TaxTMI 
TaxTMI 
2026 (3) TMI 123
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....acts and in the circumstances of the case and in law, the DRP and Ld. AO erred in holding that the licensed software receipts are taxable in India as Royalty' under Article 12(3) of India-Canada DTAA; 3. That, on the facts and in the circumstances of the case and in law, the DRP and Ld. AO erred in holding that the software maintenance fee is taxable in India as Fee for Included Services ('FIS') under Article 12(4) of India-Canada DAA; 4. That, on the facts and in the circumstances of the case and in law, the DRP and Ld. AO have grossly erred in concluding that the Appellant has Permanent Establishment (PE') in India under Article 5 of India-Canada DTAA; 5. That, on the facts and in the circumstances of the case and in law, the DRP and Ld. AO have grossly erred in holding that the entire receipt of the Appellant is taxable u/s 44BB of the Act in the absence of constituting any PE of the Appellant in India; 6. Without prejudice to the aforesaid grounds, on the facts and in the circumstances of the case and in law, the Ld. AO has grossly erred in not complying with the provisions of Article 12(6) of India-Canada DTAA; 7. Th....
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....he Tribunal in immediate preceding assessment years. He contended that in fact these issues are legacy issues and for the first time the addition was made for similar reasons in AY 2012-13. The assessee carried the issue in appeal before the Tribunal. The Tribunal vide order dated 03.05.2024 reported as Computer Modelling Group Ltd. vs. ACIT (IT), 162 taxmann.com 437 deleted the additions. Further, the ld. Counsel pointed that the AO in the DAO has recorded the fact that there is no difference in the nature of receipts during the impugned assessment year and AY 2021-22. In fact, the AO in para 4 of the assessment order has narrated entire history of the addition right from AY 2012-13 onwards. The DRP also acknowledges that the issue on which additions have been made are similar to the one raised in AY 2021-21 and 2021-22. 5. The ld. Counsel for the assessee submits that in ground no. 5 of grounds of appeal, the assessee has assailed findings of the AO in holding that the entire receipts are taxable u/s. 44BB of the Income Tax Act,1961(hereinafter referred to as 'the Act'). The AO and the DRP have erred in coming to the such conclusion without discharging the onus of proving that....
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....onsidered documents and the decisions on which rival sides have placed reliance in support of their respective submissions. The assessee based in Canada is engaged in selling software used by the customers engaged in exploration of oil and gas. The assessee also providing software maintenance services to its customers in India engaged in exploration of oil and gas. The assessee claimed revenue from sale of software licences and software maintenance fee as exempt under India-Canada DTAA. The AO in the Final Assessment Order passed in compliance with directions of the DRP held receipts from sale of software licences as 'equipment royalty' under Article 12(3)(b) of the DTAA and fee received for rendering software maintenance services, taxable in India as FIS under Article 12(4) of India-Canada DTAA. 8. Further, the AO held that entire receipts of the assessee are taxable u/s. 44BB of the Act, as the assessee is having PE in India. 9. We find that the additions in respect of sale of software licences and software maintenance services were made in the preceding assessment years i.e. AY 2012-13 and AY 2019-20 to 2021-22 on identical set of facts. This fact is acknowledged by the AO....
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....hat the impugned receipts are not in the nature of royalty/ FTS in terms of the provisions of Article 12 of the India-Canada DTAA. It is not in dispute that the impugned receipts partake the character of business income of the assessee for the relevant AYs under consideration. In this view of the matter, the question of treating the impugned receipts as royalty or FTS is irrelevant and becomes academic in nature. Having said so, as per Article 7 of DTAA, the impugned receipts being the business profit/income of the assessee during the relevant AYs under consideration are not taxable in India in the absence of a PE of the assessee in India. Accordingly, ground No. 2, 4 and 6 in AY 2012-13, ground No. 1 and 2 in AY 2019-20, ground No. 1, 3 and 4 in AY 2020-21 and ground No. 3, 5 and 6 in AY 2021-22 are allowed. [Emphasized by us]" 10. In the impugned assessment year, the DRP has held that the assessee has PE in India, hence, the provisions of section 44BB of the Act were invoked. Here it would relevant to refer to findings given by the DRP to come to such a conclusion: "4.3 Once provision of software licence by the assessee to the Indian customers is treated as 'eq....
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....n a similar manner, the proceedings were completed u/s 143(3) for A Y 19-20 by passing a Draft Assessment Order dated 22.09.2021." From bare perusal of findings of the DRP above it is evident that the DRP accepts that facts in the impugned assessment year are identical to AY 2020-21 and 2021-22. The findings of the DRP/AO in the aforesaid assessment years have already been overturned by the Coordinate Bench of Tribunal. The reasoning given by the Tribunal for deciding the issue have already been reproduced above in para 9. Further, the manner in which the DRP has held that the assessee has PE in India, itself speaks volume of perfunctory approach of DRP in holding that the assessee has PE in India. It is no more res integra that onus is on the Department to prove that the assessee has PE in India in terms of Article 5 of DTAA. [Re: Assistant DIT vs. E-funds IT Solution Inc. 86 taxmann.com 240 (SC)]. The tax authorities have failed to discharge this onus. Hence, findings of the DRP that assessee has PE in India are without any merit. 12. The Revenue has placed reliance on the judgment rendered in the case of Paradigm Geophysical Pty. Ltd. vs. CIT (supra), we find that the said....