ADIT (IT)-2(1), MUMBAI v. M/s. SOLID WORKS CORPORATION, MUMBAI

ITA 5097/MUM/2008 | 2005-2006
Pronouncement Date: 01-04-2010 | Result: Dismissed

Appeal Details

RSA Number 509719914 RSA 2008
Assessee PAN AAFCS8787E
Bench Mumbai
Appeal Number ITA 5097/MUM/2008
Duration Of Justice 1 year(s) 7 month(s) 20 day(s)
Appellant ADIT (IT)-2(1), MUMBAI
Respondent M/s. SOLID WORKS CORPORATION, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 01-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 01-04-2010
Date Of Final Hearing 20-10-2009
Next Hearing Date 20-10-2009
Assessment Year 2005-2006
Appeal Filed On 11-08-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI B. RAMAKO TAIAH (AM) ITA NO.5097/MUM/2008 ASSESSMENT YEAR : 2005-06 ASSTT. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)2(1) ROOM NO.120 1 ST FLOOR SCINDIA HOUSE BALLARD ESTATE N.M. ROAD MUMBAI-400 038. ..( APPELLANT ) VS. M/S. SOLID WORKS CORPORATION C/O. PRICEWATERHOUSE COOPERS (P) LTD. 252 VEER SAVARKAR MARG SHIVAJI PARK DADAR MUMBAI-400 028. ..( RESPONDENT ) P.A. NO. (AAFCS 8787 E) APPELLANT BY : SHRI NARENDER SINGH RESPONDENT BY : SHRI DH ANESH BAFNA AND SHRI ALIASGER RAMPURAWALA O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 27.05.2008 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2005-06. ITA NO.5097/M/08 A.Y:05-06 2 2. BRIEFLY STATED FACTS OF THE CASE AS MENTIONED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER AND BY THE TRIBUNAL IN ITS ORDER IN DDIT(IT) VS. M/S. SOLID WORKS CORPORATION IN ITA NO.3095/MUM/200 7 FOR ASSESSMENT YEAR 2003-04 DATED 15.12.2009 ARE AS UNDER ( PARA-3 AND 4 OF TRIBUNAL ORDER): 3. THE ASSESSEE IS A COMPANY INCORPORATED IN THE U SA AND A TAX RESIDENT OF USA. THE ASSESSEE FILED TAX R ESIDENT CERTIFICATE BEFORE THE ASSESSING OFFICER AND IS THE REFORE ENTITLED TO THE BENEFIT OF THE DOUBLE TAXATION AVOI DANCE AGREEMENT BETWEEN INDIA AND USA (DTAA). THE ASSESSE E DEVELOPS AND MARKETS 3D MECHANICAL DESIGN SOLUTION IN VARIOUS COUNTRIES. THE SHRINK-WRAP APPLICATION SOFT WARE DEVELOPED AND SOLD BY ASSESSEE IS CALLED SOLIDWORK S 2003 WHICH IS USED FOR 3D MODELING. THE SOFTWARE CREATES 3D MODELS EITHER FROM SCRATCH OR FROM EXIST ING 2D DATA. THE DESIGNED DATA PREPARED BY SOLIDWORKS 2003 SOFTWARE PROVIDES DATA WHICH IS 100% EDITABLE. THE SOFTWARE IS PROVIDED IN A PACKED FORM TO THE CUSTOM ERS IN INDIA ALONGWITH AND PURSUANT TO AN END USER LICENSE AGREEMENT (EULA). THE AGREEMENT IS NOT PHYSICALLY SIGNED BUT BUILT IN AS PART OF THE INSTALLATION PRO CESS. THE LICENSE AGREEMENT POPS UP ON COMPUTER SCREEN AND MU ST BE ACCEPTED BY THE USER BEFORE THE USER CAN OPERATE THE SOFTWARE. THE SOFTWARE PROVIDED TO THE