ADIT Circle-3 (1), v. Microsoft Regional Sales Corporation,

ITA 1782/DEL/2008 | 1999-2000
Pronouncement Date: 30-11-2011 | Result: Dismissed

Appeal Details

RSA Number 178220114 RSA 2008
Assessee PAN AADCM1638A
Bench Delhi
Appeal Number ITA 1782/DEL/2008
Duration Of Justice 3 year(s) 6 month(s) 22 day(s)
Appellant ADIT Circle-3 (1),
Respondent Microsoft Regional Sales Corporation,
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 30-11-2011
Date Of Final Hearing 28-11-2011
Next Hearing Date 28-11-2011
Assessment Year 1999-2000
Appeal Filed On 08-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI K.D. RANJAN ACCOUNTANT MEMBER ITA NOS.1780 1782 & 1784/DEL/2008 ASSESSMENT YEARS : 2001-02 1999-2000 & 2000-01 ITA NOS.1751 1783 1779 &1781/DEL/2008 ASSESSMENT YEARS : 2002-03 2003-04 2004-05 & 2005-06 ASSTT. DIRECTOR OF INCOME-TAX CIRCLE 3 (1) INTL. TAXATION NEW DELHI. VS. M/S MICROSOFT REGIONAL SALES CORPN. C/O S.R. BOTLIBOI & CO. 2 ND FLOOR THE CAPITAL COURT LSC PHASE-III OLD PALAM MARG MUNIRKA NEW DELHI. PAN : AADCM1638A ITA NO.4588/DEL/2010 ASSESSMENT YEAR : 2006-07 M/S MICROSOFT REGIONAL SALES CORPN. C/O S.R. BOTLIBOI & CO. GOLF VIEW CORPORATE TOWER B SECTOR 42 SECTOR ROAD GURGAON. PAN : AADCM1638A VS. ASSTT. DIRECTOR OF INCOME-TAX CIRCLE 3 (1) INTL. TAXATION NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJAN VORA CA MRS. PRITI GOEL ADVOCATE SHRI RAVINDRANATH & SHRI MANISH KHURANA CAS REVENUE BY : SHRI ASHWANI MAHAJAN CIT DR ORDER PER BENCH: ITA NOS.1751 1783 1779 & 1781/DEL/2008 AND ITA N OS.1780 1782 & 1784/DEL/2008 ARE APPEALS FILED BY THE REVENU E. ITA NO.4588/DEL/2010 IS AN APPEAL FILED BY THE ASSESSEE. IT A NOS.1751 ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 2 1783 1779 & 1781/DEL/2008 ARE APPEALS FILED BY THE DEPARTMENT RELATING TO QUANTUM APPEALS. ITA NOS.1780 1782 & 17 84/DEL/2008 ARE APPEALS FILED BY THE REVENUE AGAINST DELETION OF CONC EALMENT PENALTY AND ITA NO.4588/DEL/2010 IS THE APPEAL FILED BY THE ASSESSEE IN QUANTUM PROCEEDINGS. GROUNDS OF APPEAL BY THE REVENU E IN QUANTUM PROCEEDINGS RELATE TO ASSESSMENT YEAR 2002-03 2003-04 2004-05 AND 2005-06. THE GROUNDS OF APPEAL RAISED IN ALL THESE AP PEALS ARE IDENTICAL AND READ AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT (A) ERRED IN HOLDING THAT THE A.O. HAD WRONGL Y TAXED THE ROYALTY INCOME IN THE HANDS OF THE ASSESSEE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT (A) ERRED IN HOLDING THAT THE LICENSE FEE COLLECTE D BY THE ASSESSEE CAN BE TAXED ONLY IN THE HANDS OF M/S GRACEM AC CORPN. AND NOT IN THE HANDS OF THE ASSESSEE. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT (A) ERRED IN HOLDING THAT THE PROCEEDS RECEIVED O N DISTRIBUTION OF SOFTWARE IN INDIA IS A BUSINESS PROFIT. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT (A) FAILED TO APPRECIATE THAT COPYRIGHT IS A COLLECTI ON OF VARIOUS RIGHTS INCLUDING THE RIGHT TO DISTRIBUTE TO THE PUBLIC. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT (A) FAILED TO APPRECIATE THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS CONSIDERATION FOR TRANSFER OF DISTRIBUTION RIGHT IN RESPECT OF COPYRIGHT IN COMPUTER PROGRAM. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT (A) FAILED TO APPRECIATE THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS ROYALTY AS PER EXPLANATION 2 (V) TO SECTION 9(1) (VI) OF THE IT ACT 1961. 7. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT (A) FAILED TO UNDERSTAND THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS CONSIDERATION FOR THE USE OF OR THE RIGHT TO USE OF ANY COPYRIGHT OF A LITERARY WORK WHICH INCLUDES COMPUTER PROGRAMS TABLES AND COMPILATION INCLUDING COMPUTER DATABASES. 8. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT (A) FAILED THE UNDERSTAND THAT THE AMOUNT RECEIVED BY THE ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 3 ASSESSEE IS ROYALTY AS PER ARTICLE 12 (3)(A) OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) ENTERED BETWEEN IND IA AND USA. 9. THE ORDER OF THE CIT (A) BE SET-ASIDE AND THAT OF A .O. BE RESTORED. 10. THE APPELLANT PRAYS FOR LEAVE TO ADD ALTER AMEND OR VARY THE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2. QUANTUM APPEAL FILED BY THE ASSESSEE IS IN RESPECT OF ASSESSMENT YEAR 2006-07. GROUNDS OF APPEAL RELATES TO A N ADDITION MADE ON ACCOUNT OF ROYALTY OF AN AMOUNT OF ` 993 19 78 224/- WHICH AMOUNT HAS BEEN ASSESSED IN THE HANDS OF THE ASSESSEE AS ROYAL TY AGAINST THE RETURNED NIL INCOME FILED BY THE ASSESSEE. THE SAID ADDITION HAS BEEN UPHELD BY THE DRP AND ORDER IN CON FORMITY HAS BEEN PASSED BY THE ASSESSING OFFICER AGAINST WHICH THE ASSESSEE HAS FILED AN APPEAL RAISING VARIOUS GROUNDS WHICH READ AS UNDER:- 1. THAT ON FACTS AND IN LAW WHILE PASSING THE ASSESS MENT ORDER THE ASSISTANT DIRECTOR OF INCOME TAX CIRCLE 3(2 ) NEW DELHI ('LEARNED AO') HAS ERRED IN COMPUTING THE TOTAL I NCOME OF THE APPELLANT AT INR 9 931 978 224 AS AGAINST 'NIL' INC OME RETURNED BY THE APPELLANT AND THEREFORE THE ORDER OF THE LEARNED AO IS BAD IN LAW AND NEEDS TO BE ANNULLED. 2. TAX ON REVENUE ALLEGED 'AS ROYALTY' UNDER THE INC OME-TAX ACT 1961 ('THE ACT') 2.1 THAT ON FACTS AND IN LAW THE HON'BLE DISPUTE RESOL UTION PANEL ('DRP') HAS ERRED IN CONFIRMING THE VARIATIONS PROPOSED BY THE LEARNED AO IN THE DRAFT ASSESSMENT ORDER AS AGAINST THE RETURNED INCOME BY HOLDING THAT THE REVENUE EARNED BY TH E APPELLANT FROM THE SALE OF MICROSOFT RETAIL PRODUCTS TO TH E INDIAN DISTRIBUTORS IS TAXABLE IN THE HANDS OF THE APPELLANT AS ROYALTY UNDER THE PROVISIONS OF SECTION 9(1 )(VI) OF THE ACT. A CCORDINGLY THE ORDER PASSED BY THE LEARNED AO ON THE BASIS OF DRP 'S DIRECTIONS IS ALSO ERRONEOUS BOTH IN LAW AND ON FACTS. 2.2 THAT ON FACTS AND IN LAW THE HON'BLE DRP HAS ERRE D IN CONFIRMING THE VARIATIONS PROPOSED BY THE LEARNED AO I N THE DRAFT ASSESSMENT ORDER WHEREIN IT HAS BEEN HELD THAT: ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 4 2.2.1 THE PAYMENT MADE BY THE INDIAN DISTRIBUTORS IS TOWA RDS THE USE OF COPYRIGHT AND NOT FOR THE PURCHASE OF COPYRI GHTED ARTICLE AND THEREFORE IS ROYALTY UNDER SECTION 9(1 )(V I) OF THE ACT; 2.2.2 ALTERNATIVELY CONSIDERATION RECEIVED FOR USE OF SOFTWARE CAN ALSO BE HELD TO HAVE BEEN RECEIVED TOWARDS USE OF 'INFORMATION DEVELOPED OUT OF SCIENTIFIC EXPERIENCE' LITERARY OR SCIENTIFIC WORK PATENTED ARTICLE 'SCIENTIFIC KNOWLEDGE INVENTION SECRET FORMULA OR PROCESS' AND HENCE TAXABLE AS ROY ALTY UNDER THE ACT. 2.2.3 SECOND PROVISO TO SECTION 9(1 )(VI) OF THE ACT EX CLUDES SUCH ROYALTY PAYMENTS FROM THE PURVIEW OF SECTION 9(1 )(VI) OF THE ACT ONLY WHEN THE COMPUTER SOFTWARE IS SUPPLIED BY A NON-R ESIDENT MANUFACTURER ALONG WITH COMPUTER OR COMPUTER BASED EQUIPMENT UNDER ANY APPROVED SCHEME. ACCORDINGLY THE ORDER PASSED BY THE LEARNED AO ON THE BASIS OF DRP'S DIRECTIONS IS ALSO ERRONEOUS BOTH IN LAW AND ON FACTS. 3. THAT ON FACTS AND IN LAW THE HON'BLE DRP HAS ERRED IN CONFIRMING THE CONCLUSION DRAWN BY THE LEARNED AO IN THE DRAFT ORDER THAT THE PROVISIONS OF SECTION 115A OF THE ACT CHARACTERIZES THE INCOME FROM SALE OF SOFTWARE (DEEMED TO BE INCOME OF APPELLANT) AS 'ROYALTY' UNDER THE ACT. ACCORD INGLY THE ORDER PASSED BY THE LEARNED AO ON THE BASIS OF DRP'S DIRECTIONS IS ALSO ERRONEOUS BOTH IN LAW AND ON FACTS. 4 TAX ON REVENUE ALLEGED AS 'ROYALTY' UNDER THE DOUB LE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND US ('IN DIA US TAX TREATY') 4.1 THAT ON FACTS AND IN LAW THE HON'BLE DRP HAS ERRE D IN CONFIRMING THE VARIATIONS PROPOSED BY THE LEARNED AO I N THE DRAFT ASSESSMENT ORDER AS AGAINST THE RETURNED INCOME BY HOLDING THAT REVENUE EARNED BY THE APPELLANT FROM SALE OF MICROSOFT RETAIL PRODUCTS TO DISTRIBUTORS IN INDIA IS ROY ALTY UNDER ARTICLE 12 OF THE INDIA US TAX TREATY. ACCORDINGLY THE O RDER PASSED BY THE LEARNED AO ON THE BASIS OF DRP'S DIRECTI ONS IS ALSO ERRONEOUS BOTH IN LAW AND ON FACTS. 