ADIT, New Delhi v. M/s. Alcatel Lucent Canada, New Delhi

ITA 6360/DEL/2012 | 2003-2004
Pronouncement Date: 04-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 636020114 RSA 2012
Assessee PAN AACCN0752F
Bench Delhi
Appeal Number ITA 6360/DEL/2012
Duration Of Justice 1 year(s) 3 month(s) 11 day(s)
Appellant ADIT, New Delhi
Respondent M/s. Alcatel Lucent Canada, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 04-04-2014
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 04-04-2014
Date Of Final Hearing 29-10-2013
Next Hearing Date 29-10-2013
Assessment Year 2003-2004
Appeal Filed On 24-12-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH A AA A : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL D.AGRAWAL D.AGRAWAL D.AGRAWAL VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NOS.4866/DEL/2010 S.4866/DEL/2010 S.4866/DEL/2010 S.4866/DEL/2010 AND AND AND AND 2519/DEL/2010 2519/DEL/2010 2519/DEL/2010 2519/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 2003 2003 2003 2003- -- -04 0404 04 AND 2007 AND 2007 AND 2007 AND 2007- -- -08 0808 08 M/S ALCATEL M/S ALCATEL M/S ALCATEL M/S ALCATEL- -- -LUCENT FRANCE LUCENT FRANCE LUCENT FRANCE LUCENT FRANCE (FORMERLY KNOWN AS ALCATEL (FORMERLY KNOWN AS ALCATEL (FORMERLY KNOWN AS ALCATEL (FORMERLY KNOWN AS ALCATEL CIT FRANCE) CIT FRANCE) CIT FRANCE) CIT FRANCE) C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS BUILDING NO.10 TOWER BUILDING NO.10 TOWER BUILDING NO.10 TOWER BUILDING NO.10 TOWER- -- -C C C C 18 1818 18 TH THTH TH FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY GURGAON GURGAON GURGAON GURGAON 122 002. 122 002. 122 002. 122 002. PAN : AACCN0752F. PAN : AACCN0752F. PAN : AACCN0752F. PAN : AACCN0752F. VS. VS. VS. VS. ASSISTANT DIRECTOR OF INCOME TAX ASSISTANT DIRECTOR OF INCOME TAX ASSISTANT DIRECTOR OF INCOME TAX ASSISTANT DIRECTOR OF INCOME TAX CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NOS.4855/DEL/2010 AND 5943 TO 5947/DEL/2012 S.4855/DEL/2010 AND 5943 TO 5947/DEL/2012 S.4855/DEL/2010 AND 5943 TO 5947/DEL/2012 S.4855/DEL/2010 AND 5943 TO 5947/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 2003 2003 2003 2003- -- -04 2002 04 2002 04 2002 04 2002- -- -03 2004 03 2004 03 2004 03 2004- -- -05 2005 05 2005 05 2005 05 2005- -- -06 2006 06 2006 06 2006 06 2006- -- -07 & 07 & 07 & 07 & 2008 2008 2008 2008- -- -09 0909 09 ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME TAX TAX TAX TAX CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S ALCATEL M/S ALCATEL M/S ALCATEL M/S ALCATEL- -- -L LL LUCENT FRANCE UCENT FRANCE UCENT FRANCE UCENT FRANCE (FORMERLY KNOWN AS ALCATEL CIT (FORMERLY KNOWN AS ALCATEL CIT (FORMERLY KNOWN AS ALCATEL CIT (FORMERLY KNOWN AS ALCATEL CIT FRANCE) FRANCE) FRANCE) FRANCE) C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS BUILDING NO.10 TOWER BUILDING NO.10 TOWER BUILDING NO.10 TOWER BUILDING NO.10 TOWER- -- -C C C C 18 1818 18 TH THTH TH FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY GURGAON GURGAON GURGAON GURGAON 122 002. 122 002. 122 002. 122 002. PAN : AACCN0752F. PAN : AACCN0752F. PAN : AACCN0752F. PAN : AACCN0752F. (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NOS.1046/DEL/2013 TO 1052/DEL/2013 S.1046/DEL/2013 TO 1052/DEL/2013 S.1046/DEL/2013 TO 1052/DEL/2013 S.1046/DEL/2013 TO 1052/DEL/2013 AS ASAS ASSESSMENT YEAR SESSMENT YEAR SESSMENT YEAR SESSMENT YEARS SS S : : : : 2002 2002 2002 2002- -- -03 TO 2008 03 TO 2008 03 TO 2008 03 TO 2008- -- -09 0909 09 ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME TAX TAX TAX TAX CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S ALCATEL LUCENT BELL NV M/S ALCATEL LUCENT BELL NV M/S ALCATEL LUCENT BELL NV M/S ALCATEL LUCENT BELL NV C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS 11 1111 11- -- -A SUCHETA BHAWAN A SUCHETA BHAWAN A SUCHETA BHAWAN A SUCHETA BHAWAN VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 002. 110 002. 110 002. 