, the assessee grants a non-exclusive and non- transferable license to its customers, allowing them to copy the software for single user use only on their equipment. ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 9 Thirdly, the end-user license agreement includes several restrictions, prohibiting the use of the software for purposes other than those specified in the agreement or the creation of copies for commercial exploitation. - Fourthly, even in cases where the relevant hardware and software are itemized separately on the same invoice, or when separate invoices are issued, or when updates to the software are supplied, or additional features are validated at a later date, such distinctions should not affect the stance. These software products are exclusively compatible with the equipment manufactured by the assessee and hold no utility on similar equipment produced by its competitors. -Lastly, the software supplied by the assessee, as delineated in the three invoices mentioned in the DRP's directions, is exclusively designed for utilization with the Medical Diagnosis Devices manufactured by the assessee 10.1 Apart from that, we find that this issue stands covered by the decision of the AY ITA No. Date of Order 2006-07 8094/Mum/2010 06.05.2014 2005-06 1174/Mum/2010 30.05.2014 2004-05 4502/Mum/2009 18.05.2012 2003-04 2520/Mum/2008 09.07.2010 2002-03 2099/Mum/2007 and 188/Mum/2007 10.12.2008 2001-02 1957/Mum/2007 and 187/Mum/2007 08.12.2008 11. The Tribunal in A.Y.2001-02 has held that supply of software is not taxed as 'royalty' which has been followed in the ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 10 subsequent Tribunal orders from A.Y.2002-03 to 2006-07. The relevant extracts are as under:- \"6. We have heard the rival submissions and perused the relevant material on record. There is no dispute on the fact that the assessee had not separately sold software but it was part and parcel of the equipment supplies to M/s Siemens Limited. The case of the assessee is that it should be taken at \"Business Profits as per Article 7 to DTAA between India and Germany. On the other hand the Department wants it to be considered as falling under Article 13, being the royalty. We have to decide whether the sum of Rs.5.29 crores is to be considered as \"Business profits\" or \"royalty. The Special Bench of the Tribunal in the case of Motorola Inc. Vs. DCIT (2005) 95 ITD 269 (Delhi) (SB) has considered this aspect and held that \"the payment made to the assessee for use of software in the equipment did not amount to royalty either under the Income- tax Act or the DTAA. \" The facts involved in the instant case are akin to those considered by the Special Bench in the afore- noted case. The Learned Department Representative could not point out any distinguishing feature in the facts of the instant case vis-a-vis that decided by the Special Bench. Respectfully following the view taken by the Special Bench in this aspect of the matter, we are of the considered opinion that the amount received by the assessee towards supply of software cannot be segregated from the supply of equipment and hence that portion cannot be considered as \"royalty\". We, therefore, approve the view taken by the learned CIT(A) on this issue. \" 12. Furthermore, in AY2005-06, the Tribunal has examined the scenario wherein software was provided separately from any hardware, and it has adhered to the precedent established in assessee's own case for A. Y.2001-02. The relevant extract of the observations made by the Tribunal is as under:- \"6. During the year under consideration, the assessee had supplied equipment to the various parties in India. The software required for the said equipment was also supplied by the assessee to its Indian customers. During the course of assessment proceedings, the A.O. verified the relevant invoices and found on such verification that the software in some cases ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 11 was supplied by the assessee independently without any reference to the supply of corresponding equipment. He therefore treated the income earned by the assessee from the supply of software as in the nature of royalty and the same was brought 10 tax in the hands of the assessee as income from royalty. On appeal, the Id. CIT(A) held that the value of software could not be taxed as royalty in the hands of the assessee following the decision of the Tribunal in assessee's own case on similar issue for the earlier years ie. 2001-02 & 2002-03. He also took note of the fact that a similar issue was decided by his predecessor in favour of the assessee in assessment years 2003-04 & 2004-05. \" 13. Now, this issue of taxation of royalty under the DTAA has been decided by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited vs. CIT reported in (2021) 432 ITR 471(SC). The Hon'ble Supreme Court vide its order grouped various appeals before it into following four categories: - The first category deals with cases in which computer software is purchased directly by an end-user, resident in India, from a foreign, non-resident supplier or manufacturer. - The second category of cases deals with resident Indian companies that act as distributors or resellers, by purchasing computer software from foreign, non-resident suppliers or manufacturers and then reselling the same to resident Indian end- users. - The third category concerns cases wherein the distributor happens to be a foreign, nonresident vendor, who, after purchasing software from a foreign, non-resident seller, resells the same to resident Indian distributors or end- users. - The fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or end-users 14. The Hon'ble Supreme Court held that the amounts paid by resident Indian end-users/distributors to non-resident computer ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 12 software manufacturers/suppliers, as consideration for the resale/use of the computer software, is not payment of royalty for the use of copyright in the computer software and that the same does not give rise to any income taxable in India in all the categories of transactions mentioned above. 