2016 (5) TMI 808
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....gether and, therefore, a common order is passed for the sake of convenience. 2. Briefly the facts of the case are that the assessee is a company engaged in the business of providing consulting services, software solutions and support services in the field of oil and gas pipeline networks. In the course of providing installation, augmentation, consultancy and support services to the ultimate clients for pipeline projects, the assessee procures certain high end technology software licenses from its associate enterprise Energy Solutions International, US (ESI US in short) and provides it to the ultimate clients. 3. While completing the assessments in all the years under consideration, the AO disallowed the payments made towards purchase of s....
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....e is obligation on the part of the appellant to deduct tax at source under section 195 of the Act and it failed to do so. The submission made by the appellant with respect to purchase of software license fails and hence ground Nos.1 to 10 set out in grounds of appeal are dismissed." 7. The ld. AR submitted that the assessee purchased certain software products from its AE, being Pipe Line Studio ("PLS"), Pipe Line Manager ("PLM") and Pipe Line Transporter ("PLT") and installed it in the systems of the various oil and gas companies in India, in the course of distribution of software products. The business model of assessee is explained below: * The customers, based in India, place a purchase order with the appellant, which inter alia cons....
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....d that since the payments were made for the purpose of purchase of software products, no tax at source was deducted on the same. The Ld. AO classified the payments made to the AE as royalty and disallowed the same for non-deduction of tax at source. The Ld. AO was of the view that the payments were made to acquire the right to apply the software for developing software for sale in India and hence it should be categorized as royalty paid to foreign company requiring tax deduction at source under section 195 of the Act, which has been upheld by the Ld. CIT(A). It is pointed out by the ld. AR that despite submissions made before the AO, the Ld. AO had wrongly understood that the assessee imported licenses specific for development of software, ....
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....oyalty and deleted the disallowance for non-deduction of tax at Source under section 4o(a)(i) of the Act. 7.4 It is submitted that though the Ld. CIT(A) has given reference to the above-mentioned orders of the Hon'ble ITAT and the Ld. AO for AY 2007-08 and AY 2008-09, he has failed to appreciate the same, and has misconceived the said order and has stated that the Ld. AO passed an adverse order after the directions of the Hon'ble ITAT, whereas the Ld. AO had passed favorable order deleting the disallowance. 7.5 The ld. AR submitted that the Hon'ble co-ordinate Bench of the Hyderabad ITAT has, in the case of Energy Solutions International Inc ("ESI Inc"), an associated entity of the assessee, held by its order dated November 27, 2015 i....
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....8. We have considered the submissions of both the parties and perused the material on record. As pointed out by the ld. AR, the orders passed by AO in 2007-08 and 2008-09 have been placed in the paper book vide pages 114 to 122, wherein the AO accepted the contentions of ESI India that such payments cannot be treated as royalty and deleted the disallowance for non-deduction of tax at source under section 40(a)(i) of the Act. The assessee "ESI US" sold the software to "ESI India" and in the assessment of "ESI India", it is the payments are treated as towards the purchase of software and not as payment towards Royalty. The principle needs to be applied consistently. In our view, in the hands of the Indian company, when it is not treated as Ro....
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....section 40(a)(ia) of the Act. 12. On an appeal, the CIT(A) held that the payments for AMC are in the nature of fee for technical services as defined in the Act u/s 9(1)(vii) and also as per Article of DTAA. Thus, the company was liable to deduct tax u/s 195 of the Act, since it failed to do so, the AO has right in making disallowance u/s 40(a)(ia) of the Act. 13. Ld. AR submitted that ESI US rendered AMS to certain customers of the assessee, on behalf of the assessee. He further submitted that for rendering such services, ESI US raised invoice for an amount of Rs. 3,96,352/-, which was booked as professional services fee by the company. Though the invoice was raised during the present AY 2010-11, the payment towards the same was not made ....