4.2 THAT ON FACTS AND IN LAW THE HON'BLE DRP AND LEA RNED AO FAILED TO APPRECIATE THAT THE SALE OF SOFTWARE IS SALE OF 'COPYRIGHTED ARTICLE' AND NOT 'COPYRIGHT' IN MICROSOFT S OFTWARE AND ACCORDINGLY THE REVENUE FROM SALE OF SOFTWARE IS IN THE NATURE OF BUSINESS INCOME NOT TAXABLE UNDER ARTICLE 7 O F INDIA US TAX TREATY IN THE ABSENCE OF THE 'PERMANENT ESTABLISHMENT' OF THE APPELLANT IN INDIA. ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 5 4.3 THAT ON FACTS AND IN LAW THE HON'BLE DRP HAS ERRE D IN CONFIRMING THE CONCLUSION DRAWN BY THE LEARNED AO THAT INCLUSION OF WORD 'COMPUTER SOFTWARE' IN THE DEFINITION OF ROYALTY IN SOME OF THE TREATIES RECENTLY EXECUTED BY INDIA IS CL ARIFICATORY IN NATURE AND THAT THE CONCEPT OF TAXABILITY OF SOFTWARE IS ALREADY EMBEDDED IN THE DEFINITION OF ROYALTY GIVEN IN OLD TRE ATIES. ACCORDINGLY THE ORDER PASSED BY THE LEARNED AO ON THE BASIS OF DRP'S DIRECTIONS IS ALSO ERRONEOUS BOTH IN LAW AND ON FACTS. 5 THAT ON FACTS AND IN LAW THE HON'BLE DRP AND LEARN ED AO HAVE ERRED IN NOT PASSING A SPEAKING ORDER BY NOT CON SIDERING THE BINDING JURISDICTIONAL PRECEDENTS RELIED UPON BY TH E APPELLANT WHICH SQUARELY APPLY TO THE FACTS OF THE APPE LLANT'S CASE. 6 THAT ON FACTS AND IN LAW THE HON'BLE DRP AND LEARN ED AO HAVE ERRED IN DISREGARDING OECD COMMENTARIES US IRS REGULATIONS ON CLASSIFICATION OF TRANSACTIONS INVOLVING COMPUTER SOFTWARE INTERNATIONAL TAX COMMENTARIES RELEVANCE OF O ECD & UN MODEL CONVENTION INTERNATIONAL REVENUE RULINGS WH ILE INTERPRETING TAX TREATIES. 7 THAT ON FACTS AND IN LAW THE HON'BLE DRP HAS ERRED IN CONFIRMING THE CONCLUSION DRAWN BY LEARNED AO BY PLA CING RELIANCE ON THE APPELLATE ORDER PASSED UNDER SECTION 2 50 OF THE ACT IN APPELLANT'S OWN CASE FOR ASSESSMENT YEARS 1999 -00 2000-01 AND 2001-02 THEREBY COMPLETELY DISREGARDING THE FACTUAL LEGAL POSITION. ACCORDINGLY THE ORDER PASSED BY THE LEARNED AO ON THE BASIS OF DRP'S DIRECTIONS IS ALSO E RRONEOUS BOTH IN LAW AND ON FACTS. 8 THAT ON FACTS AND IN LAW THE HON'BLE DRP HAS ERRED IN CONFIRMING THE CONCLUSION DRAWN BY LEARNED AO BY DISTINGUISHING FROM DECISIONS OF THE HON'BLE SUPREME COURT IN CASE OF ASSOCIATED CEMENTS COMPANIES LTD (2001) [AIR 8 62] AND TATA CONSULTANCY SERVICES LTD (271 ITR 401). ACCORDING LY THE ORDER PASSED BY THE LEARNED AO ON THE BASIS OF DRP'S DIRECTIONS IS ALSO ERRONEOUS BOTH IN LAW AND ON FACTS. FACTUAL INACCURACIES : 9 THAT ON FACTS THE HON'BLE DRP AND LEARNED AO HAVE FAILED IN COMPREHENDING THE FACTS OF THE APPELLANT'S CASE AND ERRONEOUSLY OBSERVED THE FOLLOWING: (A) THAT THE APPELLANT IS ENGAGED IN LICENSING OF SOF TWARE THROUGH INDEPENDENT DISTRIBUTORS UNDER EULA; (B) REPRODUCING FROM SUBMISSIONS OF THE APPELLANT P URPORTEDLY FILED ON 5 NOVEMBER 2008 WHEREAS THE REPRODUCED PORTI ONS ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 6 WERE NEVER FILED BY THE APPELLANT. HE COMPLETELY FAIL ED IN TAKING COGNIZANCE OF THE SUBMISSIONS ACTUALLY FILED BY THE AP PELLANT FOR THE RELEVANT ASSESSMENT YEAR; (C) THAT THE APPELLANT HAS AGREED THAT PAYMENT IS MADE ONLY FOR RIGHT TO USE SOFTWARE; (D) THAT THE COPYRIGHT OF SOFTWARE REMAINS WITH THE APPEL LANT HOWEVER IT ALLOWS THE USE OF COPYRIGHT TO THE INDIAN DI STRIBUTORS; (E) THAT THE LICENSE OF MERE USAGE IS SORT OF A LEASE OF A SOFTWARE AND THUS THE SOFTWARE HAS BEEN MERELY GIVEN ON RENTAL; (F) THE APPELLANT POSSESSES RIGHT OVER THE INTELLECTUAL PROPERTY RIGHT (IPR) IN THE SOFTWARE WHICH IT IS FURTHER LICENSIN G FOR DISTRIBUTION TO THE END USERS IN INDIA; (G) THAT THE APPELLANT POSSESSES RIGHT IN COPYRIGHT WHI CH IT CAN ENFORCE IN INDIA IF ANY VIOLATION OF SUCH RIGHT IS N OTICED BY IT; (H) THAT THE SOURCE OF REVENUE DERIVED BY THE APPELLAN T IS FROM LICENSING OF SOFTWARE FROM UTILIZATION OF THE LICENSE G RANTED TO THE USERS IN INDIA; (I) THAT DELIVERY OF THE PRODUCT TO DISTRIBUTORS OUTSIDE INDIA DOES NOT AFFECT TAXABILITY OF THE RECEIPT AS PER SECTION 9(1 )(VI) OF THE ACT THE PLACE OF UTILISATION/ EXPLOITATION OF THE S OFTWARE IS IMPORTANT; (J) THAT THE APPELLANT HAS SHOWN THE RECEIPTS FROM COMP ANIES IN INDIA AS 'ROYALTY' AND HAS PAID TAXES. 