15. Before us comparison between facts of the case and the terms and conditions which have been submitted to the Id. AO during the assessment proceedings for later assessment years vis-a-vis the conclusions outlined by Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. has been given in the following manner: S.N. Engineering Analysis Centre of Excellence (P) Ltd., Siemens Conditions 01- 01-2021 to 31-12-2021 1 GRANT OF LICENCE. Samsung grants you a limited non- exclusive licence to install, use, access, display and run one copy of the Samsung Software on a single Samsung Mobile Device, local hard disk(s) or other permanent storage media of one computer and you may not make Samsung Software available over a network where it could be used by multiple computers at the same time. The Purchaser shall have the perpetual and non- exclusive right to use the Software Product on the devices for which such is intended, whereby each Software Product may only be used on one device at any given time. 2 You may make one copy of the Samsung Software in machine readable form for backup purposes only; provided that the backup copy must include all copyright or other proprietary notices contained on the original. The Purchaser may make up to three copies of the Software Product to be used for back-up purposes only. 3 LIMITATIONS ON END USER The Purchaser shall not ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 13 RIGHTS You shall not, and shall not enable or permit others to, copy, reverse engineer, decompile, disassemble, or otherwise attempt to discover the source code or algorithms of, the Software (except and only to the extent that such activity is expressly permitted by applicable law notwithstanding this limitation), or modify, or disable any features of, the Software, or create derivative works based on the Software. You may not rent, lease, lend, sublicense or provide commercial hosting services with the Software. change, reverse engineer or reverse compile the Software Products and shall not extract any parts thereof. Furthermore, the Purchaser shall not remove any alphanumeric identifiers, markings and Copyright notices from the data carriers and shall copy such in their unchanged form. The above provisions shall apply analogously to all associated documentation. 4 You may not transfer this EULA or the rights to the Samsung Software granted herein to any third party unless it is in connection with the sale of the mobile device which the Samsung Software accompanied. In such event, the transfer must include all of the Samsung Software (including all component parts, the media and printed materials, any upgrades, this EULA) and you may not retain any copies of the Samsung Software. The transfer may not be an indirect transfer, such as a consignment. Prior to the transfer, the end user receiving the Samsung Software must agree to all the EULA terms. The Supplier shall grant the Purchaser the right to transfer the right to use granted to it to a third party. In such case, an agreement is to be concluded with the third party by which the third party shall not be granted any rights of use over and above those granted by the Supplier to the Purchaser. ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 14 5 \"2. License Grant The Program is owned by IBM or an IBM supplier, and is copyrighted and licensed, not sold. Licensee receives a license to the Programs from Assimil8 Limited through a sublicensing agreement between IBM and Assimil8 Limited, Assimil8 Limited grants Licensee a nonexclusive license to (1) use the Program up to the Authorized Use specified in the PoE (2) make and install copies to support such Authorized Use, and (3) make a backup copy, all providedthat a. Licensee has lawfully obtained the Program and complies with the terms of the Agreement; b. The backup copy does not execute unless the backed-up Program cannot execute c. Licensee reproduces all copyright notices and other legends of ownership on each copy, or partial copy of the Program d. .... e. Licensee does not: (1) use. copy, modify, or distribute the Program except as expressly permitted in this agreement; (2) reverse assemble, reverse compile, otherwise translate, or reverse engineer the The Purchaser shall not change, reverse engineer or reverse compile the Software Products and shall not extract any parts thereof. Furthermore, the Purchaser shall not remove any alphanumeric identifiers, markings and Copyright notices from the data carriers and shall copy such in their unchanged form. The above provisions shall apply analogously to all associated documentation. The Purchaser may make up to three copies of the Software Product to be used for back-up purposes only ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 15 program, except as expressly permitted by law without the possibility of contractual waiver; (3) use any of the Program's components, files, modules, audiovisual content, or related licensed materials separately from that program; or (4) sublicense, rent, or lease the programme 6 You may also store or install a copy of the SOFTWARE PRODUCT on a storage device, such as a network server, used on to install or run the SOFTWARE PRODUCT on your other COMPUTERS over an internal network: however, you must acquire and run a licence for each separate COMPUTER on or from which the SOFTWARE PRODUCT is installed, used accessed, displayed, or forgoing any number of COMPUTERS may access or otherwise utilize the file and print services and peer web services of the SOFTWARE PRODUCT. In addition, you may use the \"Multiple Display\" feature of the SOFTWARE PRODUCT to expand your desktop as described in the online Help file without obtaining a license for each display.