TaxTMI 
TaxTMI 
2024 (11) TMI 886
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Financial Year, assessee had provided online education of MBA course to certain employees of the ABMC and earned a sum of Rs. 1,27,42,140/- for providing said online education course. The ABMC, while making the payment to the assessee, deducted TDS at 20% (being TDS under section 9(1)(vi) of the Act. The assessee for the Assessment Year 2014-15 filed the return of income declaring Nil income on the belief that the aforesaid receipt is not taxable in India. Accordingly, in the return of income, assessee claimed refund of taxes that was paid by ABMC. 3. The AO passed Draft Assessment Order (DAO) on 27.12.2016 holding that the aforesaid receipts by assessee from ABMC is income in the nature of "royalty" which is chargeable to tax in India. The Dispute Resolution Panel (DRP) confirmed the DAO vide its directions dated 09.09.2017. Final Assessment Order (FAO) was passed on 26.09.2017. 4. Aggrieved by the same, assessee filed appeal before the Tribunal. A copy of the aforesaid master services agreement dated 01.04.2013 was filed before the Tribunal. The Tribunal vide its order dated 30.03.2022 in IT(IT)A No.2496/Bang/2017 for Assessment Year 2014-15 remanded the issue to the files of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Supreme Court after analysing the provisions of Income tax Act, provisions of DTAA, the relevant agreements entered by the assessee's with non-resident software suppliers, provisions of Copy Right Act, the circulars issued by CBDT, various case laws relied by the parties, concluded as under:- "CONCLUSION 168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessee's, have no application in the facts of these cases. 169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ture. The AO, however, rejected the objections raised by the assessee and passed DAO pursuant to the Tribunal's remand on 30.03.2023. The DRP confirmed the DAO vide its directions dated 23.11.2023. Pursuant to the DRP's directions, the impugned FAO was passed on 15.12.2023. 6. Aggrieved by the FAO dated 15.12.2023, assessee has filed the present appeal before the Tribunal raising the following grounds: 1. General ground: 1.1. The learned Deputy Commissioner of Income Tax, International Taxation, Circle 1(1), Bangalore (hereinafter referred to as AO for brevity) has erred in passing the assessment order under section 143(3) read with section 254 read with section 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as the Act for brevity) in the manner passed by him. The order passed being bad in law is liable to be quashed. 1.2. The Hon'ble office of the Dispute resolution panel -1, Bangalore (hereinafter referred to as DRP for brevity) has erred in issuing its directions under section 144C(5) of the Act in the manner passed by it. 2. Ground relating to principles of natural justice- Section 143(3) rws 254 2.1. The learned AO has erred in passing the assessment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g, the appellant prays that the assessment order passed under section 143(3) r.w.s 254 of the Act by the learned AO to be quashed or in alternative the above grounds and relief prayed thereof be allowed. 7. Before deciding the issue on merits, it is necessary that we adjudicate the legal submissions made that AO had exceeded the jurisdiction by assessing the receipts as "FTS" instead of "royalty" in the original assessment. The learned AR reiterated the submissions that the Order of the ITAT was not an open remand but was limited to examine the chargeability of income earned under the Act / DTAA as "royalty". It was submitted that this is clearly discernible in light of the judgment of the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd., Vs. CIT reported in (2021) 432 ITR 71 (SC) and other decisions relied on by the assessee. In this context, the learned AR placed reliance on the judgment of the Hon'ble Delhi High Court in the case of LI & Fung India (P.) Ltd., Vs. ACIT (2017) 298 CTR 427 (Del). It was submitted that Hon'ble Apex Court had dismissed the SLP filed by the Revenue arising out of the aforesaid judgment of the Hon'ble Delhi High Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s also limited to examine the chargeability of income earned under the Act / DTAA as "royalty". The remand to the AO was also limited to examine and follow the judgment of the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd., Vs. CIT (supra). The Tribunal did not remand to the AO to examine the applicability of definition of FTS as per the Act / DTAA in respect of the income of the assessee. Only subsequent to the remand proceedings by the Tribunal, it dawns upon the AO after examining the services agreement to tax the same as FTS under section 9(1)(vii) of the Act instead of "royalty" under section 9(1)(vi) of the Act. The AO after examining the agreement ideally ought to have filed a MA before the Tribunal seeking for an 'open remand' so that the receipt could have been either taxed under "FTS" or under "royalty". On perusal of the above Order of the Tribunal, it is clearly discernible that it is not an open remand but only a limited remand to examine the receipt whether it can be taxed in light of the judgment of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd., Vs. CIT (supra) and other judicial pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... & Fung India (P.) Ltd., Vs. ACIT (supra). 13. The Tribunal in the case of Bhagwandas associates Vs. ITO (supra) had held that Revenue has no scope for improving an already assessed income either by way of enhancement or in pretext of rectification while giving effect of an appellate Order. The Tribunal held that the statute does not provide such a wide unlimited and unending power to the AO. The relevant finding of the Pune Bench of the Tribunal reads as follows: '7.1. We have carefully as well as consciously examined this question having far reaching effect and at the outset, we may like to place in plain words that the A.O do not have that vast jurisdiction. Rather, the A.O has a very limited jurisdiction while giving effect of an appellate order. At this juncture, we may also like to clarify ourselves that there are generally two types of directions of the appellate authority; first, specific relief pertaining to a specific addition, and, second; direction of denovo assessment afresh by setting aside an assessment order in its entirety. In a situation, falling under second category, since the direction is denovo assessment, on account of set aside of an order in totality, th....