110 002. PAN : AAHC PAN : AAHC PAN : AAHC PAN : AAHCA7652E. A7652E. A7652E. A7652E. (APPELLANT) (RESPONDENT) ITA-4866/DEL/2010 & 41 OTHERS 2 ITA NO ITA NO ITA NO ITA NOS.6360/DEL/2012 TO 6365/DE/2012 S.6360/DEL/2012 TO 6365/DE/2012 S.6360/DEL/2012 TO 6365/DE/2012 S.6360/DEL/2012 TO 6365/DE/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 2003 2003 2003 2003- -- -04 TO 2008 04 TO 2008 04 TO 2008 04 TO 2008- -- -09 0909 09 ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME TAX TAX TAX TAX CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S ALCATEL LUCENT CANADA M/S ALCATEL LUCENT CANADA M/S ALCATEL LUCENT CANADA M/S ALCATEL LUCENT CANADA C/O PRICEWAT C/O PRICEWAT C/O PRICEWAT C/O PRICEWATERHOUSECOOPERS ERHOUSECOOPERS ERHOUSECOOPERS ERHOUSECOOPERS 11 1111 11- -- -A SUCHETA BHAWAN A SUCHETA BHAWAN A SUCHETA BHAWAN A SUCHETA BHAWAN VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 002. 110 002. 110 002. 110 002. PAN : AAICA2082M. PAN : AAICA2082M. PAN : AAICA2082M. PAN : AAICA2082M. (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NO.1928/DEL/2013 .1928/DEL/2013 .1928/DEL/2013 .1928/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS : 2003 S : 2003 S : 2003 S : 2003- -- -04 0404 04 ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME TAX TAX TAX TAX CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) INTERNATIONAL T INTERNATIONAL T INTERNATIONAL T INTERNATIONAL TAXATION AXATION AXATION AXATION NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S ALCATEL LUCENT DEUTSCHLAND AG M/S ALCATEL LUCENT DEUTSCHLAND AG M/S ALCATEL LUCENT DEUTSCHLAND AG M/S ALCATEL LUCENT DEUTSCHLAND AG C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS BUILDING NO.10 TOWER BUILDING NO.10 TOWER BUILDING NO.10 TOWER BUILDING NO.10 TOWER- -- -C C C C 18 1818 18 TH THTH TH FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY GURGAON GURGAON GURGAON GURGAON 122 002. 122 002. 122 002. 122 002. PAN : AAICA5114C. PAN : AAICA5114C. PAN : AAICA5114C. PAN : AAICA5114C. (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NOS.1929/DEL/2013 TO 1931/DEL/201 S.1929/DEL/2013 TO 1931/DEL/201 S.1929/DEL/2013 TO 1931/DEL/201 S.1929/DEL/2013 TO 1931/DEL/2013 33 3 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS : 2002 S : 2002 S : 2002 S : 2002- -- -03 2003 03 2003 03 2003 03 2003- -- -04 & 2008 04 & 2008 04 & 2008 04 & 2008- -- -09 0909 09 ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME TAX TAX TAX TAX CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S ALCATEL LUCENT M/S ALCATEL LUCENT M/S ALCATEL LUCENT M/S ALCATEL LUCENT FRANCE USA INC FRANCE USA INC FRANCE USA INC FRANCE USA INC C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS 11 1111 11- -- -A SUCHETA BHAWAN A SUCHETA BHAWAN A SUCHETA BHAWAN A SUCHETA BHAWAN VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 002. 110 002. 110 002. 110 002. PAN : PAN : PAN : PAN : AAHCA6896J AAHCA6896J AAHCA6896J AAHCA6896J. .. . (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NOS.1336/DEL/2012 TO 1339/DEL/2012 S.1336/DEL/2012 TO 1339/DEL/2012 S.1336/DEL/2012 TO 1339/DEL/2012 S.1336/DEL/2012 TO 1339/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS : 2005 S : 2005 S : 2005 S : 2005- -- -06 TO 2008 06 TO 2008 06 TO 2008 06 TO 2008- -- -09 0909 09 ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME TAX TAX TAX TAX CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S ALCATEL LUCENT M/S ALCATEL LUCENT M/S ALCATEL LUCENT M/S ALCATEL LUCENT ITALIA SPA ITALIA SPA ITALIA SPA ITALIA SPA C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS BUILDING NO.10 TOWER BUILDING NO.10 TOWER BUILDING NO.10 TOWER BUILDING NO.10 TOWER- -- -C C C C 18 1818 18 TH THTH TH FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY FLOOR DLF CYBER CITY GURGAON GURGAON GURGAON GURGAON 122 002. 122 002. 122 002. 