TaxTMI 
TaxTMI 
2022 (6) TMI 125
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.... NIL. 1.2. That the Ld. CIT(A) has also erred in omitting to consider and give effect to the Application u/s 158A filed by the Appellant. Grounds on taxability of Software License: 3. That on facts and in law, the Ld. CIT (A) has erred in not accepting the contentions of the Appellant that reimbursement of actual costs relating to Software License and maintenance charges amounting to INR 5,21,55,780 are not in the nature of Royalty under the Act as well as Double Taxation Avoidance Agreement between India and UK (hereinafter referred to as "treaty") by following the ruling of Hon'ble AAR in appellant's own case and ignoring the rulings of various Hon'ble High Courts on similar issue including jurisdictional Hon'ble Delhi High Court and also ruling by Hon'ble Supreme Court in case of A.P. Moller Maersk AS (2017) 392 ITR 186 holding that reimbursement of communication network charges is not taxable. 3.1. That the Ld. CIT(A) has also erred in facts and in law in holding that no appeal is maintainable on above ground as the matter has already been decided by AAR in appellant's own case, and while doing so has ignored the rulin....
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.... the Tax Department, the assessee had filed an application before the Authority of Advance Ruling ("AAR") to seek an advance ruling that the payments so received by the assessee are not taxable in India under the Act or under the treaty. The Hon'ble AAR while pronouncing its ruling held that owing to the nature of services rendered by the assessee, all services except software charges are not taxable in India. Accordingly, the Hon'ble AAR held that software charges are taxable as "Royalty" as per the provisions of the Act and the treaty. 4.2 In background of the AAR order, the Ld. AO proceeded to frame assessment for the subject year and passed the final assessment order vide order dated 30.11.2018 whereby, the following payments were held taxable @ 10% as "Royalty" under the Act as well as the treaty: * Software license and Maintenance charges: INR 5,21,55,780/- * Global Technology Charges : INR 44,21,795/- * GWAN Connectivity Charges : INR 1,01,88,428/- The reasoning for the above action of AO in detail are as follows. 5. Assessing Officer (AO) in the assessment order noted that the assessee had filed an application before the Hon'ble A....
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....software procured from several third party vendors (deliverables) is in the nature of royalty under Article 13 of India-UK DTAA as well as section 9(1)(vi) of the Act whereas consideration received for giving right to benefit from services is not in the nature of royalty under Article of India-UK DTAA. Q.4 In respect of Q.No.3, we have ruled that consideration for computer software is taxable as royalty. This is irrespective of the fact whether the applicant has a PE in India or not. Q.5 Consideration received in respect of giving right to benefit from computer software (deliverables) by the applicant would suffer withholding of tax under section 195 of the IT Act." 6. Thereafter, AO referred to the provisions of section 245S of the Income-tax Act, 1961 (for short 'the Act') for the proposition of binding nature of the order pronounced by Hon'ble AAR. Accordingly, he rejected the assessee's pleas by holding that the order of Hon'ble AAR was binding. He made assessee's royalty income @ 10% amounting to Rs.6,67,66,000/-. 7. Upon assessee's appeal, ld. CIT (A) noted the facts as per AO's order that he has followed Hon'ble AAR ruling in case of assessee. Ld. CIT....
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....t is still awaited. 10. Upon careful consideration, we find ourselves in agreement with the submissions made by the ld. DR for the Revenue. AO has only followed the ruling of AAR in assessee's own case and as per the provisions of section 245S of the Act, ruling of Hon'ble AAR is binding upon the Revenue authorities. The provisions of section 295S which reads as under :- "245S. (1) The advance ruling pronounced by the Authority under section 245R shall be binding only- (a) on the applicant who had sought it; (b) in respect of the transaction in relation to which the ruling had been sought, and (c) on the Principal Commissioner or Commissioner, and the income-tax authorities subordinate to him, in respect of the applicant and the said transaction. (2) The advance ruling referred to in sub-section (1) shall be binding as aforesaid unless there is a change in law or facts on the basis of which the advance ruling has been pronounced." 11. Once it is clear that the Revenue authorities only followed the ruling of Hon'ble AAR in assessee's own case, no fault can be found in their orders in appellate proceedings. No case has be....