TaxTMI 
TaxTMI 
2017 (1) TMI 1786
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.... for A.Y. 2000-01 "Ground 1 The Learned Commissioner of Income tax (Appeals), XXXI, Mumbai [CIT(A)] erred in holding that the consideration received by the Appellant for the use of the SAP system is subject to tax as royalty under the Income Tax Act, 1961 ('Act'), at the rate of 20 percent on a gross basis. Ground 2 The Learned CIT (A) erred in holding that the consideration received by the Appellant in respect of the services is subject to tax as 'fees for technical services' under the Act, at the rate of 20 percent on a gross basis. Ground 3 The Learned CIT(A) erred in denying the option granted to the Appellant under Section 90 of the Act, to be taxed under provisions of the Act or the Double Tax Avoidance Agreement, as the case may be, to the extent whichever is more beneficial to the Appellant. Ground 4 The Learned CIT(A) has erred in holding that the payments received by the Appellant for the use of the system and for the rendering of services are not in the nature of reimbursement of expenses." 2. The assessee a tax resident of Malaysia is engaged in the business of marketing, distribution and sale of household products, fabric....
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....he details submitted by the assessee during the assessment proceedings and more particularly the agreement between the parties, found that the assessee had invested substantial amounts for acquisition of computer hardware, contracting with third parties for adaptation to Colgate Groups needs of software system and also in establishing necessary infrastructure to support and maintain the software system namely "SAP". He noted, as per clause (2) of the agreement, assessee had allowed CPI to use SAP system for its own business purpose. As per clause (3) of the agreement, system is residing on the hardware owned by CPM in CPM's facilities in Malaysia and also at the main data centre in Colgate Palmolive, Piscataway, New Jersey, USA. He noted that as per clause 3 of the agreement, CPI will have direct electronic access to the system resident in Malaysia and USA and CPI will be responsible for installing necessary communication equipments for obtaining such access. Clause 4 of the agreement, provides for payment of specified amounts by CPI over a period of seven years towards consideration for access and use of systems. He noted, as per clause (5) of the agreement, CPM would render servi....
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....rom any business connection in India or through or from any asset or source of income in India, shall be deemed to accrue or arise in India. The Assessing Officer observed, the receipt towards use of SAP system accrues or arises to CPM from its connection with CPI in India, hence, is covered under section 9(1)(i) of the Act. Referring to clause 3 and clause 5(c) of the agreement between CPI and CPM, the Assessing Officer observed that the system in U.S.A. is linked to the system in Malaysia through communication channels as a result of which the SAP system is resident on the facility of Colgate Group both in Malaysia and U.S.A. He observed, the system owned by CPI in turn is to be linked to the SAP system by necessary communication equipment. Therefore, it can be inferred that the system is resident on the facilities of the Colgate Group in USA, Malaysia and India. Accordingly, revenue arising to CPM will be taxable in India. As far as the amount received towards services rendered, the Assessing Officer observed that the claim of the assessee that it has opted to be taxed under DTAA is at variance and totally contrary to its stand taken in respect of payment received for use of SAP....
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....order to obtain access to the SAP system. The Assessing Officer observed, the clauses of the agreement indicate that the SAP system was specially modified to suit the requirement of Colgate Group. He, therefore, observed that payment received for use of SAP system set-up by CPM comes within the ambit of "Royalty" as defined under Explanation 2(iii) to section 9(i)(vi) of the Act. The Assessing Officer observed, SAP system developed by CPM, is an asset which is in the nature of patent, invention, model, design, secret formula or process of trading market, hence, covered by the phrase "or similar property", thus, is in the nature of "Royalty" under the Act also and the payments received on account of rendering services are in the nature of "fees for technical services". He observed, even under the DTAA, they would be royalty and fees for technical services. In this context, the Assessing Officer relied upon the decision of the Authority for Advance Ruling(AAR). He also referred to the decision of the Tribunal, Delhi Bench, in M/s. Asia Satellite Telecommunication Co. Ltd., to conclude that as CPM is providing a process to CPI for enabling it to carry on its business in India more eff....