122 002. PAN : AAICA3581H. PAN : AAICA3581H. PAN : AAICA3581H. PAN : AAICA3581H. (APPELLANT) (RESPONDENT) ITA-4866/DEL/2010 & 41 OTHERS 3 ITA NO ITA NO ITA NO ITA NOS.438/DEL/2013 TO 444/DEL/2013 S.438/DEL/2013 TO 444/DEL/2013 S.438/DEL/2013 TO 444/DEL/2013 S.438/DEL/2013 TO 444/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS : 2002 S : 2002 S : 2002 S : 2002- -- -03 03 03 03 TO 2008 TO 2008 TO 2008 TO 2008- -- -09 0909 09 ASSI ASSI ASSI ASSISTANT DIRECTOR OF INCOME STANT DIRECTOR OF INCOME STANT DIRECTOR OF INCOME STANT DIRECTOR OF INCOME TAX TAX TAX TAX CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S ALCATEL M/S ALCATEL M/S ALCATEL M/S ALCATEL LUCENT ENTERPRISE LUCENT ENTERPRISE LUCENT ENTERPRISE LUCENT ENTERPRISE C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS 11 1111 11- -- -A SUCHETA BHAWAN A SUCHETA BHAWAN A SUCHETA BHAWAN A SUCHETA BHAWAN VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 002. 110 002. 110 002. 110 002. PAN : PAN : PAN : PAN : AAHCA7398H. AAHCA7398H. AAHCA7398H. AAHCA7398H. (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NOS.5420/DEL/2012 TO 5425/DEL/2012 S.5420/DEL/2012 TO 5425/DEL/2012 S.5420/DEL/2012 TO 5425/DEL/2012 S.5420/DEL/2012 TO 5425/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS : 2003 S : 2003 S : 2003 S : 2003- -- -04 TO 2008 04 TO 2008 04 TO 2008 04 TO 2008- -- -09 0909 09 ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME ASSISTANT DIRECTOR OF INCOME TAX TAX TAX TAX CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION INTERNATIONAL TAXATION NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S ALCATEL LUCENT SHANGHAI BELL M/S ALCATEL LUCENT SHANGHAI BELL M/S ALCATEL LUCENT SHANGHAI BELL M/S ALCATEL LUCENT SHANGHAI BELL CO.LTD. CO.LTD. CO.LTD. CO.LTD. C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS C/O PRICEWATERHOUSECOOPERS 11 1111 11- -- -A SU A SU A SU A SUCHETA BHAWAN CHETA BHAWAN CHETA BHAWAN CHETA BHAWAN VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG VISHNU DIGAMBER MARG NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 002. 110 002. 110 002. 110 002. PAN : AAICA3580G. PAN : AAICA3580G. PAN : AAICA3580G. PAN : AAICA3580G. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KANCHAN KAUSHAL SHRI ARVIND RAJAN AND SHRI SHAGUN MAHAJAN CAS. REVENUE BY : SHRI SANJEEV SHARMA CIT-DR AND SHRI VIVEK KUMAR SENIOR DR. ORDER ORDER ORDER ORDER PER BENCH PER BENCH PER BENCH PER BENCH : :: : ITA NO.4855/DEL/2010 ITA NO.4855/DEL/2010 ITA NO.4855/DEL/2010 ITA NO.4855/DEL/2010 REVENUES APPEAL FOR AY 2003 REVENUES APPEAL FOR AY 2003 REVENUES APPEAL FOR AY 2003 REVENUES APPEAL FOR AY 2003- -- -04 & 04 & 04 & 04 & ITA NO.4866/DEL/2010 ITA NO.4866/DEL/2010 ITA NO.4866/DEL/2010 ITA NO.4866/DEL/2010 ASSESSEES APPEAL FOR AY 2003 ASSESSEES APPEAL FOR AY 2003 ASSESSEES APPEAL FOR AY 2003 ASSESSEES APPEAL FOR AY 2003- -- -04 : 04 : 04 : 04 :- -- - THESE APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIREC TED AGAINST THE ORDER OF LEARNED CIT(A)-XXIX NEW DELHI DATED 13 TH AUGUST 2010 FOR THE AY 2003-04. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- ITA-4866/DEL/2010 & 41 OTHERS 4 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN LAW BY REDUCING THE QUANT UM OF REVENUES RECEIVED FROM INDIA FROM US $40 MILLION TO EURO 27 MILLION (US$32.5 MILLION) BY ADMITTING ADDITION AL EVIDENCE IN SPITE OF THE FACTS THE ASSESSEE COMPANY ADMITTEDLY FAILED TO PROVIDE THE NECESSARY DETAILS DUR ING THE ASSESSMENT PROCEEDINGS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN LAW BY HOLDING THAT INCOM E FROM THE SALE OF SOFTWARE WAS TO BE TAXED AS BUSINESS RECEIPT IN ACCORDANCE WITH THE ARTICLE 7 OF DTAA WHICH WAS HOW EVER TAXED AS ROYALTY BY THE AO. THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE BASIS OF THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN CASE OF MOTOROLA AGAINS T WHICH THE DEPARTMENT IS IN APPEAL BEFORE THE HON'BLE DELHI HIGH COURT. FURTHER THE MORE RECENT JUDGMENT BY TH E ITAT ON THE SAME ISSUE IN THE CASE OF M/S GRACEMAC CORPORATI ON DATED 26.10.2010 IS IN FAVOUR OF THE DEPARTMENT. 3. THE APPELLANT CRAVES TO ADD AMEND MODIFY OR ALTE R ANY GROUND OF APPEAL AT THE TIME OR BEFORE THE HEAR ING OF THE APPEAL. 3. IN THE APPEAL BY THE ASSESSEE FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XXIX [LD.CIT(A)] ERRED IN NOT HOLDING THAT INTEREST UNDER SECTION 234B OF THE ACT IS NOT LEVIABLE EVEN TH OUGH THE ENTIRE CONSIDERATION IN THE HANDS OF APPELLANT W AS SUBJECT TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 19 5 OF THE ACT. 