TaxTMI 
TaxTMI 
2019 (7) TMI 1592
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....id-range engines for trucks and buses and marine lodging, agriculture and rail applications. During the period relevant to the assessment years under appeal the assessee entered into international transactions with its Indian associates (Joint Venture) i.e. Cummins India Limited (CIL) and Cummins Sales and Services India Limited (CSSIL). The assessee had provided off-the-shelf software and related support services to its associates in India to the tune of Rs. 7,75,38,913/- in assessment year 2004-05 and Rs. 6,27,69,649/- in assessment year 2006-07. The assessee claimed the receipts in lieu of services provided as reimbursement of expenditure. The Assessing Officer as well as DRP held that the payments received by appellant are in the nature of "Royalty‟ u/s. 9(1)(vi) of the Act and hence, taxable in India. 3. This is second round of litigation before the Tribunal. The Coordinate Bench of Tribunal in the first round vide order dated 08-08-2013 had decided this issue against the assessee by following the judgment of Hon‟ble Karnataka High Court in the case of Commissioner of Income Tax & Ors. Vs. Samsung Electronics Co. Ltd. & Anr. reported as 345 ITR 494. Thereafter, th....
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.... of the assessee submitted that the Assessing Officer has erred in holding that consideration received by the assessee for grant of user rights in software and related support services are chargeable to tax in India as "royalty‟. 5.1 Aggrieved against the assessment order, the assessee filed objection before the Dispute Resolution Panel (DRP). The DRP rejected the contentions of the assessee and upheld the findings of Assessing Officer in determining the nature of payments for services provided by the assessee as royalty within the meaning of section 9(1)(vi) of the Act. 5.2 The ld. AR submitted that the assessee/appellant being a principal company of group, procured various softwares with the object of standardization, efficiency, consistency and cost effectiveness. Thereafter, the appellant granted user rights in the softwares to its affiliate company worldwide for their internal use including its affiliates in India i.e. CIL and CSSIL. The assessee/appellant entered into separate agreements dated 07-06-2004 with CIL and CSSIL for grant of user rights in the software and provision of related basic software support services. The appellant obtained licenses in respect of ce....
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....5 and 2007-08 decided on 25-06-2012. 5.4 The ld. AR further submitted that the assessee/appellant is a resident of USA and is eligible to claim beneficial provisions under India- US Double Tax Avoidance Agreement (Treaty) (DTAA). The definition of "royalty‟ as given in Article 12 of the DTAA is very restrictive as compared to royalty defined under the Act. The consideration received for grant of user rights in software licenses would not amount to royalty income within the purview of DTAA. It is a well settled legal position that where DTAA is more beneficial to the appellant, the same would prevail over the provisions of the Act. 6. On the other hand Shri S.B. Prasad representing the Department vehemently defended the assessment order and prayed for dismissing the appeals of assessee. The ld. DR submitted that the issue in the present appeal i.e. Whether the payments received for supply of software falls within the definition of royalty has been considered by the Hon‟ble Karnataka High Court in the case of Commissioner of Income Tax & Ors. Vs. Samsung Electronics Co. Ltd. & Anr. (supra). The Hon‟ble High Court has held such payments to be taxable as royalty wit....
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....ct and are more beneficial and the definition of "royalty‟ having not undergone any amendment in DTAA, the assessee was not liable to deduct tax for payments made for purchase of software. In such scenario, the assessee cannot be held to be in default and the demand created under section 201(1) and interest charged under section 201(1A) of the Act is thus, cancelled." 9. The Tribunal further while dealing with the issue of support services placed reliance on the decision rendered in the case of Sandvik Australia Pty Ltd. Vs. DDIT reported as 31 taxmann.com 256 (Pune-Trib.) and held : "92. The Tribunal further vide para 16 held that where no technical knowledge was made available or expertise was made available to the recipient of Indian company, then such case is not covered in clause (g) of para 3 to Article 12 of India and Australia Treaty. It was further observed that where the assessee had only provided backup facilities and IT support services for solving IT related problems to its Indian subsidiaries and where no technical services were made available, the same could not be taxable in India. It was further held that the amount received by assessee could not be treate....