TaxTMI 
TaxTMI 
2023 (8) TMI 1720
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....4B of the Act (v) Initiation of penalty proceedings u/s. 274 r.w.s. 270A of the Act. 3. Shri Nitesh Joshi appearing on behalf of the assessee narrating facts of the case submitted; The assessee is a tax resident of Singapore. The assessee provides management services and is also engaged in sale of software/information technology products to its Indian Associated Enterprise (AE) Tech Data Advanced Solutions (India) Pvt. Ltd. and third party customers. During assessment proceedings, the assessee was asked to show cause as to why the receipts from India be not treated as royalty/ FTS. The ld. Counsel for the assessee explaining business model of the assessee submitted that the assessee buys off-the shelf Software in bulk in Singapore and sells the same to its distributor in India (a group concern ). The Indian distributor further sells the said software to various authorized re-sellers. The assessee while filling return of income offered income from sale of software as 'royalty'. After the decision of Hon'ble Supreme Court rendered in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT, 432 ITR 471/125 taxmann.com 42, the assessee realized that the asse....
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.... been proposed by the Assessing Officer in the income returned by the assessee, the objection raised by the assessee does not require any consideration. 3.1 The ld. Counsel for the assessee submitted that the Hon'ble Apex Court in para 45 of the judgment has held that where the distributor is granted nonexclusive, non-transferable licence to resell computer software and it has been expressly provided that no copy right in the computer programme is transferred either to the distributor or to the ultimate end user and the distributor is making profit on resale of such software, the income from sale of such software shall be income from business. 3.2 The ld. Counsel for the assessee further referring to Article -12 of IndiaSingapore DTAA submitted that sub- clause (iv) of Article-12 states that FTS means payment of any kind to any person in consideration for services of managerial, technical or in the nature of consultancy. If such services are ancillary and subsidiary to application or engagement of any right or make available technology know-how or consist of the development and transfer of technical plan or technical design. In the instant case none of the conditions are sati....
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....und that no adjustment has been proposed by the Assessing Officer, hence, the objection raised by the assessee does not fall within the parameters of section 144C of the Act. 7.1 The facts as emanating from records are: The assessee is a distributor of off the shelf software . The software is developed by F5. F5 has appointed the assessee as a distributor for the promotion, sale and delivery of its various products and services within the authorized territory solely to authorized seller and other approved channel partners for the resale to end users. In terms of Clause-9 of the Distributor Agreement( at page-154 to 169 of the paper book), during the term of agreement the assessee has been given non-exclusive, nontransferable rights to use trademarks to represent F5 as authorized distributor and to advertise its various products. Thus, from a perusal of the Distributor Agreement between F5 and the assessee, it emerges that the payment received by the assessee on sale of off the shelf software prima-facie doesn't fall within the definition of 'royalty' as defined under Article-12 of IndiaSingapore DTAA or section 9 of the Act. 7.2 As pointed earlier, the assessee for the first ....
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....e that the State cannot collect taxes more than what is due. The CBDT Circular No.14(XL-35) dated 11/04/1995 has emphasized this principle and has accordingly issued directions to its Officers. 7.3 The Hon'ble Kerala High Court in the case of Parekh Brothers vs. CIT, 150 ITR 105, after referring to the above Circular has observed: " 12. .......... We are referring to this circular only to highlight the spirit behind this circular. In our opinion, the circular envisages that 'Officers of the department' which will certainly take in the Head of the Department - the Commissioner (first respondent herein), should bear in mind the spirit of the said circular in affording relief to the assessee, as indicated therein. At least when the matter is brought to their notice, without raising technical objections, the matter should receive attention. The circulars have got the force of law. The circulars, at any rate, are binding on the department. The assessee is entitled to the benefit of such circulars. It is unnecessary to refer to the scope and enforceability of such circulars, in view of the fact that we are not resting our decision based on the above circular. But we a....
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....ed by the assessee for rendering services is in the nature of FTS. Article-12(4) of India - Singapore DTAA defines the expression FTS. For the sake of ready reference clause -4 of Article 12 is reproduced herein under:- "4. The term "fees for technical services" as used in this Article means payments of any kind to any person in consideration for services of a managerial technical or consultancy nature (including the provision of such services through technical or other personnel) if such services: (a) Are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) Make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein; or (c) Consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply technology contained therein. For the purpose of (b) and (c) above, the person acquiring the service shall be deemed to include an agent, ....