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....s are merely reimbursement of costs. He observed, the very fact that charges are specified for the full term of seven years in advance, itself shows that it cannot be simply reimbursement of expenditure as nobody can specify the actual cost in advance for a period of seven years. Countering the contention of the assessee to the effect that SAP system being located outside India, the provisions of section 9(1)(i) cannot be applied, the learned Commissioner (Appeals) observed, since the payment made by CPI is in the nature of royalty as envisaged under section 9(1)(vi) of the Act, where the location of asset is not a criteria, the taxability would be determined in accordance with the said provision and not with reference to section 9(1)(i). In this context, the learned Commissioner (Appeals) referred to the decision of the Hon'ble Madras High Court in CIT v/s Capes Volcan Inc., 167 ITR 884 (Mad.). Accordingly, he upheld the decision of the Assessing Officer in bringing to tax the amount paid towards use of SAP systems. 6. As far as payment made received by the assessee from CPI on account of services rendered amounting to US $ 3,66,000 is concerned, the learned Commissioner (Ap....
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....lanation-1 to section 9(1)(i), in case of a business of which all the operations are not carried out in India, the income of the business deemed to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. Explaining the mode and manner of use of SAP systems by CPI, the learned Sr. Counsel submitted, data is sent by CPI to CPM and CPM processes the data and sends report to CPI. The entire operation is carried out in Malaysia. Thus, no part of the operation is carried out in India. Learned Sr. Counsel submitted, the source of income would either be the activity for which payment is made or the assets in question i.e., SAP system. He submitted, as the asset as well as the activities are outside India and no work is done in India, no income can be deemed to accrue or arise in India. He submitted, only when an amount is chargeable to tax under the Act, then the question of considering the position under DTAA would arise. In this context, he relied upon the following decision:- i) Motorola Inc. v/s DCIT, 95 ITD 269 (Del.) (SB); and ii) Union of India v/s Azadi Bachao Andolan., 263 ITR 706.(SC) 8. Learned ....
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....unless the person accessing the equipment has control and possession thereof, payment for such access cannot be regarded as royalty. He submitted, as the system is resident in Malaysia and U.S.A., CPI merely accesses the system and does not have control or possession thereof, hence, payment made by CPI cannot be regarded as payment for use of the system. Learned Sr. Counsel submitted, as the amount is not taxable under the Act, there is no need to examine the position under the DTAA. However, in any event, the definition of "royalty" in DTAA is narrower than the definition provided under the Act insofar as the intangible properties are concerned. He submitted, as per Article 13(5)(b) of the DTAA, royalty means payment of any kind received as a consideration for the use or the right to use of industrial, commercial or scientific equipment or information concerning industrial, commercial or scientific experience. Therefore, Explanation-5 to section 9(1)(vi) has no application and cannot be read into the DTAA. For such proposition, learned Sr. Counsel relied upon the following decisions:- i) DIT v/s Nokia Networks, 358 ITR 589; ii) DIT v. New Skies Satellite BV [2016] 382 ITR 11....
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....that the aforesaid Explanation is applicable, same cannot be imported into the DTAA, hence, payment cannot be regarded as royalty as it is not affected by the amendment under the Income Tax Act. Learned Sr. Counsel submitted, a new DTAA was entered into between India and Malaysia on 12th October 2004, effective from assessment year 2006-07. Under Article-12(3) of the new DTAA, royalty is defined, amongst other things, to mean consideration for use of or right to use any computer software program. Therefore, use of the expression computer software program separately signifies that it is not coming within any other items used in the said Article including copyright. Learned Sr. Counsel submitted, computer software program was not included in the term of "royalty" in the old DTAA which applies to the assessment year under consideration. Learned Sr. Counsel submitted, the decision of the Tribunal in Asia Satellite Co. (supra) relied upon by the Departmental Authorities since has been reversed by the Hon'ble Delhi High Court, it cannot be considered to be laying down good law. Thus, it was submitted, the payment received by the assessee towards use of equipment cannot be treated as ....