10 THAT ON FACTS AND IN LAW THE HON'BLE DRP HAS ERRE D IN CONFIRMING THE CONCLUSION DRAWN BY LEARNED AO BY REL YING ON THE DECISIONS OF HON'BLE SUPREME COURT AND HON'BLE HI GH COURTS WHICH ARE ON COMPLETELY DIFFERENT FACTS AND QUESTIONS O F LAW THEREIN. ACCORDINGLY THE ORDER PASSED BY THE LEARNED AO ON THE BASIS OF DRP'S DIRECTIONS IS ALSO ERRONEOUS BOTH IN L AW AND ON FACTS. 11 WITHOUT PREJUDICE TO THE ABOVE GROUNDS THE HON'BLE DRP AND THE LEARNED AO HAVE ERRED IN HOLDING THAT TOE REVEN UE EARNED BY THE APPELLANT FROM SALE OF PRODUCTS IS 'ROYA LTY' UNDER THE ACT/INDIA US TAX TREATY WHEREAS THE AO OF GRACEMAC H AS ALREADY TAXED THE SAME IN THE ASSESSMENT OF GRACEMAC FO R AY 2006-07 WHICH HAS RESULTED IN DOUBLE TAXATION OF SAME SOURCED INCOME. ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 7 12 WITHOUT PREJUDICE TO THE ABOVE GROUNDS THE HON'BLE DRP HAS ERRED IN CONFIRMING THE CONCLUSIONS DRAWN BY LEA RNED AO IN LEVYING INTEREST UNDER SECTION 2348 OF THE ACT WHILE COM PLETELY DISREGARDING THE PROVISIONS OF THE ACT AND THE JUDICIAL PRECEDENTS. THE ABOVE GROUNDS OF APPEAL ARE MUTUALLY EXCLUSIVE A ND WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD ALTER AMEND AND / OR MODIFY ANY OF THE GROUNDS OF APPEAL A T OR BEFORE THE HEARING OF THE APPEAL. THE APPELLANT PRAYS FOR APPROPRIATE RELIEF BASED ON TH E SAID GROUNDS OF APPEAL. 3. ITA NOS.1782 1784 AND 1780/DEL/2008 ARE APPEALS F ILED BY THE REVENUE IN RESPECT OF ASSESSMENT YEARS 1999-2000 2000-01 AND 2001-02 RESPECTIVELY AGAINST THE DELETION OF PENALTY LEVIED U/S 271(1)(C). THE GROUNDS OF APPEAL FOR ALL THESE YEARS ARE IDENTICAL AND READ AS UNDER:- 1. IN THE FATS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LEARNED CIT (A) ERRED IN DELETING THE PENALTY OF RS.6 45 31 340/- IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME TAX ACT 1961. 2. THE ORDER OF THE CIT (A) BE SET ASIDE AND THAT OF A. O. BE RESTORED. 3. THE APPELLANT PRAYS FOR LEAVE TO ADD ALTER AMEND OR VARY THE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 4. THE BASIC FACTS AS FOUND MENTIONED IN THE CONSOLIDAT ED ORDER PASSED BY THE CIT (A) IN RESPECT OF ASSESSMENT YEARS 1999-2 000 2000- 01 AND 2001-02 ARE AS UNDER:- 4. FACTS OF THE CASE THE APPELLANT IS A COMPANY INCORPORATED IN US AND IS A WHOLLY OWNED SUBSIDIARY ('WOS') OF MICROSOFT CORPORATION US A ('MS CORP') WITH A BRANCH IN SINGAPORE. THE OPERATING STRUC TURE OF THE DISTRIBUTION MODEL ALONG WITH THE FLOW OF DISTRIBUTION RIGHTS ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 8 FROM MS CORP TO APPELLANT THROUGH GRACEMAC CORPORATION USA ('GRACEMAC') AND MICROSOFT OPERATIONS PTE LIMITED SING APORE (MO') WAS EXPLAINED BY APPELLANT AS FOLLOWS: GRACEMAC IS A COMPANY INCORPORATED UNDER THE LAWS OF USA ON SEPTEMBER 23 1994 HAVING ITS REGISTERED OFFICE AT 300 SOUTH FOURTH STREET SUITE 1100 LAS VEGAS NEVADA USA-89109 . GRACEMAC IS A WOS OF MS CORP. MS CORP ENTERED INTO A PARENT SUBSIDIARY AGREEMENT ('PSA'') WITH GRACEMAC ON JANUAR Y 1 1999 WHEREIN MS CORP HAD GRANTED GRACEMAC THE: A) EXCLUSIVE LICENSE TO MANUFACTURE MICROSOFT PRODUCTS B) EXCLUSIVE LICENSE TO DISTRIBUTE THE PRODUCTS SO MANUFACTURED DIRECTLY TO RETAILERS OR TO MS CORP OR TO SUBSIDIARIES OF MS CORP; AND C) EXCLUSIVE RIGHT TO LICENSE ANY THIRD PARTY TO DIRECTLY GRANT CUSTOMERS THE RIGHT TO REPRODUCE MICROSOFT SOFTWARE PRODU CTS FOR