\" In the event that the Supplier has granted the Purchaser a network license, the Purchaser shall have the perpetual and nonexclusive right to use the Software Product in a network comprising any number of users, in accordance with the provisions for single licenses. The Purchaser may transfer these rights to third parties. \"2. DESCRIPTION OF OTHER RIGHTS AND LIMITATIONS Limitations on Reverse Engineering, Decompilation, The Purchaser shall not change, reverse engineer or reverse compile the Software Products and shall ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 16 and Disassembly - You may not reverse engineer, decompile, or disassemble the SOFTWARE PRODUCT, except and only to the extent that such activity is expressly permitted by applicable law nothwithstanding this limitation.\" not extract any parts thereof. Furthermore, the Purchaser shall not remove any alphanumeric identifiers, markings and Copyright notices from the data carriers and shall copy such in their unchanged form. The above provisions shall apply analogously to all associated documentation. 6. BACKUP COPY- After installation of one copy of the SOFTWARE PRODUCT pursuant to this EULA, you may keep the original media on which the SOFTWARE PRODUCT was provided by Microsoft solely for backup or archival purposes. If the original media is required to use the SOFTWARE PRODUCT on the COMPUTER, you may make one copy of the SOFTWARE PRODUCT solely for backup or archival purposes. Except as expressly provided in this EULA, you may not otherwise make copies of the SOFTWARE PRODUCT or the printed materials accompanying the SOFTWARE PRODUCT The Purchaser may make up to three copies of the Software Product to be used for back-up purposes only. Subject to the terms of conditions set forth in this Article 20, Licence, JT MOBILES is hereby granted a nonexclusive restricted licence to use the Software and Documentation, but only for JT The Purchaser shall have the perpetual and non- exclusive right to use the software product on the devices for which such is intended, whereby each software product may only ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 17 MOBILES' own operation and maintenance of the System in accordance with this contract, and not otherwise. there is no further right to sub- licence or transfer, nor is there any right to reverse engineer, modify, reproduce in any manner otherwise than permitted by the licence to the end-user be used on one device at any given time. The Purchaser shall not change, reverse engineer or reverse compile the Software Products and shall not extract any parts thereof. Thus, the ratio and principle laid down by the Hon'ble Supreme Court is clearly applicable on the facts of the assessee's case and accordingly we hold that consideration received for supply of software cannot be taxed as royalty under India German DTAA 16. During the course of hearing, the Id. DR had strongly relied upon the observation made in the assessment order and submitted that a review petition had also been filed before the Hon'ble Supreme Court in the matter of Engineering Analysis Centre of Excellence Pvt Ltd However, the same is not entertained because judgment of the Hon'ble Supreme Court as on today is binding on us. Moreover, there are various other decisions of the Hon'ble High Courts on this issue which has been highlighted before us, the same is not being reproduced Accordingly, we hold that this issue is covered in favour of the assessee not only in its own case as well as by the judgement of the Hon'ble Supreme Court and therefore we hold that income derived by the assessee from supply of software cannot be subject to taxation as royalty either under Income Tax Act or under treaty. Thus, ground Nos. 2- 5 raised by the assessee are allowed.\" 14. Accordingly, respectfully following the aforesaid decision of the Tribunal wherein, this issue has been dealt and discussed threadbare considering all the facts, we allow this ground of the assessee holding that supply of software cannot be subject to ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 18 taxation as royalty under India-Germany DTAA. Accordingly, grounds No. 3 & 4 are allowed. 15. Ground No.5 has been stated to be infructuous because they have already held that income by way of royalty and FTS would be assessed on cash / receipt basis. Accordingly, ground No.5 is dismissed. 16. Now coming to the issue of transfer pricing adjustment, the facts are that assessee had received royalty for technical know- how and fees for technical assistance from Indian Associated Enterprises ('Indian AEs). In this regard the Indian AE's have withheld tax at source at 10% for the payments made to the assessee under the provisions of Tax Treaty. The assessee filed its return of income and Form No. 3CEB on receipt/cash basis. 