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....ions of the Act and DTAA relating to royalty are in pari-materia. He submitted, Explanation-4, 5 and 6 to section 9(1)(vi), inserted by Finance Act, 2012, and Explanation to section 9(2), inserted by Finance Act, 2010, are applicable to assessee's case. He submitted, as there is transfer of certain rights in respect of rights or property, the case of the assessee is also covered by the clarificatory provisions of Explanation-4 to section 9(1)(vi). He submitted, for the purpose of relevance of location of rights, property or information, Explanation-5 is relevant and for the definition of "process", Explanation-6 is relevant. He submitted, "process" as defined in Explanation-6 includes transmission by satellite cable or optic fiber or any other technology which are applicable to assessee's case. He submitted, as these explanations are clarificatory in nature, they do not change, amend or modify the definition of "royalty" as given either in Explanation-2 to section 9(1)(vi) or in the DTAA, therefore, they can be read into DTAA by virtue of provisions of Article-3(2) of the DTAA. In this context, the learned Departmental Representative relied upon the decision of the Hon'ble Juri....
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....he definition of "royalty" provided in Explanations to section 9(1)(vi) is wide enough to cover industrial royalty as well as copyright royalties. He submitted, the DTAA entered into by Government with foreign countries which are worded in similar manner as Explanation-2 to section 9(1)(vi), encompass both industrial royalty and copyright royalties. Drawing attention of the bench to second proviso to section 9(1)(vi) and Explanation-3, the learned Departmental Representative submitted, by such provisions, the intention of the legislature has been made clear to show that since inception i.e., 1st June 1976, it was always the intention of the Government to treat user of software as royalty under the Act. He submitted, Finance Act, 2000, substituted the old Explanation-3 with a new one and Finance Act, 2001, inserted clause (iva) to Explanation-2 to section 9(1)(vi). He submitted, these amendments brought to the Act have widened the meaning of "royalty". He submitted, Explanation-4, 5 and 6 to section 9(1)(vi) were brought into the statute to clarify the meaning of "royalty". In this context, he referred to the explanatory note to the Finance Bill 2012. Learned Departmental Representa....
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...."royalty", the claim of the assessee has to be tested in the light of those definitions without referring to the definition under the Copyright Act. With reference to the submissions of the assessee, whether CPI has made payment for user of a standard facility thereby rendering the nature of payment is not royalty, the learned Departmental Representative relied upon the decision of the Hon'ble Karnataka High Court in Wipro Ltd. (supra), where according to the learned Departmental Representative similar nature of service provided were held to be "royalty". As far as the contention of the assessee that equipment of SAP is located outside India in Malaysia and no process is carried out in India, therefore, income, if any, accrues outside India, learned Departmental Representative submitted, legislative intent as explained in the notes to Finance Act, 2012, is very clear which is expressed by introduction of Explanation-5 to section 9(1)(vi). As far as the contention of the assessee that it has merely been reimbursed the expenditure incurred by it by CPI, the learned Departmental Representative submitted, assessee has not been able to establish that it had incurred the expenditure ....
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.... is necessary to understand what is SAP system. As understood by us, SAP is an enterprise resource planning(ERP) system developed by SAP A.G., Germany. The expression "SAP" stands for "Systems, Applications and Products" in data processing. It provides end-to-end solutions for financials, logistics, distributions, inventories, etc. All business processes are executed in one SAP system and sharing common information with everyone. 16. CP, USA, on 28th March 1994, entered into an end user software license agreement with SAP America Inc., which was owning the rights over the software in U.S.A., and was competent to grant licenses of such software. Under the agreement, SAP America Inc., granted license to CP, USA.As per clause-2 of the license agreement, the license to use the software granted to CP, USA, and it's affiliates are non-exclusive, perpetual and non-transferrable. It also provided license granted does not include the right for Colgate to distribute the software to third parties or other legal entities other than Colgate affiliates. CP, US, in turn entered into an agency agreement with CPM (assessee) for providing services related to Information Technology (including costs....