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT(A) ERRED IN NOT FOLLOWIN G THE SPECIAL BENCH DECISION IN THE CASE OF MOTOROLA INC. V S. DY. CIT [2005] 95 ITD 269 WHEREIN IT WAS HELD THAT INTE REST UNDER SECTION 234B OF THE ACT IS NOT LEVIABLE IF THE CONSIDERATION IS SUBJECT TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT. ITA-4866/DEL/2010 & 41 OTHERS 5 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN NOT EXCLUDIN G THE SALES MADE BY APPELLANT TO ALCATEL INDIA LIMITED [NOW KNOWN AS ALCATEL-LUCENT INDIA LIMITED (ALIL)] FOR T HE PURPOSE OF COMPUTING PROFITS ATTRIBUTABLE TO THE ALL EGED PERMANENT ESTABLISHMENT (PE) I.E. ALIL. 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT(A) ERRED IN NOT TAKING COGNIZANCE THAT SALES BETWEEN APPELLANT TO ALIL WERE ON PRINCIPAL-TO-PRINCIPAL BASIS. 4. GROUND NO.1 IN THE REVENUES APPEAL AND GROUND NO .2 IN THE ASSESSEES APPEAL ARE SIMILAR. THEREFORE BOTH WILL BE D EALT TOGETHER FOR THE SAKE OF CONVENIENCE. THE FACTS OF THE CASE AR E THAT THE ASSESSEE IS A COMPANY INCORPORATED IN FRANCE AND IS A TAX RESIDENT OF FRANCE. IT IS IN THE BUSINESS OF MANUFACTURING TRADIN G AND SUPPLYING OF EQUIPMENT AND SERVICES FOR GSM CELLULAR RADIO TELEPHO NES SYSTEM. THE ASSESSEE HAD FILED THE RETURN DISCLOSING TOTAL INCOME OF ` 1 13 95 910/-. DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF REVENUE RECEI VED FROM INDIA. HOWEVER THE ASSESSEE DID NOT FURNISH ANY DETAIL S. ON THE OTHER HAND IT REQUESTED TO TAKE THE SALES IN INDIA AT EURO 27 MILLION. THE RELEVANT REPLY BY THE ASSESSEE WHICH IS REPRODUCED BY TH E ASSESSING OFFICER AT PAGE 2 OF THE ASSESSMENT ORDER IS REPRODUCED BELOW FOR READY REFERENCE:- WE ALSO WISH TO SUBMIT THAT THE ASSESSEE DOES NOT TRACK SALES IN SOUTH ASIAN REGION ON A COUNTRY SPECIFIC BASIS. HOWEVER YOU MAY TAKE EURO 27 MILLION (USD 32.5 MILL ION) AS A GOOD FAITH ESTIMATE FOR THE AGGREGATE SUPPLIES INVOICED TO INDIA IN F.Y. 2002-03. 5. SINCE THE ASSESSEE DID NOT GIVE THE EXACT FIGURES OF SALES AND DETAILS THEREOF THE ASSESSING OFFICER ESTIMATED THE ASSESSEE S REVENUE IN INDIA AT US$ 40 MILLION. THE ASSESSEE AGGRIEVED WI TH THE ORDER OF ITA-4866/DEL/2010 & 41 OTHERS 6 THE ASSESSING OFFICER WAS IN APPEAL BEFORE THE LEARNED CIT(A). BEFORE THE LEARNED CIT(A) THE ASSESSEE FILED AN APPLICATION U NDER RULE 46A OF THE INCOME-TAX RULES 1962 IN WHICH IT FILED ADDITIO NAL EVIDENCE WHICH INCLUDED THE DETAILS OF SALES FOR THE FINANCIAL YEAR UNDER CONSIDERATION SHOWING THE SALES AT EURO 27 307 776. COPY OF THE ADD ITIONAL EVIDENCE WAS FORWARDED TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE ASSESSING OFFICER VIDE HIS REPORT DATED 30 TH APRIL 2009 OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCE ON THE GROUND THAT SU FFICIENT OPPORTUNITY WAS ALLOWED TO THE APPELLANT DURING ASSESSME NT PROCEEDINGS BUT THE ASSESSEE DID NOT FURNISH THE REQUIRED INFORMATION. WITH REGARD TO ADMISSION OF ADDITIONAL EVIDENCE THE ASSESSEES SUBMISSION BEFORE THE CIT(A) AS INCORPORATED BY THE CIT (A) IN PARAGRAPH NOS.31 & 32 OF HIS ORDER READS AS UNDER:- 31. THE APPELLANT ON THE OTHER HAND SUBMITTED THAT RULE 46A PROVIDES THAT THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE CIT(A) ANY EVIDENCE OTHER THAN EVIDENCE PRODUCED BY HIM BEFORE THE AO EXCEPT IN T HE FOLLOWING CIRCUMSTANCES. (A) THE AO HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED. (B) THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FR OM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE. (C) THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FR OM PRODUCING BEFORE THE AO ANY EVIDENCE WHICH IS RELEVA NT TO ANY GROUND OF APPEAL. (D) THE AO MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO A DDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. 