USER IS A SI NGLE USER LICENSE WHEREBY THE SOFTWARE CAN BE LOADED IN ONE COMPUTER OR CAN BE USED MANY TIMES (CALLED MULTIPLE USER LICENSE) WHICH CAN BE LOADED ON SEVERAL COMPUTERS. SOLIDWORK OWNS AND WILL RETAIN ALL COPYRIGHT TRADE MARK TRADE SECRETE AND OTHER PROPRIETARY RIGHTS. THE END USER IS NOT PERMITTED TO MAKE ANY MODIFICATION OR MAKE W ORKS DERIVATIVE OF THE SOFTWARE AND USER IS NOT ENTITLE TO REVERSE ENGINEER DECOMPILE DISASSEMBLE OR OTHERWI SE DISCOVER THE SOURCE CODE OF THE SOFTWARE. 4. FOR THE PURPOSES OF MARKETING THE SHRINK WRAP SOFTWARE THE ASSESSEE HAD ENTERED INTO AGREEMENT W ITH VARIOUS DISTRIBUTORS/RESELLERS IN INDIA. COPY OF A SOFTWARE DISTRIBUTION AGREEMENT WAS FILED BEFORE THE ASSESSI NG OFFICER. ALL DISTRIBUTION AGREEMENTS ARE IDENTICAL. AS PER THE SOFTWARE DISTRIBUTION AGREEMENT THE DISTRIBUTO R GETS RIGHT TO MARKET DISTRIBUTE AND SUPPORT THE PRODUCT. ITA NO.5097/M/08 A.Y:05-06 3 HOWEVER DISTRIBUTOR DOES NOT GET ANY EXCLUSIVE DISTRIBUTOR RIGHTS. HE ALSO DOES NOT GET ANY RIGHT TO DISASSEMBLE DECOMPILE OR REVERSE ENGINEER THE SOFT WARE. COPYRIGHT OVER SOFTWARE REMAIN WITH THE ASSESSEE. O N THESE FACTS IT WAS CLAIMED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THE SOFTWARE BEING SOLD BY T HE ASSESSEE WAS A SHRINK WRAP SOFTWARE BEING SOLD TO CUSTOMERS FOR THEIR PERSONAL USE WITHOUT TRANSFER O F ANY COPYRIGHT TRADE MARK OR PATENT ETC. IN VIEW OF TH IS PAYMENT RECEIVED FOR SUPPLY OF SOFTWARE WAS NOT ROY ALTY AND WAS ONLY BUSINESS INCOME. THE ASSESSEE DID NOT HAVE A PERMANENT ESTABLISHMENT (PE) IN INDIA AND THEREFO RE BUSINESS INCOME IS NOT TAXABLE AS PER ARTICLE-7 OF THE DTAA. 3. THE AO DID NOT AGREE WITH THE PLEA OF THE ASSESSEE. HE WAS OF THE VIEW THAT THE PAYMENT RECEIVED BY THE ASSESSEE FOR T HE USE OF SOFTWARE SOLID WORKS 2003 IS IN THE NATURE OF ROYALTY AS DEFINED UNDER THE INDO-US DTAA. HE FURTHER OBSERVED THAT SIMILAR VIEW WAS TAKEN IN THE EARLIER YEARS. ON APPEAL THE LD. CIT(A) HE LD THAT NO ROYALTY ARISES IN INDIA IN RESPECT OF SALE OF THE SOFTWARE. HOWEVE R THE DEPARTMENT HAS NOT ACCEPTED THE ORDER OF THE LD. CIT(A ) AND APPEAL HAS BEEN FILED BEFORE THE TRIBUNAL. ACCORDINGLY HE BRO UGHT THE PAYMENTS TO TAX AS ROYALTY AND ASSESSED THE INCOME AT RS.4 13 94 748/- VIDE ORDER DATED 30.11.2007 PASSED U/ S.143(3) OF THE INCOME TAX ACT 1961 (THE ACT). ON APPEAL THE LD . CIT(A) HELD THAT DISTRIBUTOR OR END-USER UNDER THE SOFTWARE CONTR ACT ACQUIRED ONLY A COPY OF SOFTWARE PROGRAMME AND DID NOT ACQUIRE ANY CO PYRIGHT OVER SUCH SOFTWARE AS ENVISAGED BY SEC.14 OF THE COPYRIGHT ACT A ND HENCE PAYMENT RECEIVED BY THE APPELLANT CANNOT BE SAID TO BE PAYMENT FOR ITA NO.5097/M/08 A.Y:05-06 4 THE USE OF OR RIGHT TO USE OF COPYRIGHT. THUS PAYMENT AMOUNTED ONLY FOR PURCHASE OF COPYRIGHTED ARTICLE AND DOES NOT AMOUNT TO ROYALTY WITHIN THE MEANING OF ARTICLE-12(3) OF THE DTAA AND ACCORDINGLY DELETED THE ADDITION MADE BY THE AO. