TaxTMI 
TaxTMI 
2022 (1) TMI 1089
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....The learned Assistant Commissioner of Income Tax, Circle- 4(1)(2), Bangalore (`A0') has erred in passing the assessment order under section 143(3) of the Income Tax Act, 1961 (`the Act') in the manner passed by him and the Commissioner of Income Tax- (Appeals)-4 (`CIT(A)') has erred in confirming the said assessment order. The said order being bad in law is liable to be quashed. 2. Grounds relating to treatment of marketing expenses as royalty under section 9(1)(vi) Notional Tax Effect : (1,16,00,53593.6%). 38,97,780 2.1. The learned AO and CIT(A) erred in treating the marketing expenses amounting to Rs. 1,16,00,535 as royalty under section 9(1)(vi) and disallowing the same under section 40(a)(i) for non-deduction of tax at ....
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....uld be deleted. The Appellant prays accordingly." Additional ground "1. Assuming without admitting that the credits/payments to nonresidents was liable for disallowance under section 40(a)(i), the said disallowance, if any, should be restricted to 30% of the expenditure as per the Non Discrimination Article in the Double Taxation Avoidance Agreements. The appellant prays accordingly." Brief facts of the case are as under: 2. The assessee is an Indian Company engaged in the business of developing, marketing and operating games and gaming infrastructure for mobile phones. For the relevant Assessment Year, the assessee filed the return of income on 29.09.2015, returning a loss of Rs.(2,15,32,462/-) and claiming a refund of Rs. 5,39,168/....
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....the advertisement expenses paid to Facebook and other entities constitutes use of industrial, commercial or scientific equipment under section 9(1)(vi) of the Act whether active or passive and hence 'Royalty' under the Act. As regards taxability as "Fees for technical services", it was held by the Ld.CIT(A) that since the process is automated and there is no human intervention, the payments do not qualify as Fees for technical services under section 9(1)(vii) of the Act. 3.2 The disallowance under section 14A was deleted by the CIT(A) in the absence of exempt income. 4. Aggrieved by the order of Ld.CIT(A), the assessee preferred appeal before this Tribunal. 4.1 The Ld.AR submitted that for purposes of marketing its games, the assessee ad....
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....cebook and other entities. No access to the technology behind the airing of the advertisement on the website is provided to the assessee. He thus advocated that the payment does not amount to Royalty under the Act. 4.4. On the contrary, the Ld.Sr.DR submitted that the decision rendered by Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence P Ltd (supra) cannot be blindly followed. She submitted that each payment made by the assessee needs to be examined on the basis of the agreement entered between the assessee and the suppliers of software in order to find out whether there was transfer of copy right or not. Accordingly, the Ld. D.R. submitted that the entire issues may be restored to the file of the A.O. for ex....
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....purchasing software from a foreign, non-resident seller, resells the same to resident Indian distributors or end-users.5 (iv) The fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or endusers. 5.2 After analysing the provisions of Income tax Act, provisions of DTAA, the relevant agreements entered by the assessees with non-resident software suppliers, provisions of Copy right Acts, the circulars issued by CBDT, various case laws relied upon by the parties, the Hon'ble Supreme Court concluded as under:- "CONCLUSION 168. Given the definition of royalties contained in Article 12 of the DTAAs ....