32. ACCORDING TO THE APPELLANT ITS CASE FALLS WITHIN T HE SCOPE OF CLAUSE (C) AND CLAUSE (D) ABOVE. FURTHER TH E APPELLANT WAS PREVENTED FROM PRODUCING RELEVANT INFORMATION/DETAILS BEFORE THE AO DUE TO PAUCITY OF TIME AS ITA-4866/DEL/2010 & 41 OTHERS 7 THE ASSESSMENT PROCEEDING WAS FINALIZED WITHIN A SHORT SPAN OF THREE MONTHS DURING WHICH THE APPELLANT WAS NO T GIVEN ADEQUATE OPPORTUNITY TO FILE EVIDENCE WHICH I S BEING FILED NOW IN SUPPORT OF THE GROUNDS OF APPEAL. THE APPELLANT FURTHER SUBMITTED THAT THE PRINCIPLES AND CIRCUMSTANCES UNDER WHICH THE FIRST APPELLATE AUTHORIT Y SHOULD ADMIT ADDITIONAL OR FRESH EVIDENCE ARE PRIMARI LY; THE PRINCIPLES OF NATURAL JUSTICE NEEDS TO BE ADHERED TO A ND SECONDLY THAT THE POWERS OF THE FIRST APPELLATE AUTHO RITY ARE CO-TERMINUS WITH THAT OF THE AO AND ARE QUASI-JUD ICIARY POWERS WHICH SHOULD BE EXERCISED JUDICIOUSLY TO MEET T HE ENDS OF JUSTICE AND FAIR PLAY. THE APPELLANT RELIED ON FOLLOWING CASE LAWS IN THIS REGARD. (I) SHAKUNTALA VS. KUNTAL KUMAR AIR 1969 (SC) 575. (II) JUTE CORPORATION INDIA LTD. VS. CIT 187 ITR 688 . 6. LEARNED CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISS ION AS WELL AS ASSESSING OFFICERS OBJECTION ADMITTED THE ADDIT IONAL EVIDENCE AND THE RELEVANT FINDING BY HIM READS AS UNDER:- 35. KEEPING IN VIEW THE ABOVE MENTIONED SUBMISSIONS O F THE APPELLANT THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT IS ADMITTED. THE SAME WAS ALSO SUPPLIED TO THE AO FOR HIS COMMENTS. NO ADVERSE FINDINGS HAVE BEEN INTIMATED BY THE AO. MOREOVER AFTER THE SURVEY AT THE APPELLANTS PREMISES THE APPELLANT WAS ASKED TO FILE TH E DETAILS OF YEAR-WISE SALES MADE BY IT DURING ALL THE YE ARS FROM A.Y. 2002-03 UP TO THE TIME OF SURVEY. IN THESE DETAILS ALSO THE APPELLANT REFLECTED THE FIGURE OF SAL ES FOR THE CURRENT YEAR AT EURO 27 307 776. IN HIS REMAND REPORT DATED 32.06.2010 THE AO HAS NOT BROUGHT TO MY NOTIC E ANY DISCREPANCY IN THESE SALE FIGURES. THEREFORE THE AO I S DIRECTED TO TAKE THE TOTAL SALES OF THE APPELLANT IN INDIA FOR THE YEAR UNDER CONSIDERATION AT EURO 27 307 776 MILL ION. 60% OF THIS FIGURE SHOULD BE TAKEN AS SALES OF EQUIPMEN T SUPPLIED IN INDIA AND THE NET PROFIT RATE OF 2.5% SHO ULD BE APPLIED TO THE SAME FOR CALCULATING THE TAXABLE PROF ITS OF THE PE IN RESPECT OF HARDWARE SALES IN INDIA AS ALREA DY HELD ABOVE. THE AO IS DIRECTED ACCORDINGLY. ITA-4866/DEL/2010 & 41 OTHERS 8 7. THE REVENUE AGGRIEVED WITH THE ORDER OF LEARNED CIT(A) IS IN APPEAL BEFORE US AND HAS RAISED GROUND NO.1 AGAINST THE ADMISSION OF ADDITIONAL EVIDENCE AS WELL AS AGAINST THE REDUCTION I N THE QUANTUM OF THE REVENUE. THE ASSESSEE VIDE GROUND NO.2 OF ITS APPE AL HAS CLAIMED THAT THE SALES MADE BY THE ASSESSEE TO ALCATEL I NDIA LIMITED SHOULD HAVE BEEN EXCLUDED FROM THE REVENUE OF THE ASSE SSEE. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND P ERUSED RELEVANT MATERIAL PLACED BEFORE US. FROM A PERUSAL O F THE ASSESSMENT ORDER WE FIND THAT THE ASSESSING OFFICER ASKED THE ASSESSE E TO FURNISH THE DETAILS OF THE REVENUE RECEIVED FROM INDIA. THE ASSESSEE REQUESTED THE ASSESSING OFFICER TO TAKE THE REVENUE AT E URO 27 MILLION. THEREAFTER THE ASSESSING OFFICER WITHOUT ALLOWING ANY FURTHER OPPORTUNITY ESTIMATED THE SAME AT US$ 40 MILLION. I N OUR OPINION WHEN THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ASSESSEE S ESTIMATE HE SHOULD HAVE ALLOWED AT LEAST ONE MORE OPP ORTUNITY TO THE ASSESSEE INTIMATING IT THAT IF IT DOES NOT FURNISH THE DE TAILS THEN THE SALE SHOULD BE ESTIMATED AT US$ 40 MILLION. THEREFORE IN OUR OPINION WHEN BEFORE THE CIT(A) THE ASSESSEE FURNISHED COMPLETE D ETAILS OF THE SALES MADE IN INDIA THE CIT(A) WAS FULLY JUSTIFIED IN ADMITTING THE SAME AS ADDITIONAL EVIDENCE. HE ALLOWED THE OPPORTUNITY TO THE ASSESSING OFFICER TO VERIFY SUCH ADDITIONAL EVIDENCE AND THE C IT(A) HAS RECORDED THE FINDING THAT NO DISCREPANCY IN THE DETAILS OF SALE S MADE IN INDIA WAS POINTED OUT BY THE ASSESSING OFFICER IN THE REMAND R EPORT. HE THEREFORE DIRECTED THE ASSESSING OFFICER TO ACCEPT THE SALES AT EURO 27 307 776 AS PER THE DETAILS FURNISHED BY THE ASSESSEE. CONSIDERING THE FACTS OF THE CASE AND THE ARGUMENTS OF BOTH THE SI DES WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) A ND DIRECT THE ASSESSING OFFICER TO ADOPT THE SALES AS PER THE DETAILS OF SALES FURNISHED BY THE ASSESSEE IN APPELLATE PROCEEDINGS. ITA-4866/DEL/2010 & 41 OTHERS 9 9. NOW IN THE ASSESSEES APPEAL THE ASSESSEE FOR THE FI RST TIME HAS RAISED AN ARGUMENT