TaxTMI 
TaxTMI 
2018 (10) TMI 1939
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....n Panel ('DRP') and Learned AO erred on the facts of the case and in law, in determining the income of the Appellant for the subject Assessment Year at INR 27,79,45,07,738 thereby completely ignoring the fact that the payments received by the Appellant from licensing of manufacturing and distribution rights to Microsoft Operations Pte Ltd. ('MO') pertaining to India was INR 16,67,67,04,643. 3 Tax on revenue alleged as 'Royalty' under the India US tax treaty: 3.1 That on facts and in law, the Hon'ble DRP erred in confirming the variations proposed by the Learned AO in the draft assessment order by holding that: 3.1.1 payments received by the Appellant are deemed to arise in India under Article 12(7) of the India US tax treaty, disregarding the fact that 'royalty' paid by MO is not for earning income from a source in India; 3.1.2 revenue earned and received from sale of software by MRSC is taxable in India in the hands of the Appellant under the provisions of Article 12(2) and Article 12(3)(a) of the India US tax treaty. 3.2 That on facts and in law, the Hon'ble DRP and the Learned AO erred in not ap....
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....e received from sale of software by a group company of the Appellant - Microsoft Regional Sales Corporation ('MRSC'), from Indian distributors is taxable in India in the hands of the Appellant under the provisions of the section 9(1)(vi) of the Act. 4.3 That on facts and in law, the Learned AO erred in observing that amount paid by MO to Appellant was for earning income from a source in India and from licensing of software carried out in India. 4.4 That on facts and in law, the Hon'ble DRP and the Learned AO erred in placing reliance on the order passed by the Hon'ble Income-tax Appellate Tribunal (ITAT) in case of Gracemac Corporation (now MOLC) for Assessment Years 1999-00 to 2004-05 which is not a good law. 4.5 That on the facts and in law, the Learned AO erred in observing as under: 4.5.1 that the agreement between MO and MRSC clearly establishes that the Appellant is getting royalty out of licensing of software carried out in India; 4.5.2 that the payment received by the Appellant is related to number of software that is ultimately licensed and distributed in India; 4.5.3 that the use of computer programme i....
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..... Bachu Lal Kapoor (60 ITR 74) (1966) (SC). The above grounds of appeal are mutually exclusive and without prejudice to each other. The appellant craves leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the appeal. The appellant prays for appropriate relief based on the said grounds of appeal." 3. From the above grounds, it is gathered that the only grievance of the assessee relates to the nature of the payments received from licensing of manufacturing and distribution rights of Microsoft Operations Pte Ltd. and as to whether the said payment is taxable as "royalty" under the provisions of Section9(1)(vi) of the Act or not. 4. During the course of hearing, the ld. Counsel for the assessee at the very outset sated that this issue is squarely covered in assessee's favour vide order dated 26.09.2016 in assessee's own case for the assessment years 2007-08 to 2010-11 in ITA Nos. 6089 to 6091/Del/2012 and 1969/Del/2014 respectively (copy of the said order was furnished which is placed on record). It was also stated that the issue vide the aforesaid order had been restored to the AO, however, he had not followed the....
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....f Honorable Delhi high court in DIT V Infrasoft limited (supra) view of the coordinate bench in case of Gracemac corporation no longer remains a good law. 18. In view of the above facts it is apparent that after rendering of the decision of the tribunal based on which the reopening has been initiated by revenue and addition has been made in the hands of the appellant, the decision of the Hon'ble Delhi high court in case of DIT V versus Infrasoft limited covers the issue in favour of the assessee. As the lower authorities did not have any benefit of the decision of the Hon'ble Delhi high court while deciding the issue about the taxation of copyrighted article i.e. the software being sold by the appellant but have solely relied upon the decision of the coordinate bench in case of M/s Gracemac Corporation, it would be in the interest of the Justice to set the whole issue back to the file of the Ld. assessing officer to decide it afresh after considering the decision of Hon'ble Delhi high court DIT versus Infrasoft Ltd (supra), applying it to nature of the software of the appellant, which covers the issue with respect to the sale of software holding that according to article 1....