INTERNAL USE. IN LIEU OF THE ABOVEMENTIONED RIGHTS GRACEMAC HAS ISS UED ITS ENTIRE SHARE CAPITAL TO MS CORP. IN PURSUANCE OF THE RIGHTS GRANTED UNDER THE PSA GRACE MAC HAS ENTERED INTO A LICENSE AGREEMENT WITH MO (A COMPANY INCORPORATED UNDER THE LAWS OF SINGAPORE AND A WOS OF MS CORP) ON JANUARY 1 1999 WHEREIN GRACEMAC HAS GRAN TED MO THE: A) NON-EXCLUSIVE LICENSE TO MANUFACTURE MICROSOFT PROD UCTS IN SINGAPORE; B) NON-EXCLUSIVE LICENSE TO DISTRIBUTE THE PRODUCTS SO MANUFACTURED TO RETAILERS OR TO MS CORP OR TO SUBSIDIAR IES OF MS CORP; AND C) NON-EXCLUSIVE RIGHT TO LICENSE OR SUBLICENSE THE RI GHT TO REPRODUCE MICROSOFT SOFTWARE PRODUCTS TO CERTAIN END USE RS (LARGE ACCOUNT CUSTOMERS) FOR THEIR INTERNAL USE. IN LIEU OF THE ABOVEMENTIONED RIGHTS GRACEMAC EARNS R OYALTY FROM MO. THE ROYALTY WAS COMPUTED ON THE BASIS OF THE N ET SELLING PRICE OF MICROSOFT PRODUCTS MANUFACTURED BY MO AND DISTRIBUTED TO RETAILERS MS CORP OR SUBSIDIARIES OF MS CORP. 4.1 IN TURN MO HAS ENTERED INTO A NON-EXCLUSIVE DISTRI BUTION AND INTER-COMPANY SERVICES AGREEMENT ('DISTRIBUTION AGREEME NT') WITH THE APPELLANT WHEREIN APPELLANT WAS APPOINTED AS A DISTRIBUTOR OF MICROSOFT PRODUCTS MANUFACTURED BY MO. AP PELLANT ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 9 WAS GIVEN THE RIGHT TO DISTRIBUTE MICROSOFT PRODUCTS IN AS IA (WITH RESTRICTIONS IN CHINA KOREA AND TAIWAN) JAPAN SOUTH EAST ASIA AND THE SOUTH PACIFIC. THE ASSESSEE DID NOT HAVE ANY R IGHT TO COPY ADAPT ETC. THE SOFTWARE. THE DISTRIBUTION AGREEMENT SPECIFIES THAT MO WOULD SHIP THE PRODUCTS TO SUCH ADDRES SES (OF THE ASSESSEE OR ITS APPROVED DISTRIBUTORS) AS SPECIFIED BY THE APPELLANT. FURTHER EXCEPT FOR AUSTRALIA AND JAPAN THE TITLE OF THE PRODUCTS HAS BEEN AGREED TO BE TRANSFERRED TO APPELLAN T IN SINGAPORE WHICH EVIDENCES THE FACT THAT DELIVERY TAKES P LACE OUTSIDE INDIA. 4.2 MO HAD AGREED TO SELL THE PRODUCTS TO APPELLANT AT A PRICE EQUAL TO 95% OF THE PRICE AT WHICH APPELLANT SELLS THE P RODUCT TO APPROVED DISTRIBUTORS OR OTHER MS CORP AFFILIATES. PURS UANT TO THE DISTRIBUTION AGREEMENT THE ASSESSEE HAD ENTERED INTO AGREEMENTS WITH VARIOUS DISTRIBUTORS IN 'APPROVED TERRITO RIES'. THE DISTRIBUTORS HAD A RIGHT TO DISTRIBUTE THE PRODUCTS IN INDIA. THE PRODUCTS SUPPLIED BY THE ASSESSEE ARE OFTEN STOCKED BY DISTRIBUTORS AND THEN SUPPLIED AGAINST SPECIFIC ORDERS. THE PRODUCTS WERE DELIVERED BY THE ASSESSEE TO DISTRIBUTORS 'EX WAREHOUSE' FROM THE WAREHOUSING FACILITY NOMINATED BY THE ASSESSEE. FURTHER THE DISTRIBUTOR SOLD THE PRODUCTS TO A RESELLER IN INDIA WHO IN TURN SOLD IT TO A CONSUMER/ DISTRIBUTOR SELLS DIRECTLY TO CONSUMERS. THE RESELLERS/ CONSUMERS DID N OT HAVE THE RIGHT TO MAKE COPIES OF THE SOFTWARE FOR 'COMMERCIAL EXPLOITATION'. THE DISTRIBUTOR WAS NOT LIABLE TO PAY THE A SSESSEE ONLY UPON SALE BY THE DISTRIBUTOR TO THE RESELLER/ CONSU MER. IT WAS LIABLE TO PAY THE ASSESSEE EVEN IF IT WAS NOT ABLE TO SELL THE PRODUCTS TO THE RESELLER/ CONSUMER. 4.3 ACCORDING TO APPELLANT THE INCOME EARNED FROM THE S ALE OF COMPUTER SOFTWARE TO INDEPENDENT DISTRIBUTOR IN INDIA WAS IN THE NATURE OF BUSINESS PROFIT IN THE YEARS UNDER CONSIDERA TION AND WAS NOT TAXABLE IN INDIA AS APPELLANT DID NOT HAVE A PE IN INDIA UNDER PROVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEM ENT BETWEEN INDIA AND USA (IN SHORT DTAA). IT WAS ALSO CON TESTED THAT ROYALTY INCOME FROM SALE OF SOFTWARE COULD NOT BE TA XED IN HAND OF APPELLANT WHICH WAS ONLY DISTRIBUTOR OF THE SOF TWARE OF MS CORP AND COPYRIGHTS OF THESE SOFTWARE WERE OWNED BY MS CORP NOT BY APPELLANT. FOR THESE REASONS IT WAS CLAIMED THAT BUSINESS INCOME OF APPELLANT WAS NOT TAXABLE IN INDIA FOR THE YEARS UNDER CONSIDERATION ACCORDINGLY APPELLANT DID NOT FILE RETURNS OF INCOME FOR THE YEARS UNDER CONSIDERATION. L ATER ON THE AO ISSUED NOTICE TO THE APPELLANT FOR THE YEARS