THAT THE SALES MADE BY THE APPE LLANT TO ALCATEL INDIA LIMITED SHOULD BE EXCLUDED. WE DO NOT FIND AN Y SUCH ARGUMENT RAISED EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A). BEFORE THE ASSESSING OFFICER THE ASSESSEE STATED THAT THE SALES MAY BE TAKEN AT EURO 27 MILLION ON ESTIMATED BASIS. THE ASSESSING OFFI CER DID NOT ACCEPT THE SAME AND ESTIMATED THE SALES AT US$ 40 MILLI ON. BEFORE THE CIT(A) THE ASSESSEE ITSELF FURNISHED THE COMPLETE DETAIL S OF THE SALES AMOUNTING TO EURO 27 307 776 AND THE SAME WAS ACCEPTE D BY THE CIT(A). THEREFORE GROUND NO.2 NOW BEING CLAIMED B Y THE ASSESSEE IS NEITHER ARISING FROM THE ORDER OF THE ASSESSING OFFICER NOR FROM THE ORDER OF THE CIT(A). THE SALES HAVE BEEN ACCEPTED AS PER THE DETAILS FURNISHED BY THE ASSESSEE ITSELF BEFORE THE CIT(A). IN V IEW OF THE ABOVE WE DO NOT FIND ANY MERIT IN GROUND NO.2 OF T HE ASSESSEES APPEAL. THE SAME IS REJECTED. 10. WITH REGARD TO GROUND NO.2 OF THE REVENUES APPE AL AT THE OUTSET IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT THE CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE FOLLOWING THE DECISIO N OF ITAT IN ASSESSEES OWN CASE AS WELL AS THE DECISION OF SPECIAL BENC H OF THE ITAT IN THE CASE OF MOTOROLA INC. VS. DCIT [2005] 9 6 TTJ 1. THAT BOTH THE DECISIONS OF THE ITAT HAVE BEEN UPHELD BY HON'BLE JURISDICTIONAL HIGH COURT. THAT THE DECISION OF SPECIAL BENCH OF I TAT HAS BEEN AFFIRMED BY HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIT VS. ERICSSON A.B. [2012] 343 ITR 470 (DELHI) AND THE DE CISION IN ASSESSEES OWN CASE IN THE CASE OF DIT VS. NOKIA NETWORKS OY & OTHERS 358 ITR 259. 11. LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND HE ALSO FURNISHED THE WRITTEN SUBM ISSION WHICH READS AS UNDER:- ITA-4866/DEL/2010 & 41 OTHERS 10 THIS BRIEF WRITTEN SUBMISSION IS A SUMMARY OF ARGUMENT S OF THE REVENUE ON THE ISSUE OF TAXATION OF SOFTWARE PAYMENT AS ROYALTY. BRIEF FACTS 2. A SURVEY UNDER SECTION 133A WAS CARRIED OUT AT THE OFFICE PREMISES OF ALCATEL LUCENT INDIA ON 27.02.2009 . DURING THE COURSE OF SURVEY PROCEEDINGS PHOTO COPY OF VARIOUS DOCUMENTS WAS OBTAINED AND STATEMENTS OF SENIOR EMPLOYEES INVOLVED IN ADMINISTRATION SALES AND MARKETI NG WERE RECORDED. SOME EXPATRIATE PERSONS WHO WERE EMPLOYEES OF ALCATEL GROUP WERE ALSO FUNCTIONING FROM THESE OFFICES. ON THE BASIS OF INFORMATION OBTAINED DU RING SURVEY AND POST SURVEY INQUIRIES NOTICES UNDER SECTION 1 48 OF THE ACT WERE ISSUED TO ALL ALCATEL GROUP ENTITIES W HICH HAD CARRIED OUT BUSINESS IN INDIA. ALCATEL GROUP IS HA S SUPPLIED TELECOMMUNICATION EQUIPMENTS AND SOFTWARE TO VARIOUS INDIAN CUSTOMERS. 3. IN THE ASSESSMENT ORDERS IT WAS HELD THAT VARIOUS ALCATEL GROUP ENTITIES HAVE BUSINESS CONNECTION AS WELL AS A PERMANENT ESTABLISHMENT IN THE FORM OF FIXED PLACE PE DEPENDENT AGENT PE AND INSTALLATION PE. A PROFIT BA SED ON THE SALES OF EQUIPMENTS MADE IN INDIA WAS ATTRIBUTED TO THESE PERMANENT ESTABLISHMENTS. INDIAN PERMANENT ESTABLISHMENT WAS ALSO INVOLVED IN MAKING SALES IN SOME SOUTH ASIAN COUNTRIES. A PROFIT ON ACCOUNT OF THESE SA LES WAS ALSO ATTRIBUTED TO INDIAN PERMANENT ESTABLISHMENT. THE ASSESSEE HAS NOT DISPUTED THE ISSUE OF THE PERMANENT ESTABLISHMENT AS WELL AS ATTRIBUTION OF PROFIT TO THE SAME AND HAS PAID THE DUE TAXES. TAXATION OF INCOME FROM LICENSING OF SOFTWARE 4. INCOME FROM SOFTWARE HAS BEEN TAXED AS ROYALTY. THE PARAGRAPH 8 OF THE ASSESSMENT ORDER FOR AY 2006-07 DEALS WITH THE TAXATION OF INCOME FROM LICENSING OF SOFTWARE AS ROYALTIES. THE ASSESSEE HAS TAKEN THIS OF TAXATION IN APPEAL. 5. THE LD.CIT(A) HAS DISCUSSED THE ISSUE OF TAXATION OF INCOME FROM LICENSING OF SOFTWARE IN PARAGRAPHS 3.4 TO 5.8 OF HIS ORDER. THE LD.CIT(A) BY FOLLOWING THE JUDGM ENT OF THE HON'BLE DELHI HIGH COURT IN THE CASES OF ERICSSON AB AN D M/S NOKIA NETWORKS HAS ALLOWED THE APPEAL OF THE ITA-4866/DEL/2010 & 41 OTHERS 11 ASSESSEE. HOWEVER IN PARAGRAPH 5.8 OF THE ORDER THE LD.CIT(A) HAS DIRECTED THE AO TO TAX PROFIT WORKED O UT @ 2.5% OF TOTAL SALE CONSIDERATION RECEIVED BY THE APPE LLANT FOR SUPPLY OF HARDWARE AND SOFTWARE. 