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 5. GROUND NO.1 AND 2 READ AS UNDER: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSES SING OFFICER HAS WRONGLY HELD THAT THE AMOUNT OF RS. 4 13 94 748/- RECEIVED BY THE ASSESSEE FOR SUPPLY O F SOFTWARE IS IN THE NATURE OF ROYALTY WHICH IS LIA BLE FOR TAXATION IN INDIA. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW LEARNED CIT(A) FAILED TO APPRECIATE THAT THE P AYMENT FOR OBTAINING COMPUTER SOFTWARE IS IN THE NATURE OF ROYALTY AND THE SAME IS LIABLE FOR TAXATION IN IN DIA WITHIN THE MEANING OF ARTICLE 12(3) OF THE INDO-US DTAA. 6. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FO R THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER THE LD. CIT(A) WAS N OT JUSTIFIED IN HOLDING THAT THE AMOUNT RECEIVED BY THE ASSESSEE FOR SUPP LY OF SOFTWARE DOES NOT AMOUNT TO ROYALTY WITHIN THE MEANIN G OF ARTICLE 12(3) OF DTAA. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE AO BE RESTORED. ITA NO.5097/M/08 A.Y:05-06 5 7. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITS THAT THE IMPUGNED ISSUE IS FULLY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF TH E TRIBUNAL IN ASSESSEE'S OWN CASE SUPRA. HE ALSO PLACED ON RECORD THE COPY OF THE SAID ORDER OF THE TRIBUNAL . 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT THE TRIBUN AL IN THE ASSESSEES OWN CASE SUPRA HAS HELD VIDE PARA 6 TO 9 OF ITS ORDER D ATED 15.12.2009 AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE SAMPLE COPY OF THE SOFTWARE DISTRIBUTION AGREEMENT FILED B EFORE THE LOWER AUTHORITY SHOWS THAT UNDER SECTION 6 THE REOF THE DISTRIBUTOR HAS TO OBTAIN ORDERS FOR THE PRODUC T AND WAS FREE TO FIX PRICE OF THE PRODUCT. THE ASSESSEE HAD A RIGHT TO ACCEPT OR REJECT THE REQUEST OF THE DISTRI BUTOR FOR SUPPLY. THE DISTRIBUTOR WAS NOT AUTHORIZED DIRECTLY OR INDIRECTLY TO ENTERED INTO ANY WRITTEN OR ORAL CONT RACT ON BEHALF OF THE ASSESSEE. MORE IMPORTANTLY DISTRIBUT OR CANNOT TAMPER WITH OR REMOVE FROM THE ORIGINAL PACKAGING AND ALL PRODUCT SHALL BE DISTRIBUTED BY T HE DISTRIBUTOR IN UNOPENED PACKAGING IN WHICH SUCH PRO DUCTS WERE RECEIVED FROM THE ASSESSEE. THE DISTRIBUTOR DO ES NOT HAVE ANY RIGHT TO MAKE FURTHER COPIES OF THE PR ODUCTS. UNDER SECTION 3 OF THE AGREEMENT WHICH GRANTS LICE NSE FOR USE OF THE PRODUCT BY THE ULTIMATE CONSUMER CLE ARLY PROVIDES THAT DISTRIBUTOR CANNOT DISASSEMBLE DECOM PILE OR IN ANY WAY ATTEMPT TO REVERSE ENGINEER ANY