UNDER CONSIDERATION U/S 148 OF THE ACT. IN RESPONSE TO NOTICE APPELLANT FILED RETURN OF INCOME DECLARING NIL INCOME FOR THE Y EARS UNDER CONSIDERATION STATING ABOVE REASONS FOR NON TAXABILITY O F ITS BUSINESS PROFIT IN INDIA. LATER ON THE CASES OF APPEL LANT FOR THE YEARS WERE SELECTED FOR SCRUTINY BY ISSUE AND SERVICE OF NOTICE U/S .143(2). DURING THE COURSE OF SCRUTINY ASSESSMENT THE A.O ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 10 ASSESSED THE INCOME OF THE APPELLANT FOR THE YEARS UNDE R CONSIDERATION AT US$ 1 01 75 235 US$ 5 87 64 099 AND US$ 8 35 51 260 UNDER THE HEAD 'ROYALTY' AGAINST THE NIL IN COME DISCLOSED BY THE APPELLANT IN THE RETURNS OF INCOME FIL ED FOR THE YEARS UNDER CONSIDERATION FOR FOLLOWING GROUNDS: A) THE SOFTWARE FALLS UNDER THE CATEGORY 'SECRET FORMUL A OR PROCESS' AND THE SOFTWARE WHEN INSTALLED ON A COMPUTER RESPOND TO EVERY INSTRUCTION IN A SPECIFIC WAY. ACCORDINGLY THE TOTAL REVENUE RECEIVED BY THE APPELLANT FROM SALE OF SOFTWAR E IN INDIA WAS ROYALTY. B) THE APPELLANT WAS TAXABLE IN INDIA UNDER PROVISION S OF ACT AND THE DTAA AS INCOME FROM SALE OF SOFTWARE WAS IN TH E NATURE OF ROYALTY U/S 9(1)(VI) AND ARTICLE 12 OF DTAA. 5. ACCORDINGLY AFOREMENTIONED INCOME WAS ASSESSED IN TH E HANDS OF THE ASSESSEE AS ROYALTY UPON WHICH THE PENALTY HAS BEE N LEVIED BY THE ASSESSING OFFICER AS FOLLOWS:- ASSESSMENT YEAR 1999-2000 ` 6 45 31 340/- ASSESSMENT YEAR 2000-2001 ` 38 30 83 161/- ASSESSMENT YEAR 2001-2001 ` 58 18 92 771 6. THE AFOREMENTIONED ADDITIONS WERE ALSO UPHELD BY L EARNED CIT (A) AGAINST WHICH A FURTHER APPEAL TO THE TRIBUNAL W AS FILED AND THE SAID APPEALS HAVE BEEN DECIDED BY THE TRIBUNAL ALONG WITH THE APPEALS IN THE CASE OF M/S GRACEMAC CORPN. VS. ASSTT. DIRECTOR O F INCOME-TAX INTERNATIONAL TAX DIVISION CIRCLE 2 (1) NEW DELHI AND APPEALS OF M/S MICROSOFT CORPORATION VS. ASSTT. DIRECTOR OF INCOME-TAX VIDE ORDER DATED 26 TH OCTOBER 2010 WHICH IS SINCE REPORTED AS 132 TTJ 257 (DEL); 8 ITR (TRIB.) 522 (DEL); 42 SOT 550 (DEL). THOUGH IT HAS BEEN HELD BY THE TRIBUNAL THAT THE SAID AMOUNT WAS IN THE NATURE OF RO YALTY BUT IT WAS HELD THAT THE SAID AMOUNT CANNOT BE ASSESSED IN THE HAND S OF THE PRESENT ASSESSEE AND IT HAS BEEN HELD TO BE TAXABLE IN TH E HANDS OF THE GRACEMAC CORPN. THE RELEVANT OBSERVATIONS OF THE TRI BUNAL WHILE HOLDING SO ARE CONTAINED IN PARA 128 AND 132 AND IT WILL BE RELEVANT TO ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 11 REPRODUCE THE SAID OBSERVATIONS OF THE TRIBUNAL WITH R EGARD TO TAXABILITY OR OTHERWISE OF THE AFOREMENTIONED AMOUNT IN THE HANDS OF THE ASSESSEE:- 128. FROM THE ABOVE IT IS EVIDENT THAT MRSC WAS ALSO AUTHORIZED TO REPRODUCE CERTAIN PRODUCTS AND DISTRIBUTE THE SAME TO END USERS THROUGH THE DISTRIBUTORS APPOIN TED BY MRSC. MRSC VIDE AGREEMENT DATED 3RD MAY 1999 WAS AUTHORIZED TO COPY THE MARKETING PROGRAMMES IN OBJEC T CODE FORM FROM THE MASTER COPY PROVIDED BY MICROSOFT OPERATI ONS (MO) ON TO EITHER DISKETTES OR SUCH APPROVED MEDIA AND PREPARE THE PRODUCT DOCUMENTATION AND PACKAGING BASED ON THE MATERIAL PROVIDED AND APPROVED BY MO. WE WOULD LIKE TO MENTION HERE THAT SOURCE CODE AND OBJECT CODE HAVE COP YRIGHT. THEREFORE MRSC ALSO GOT RIGHT TO USE COPYRIGHT IN COMPUTER PRODUCTS FROM SUB-LICENCEE (MO). EACH P RODUCT PACKAGE WOULD INCLUDE A PRE-APPROVED DISKETTES LABEL ATTACHED TO THE DISKETTES AND MS CORP. STANDARD END USER LICENCE AGREEMENT FOR THE TERRITORY. FROM THE ABOVE IT IS EVIDENT THAT MRSC IS NOT SIMPLY A DISTRIBUTOR APP OINTED BY MICROSOFT OPERATIONS BUT WAS AUTHORIZED TO REPRODUC E CERTAIN COMPUTER PROGRAMMES. THE END USER LICEN CE AGREEMENT WAS TO BE IN THE STANDARD FORMAT OF MICROSOFT CORPORATION. ARTICLE 3.2 ALSO PROVIDES THAT THE MARKETIN G PROGRAMME RELEASED BY THE DISTRIBUTOR WILL BE APPROXIM ATELY EQUIVALENT IN QUALITY OF THE SOFTWARE PRODUCT