6. THE REVENUE IS AGGRIEVED WITH THE DECISION OF LD.CIT(A) TO THE EXTENT OF NOT UPHOLDING TAXATION O F INCOME FROM SOFTWARE AS ROYALTY AND ALSO NOT CONSIDERING THE APPLICABILITY OF RETROSPECTIVE CLARIFICATORY AMENDME NTS THROUGH INSERTION OF EXPLANATIONS 5 AND 6 TO SECTION 9(1)(VI) OF THE ACT BY FINANCE ACT 2012. 7. THE UNDISPUTED FACTS IN PRESENT CASE ARE THAT SOFTWARE HAS BEEN LICENSED AND NOT SOLD. FURTHER TITL E IN THE SOFTWARE HAS NOT BEEN TRANSFERRED. ONLY PARTIAL R IGHTS PERMITTING THE USE OF SOFTWARE HAVE BEEN GRANTED. 8. THE REVENUE RELIES ON THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF INFRASOFT LTD (ORDER DATED 22.11.2013 IN ITA NO.1034/2009) TO THE EXTENT THAT THE ASSESSEE HAS NOT CONTESTED THE TAXABILITY OF INCOME FROM SOFTWARE AS ROYALTY UNDER THE PROVISIONS OF THE INCOME TAX ACT. THE HONBLE HIGH COURT IN THE CASE OF DIT V/S N OKIA NETWORKS OY [2013] 212 TAXMAN 68 HAS CONSIDERED THE APPLICABILITY OF THE NEW EXPLANATIONS 5 AND 6 PROVID ING FOR RETROSPECTIVE CLARIFICATORY AMENDMENTS IN THE ACT CONCERNING TAXABILITY OF INCOME FROM SOFTWARE AS ROYA LTY. HOWEVER THE HONBLE COURT HAS NOT CONSIDERED THE PROVISIONS OF ARTICLE 3(2) WHILE HOLDING THAT IN ABSE NCE OF ANY CHANGE TO THE TREATY THE EARLIER DECISIONS OF THE HONBLE COURT IN THE CASE OF ERICSSON APPLY. 9. THE REVENUE SUBMITS THAT ARTICLE 3(2) OF THE TAX TREATY BETWEEN INDIA AND FRANCE AND OTHER APPLICABL E TREATIES IN THE PRESENT CASE PROVIDES THAT AS REGARDS TH E APPLICATION OF THE CONVENTION BY A CONTRACTING STAT E ANY TERM NOT DEFINED THEREIN SHALL UNLESS THE CONTEXT OTHERWISE REQUIRES HAVE THE MEANING WHICH IT HAS UNDE R THE LAW OF THAT CONTRACTING STATE CONCERNING THE TA XES TO WHICH THE CONVENTION APPLIES. THEREFORE TAKING IN TO ACCOUNT THE RULES OF TREATY INTERPRETATION IT IS EXPL ICITLY CLEAR THAT FOR FINDING OUT THE MEANING OF A TERM RE FERENCE CAN ONLY BE MADE TO INCOME TAX ACT AND UNDER NO CIRCUMSTANCES THE ASSISTANT OF COPYRIGHT ACT OR ANY OTHE R ACT LIKE SALES TAX ACT CAN BE TAKEN IN THIS REGARD. ITA-4866/DEL/2010 & 41 OTHERS 12 10. THE REVENUE STRONGLY RELIES ON THE DECISION OF CENTRAL ECONOMIC-ADMINISTRATIVE COURT OF SPAIN IN CA SE NUMBER 3604/2006 WHEREIN THE ISSUE OF TAXATION OF INC OME FROM SOFTWARE UNDER THE TAX TREATY BETWEEN SPAIN AND THE USA HAS BEEN ADJUDICATED. IN THIS CASE THE TAXPAYERS HAD CLAIMED THAT THE COMPUTER SOFTWARE HAD TO BE REGARDE D AS LITERARY WORK UNDER THE TAX TREATY BETWEEN SPAIN AN D THE USA. THE SPANISH COURT GAVE DECISION IN THE FAVOUR O F THE SPANISH TAX AUTHORITIES AND AGAINST THE TAXPAYER. THE COURT OBSERVED THAT COMPUTER SOFTWARE IS NOT EXPRESSLY INCLUDED IN THE DEFINITION OF ROYALTY IN ARTICLE 12 (3) OF THE TREATY DUE TO RAPID DEVELOPMENT OF COMPUTER TECHNOL OGY IN RECENT YEARS. THE COURT THEN OBSERVED THAT PARAGRAPH 13.1 OF THE OECD MODEL COMMENTARY 2000 ON ARTICLE 12 RECOGNIZES THAT THERE MAY BE DIFFICULTIES IN APPLYIN G THE COPYRIGHT PROVISIONS OF ART. 12 TO SOFTWARE PAYMENTS SI NCE PARAGRAPH 2 REQUIRES THAT SOFTWARE BE CLASSIFIED AS A LITERARY ARTISTIC OR SCIENTIFIC WORK BUT NONE OF TH ESE CATEGORIES SEEMS ENTIRELY APT. CONSIDERING THE INTERPRETATION REQUIRED BY ARTICLE 3(2) OF THE TREA TY AND THE AMENDMENT IN SPANISH TAX LAW THAT RECENTLY ADOPTED A DEFINITION OF ROYALTY (ART. 12 OF NON-RESIDENT INCOM E TAX ACT (LAW 41/1998 OF 9 DECEMBER AMENDED BY LAW 46/20 02 OF 8 DECEMBER CURRENTLY ARTICLE 13.1) NO.3 OF ROYA L LEGISLATIVE DECREE 5/2004) THE ADMINISTRATIVE COURT CONCLUDED THAT PAYMENTS DERIVED FROM THE USE OF COMPUTER SOFTWARE SHOULD NOT BE REGARDED AS LITERARY OR SCIENTIFIC WORK AND THEREFORE SUCH ROYALTIES SHOULD BE TAXED AS OTHER ROYALTIES AT A HIGHER RATE OF 10% AND NOT AT 5% AS APPLICABLE TO LITERARY OR SCIENTIFIC WORK. COP Y OF SUMMARY OF THIS DECISION IS SUBMITTED. 