17. The assessee had given detailed functions, assets and risks analysis in accordance with Rule 10B and Rule 10C of the Income-tax Rules, 1962 (the Rules); based on which a comprehensive economic analysis was undertaken to review the arm's length nature of its international transactions in its Transfer Pricing Study Report. Further, it had been stated that the India AEs earned Net Cost-Plus mark-up (NCP)/Net Profit Margin (NPM) (after considering services availed from assessee) that are consistent with the margins carried by independent comparable companies. Accordingly, applying the Transactional Net Margin Method (TNMM) and from the analysis as aforesaid, the services rendered by assessee are considered to be compliant with the arm's length principle. Before us, the case of the ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 19 assessee has been that the international transactions relating to the compensation received in respect of technical services rendered to its Indian AEs; are mirror reflections of corresponding transactions entered by the Indian AEs. In this regard, the assessee has filed a detailed submission to demonstrate how the transactions reported by the assessee and its Indian AEs are mirror transactions, vide letter dated 13/09/2011. In respect of the Indian AEs, orders have been passed by the Ld. TPO determining the payments made by them are higher than the arm's length price. Thus, accordingly, it had been submitted that it cannot be held that assessee had under charged albeit, Indian AE have over paid. 18. Additionally, it had been submitted that assessee has borrowed CUP method to benchmark the transaction considering that the rates are approved by the Central Government / RBI which is to be considered to be compliant with the arm’s length principle under the CUP. 19. This issue had come up for consideration before the Tribunal in A.Y.2009-10, whether the addition made by the ld. TPO will be deleted as they are on adhoc basis without a specific method prescribed u/s.92C as per the parameters laid down in Rule 10B. Whereas, the ld. TPO had made adhoc adjustment of 10% of the value of international transaction after stating that transaction of the assessee with the AE are not mirror transactions. ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 20 20. We find that this issue has been discussed by the Tribunal in A.Y.2019-20 wherein the Tribunal has deleted exactly similar adjustment based on the same reasoning as given by the ld. TPO this year. For the sake of ready reference, the relevant extract of the judgment is reproduced hereunder:- “76. We have heard the rival submissions and perused the relevant finding given in the impugned orders. One of the reasons given by the ld. TPO and the Id. DRP is that assessee has been earning to reconcile the value of transaction disclosed by the Indian AEs in the Form 3CEB if the value disclosed by the assessee in its return of income. The assessee had explained that the difference is for the reason that assessee accounts the amount on receipt basis whereas the Indian AE's reports the transaction on accrual basis and this assessee has been doing in accordance with the provisions of the tax treaty. It is important to note here that, this position has also been upheld by the Hon'ble Bombay High court in assessee's own case that it should be taxed on receipt basis. It was for this reason amounts recorded by the Indian AE cannot be the same. Apart from that, the assessee reports only those transactions that are subject to tax in India, Le., element of Fees for Technical Services only, whereas Indian AEs report all the transactions like purchase/sale of goods, provision and availing of services, reimbursement/recovery of expenses whether income/expense. It is thus quite natural that there would be differences in the transactions reported by the assessee and the AE's. Once this fact has been brought on records and assessee has given this explanation for reconciliation, then this cannot be the reason or the ground for making adhoc adjustment @10% by taking 10% mark-up on the value of international transaction. Such an exercise is completely against the concept of transfer pricing revelation. The Id. TPO was bound to determine the ALP in accordance with the Rules after analyzing the nature of transaction and the arm's length price after applying method provided under the Rules If in the case of the Indian AE, the same transaction has been benchmarked and has been accepted to the ALP, then, unless there are different factors which need to be analyzed on the same transaction, it cannot be held that the same ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 21 ALP cannot be accepted in the case of recipient foreign company. In fact it has been informed that Id. TPO has made adjustment under various heads which also includes payment of royalty Any further adjustment is not called for in the case of the assessee to adopt a different ALP Though the true course would have been that ALP of FTS and royalty should have been benchmarked separately as per the Rules, however, when assessee had carried out and furnished TP study report and also relied upon the margins declared by the Indian AEs after carrying out different study report, then without finding any defect in such TP analysis and determination of ALP by the assessee, Id. TPO could not have resorted to adhoc mechanism for adding 10% mark-up on adhoc basis. Thus, in absence of any contrary inference drawn by the ld. TPO on the TP study report of the assessee and at the same time in the case of Indian AE, same transaction has been benchmarked and ALP has been determined then we do not find any reason for taking adhoc 10% mark-up. Accordingly, the same is deleted. In the result, grounds No. 12-19 are allowed.” (emphasis supplied) 21. Accordingly, ground No.6-11 raised by the assessee are allowed. 22. In so far as additional grounds are concerned ld. Counsel for the assessee had submitted that since on merits, the issues are covered therefore, these additional grounds should be kept open. Accordingly, additional grounds are dismissed as infructuous. 23. In the result, appeal of the assessee is partly allowed. Order pronounced on 16th June, 2025. Sd/- (OMKARESHWAR CHIDARA) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 16/06/2025 ITA No.7779/Mum/2012 Siemens Aktiengesellschaft 22 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// "