MANUFACTU RED BY MS CORP. THE MICROSOFT OPERATION ALSO PROVIDED UP-DA TED MASTER COPIES OF MARKETING PROGRAMMES AS AND WHEN THE SAME WERE UP-DATED BY MS CORP. SINCE THE MICROSOFT CORPORA TION HAS GRANTED THE RIGHT TO REPRODUCE AND DISTRIBUTE MICRO SOFT PRODUCTS IN LIEU OF SHARES TO GRACEMAC AND NO FU RTHER ROYALTY IS PAYABLE BY GRACEMAC AND ALSO THE END USER LICENCE AGREEMENT IS TO BE IN THE STANDARD FORMAT OF MICROSOFT CORPORATION THE MICROSOFT CORP. IS UNDER OBLIGATION TO SIGN EULA ON BEHALF OF GRACEMAC. THUS IT HAS TO BE LOGICALLY CONCLUDED THAT MICROSOFT CORPORATION HAS SIGNED THE EULA ON BEHALF OF GRACEMAC TO WHOM EXCLUSIVE RIGHTS TO M ANUFACTURE AND DISTRIBUTE MICROSOFT PRODUCTS HAVE BEEN GRANTED OTHERWISE THE PRODUCTS WOULD HAVE BEEN RENDERED USEL ESS AND NO REVENUE COULD HAVE BEEN EARNED BY ANYONE I N THE SUPPLY CHAIN. MICROSOFT CORPORATION HAS DEVISED A SCHEME UNDER WHICH EULA HAS TO BE SIGNED BY MICROSOFT CORP . AND NOT BY GRACEMAC CORPORATION. HENCE ASSESSEE CANNOT BE PER MITTED TO TAKE A PLEA THAT SINCE EULA HAS BEEN SIGNED BETWEEN E ND USERS AND MICROSOFT CORP. NO LICENCE WAS GRANTED BY G RACEMAC AND CONSEQUENTLY THE ROYALTY PAYMENTS WILL NOT BE CHARGEABLE TO TAX IN THE HANDS OF GRACEMAC. THE AGREEMENTS ENTERED INTO BETWEEN GROUP COMPANIES HAVE DRAFTED IN SUCH A WAY WHICH GIVE AN IMPRESSION TH AT ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 12 GRACEMAC CORPORATION HAS NO CONNECTION WITH THE GRA NTING OF LICENCE. THE REAL TRANSACTION OF THE GRANTING OF THE LICENCE IN RESPECT OF COPYRIGHTS IN COMPUTER PROGRAMMES HAVE CAMOUFLAGED BY ENTERING INTO VARIOUS AGREEMENTS B ETWEEN MICROSOFT AND GRACEMAC; GRACEMAC AND MICROSOFT OPERATIONS; MICROSOFT OPERATION AND MRSC; AND MRS C AND INDIAN DISTRIBUTORS BUT WHEN REAL INTENTION IS GATHE RED FROM THE IN-DEPTH READING OF THE AGREEMENTS THE MATTER B ECOMES CRYSTAL CLEAR. SINCE WE HAVE HELD THAT END USERS H AVE MADE PAYMENTS IN RESPECT OF THE GRANTING OF LICENCE IN RESPECT OF COPYRIGHT IN COMPUTER PROGRAMMES THE PAYMENTS MADE BY END-USERS AS CONSIDERATION FOR THE SAME WILL BE TAXABL E IN THE HANDS OF GRACEMAC. 132. AS DISCUSSED ABOVE MRSC REPRODUCED CERTAIN S OFTWARE PRODUCTS AND DISTRIBUTED THE SAME THROUGH CHAIN OF DISTRIBUTORS IN INDIA. THEREFORE THE VERY APPOI NTMENT OF DISTRIBUTORS BY MRSC IN INDIA HAD BUSINESS C ONNECTION IN INDIA AND THE PORTION OF INCOME EARNED BY MRSC PE RHAPS COULD HAVE BEEN CHARGEABLE TO TAX AS BUSINESS INCOME UNDER SECTION 9(1)(I) OF THE ACT. BUT SINCE THE ASSESSIN G OFFICER AS WELL AS THE LD. CIT (APPEALS) HAS CHOSEN TO ASSESS THE ENTIRE RECEIPTS UNDER THE HEAD 'ROYALTY' IN THE HANDS OF MRSC ALSO IN OUR CONSIDERED OPINION MRSC CANNOT BE TAXED AGAIN ON THE SAME INCOME BY WAY OF ROYALTY FOR EXPLOITATION OF SAME RIGHTS WHICH HAD BEEN ASSESSED IN THE HANDS OF GRACEMAC O THERWISE IT WOULD RESULT IN DOUBLE TAXATION. THEREFORE WE DELE TE THE ADDITION IN THE HANDS OF MRSC FOR ALL THE THREE YEARS. 7. THE QUESTION INVOLVED IN THE QUANTUM APPEALS FILED BY THE REVENUE IS WHETHER LEARNED CIT (A) IS RIGHT IN DELETI NG THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF AFOREMENTIO NED ROYALTY. THE LEARNED AR OF THE ASSESSEE HAS REFERRED TO THE AFORE MENTIONED DECISION OF THE TRIBUNAL WHEREIN ON SIMILAR FACTS IT HAS BEEN HELD BY THE TRIBUNAL THAT SUCH ROYALTY CANNOT BE ASSESSED IN TH E HANDS OF THE ASSESSEE AS IT WILL TANTAMOUNT TO ASSESS THE SAME INCOME WHIC H HAS BEEN ASSESSED IN THE HANDS OF GRACEMAC AND IT HAS BEEN HE LD BY THE TRIBUNAL THAT THE AFOREMENTIONED AMOUNT OF ROYALTY CANNOT BE ASSESSED IN THE HANDS OF THE ASSESSEE AS THE SAME IS TAXABLE IN THE HANDS OF THE GRACEMAC. THEREFORE IT IS THE CASE OF T HE LEARNED AR THAT FOR ALL THE AFOREMENTIONED YEARS IN WHICH LEARNED CI T (A) HAS GRANTED ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 13 RELIEF TO THE ASSESSEE IN QUANTUM WILL BE COVERED BY T HE AFOREMENTIONED DECISION AND HENCE THE ORDER OF THE CIT (A) FOR DELETION OF THE AFOREMENTIONED AMOUNT SHOULD BE UPHE LD. AS AGAINST THAT IT IS THE CASE OF THE LEARNED DR THAT ROYALTY HA S RIGHTLY BEEN ASSESSED IN THE HANDS OF THE ASSESSEE AND LEARNED CIT (A) HA S WRONGLY DELETED THE SAME. 8. IN THE PENALTY PROCEEDINGS IT IS THE CASE OF THE L EARNED AR THAT IT HAS BEEN HELD BY THE TRIBUNAL THAT INCOME IS NOT ASSESSAB LE IN THE HANDS OF THE ASSESSEE. THEREFORE HE PLEADED THAT THERE IS NO QUESTION OF LEVY OF CONCEALMENT PENALTY ON THE ASSESSEE. HE SUBM ITTED THAT LEARNED CIT (A) THOUGH HAS DELETED THE PENALTY ON ME RITS AND THEREFORE IT IS THE CASE OF THE LEARNED AR THAT PENA LTY HAS RIGHTLY BEEN DELETED BY THE CIT (A) AND HIS ORDER SHOULD BE UPHELD . 9. IN RESPECT OF APPEAL FILED BY THE ASSESSEE IT IS THE CASE OF THE LEARNED AR THAT THE FACTS FOR ASSESSMENT YEAR 2006-07 AR E SAME AND ON THE BASIS OF SIMILAR FACTS LD. DRP HAS HELD THAT THE ASSESSEE IS ASSESSABLE IN RESPECT OF ROYALTY. HE SUBMITTED THAT THE ORDER OF DRP IS NOT IN CONFORMITY WITH THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND THE AFOREMENTIONED DECISION OF THE TRIBUNAL WILL BE EQUALLY APPLICABLE FOR THAT YEAR ALSO AND THEREFORE THE AD DITION MADE BY THE DEPARTMENT FOR THAT YEAR SHOULD BE DELETED. 10. ON THE OTHER HAND IT IS THE CASE OF THE LEARNED DR THAT THE ADDITION HAS RIGHTLY BEEN MADE BY THE ASSESSING OFFICER AND HIS ORDER SHOULD BE CONFIRMED. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS I N THE LIGHT OF THE MATERIAL PLACED BEFORE US. IT HAS BEEN HELD BY TH E TRIBUNAL IN AFOREMENTIONED DECISION THAT THOUGH THE AMOUNT CONSTI TUTE ROYALTY BUT THE SAME IS NOT ASSESSABLE IN THE HANDS OF THE PRESENT ASSESSEE. ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 14 ONE OF US (AM ) IS PARTY TO THE AFOREMENTIONED DECISIO N. NO CASE HAS BEEN MADE OUT BY THE DEPARTMENT TO DIFFER FROM THE EARLIER DECISION WHICH HAS BEEN FOUND TO BE DELIVERED ON THE BASIS OF SI MILAR FACTS. THE FACTS FOR ALL THE YEARS ARE SIMILAR AND THIS FACT IS NOT DISPUTED BY THE REVENUE. THEREFORE RESPECTFULLY FOLLOWING THE AFORE MENTIONED DECISION OF THE TRIBUNAL THE RELEVANT OBSERVATIONS OF WHICH H AS ALREADY BEEN REPRODUCED WE HOLD IN THE QUANTUM APPEALS THAT THE ADDITIONS HAVE RIGHTLY BEEN DELETED BY LEARNED CIT (A) AND WE DECL INE TO INTERFERE IN HIS ORDER. SIMILARLY FOR PENALTY APPEALS AS INCOME HAS NOT BEEN HELD TO BE ASSESSABLE IN THE HANDS OF THE ASSESSEE WE FIND NO JU STIFICATION IN LEVY OF PENALTY THEREFORE THE ORDER OF THE CIT (A) DELETING THE PENALTY IS UPHELD ON THE GROUND THAT AS THE INCOME IT SELF IS NOT ASSESSABLE IN THE HANDS OF THE ASSESSEE ACCORDING TO THE AFOREMENTIONED ORDER OF THE TRIBUNAL THERE IS NO QU ESTION OF LEVY OF PENALTY. 12. SO FAR AS IT RELATES TO ASSESSEES APPEAL THE FACTS BE ING SIMILAR ADOPTING THE SIMILAR VIEW WHICH HAS BEEN ADOPTED BY T HE TRIBUNAL IN EARLIER DECISION IN THE CASE OF THE ASSESSEE WE FIND NO JUSTIFICATION IN ASSESSABILITY OF AFOREMENTIONED ROYALTY IN THE HANDS OF THE ASSESSEE THEREFORE THE APPEAL OF THE ASSESSEE IS ALLOWED. 13. TO SUM UP IN THE RESULT ALL THE DEPARTMENTAL AP PEALS ARE DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED I N THE MANNER AFORESAID. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.20 11. SD/- SD/- [K.D. RANJAN] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 30.11.2011. ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 15 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES ITA NOS.1780 1782 & 1784/DEL/2008 ITA NOS.1751 1783 1779 &1781/DEL/2008 & ITA NO.4588/DEL/2010 16 DATE OF DICTATION 28.11.2011 DATE OF PRESENTATION OF THE DRAFT ORDER TO THE MEMBER 29.11.2011 DATE OF RETURN FROM THE BENCH AFTER PRONOUNCEMENT &SIGNING DATE OF DISPATCH OF THE ORDER TO THE BENCH