OF TH E PRODUCT OR TO MODIFY OR MAKE WORKS DERIVED FROM THE PRODUCTS. IT ALSO PROVIDES THAT LICENSE TO USE CANN OT BE CONSTRUED AS A RIGHT TO MAKE COPIES OF THE PRODUCT. WHEN THE ULTIMATE CONSUMER USES THE PRODUCT HE HAS TO ITA NO.5097/M/08 A.Y:05-06 6 SUBSCRIBE THE END USER LICENSE AGREEMENT (EULA). TH IS ONLY PROVIDES FACILITY TO ULTIMATE CONSUMER TO INST ALL SOFTWARE ON HIS COMPUTER AND USE IT PERSONALLY WITH OUT ALLOWING ANY RIGHT TO THE CONSUMER OF DISASSEMBLE REVERSE ENGINEER DECOMPILE THE SOFTWARE. CUSTOMER IS ALSO NOT ENTITLED TO SELL LICENSE SUB-LICENSE TR ANSFER ASSIGN LEASE OR RENT THE SOFTWARE. IT IS THUS CLEA R NEITHER THE DISTRIBUTOR NOR END USER HAS ANY RIGHT OVER THE COPYRIGHT OF THE SOFTWARE. 7. THE HON'BLE SUPREME COURT IN THE CASE OF TATA CONSULTANCY SERVICES PVT. LTD. VS. STATE OF ANDHRA PRADESH (2004) 271 ITR 401 HAS HELD AS FOLLOWS :- A SOFTWARE PROGRAMME MAY CONSIST OF VARIOUS COMMANDS WHICH ENABLE THE COMPUTER TO PERFORM A DESIGNATED TASK. THE COPYRIGHT IN THAT PROGRAMME MAY REMAIN WITH THE ORIGINATOR OF THE PROGRAMME. BUT THE MOMENT COPIES ARE MADE AND MARKETED IT BECOMES GOODS WHICH ARE SUSCEPTIBLE TO SALE TAX. EVEN INTELLECTUAL PROPERTY ONCE IT IS PUT ON TO A MEDIA WHETHER IT BE IN THE FORM OF BOOKS OR CANVAS (IN CASE OF PAINTING) OR COMPUTER DISCS OR CASSETTES AND MARKETED WOULD BECOME GOOD. WE SEE NO DIFFERENT BETWEEN A SALE OF A SOFTWARE PROGRAMME ON A CD/FLOPPY DISC FROM A SALE OF MUSIC ON A CASSETTE/CD OR A SALE OF A FILM ON A VIDEO CASSETTE/CD. IN ALL SUCH CASES THE INTELLECTUAL PROPERTY HAS BEEN INCORPORATED ON A MEDIA FOR PURPOSES OF TRANSFER. SALE IS NOT JUST OF THE MEDIA WHICH BY ITSELF HAS VERY LITTLE VALUE. TH E SOFTWARE AND THE MEDIA CANNOT BE SPLIT UP. WHAT THE BUYER PURCHASES AND PAYS FOR IS NOT THE DISC OR THE CD. AS IN THE CASE OF PAINTINGS OR BOOKS OR MUSIC OR FILMS THE BUYER IS PURCHASING THE INTELLECTUAL PROPERTY AND NOT THE MEDIA I.E. THE PAPER OR CASSETTE OR DISC OR CD. THUS A TRANSACTIO N OF SALE OF COMPUTER SOFTWARE IS CLEARLY A SALE OF GOODS WITHIN THE MEANING OF THE TERM AS DEFINED IN THE SAID ACT. 8. THUS COMPUTER SOFTWARE WHEN IT IS PUT ON TO A MEDIA AND SOLD HAS BECOME GOODS LIKE ANY OTHER AUDI O CASSETTE OR PAINTING ON CANVAS OR A BOOK. IT IS CEA SES TO BE TRANSFER OF INTELLECTUAL PROPERTY RIGHT. IN FACT BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF LUCE NT TECHNOLOGIES HINDUSTAN LTD. VS. ITO 92 ITD 366 (BAN G) HAS ALSO TAKEN THE VIEW THAT IN SUCH A SITUATION TH ERE IS ITA NO.5097/M/08 A.Y:05-06 7 NO ACQUISITION OF ANY RIGHT IN SOFTWARE. DEFINITIO N OF ROYALTY IS GIVEN IN SECTION (9)(1) EXPLANATION (2 ) OF THE ACT AND THE DEFINITION OF ROYALTY IN