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....lp process the payroll (along with all the supporting (e.g. Pay-slip / Tax forecasting I Form 16) periodically." 17. It is stated on the basis of the data fed into the system, stake holders at the divisions level can have visibility to the stock position across the countries in the division. With global manufacturing facilities supplying to many countries, online data available in SAP is very crucial in placing orders for procurement. Financial records are consolidated using the reporting modules and are made available within few days of the close of the period. The Group companies in different countries can only process transactions and have no access to modify any of the configurations. On a perusal of the impugned assessment order, it is evident, the Assessing Officer referring to the definition of "royalty" in Article-13(5) of DTAA has held that the payments made by the CPI to the assessee is "royalty". To put it precisely, the Assessing Officer has concluded that the payment made to the assessee by CPI was for the use or right to use industrial, commercial or scientific equipment or information concerning industrial commercial or scientific experience as provided under Artic....
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.... amendment brought to Explanation-2 to section 9(1)(vi) by Finance Act, 2001, clause (iva) providing for equipment royalty was inserted with effect from 1st April 2002. Thus, till assessment year 2001-02, section 9(1)(vi) did not provide for equipment royalty. Therefore, since equipment royalty was not coming within the meaning of royalty as provided under section 9(1)(vi) r/w Explanation-2 amount received could not have been brought to tax under the Act, at least, till assessment year 2001-02 considering the provisions of section 90(2) of the Act. 18. Now, we propose to deal with the issue whether the payment made by CPI to CPM towards user of the system can be brought into tax in India under Article-13(5)(b) of India-Malaysia DTAA (Old). Undoubtedly, Article-13(5) of the treaty defines "royalty". Under clause (b) of Article-13(5), "royalty" would also include payment made for use or right to use industrial, commercial or scientific equipment or information concerning industrial commercial or scientific experience. As could be seen, the specific finding by the Assessing Officer / Commissioner (Appeals) which is also a fact emerging out of the agreement dated 14th May 1998, betwe....
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...., after considering the fact that the assessee has not used man, material or machinery in Indian territory held that the provisions of section 9(1)(i) is not attracted. In other words, the Hon'ble High Court held that since no operations were carried out by the assessee in Indian territory, income did not accrue or arise in India. As far as applicability of section 9(1)(vi) is concerned, the Hon'ble High Court held that the term "process" appearing in Explanation-2 to section 9(1)(vi) would mean a process which is an item of an intellectual property. Further, the High Court taking into consideration the Explanation inserted by Finance Act, 2007 and Finance Act, 2010, with retrospective effect from 1st June 1976, observed, the assessee is the operator of the satellite and systems and in control of the same. It had not leased out the equipment to the customers. Thus, taking into consideration these facts, the High Court ultimately disagreeing with the view expressed by the Tribunal, held that the amount cannot be treated as "royalty" under section 9(1)(vi) of the Act. Thus, as could be seen, the very basis on which the Assessing Officer held the payment received by the assess....
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....f Motorola Inc Vs DCIT (95 lTD SB 269), Samsung Electronics Cc Ltd Vs ITO (94 ITD 91), and Lucent Technologies Hindustan Ltd Vs ITO (92 ITD 366). It is not even the revenue's case that the payment in question is not for the use of, or right to use of, patent, design or model, plan, secret formula or process, or trade mark." 15."That takes us to the question whether the provisions Article 12(3)(b), as relied upon by the revenue authorities, can be invoked the facts of the present case. Article 12(3)(b) can apply only when the payment in question can be held to be payment for *the use of, or the right to use, any industrial, commercial or scientific equipment'. This condition can only be satisfied when it is established that the impugned payment is made for the use of, or right to use of, mainframe computer. The Indian company does not have any control over, or physical access to, the mainframe computer in Australia. These cannot, therefore, be any question of payment for use of the mainframe computer. it is indeed true that the use of mainframe computer is integral to the data processing but what is important to, bear in mind is the fact that the p1yment is not for the us....
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....ed by CPM at its facilities for exchange of information / data. As far as the reliance upon Explanation-6 to section 9(1)(vi), in our considered opinion, it will have no bearing on the issue at hand as the expansion of scope of process in Explanation-6 would not apply to the assessee as it does not relate to payment made towards transmission by satellite. What is meant by the aforesaid Explanation is live transmission of programs such as channel feed and not SAP which is used for input of data and generation of reports. Therefore, in our considered opinion, the payment received by the assessee from CPI towards use of SAP system can neither be treated as "equipment royalty" nor "process royalty" either under the provisions of the Act or the relevant DTAA. 20. Having held so, we will now examine the contention of the learned Departmental Representative that the payment received by the assessee from CPI being towards transfer of rights in respect of copyright is royalty in terms of Explanation-2(v) of section 9(1)(VI). At the outset, we must mention, this is a completely new facet brought in the argument of learned Departmental Representative which is not the case of the Assessing O....
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....the Hon'ble Delhi High Court in case of Ericson A.B.(supra) bringing out the difference between transfer of copyright and copyrighted article has observed that when there is transfer of copyrighted article, it cannot be considered as "royalty". The relevant observation of the hon'ble court is as under: - "Be that is it may, in order to qualify as royalty payment, within the meaning of section 9(1)(vi) and particulary clause (v) of Explanation 2 thereto, it is necessary to establish that there is transfer of all or any rights (including the granting of any licence) in respect of copyright of a literary, artistic or scientific work. Section 2(o) of the Copyrights Act makes it clear that a computer progarmme is to be regarded as a "literary work". Thus, in order to treat the consideration paid by the cellular operator, by making such payment, obtains all or any of the copyright rights of such literary work. In the present case, this has not been established. It is not even the case of the Revenue that any right contemplated under section 14 of the copyright Act, 1957, stood vested in this cellular operator as a consequence of article 20 of the supply contract. Distinction has t....
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.... consideration is for purchase of goods and is not royalty." 88. "The license granted by the Assessee is limited to those necessary to enable the licensee to operate the program. The rights transferred are specific to the nature of computer programs. Copying the program onto the computer's hard drive or random access memory or making an archival copy is an essential step in utilizing the program. Therefore, rights in relation to these acts of copying, where they do no more than enable the effective operation of the program by the user, should be disregarded in analyzing the character of the transaction for tax purposes. Payments in these types of transactions would be dealt with as business income in accordance with Article 7." 89. "There is a clear distinction between royalty paid on transfer of copyright rights and consideration for transfer of copyrighted articles. Right to use a copyrighted article or product with the owner retaining his copyright is not the same thing as transferring or assigning rights in relation to the copyright. The enjoyment of some or all the rights which the copyright owner has, is necessary to invoke the royalty definition. Viewed from this angle....
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....case of the Assessee company, the licensee to whom the Assessee company has sold/licensed the software were allowed to make only one copy of the software and associated support information for backup purposes with a condition that such copyright shall include Infrasoft copyright and all copies of the software shall be exclusive properties of Infrasoft. Licensee was allowed to use the software only for its own business as specifically identified and was not permitted to loan/rent/sale/sub-licence or transfer the copy of software to any third party without the consent of Infrasoft." 93. "The licensee has been prohibited from copying, decompiling, de-assembling, or reverse engineering the software without the written consent of Infrasoft. The licence agreement between the Assessee company and its customers stipulates that all copyrights and intellectual property rights in the software and copies made by the licensee were owned by Infrasoft and only Infrasoft has the power to grant licence rights for use of the software. The licence agreement stipulates that upon termination of the agreement for any reason, the licencee shall return the software including supporting information and ....
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....even software bought off the shelf, does not constitute a "copyrighted article" as sought to be made out by the Special Bench of the ITAT in the present case. However, the above argument misses the vital point namely the assessee has opted to be governed by the treaty and the language of the said treaty differs from the amended Section 9 of the Act. It is categorically held in CIT Vs. Siemens Aktiongesellschaft, 310 ITR 320 (Bom) that the amendments cannot be read into the treaty. On the wording of the treaty, we have already held in Ericsson (supra) that a copyrighted article does not fall within the purview of Royalty. Therefore, we decide question of law no.1 & 2 in favour of the assessee and against the Revenue." 24. The decisions of the Tribunal, Mumbai Bench, in Galatea Ltd. Vs.DCIT(2016)157ITD938 and DDIT vs. Reliance Industries Ltd.(2016)47CCH94, also express similar view. In fact, in case of DDIT vs. Reliance Industries ltd.(supra) the Bench has observed, under the Act "computer software" has neither been included or deemed to be included within the scope or definition of "literary work" under section 9(1)(vi). Moreover, the expression "computer software" does not find p....
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....ational law, while not every attempt to subvert the obligations under the treaty is a breach, it is nevertheless a failure to give effect to the intended trajectory of the treaty. Employing interpretive amendments in domestic law as a means to imply contoured effects in the enforcement of treaties is one such attempt, which falls just short of a breach, but is nevertheless, in the opinion of this Court, indefensible. The Vienna Convention on the Law of Treaties, 1969 ("VCLT") isuniversally accepted as authoritatively laying down the principles governing the law of treaties. Article 39 therein states the general rule regarding the amendment of treaties and provides that a treaty may be amended by agreement between the parties. The rules laid down in Part II of the VCLT apply to such an agreement except insofar as the treaty may otherwise provide. This provision therefore clearlystates that an amendment to a treaty must be brought about by agreement between the parties. Unilateral amendments to treaties are therefore categorically prohibited. We do not however rest our decision on the principles of the VCLT, but root it in the inability of the Parliament to effect amendments to inter....
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.... unilaterally change the terms of the treaty and annul this economic bargain. It may decide to not follow the treaty, it may choose to renege from its obligations under it and exit it, but it cannot amend the treaty, especially by employing domestic law. The principle is reciprocal. Every treaty entered into by the Indian State, unless self-executory, becomes operative within the State once Parliament passes a law to such effect, which governs the relationship between the treaty terms and the other laws of the State. It then becomes part of the general conspectus of domestic law. Now, if an amendment were to be effected to the terms of such treaty, unless the existing operationalizing domestic law states that such amendments are to become automatically applicable, Parliament will have to by either a separate law, or through an amendment to the original law, make the amendment effective. Similarly, amendments to domestic law cannot be read into treaty provisions without amending the treaty itself. On a final note, India's change in position to the OECD Commentary cannot be a fact that influences the interpretation of the words defining royalty as they stand today. The only manner in....
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....Even, assuming that it will be covered under the said provision, nevertheless, it is to be concluded that the right obtained by CPI is in respect of a copyrighted article and not copyright because such rights obtained by CPI is only for its own use and he cannot commercially exploit such right 28. Having held so, we have to decide whether the consideration received can at all be taxed in India. Since we have held that the consideration received by the assessee from CPI towards use of SAP system is not royalty, in terms of Indo-Malaysian treaty, it will be a business profit under Article-7 of the treaty. Therefore, in terms of Article-7, unless the enterprise of a contracting State has a P.E. in the other contracting State, the business profit cannot be brought to tax in the other contracting State. That being the case, the consideration received by the assessee from CPI towards use of SAP system is not taxable in India. Ground no.1, is allowed. 29. In ground no.2, the assessee has challenged the decision of the Departmental Authorities in bringing to tax the consideration received towards service rendered by treating it as fees for technical services. 30. As discussed earlier....
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....rent sources of income, on reading the provisions of section 90(2) of the Act, we do not find any such restriction imposed therein. As per the plain reading of section 90(2), the provisions of the Act shall apply to the extent they are more beneficial to the assessee. In other words, if the provision of DTAA qua a particular item of income is more beneficial to the assessee, the same has to apply. Ground no.2, is allowed. 32. In view of our decision herein above, there is no need to adjudicate ground no.3, separately. 33. As far as ground no.4 is concerned, in view of our decision in the preceding paragraph, it has become infructuous, hence, dismissed. 34. In the result, assessee's appeal being ITA no.2130/Mum./2004, for A.Y. 2000-01 is partly allowed. ITA no.2129/Mum./2004 Assessee's Appeal for A.Y. 1999-2000 The grounds raised by the assessee are reproduced below:- "Ground 1 The Learned Commissioner of Income tax (Appeals), XXXI, Mumbai [CIT(A)] erred in holding that the consideration received by the Appellant for the use of the SAP system is subject to tax as royalty under the Income Tax Act, 1961 ('Act'), at the rate of 20 percent on a gross bas....
