2022 (5) TMI 1660

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....isions of the Income tax Act, 1961 ("Act"), lacks jurisdiction and is liable to be struck down. 1.2 The learned AO has erred in law and on facts in computing the total income of the assessee at INR 74,18,49,200. 2. Taxability of receipts towards sale of software products 2.1 The Honourable DRP has erred in upholding the draft assessment order after rejecting the appellant's objections merely for the reason that the issue was decided against the appellant by the DRP in the earlier years, even as it noted that the binding decisions of the jurisdictional Mumbai Bench of the Income Tax Appellate Tribunal on identical issue in the appellant's own case for the earlier assessment years 2003-04, 2005-06 and 2006-07, 2007-08, 2009-10, 2011-12, 2013-14, 2014-15, 2015-16 and 2016-17 were concluded in favour of the appellant. 2.2 On the facts and the circumstances of the case and in law, the learned AO and DRP have erred in holding that the income from sale of shrink-wrapped software is taxable in India, being in the nature of royalty under the provisions of section 9(l)(vi) of the Act as well as Article 12(3) of the Double Taxation Avoidance Agreeme....

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....r under consideration the assessee has entered into software distribution agreement with reseller in India who buys "shrink wrapped software" from the assessee and in turn sells the same to the customers in India. The end user has limited rights to use the software for internal purposes, right to copy the software on hard disk all to make copies of archive purposes and the reproduction thereof is specifically prohibited except for backup purpose and the user cannot transfer the software. 3. During the scrutiny proceedings the Assessing Officer (AO) called upon the assessee to explain as to why the receipt of Rs. 74,18,49,200/- from the sale of software project be not treated as royalty income. Declining the contentions raised by the assessee AO passed draft order holding that the payment received by the assessee from the reseller in India for acquisition of computer software are held to be in the nature of royalty and chargeable to tax in India. 4. Assessee carried the matter before the Ld. DRP by way of filing objections who has rejected the same by upholding the addition made by the AO. 5. Pursuant to the draft order and order passed by the Ld. DRP, the AO proceeded....

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.... perusal of the recent order of the Tribunal i.e. ITAT "I" Bench, Mumbai, in the assessee's own case for the immediately preceding year i.e. A.Y 2015-16 in ITA No. 7027/Mum/2018, dated 10.01.2019, we find that it was observed by the Tribunal as under: "5. We have heard the rival submissions and perused the orders of the authorities below and the decision of the Coordinate Bench. On a perusal of the order of the Tribunal for the earlier assessment year we find that this issue has been decided by the Tribunal observing as under: - "3. At the outset, Ld. AR placed on record series of the order of the Tribunal in assessee's own case for the A.Y. 2003-04 order dated 15/12/2009, A.Y. 2005-06 order dated 01/04/2010, A.Y. 2006-07 order dated 08/02/2012, A.Y. 2007-08 order dated 31/03/2016, 4 ITA No. 7027/MUM/2018 (A.Y: 2015-16) Dassault Systems Solidworks Corporation A.Y. 2009-10 order dated 31/03/2016 and A.Y. 2011-12 order dated 28/02/2017 wherein exactly similar issue was decided in favour of the assessee and it was held that receipts towards sale of software products was not liable to tax as royalty. The precise observation of the Tribunal for the A.Y. 2011-....

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..... & Others, (2011) 345 ITR 0494, Kar HC, dated 15.10.2011. Therefore, in the said circumstances the order passed by the 5 ITA No. 7027/MUM/2018 (A.Y: 2015-16) Dassault Systems Solidworks Corporation Assessing Officer is justifiable which is not liable to be interfere with at this appellate stage. Keeping in view of the argument advanced by the parties and perused the record carefully, it is apparent on record that the said issue has been decided in favour of the assessee by the Hon'ble Income Tax Appellate Tribunal in the assessee's own case for the A.Y. 2002-03 in ITA No. 3095/Mum/2007 order dated 15th December 2009 and for the A.Y. 2005-06 in ITA No. 5097/Mum/2008 order dated 1st April 2010 and for A.Y. 2006-07 in ITA No. 3219/Mum/2010 order dated 08.02.2012 and for A.Y. 2007-08 in ITA No. 8721/Mum/2010 order dated 31.03.2016 and for A.Y. 2009-10 in ITA No. 7790/Mum/2012 order dated 31.03.2016. On appraisal of the latest order for the A.Y. 2009-10, we found that the Hon'ble Income Tax Appellate Tribunal considered the order passed by the Hon'ble Karnataka High Court which was favour of the assessee. In the said order, the discussion in this regard is....

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.... plainly authorized. This exception, lain down in Littman vs Barron 1952(2) AIR 393 and followed by apex Court in Mangalore Chemicals & Fertilizers Ltd. vs Dy. Commr. of CT (1992) Suppl. (1) SCC 21 and Novopan India Ltd. vs CCE & C 1994 (73) ELT 769 (SC), has been summed up in the words of Lord Lohen, in case of ambiguity, a taxing statute should be construed in favour of a tax-payer does not apply to a provision giving taxpayer relief in certain cases from a section clearly imposing liability. This exception, in the present case, has no application. The rule of resolving ambiguity in favour of the assessee does not also apply where the interpretation in favour of assessee will have to treat the provisions unconstitutional, as held in the matter of State of M.P. vs Dadabhoy's New Chirmiry Ponri Hill Colliery Co. Ltd. AIR 1972 (SC) 614. [Tej International Pvt. Ltd. Vs. DCIT (2000) 69 TTJ 650 (Del)] 52. Even otherwise, the Revenue has not cited any direct case law of the jurisdictional High Court of Bombay before us. In the case laws cited by the Revenue of the Honb'le Karnataka High Court in the matter of CIT Vs. Samsung Electronics Company Ltd." (supra) and CIT Vs. Synopsi....

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....lhi High Court in case of DIT Vs. Infrasoft Ltd. 264 CTR 329 (Del.) and in case of CIT Vs. Vegetable Products Ltd. 88 ITR 192 (SC) has decided this issue in favour of the assessee. Since, the matter has also been considered by the Hon'ble Income Tax Appellate Tribunal and decided this issue in favour of the assessee specifically for the A.Y. 2002- 03 in ITA No. 3095/Mum/2007 order dated 15th December 2009 and for the A.Y. 2005-06 in ITA No. 5097/Mum/2008 order dated 1st April 2010 and for A.Y. 2006-07 in ITA No. 3219/Mum/2010 order dated 08.02.2012 and for A.Y. 2007-08 in ITA No. 8721/Mum/2010 order dated 31.03.2016 and for A.Y. 2009-10 in ITA No. 7790/Mum/2012 order dated 31.03.2016 in which the receipt on account of sale of Shrinkwrap software is not in the nature of royalty hence is not liable ITA No. 936/M/2015 A.Y. 2011-12 12 in India un view of the provision of section 9(1)(iv) of the Act as well as Article 12(3) of the Double Taxation Avoidance Agreement between India and U.S.A. In view of the said circumstances, we are of the view that the case of the assessee is fully covered by the above mentioned decisions and the finding of the Assessing Of....