TaxTMI 
TaxTMI 
2019 (3) TMI 563
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....from provision of the software solutions for onward distribution to third party customers in India is taxable in India as 'royalty' income under the provisions of the Act; Non-taxability of the income received by the Appellant as 'royalty' income under the India-Israel Tax Treaty 3. erred in holding that the income received by the Appellant from provision of the software solutions for onward distribution to third party customers in India is taxable in India as 'royalty' income under the provisions of Article 12 of the India-Israel Tax Treaty; 4. erred in holding that the income received by the Appellant from provision of the software solutions for onward distribution to third party customers in India is taxable in India as 'royalty' income under the provisions of Article 12 of the India-Israel Tax Treaty without appreciating the fact that there is no 'use' or 'right to use' of the 'copyright' in the software solutions which is being provided by the Appellant to Celltick Mobile Media (India) Private Limited ('Celltick India') for onward distribution to third party customers in India; 5. e....
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....dering that Celltick India independently undertakes the activity of distribution of the software solutions to third party customers in India; Incorrect attribution of income and profits to the alleged DAPE of the Appellant in India without prejudice to ground No. 6 to 10 above, even assuming (without admitting) that the Appellant has a DAPE in India, 11. erred in attributing further income to the DAPE, without appreciating the fact that the DAPE has been remunerated at an arm's length price; 12. erred in attributing 50 percent of the gross revenues of the Appellant as being attributable to the DAPE in India, on an arbitrary and ad-hoc basis; 13. erred in attributing 50 percent of the gross revenues of the Appellant from third party customers in India to the DAPE without appreciating the fact that the said receipts are not attributable to the DAPE of the Appellant; 14. erred in attributing the profits of the Appellant without appreciating the fact that additional attribution of profits to the DAPE in India to the extent of 50 percent of the gross receipts of the Appellant from Celltick India would tantamount to total at....
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....ore us is a foreign company incorporated in Israel and is engaged in the business of developing software and marketing active content for mobile phones all over the world. During the year under consideration, assessee earned revenues from providing of its software solutions to an Indian concern, namely, Celltick Mobile Media (India) Pvt. Ltd. (hereinafter referred to as 'Celltick India'), who was its 100% subsidiary, for onward distribution to third party customers. In certain cases, assessee also provided software solution to third party customers directly. The intellectual property rights related to the software solution is admittedly owned by the assessee. In the return of income filed, assessee asserted that the receipts from provision of such software solutions earned from India amounting to Rs. 14,38,59,010/- would not be taxable in India either as 'Royalty' or 'Fee for Technical Services' or even as 'Business profits', in the absence of any PE in India. The Assessing Officer, however, was not convinced with the stand of the assessee. Insofar as the characterisation of the receipts is concerned, the Assessing Officer held that the receipts are in the nature of 'Royalty' as th....
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....nsaction' within the meaning of Sec. 92B of the Act for the instant assessment year. A reference was made to the order passed by the Transfer Pricing Officer (TPO) in the case of Celltick India for Assessment Year 2012-13 dated 25.01.2016 under Section 92CA(3) of the Act whereby such transactions have been held to be at an arm's length price. A copy of said order was furnished at the time of hearing. On this basis, it is sought to be canvassed that since the amount payable to the Indian subsidiary has been held to be at an arm's length price, therefore, no further income or profits could be said to be attributable to the assessee on account of its agency PE in India. The aforesaid plea was sought to be supported by the judgments of the Hon'ble Court in the case of Morgan Stanley & Co. (supra) as well as in the case of E-Funds IT Solution Inc. (supra). Emphasising the importance of the proposition that once 'arm's length principle' has been satisfied, no further profits could be attributable to a person even if it has a PE in India, the learned representative also relied upon the judgment of the Hon'ble Supreme Court in the case of Honda Motor Co. Ltd. vs ADIT, [2018] 301 CTR 60....
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....ld be attributable to it on account of its PE in India. In our considered opinion, the proposition sought to be canvassed by the assessee has the approval of the Hon'ble Supreme Court in the case of Morgan Stanley & Co. (supra). In fact, in a subsequent judgment in the case of E-Funds IT Solution Inc. (supra), the Hon'ble Supreme Court reiterated the earlier proposition laid down in the case of Morgan Stanley & Co. (supra), and in doing so, it took into consideration the transfer pricing assessment made in the case of the Indian subsidiary. In that case too, in the case of the Indian subsidiary, the transaction with the foreign assessee was accepted to be at an arm's length price. Accordingly, it was held by the Hon'ble Supreme Court that the 'arm's length principle' stood satisfied and, therefore, no further profits could be attributable even if there existed a PE of the foreign assessee in India. In our considered opinion, the manner in which the proposition has been applied by the Hon'ble Supreme Court in the case of E-Funds IT Solution Inc. (supra) is clearly attracted in the present case too. In the present case also, the transactions of the assessee with its I....