TaxTMI 
TaxTMI 
2021 (11) TMI 806
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....nt at Rs. 12,48,05,161 as against Rs. 65,51,514 income returned by the Appellant and therefore, the order of the Ld. AO is bad in law and needs to be annulled. 2. Revenue earned from supply of Software taxed as 'Royalty' is incorrect 2.1 That on facts and circumstances of the case and in law, the Ld. AO/DRP have grossly erred in taxing the revenue earned by the Appellant amounting to Rs. 11,82,53,647 from supply of software to customers in India as 'royalty' under Article 12 of the Double Taxation Avoidance Agreement between India and United States of America ('India - US tax treaty'). 2.2 That on facts and in law, the Ld. AO/ DRP have erred in not following the decision of Hon'ble HC and Hon'ble ITAT in Appellant's own case for earlier years' where the Hon'ble HC and Hon'ble ITAT has held that the consideration received by the Appellant for supply of software is for copyrighted article and is not in the nature of royalty under Article 12 of the India-US tax treaty. 2.3 That on facts and circumstances of the case and in law, Hon'ble DRP has grossly erred in confirming the observation of the Ld AO that software 'made available' a 'process' to customers who used the 'process'....
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....he Act. Without prejudice to the Ground No. 2, on facts and circumstances of the case and in law, the Ld. AO/ DRP have grossly erred in taxing the revenue from supply of software as 'royalty' @ 15% as per India - US tax treaty in the final assessment order, instead of applying beneficial rate of 10% as per the provisions of section 115A of the Act. 4. Revenue earned from rendering of professional, educational and training services taxed @ 15% as per India-US tax treaty in the final assessment order, instead of applying beneficial rate of 10% claimed by the Appellant in its return of income as per the provisions of section 115A of the Act. That on facts and circumstances of the case and in law, the Ld. AO has grossly erred in taxing the revenue from rendering of professional, educational and training services @ 15% as per the provisions of India - US tax treaty in the final assessment order, instead of applying beneficial rate of 10% claimed by the Appellant in its return of income as per the provisions of section 115A of the Act. 5. DRP directions are laconic with respect to how TP provisions apply to Appellant 5.1 Without prejudice to our other grounds of appeal, the order....
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....ty, which involves as well as provides, testing, providing maintenance support to the assessee. 5. During the year, the assessee received revenues in India during the F.Y. 2015-16 from the following categories which is as under: a. Supply of hardware (offshore supply) - Rs. 474,18,129/- b. Supply of software (offshore supply) - Rs. 1182,53,647/- c. Maintenance and implementation services - Rs. 1834,59,663/- d. Professional Services (offered to tax) - Rs. 65,51,510/- 6. The AO held that the assessee had an Agency PE in India in the form of Aspect Contact Centre Software India Pvt. Ltd. for the supply of hardware in India and proposed 15% attribution of income to Indian PE and also allocated proportionate expenditure of 13.1% out of the amount reimbursed to Aspect India (PE) by the assessee. The AO has also held that the amount received by the assessee on account of software licensing as loyalty u/s 9(1)(vi) & (vii) of the Income Tax Act, 1961 and under the Article 12 of the treaty between India and USA. 7. The ld. DRP has disagreed with the findings of the AO in the draft order and directed that attribution of profits of 15% from the sale of equip....
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....wered in favour of the Assessee and against the Revenue. 7. The first issue is whether the payment for supply of customized software would be treated as "royalty" under Article 12(3) of the Indo-US Double Taxation Avoidance Agreement (DTAA) read with Section 9(1)(vi) of Act. In ZTE Corporation (supra), the Assessee being a resident of Republic of China the transactions were governed by the Indo-China DTAA containing identical clauses as the Indo-US DTAA. Relying on the decision of this Court in Director of Income Tax v. Ericsson AB (2012) 343 ITR 470, this Court in ZTE Corporation (supra) held in para 22 as under: "22. In the present case, the facts are closely similar to Ericson. The supplies made (of the software) enabled the use of the hardware sold. It was not disputed that without the software, hardware use was not possible. The mere fact that separate invoicing was done for purchase and other transactions did not imply that it was royalty payment. In such cases, the nomenclature (of license or some other fee) is indeterminate of the true nature. Nor is the circumstance that updates of the software are routinely given to the Assessee's customers. These facts do not detract....