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....ross basis. Ground 3 The Learned CIT(A) erred in denying the option granted to the Appellant under Section 90 of the Act, to be taxed under provisions of the Act or the Double Tax Avoidance Agreement, as the case may be, to the extent whichever is more beneficial to the Appellant. Ground 4 The Learned CIT(A) has erred in holding that the payments received by the Appellant for the use of the system and for the rendering of services are not in the nature of reimbursement of expenses." Ground 5 The Learned CIT(A) has erred in holding that the interest be levied under section 234B of the Act. Ground 6 The Learned CIT(A) has erred in holding that the interest us 234D of the Act be levied on the interest granted under section 244A of the Act, under section 143(1) of the Act. 38. The aforesaid grounds no.1, 2 and 3, are identical to the grounds no.1, 2 and 3, raised by the assessee in its appeal being ITA no.2130/Mum./2004, for A.Y. 2000-01, which relates to chargeability to tax the amount received by the CPI towards SAP system and towards services rendered to CPI. The facts involved are also materially same. The learned Counsels appearing for both the parties ad....
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....e and interest under section 234D was levied. He submitted, while levying interest on the excess refund, the Assessing Officer has also charged interest under section 234D on the interest granted under section 244A. He submitted, under section 234D, the Assessing Officer can charge interest only on refund amount and not on interest under section 244A of the Act. In support of such contention, the learned Authorised Representative has relied upon the decision of the Tribunal, Delhi Bench, in Clough Engineering Ltd., ITA no.5605/Del./2010, dated 15th February 2011. 45. Learned Departmental Representative relied upon the decision of the Departmental Authorities. 46. We have considered the submissions of the parties and perused the material available on record. We find that the issue has been decided by the Tribunal, Delhi Bench, in Clough Engineering Ltd. (supra) by holding that interest under section 234D is to be charged after excluding the interest granted under section 244A. In view of the aforesaid, we direct the Assessing Officer to charge interest under section 234D only on the principal amount and not on the interest granted under section 244A. Consequently, grounds no.5 a....
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.....1 to 5 are identical to the issues dealt in while deciding assessee's appeal being ITA no.2130/Mum./ 2004, for A.Y. 2000-01. Following our decisions given as aforesaid, we hold that the payment received by the assessee from CPI towards use of SAP system and services rendered are not taxable in India under the Act. Consequently, grounds no.1 to 5 are allowed. 49. In view of the above, ground no.7, raised by the assessee by way of additional ground having become infructuous, is dismissed. 50. Ground no.6, is in relation to levy of interest under section 234D. 51. Learned Authorised Representative fairly submitted, the issue has been decided against the assessee by the Hon'ble Jurisdictional High Court in Indian Oil Corporation, 254 CTR 113 (Bom.). In view of the aforesaid submissions of the learned Authorised Representative, this ground is dismissed. 52. In the result, assessee's appeal being ITA no.2369/Mum./2006 for A.Y. 2002-03 is partly allowed. ITA no.5423/Mum./2006 Assessee's Appeal for A.Y. 2003-2004 The grounds raised by the assessee are reproduced below: - Aggrieved by the order passed by the Commissioner of Income-tax (Appeals) -XXXI, Mumbai [he....
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.... 234D of the Act. 56. Following our decision in assessee's appeal being ITA no.2369/ Mum./2006, for A.Y. 2002-03, while deciding similar ground no.6, raised by the assessee, we dismiss ground no.7 in this appeal also. 57. In the result, assessee's appeal being ITA no.5423/Mum./2006, for A.Y. 2003-04 is partly allowed. ITA no.5794/Mum./2006 Department's Appeal for A.Y. 2003-2004 The grounds raised by the Department are reproduced below: - 1. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in deleting the interest under section 234B of the Act. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in holding that the refund for purposes of section 234D means only the refund of tax and does not include the interest granted under section 244A of the Act. 58. In ground no.1, the Department has challenged deletion of interest charged under section 234D. 59. This issue is similar to the issue raised in ground no.5, by the assessee in its appeal being ITA no.8311/Mum./2004, for A.Y. 2001-02. Following our decision therein, we uphold the order of the learned ....