ARTICLE 12(3) OF THE INDO-US DTAA SHOWS THAT DEFINITION OF ROYALTY UNDER DTAA IS MORE RESTRICTIVE THAN WHAT IS PROVIDED IN SECTION (9)(1) OF THE ACT. UNDER THE DEFINITION AS CONTAINE D IN DTAA THERE SHOULD BE A TRANSFER OF COPYRIGHT. SALE OF SOFTWARE BY THE ASSESSEE TO THE DISTRIBUTOR OR END USER DOES NOT INVOLVE ANY TRANSFER OF COPYRIGHT EITHER I N PART OR IN WHOLE; THEREFORE CONSIDERATION PAID BY THE DISTR IBUTOR CANNOT BE SAID TO BE A PAYMENT FOR RIGHT OF USE COP YRIGHT OR TRANSFER OF USE OF COPYRIGHT. IT HAS BEEN UNIFOR MLY HELD IN SEVERAL DECISIONS OF THE ITAT THAT SALE OF SHRIN K-WRAP SOFTWARE DOES NOT INVOLVE RECEIPT OF CONSIDERATION WHICH CAN BE SAID TO BE ROYALTY. DECISIONS IN THIS REGARD ARE AS FOLLOWS :- SAMSUNG ELECTRONICS CO. LTD. VS. ITO 93 TTJ 658 MOTOROLA INCORPORATION 270 ITR (AT) 62 SONATA INFORMATION TECHNOLOGIES LTD. ITA NO. 1561 TO 1580/BANG/2004 DATED 31.1.2006. 9. COMPUTER PROGRAMME CANNOT ALSO BE TREATED AS PATENT AND INVENTION. COMPUTER PROGRAMME CANNOT SAI D TO BE AN INVENTION AND THEREFORE CANNOT BE SAID TO BE COVERED BY THE PATIENT ACT. COMPUTER SOFTWARE CANNO T ALSO BE TREATED AS PROCESS. END USER OF THE SOFTWAR E IN THE CASE OF SHRINK-WRAP SOFTWARE DOES NOT HAVE ANY ACCESS TO SOURCE CODE. HE HAS ONLY RIGHT TO USE THE SOFTWARE FOR HIS PERSONAL OR BUSINESS USE. FOR ALL THE ABOVE REASONS WE ARE OF THE VIEW THAT LEARNED CIT( A) WAS RIGHT IN CONCLUDING THAT PAYMENT RECEIVED BY TH E ASSESSEE WAS NOT IN THE NATURE OF ROYALTY AND CANNO T THEREFORE BE BROUGHT TO TAX. WE UPHOLD THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND DISMISS GROUND NO. 1&2 RAISED BY THE REVENUE. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT O N RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE ORDER OF THE TR IBUNAL SUPRA HOLD THAT THE PAYMENT RECEIVED BY THE ASSESSEE WAS NOT IN THE NATURE OF ROYALTY WITHIN THE MEANING OF ARTICLE 12(3) OF INDO- US DTAA AND ITA NO.5097/M/08 A.Y:05-06 8 ACCORDINGLY WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE AO. THE GROUNDS T AKEN BY THE REVENUE ARE THEREFORE REJECTED. 9. GROUND NO.3 READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT SI NCE THE TAXES ARE TO BE DEDUCTED AT SOURCE ASSESSEE IS NOT LIABLE TO PAY INTEREST UNDER SECTION 234B OF THE INCOME TA X ACT. 10. THE LD. DR SUPPORTS THE ORDER OF THE AO. 11. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE TRIBUNAL SUPRA. 12. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND TH AT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE BEING A NON-RESIDENT ITS ENTIRE INCOME ARISING IN INDI A IS SUBJECT TO DEDUCTION OF TAX AT SOURCE IN TERMS OF SEC. 195 OF THE ACT . THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-0 4 HAS HELD VIDE PARA-10 OF ITS ORDER DATED 15.12.2009 AS UN DER : 10. THE ASSESSEE BEING A NON-RESIDENT. ENTIRE INCO ME ARISING IN INDIA IS SUBJECT TO DEDUCTION OF TAX AT SOURCE IN TERMS OF SECTION 195 OF THE ACT. U/S. 209(1)(D) OF THE ACT LIABILITY FOR PAYMENT OF ADVANCE TAX HAS TO BE DETE RMINED ITA NO.5097/M/08 A.Y:05-06 9 AFTER REDUCING THE AMOUNT OF INCOME TAX WHICH IS DEDUCTIBLE AT SOURCE. SINCE TAX IS DEDUCTIBLE AT S OURCE IN RESPECT OF ENTIRE INCOME ARISING IN INDIA TO THE AS SESSEE THERE CAN BE NO LIABILITY ON THE PART OF THE ASSESS EE TO PAY ADVANCE TAX. CONSEQUENTLY THERE CAN BE NO LIABILIT Y ON THE PART OF THE ASSESSEE TO PAY INTEREST U/S. 234B OF THE ACT. SPECIAL BENCH OF THE ITAT IN THE CASE OF MOTOR OLA INCORPORATION VS. DCIT 95 ITD 269 (DEL)(SB) HAS AL SO HELD THAT IN SUCH CIRCUMSTANCES THERE WILL BE NO LI ABILITY TO LEVY OF INTEREST U/S. 234B OF THE ACT. LEARNED CIT( A) HAS ACCEPTED THE PLEA OF THE ASSESSEE AND HAS DELETED CHARGING OF INTEREST U/S. 234B OF THE ACT. IN OUR V IEW ORDER OF LEARNED CIT(A) IS CORRECT AND DOES NOT CAL L FOR ANY INTERFERENCE. CONSEQUENTLY APPEAL OF THE REVEN UE IS DISMISSED. 13. RECENTLY THE HONBLE JURISDICTIONAL HIGH COURT IN D IRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) VS. NGC NETWORK ASIA LLC (2009) 313 ITR 187(BOM.) ON THE IDENTICAL ISSUE HAS HELD VIDE PLACITUM 8 (AT PAGE 190 OF THE ITR) AS UNDER : WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEW TAKEN IN THE CASE OF CIT VS. SEDCO FOREX INTERNATIO NAL DRILLING CO. LTD.(2003) 264 ITR 320 BY THE UTTARAN CHAL HIGH COURT. WE ARE CLEARLY OF THE OPINION THAT WHEN A DUTY IS CAST ON THE PAYER TO PAY THE TAX AT SOURCE ON FAILURE NO INTEREST CAN BE IMPOSED ON THE PAYEE- ASSESSEE. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT O N RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT AND THE TRIBUNAL(SUPRA) HOLD THAT WHEN A DUTY IS CAST ON THE PAYER TO PAY THE TAX AT SOURCE ON F AILURE NO INTEREST CAN BE IMPOSED ON THE ASSESSEE AND ACCORDINGLY WE A RE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN DE LETING THE INTEREST ITA NO.5097/M/08 A.Y:05-06 10 CHARGED U/S.234B OF THE ACT. THE GROUND TAKEN BY THE REVENUE IS THEREFORE REJECTED. 14. IN THE RESULT REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1.4.2010. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 1.4.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 24.3.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 25.3.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 1.4.2010 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 6.4.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER