2018 (8) TMI 853

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....d Deputy Commissioner of Income-tax, ('learned Assessing Officer' or 'learned AO') under section 144 read with section 143(3) read with section 1440(3) of the Income-tax Act, 1961 ('Act') and the order passed by the learned Commissioner of Income-tax (Appeals) [learned CIT(A)] under section 250 of the Act, to the extent prejudicial to the Appellant, is bad in law and contrary to the facts and circumstances of the case. 2.a. That on the facts and in the circumstances of the case, the learned CIT(A) has erred in upholding the action of the learned AO in bringing to tax the sum of Rs. 18,146,720 (Rs.22,232,048 for assessment year 2010-11) received by the Appellant from customers for managed hosting services as income chargeable to inc....

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...., know how or processes to its customers and consequently these do not constitute fee for included services within the meaning of Article 12 of India US DTAA. It claimed that the amount represented business income of the assessee and since it did not have any permanent establishment (PE) in India under Article 5 of the treaty, the income was not liable to tax under Article 7(1) of the DTAA. During the course of assessment proceedings, the Assessing Officer concluded that apart from the use of telecommunication equipments, the customers also used various know-how, technology and software provided by the assessee which were either owned by the assessee or were available to the assessee under license agreement with third party. The use of such....

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....ly considered facts of the case in the light of the applicable legal position. 7. We have noted that while the CIT(A] has given relief in the light of the provisions of the Indo US tax treaty as also the provisions of the Act, but limited grievance raised before us is with respect to the provisions of the Act. The issue so raised is purely academic in the sense that even if the grievance of the Assessing Officer is upheld, the findings on the treaty aspect will remain intact, and as the provisions of the Act come into play only when these provisions are more beneficial vis-a-vis the treaty provisions, the relief under the treaty provisions will continue to hold the field. The success of the Assessing Officer, even if he was actuall....

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....rdinate bench, dealing with a situation in which the mainframe computer and the specialized software was used for rendering data processing services to an Indian entity, held so and observed that, "No part of this payment can be said to be for the use of specialized software on which data is processed or for the use of mainframe computer because the Indian company does not have any independent right to use the computer or even physical access to the mainframe computer, so as to use the mainframe computer or the specialized software." A payment cannot be said to be consideration for use of scientific equipment when person making the payment does not have an independent right to use such an equipment and physical access to it. In the present ....