11. RELEVANT PORTION OF ARTICLE 12 OF SPAIN-USA TRE ATY IS ALSO ATTACHED. THE ISSUE OF TAXATION OF INCOME FROM SOFTWARE AS ROYALTY WAS NEVER IN DOUBT AND NOT DISPUTE D UNDER THE SPAIN-USA TREATY THE DISPUTE ONLY CONCERN ED RATE OF TAX. 12. KIND REFERENCE IS ALSO INVITED TO PARAGRAPHS 114 T O 117 AND 130 TO 134 OF THE ASSESSMENT ORDER FOR AY 2006- 07 IN THE MATTER. PAGE 116 AND 117 SHOWS THAT EVEN T HE OECD COUNTRIES NAMELY MEXICO SPAIN SLOVAK REPUBLIC GREECE KOREA POLAND AND PORTUGAL TAXES THE INCOME FROM SOFTWARE. INDIA ALONG WITH MANY NON-MEMBER COUNTRIE S OF THE OECD HAVE SUBMITTED THEIR POSITION ON TAXATION OF SOFTWARE (KINDLY REFER TO PAGES 132 AND 133 OF THE ITA-4866/DEL/2010 & 41 OTHERS 13 ASSESSMENT ORDER). IT IS MENTIONED THAT UNDER SECTION 9 0 OF THE ACT THE PARLIAMENT HAS DELEGATED THE AUTHORI TY TO THE CENTRAL GOVERNMENT TO NEGOTIATE THE TAX TREATIE S WITH OTHER COUNTRIES. TAX TREATIES SIGNED BY THE GOVERNMEN T HAS FULL FORCE OF LAW AND DO NOT REQUIRE ANY FURTHER RATIFICATION BY THE PARLIAMENT. THEREFORE ANY STAT ED POSITION OF THE GOVERNMENT IS FULLY EFFECTIVE AND HAS EQUAL FORCE OF LAW AS THE TAX TREATIES. THE POSITION OF IND IA ON TAXATION OF INCOME FROM SOFTWARE IS KNOWN TO ALL THE TREATY PARTNERS AND THIS HAS NOT BEEN OBJECTED BY ANY ONE. 13. THE REVENUE WOULD LIKE TO SUBMIT THAT CHINA KOR EA JAPAN AND VIETNAM HAVE TAXED INCOME FROM SOFTWARE UN DER THEIR RESPECTIVE TAX TREATY WITH FINLAND. COPY OF A SUMMARY OF DECISION OF THE SUPREME ADMINISTRATIVE COUR T OF FINLAND IN CASE NUMBER KHO 2011 : 101 DATED 12 DECEMBER 2011 IS ENCLOSED. 12. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOT H THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. WE F IND THAT LEARNED CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE FOLLOWING THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AY 1997-98 IN ITA NO.407/DEL/2 001. THE ITAT HAD DELIVERED THE ABOVE DECISION FOLLOWING THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF MOTOROLA INC. (SUPRA). WE FIND THAT HON'BLE JURISDICTIONAL HIGH COURT UPHELD THE DECISION OF ITAT OF SPECIAL BENCH IN THE CASE OF MOTOROLA INC. (SUPRA) IN THE CASE OF DIT V S. ERICSSON A.B. (SUPRA). IN THE APPEAL BY THE REVENUE QUESTION NO.3 PROPOSED BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT AND ADMITTED B Y THEIR LORDSHIPS READS AS UNDER:- WHETHER IN LAW THE LEARNED DELHI TRIBUNAL WAS JUSTI FIED IN HOLDING THAT THE CONSIDERATION FOR SUPPLY OF SOFTWARE WAS NOT A PAYMENT BY WAY OF ROYALTY AND HENCE WAS NOT ASSESSABLE BOTH UNDER SECTION 9(1)(VI) OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN THE GOVERNMENT OF INDIA AND SWEDEN? ITA-4866/DEL/2010 & 41 OTHERS 14 13. THAT THE HON'BLE JURISDICTIONAL HIGH COURT AFTE R DETAILED DISCUSSIONS WHICH ARE AT PAGES 474 TO 506 OF THE ITR 343 ANSWERED THE QUESTION IN FAVOUR OF THE ASSESSEE AND AGAINST THE RE VENUE. 14. THE REVENUE HAD ALSO FILED THE APPEAL AGAINST THE DECISION OF ITAT IN ASSESSEES OWN CASE WHICH IS DECIDED BY THEIR LOR DSHIPS ALONGWITH VARIOUS OTHER CASES INCLUDING THE CASE OF M/ S NOKIA NETWORKS. IN THIS CASE ALSO THE QUESTION NO.3 PROPOSED BY THE REVENUE AND ADMITTED BY THEIR LORDSHIPS READS AS UNDER: - WHETHER ANY PART OF THE CONSIDERATION FOR SUPPLY OF SOFTWARE STATED BY THE RESPONDENT TO BE INTEGRAL TO TH E EQUIPMENT IS TAXABLE AS ROYALTY EITHER UNDER SECTION 9(1)(VI) OR THE RELEVANT PROVISIONS OF THE DOUBLE TAX ATION AVOIDANCE AGREEMENT? AFTER DETAILED DISCUSSION THEIR LORDSHIPS ANSWERED THE QUESTION IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. SINCE THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE JURISDICTI ONAL HIGH COURT IN THE CASE OF THE ASSESSEE AS WELL AS IN THE CASE OF ERICSSON A .B. (SUPRA) RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE ORDER OF LEARNED CIT(A) IN THIS REGARD AND REJECT GROUND NO.2 OF THE REVENUE S APPEAL. 15. GROUND NO.1 AND 1.1 OF THE ASSESSEES APPEAL READ A S UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XXIX [LD.CIT(A)] ERRED IN NOT HOLDING THAT INTEREST UNDER SECTION 234B OF THE ACT IS NOT LEVIABLE EVEN TH OUGH THE ENTIRE CONSIDERATION IN THE HANDS OF APPELLANT W AS SUBJECT TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 19 5 OF THE ACT. 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT(A) ERRED IN NOT FOLLOWIN G THE SPECIAL BENCH DECISION IN THE CASE OF MOTOROLA INC. V S. DY. ITA-4866/DEL/2010 & 41 OTHERS 15 CIT [2005] 95 ITD 269 WHEREIN IT WAS HELD THAT INTE REST UNDER SECTION 234B OF THE ACT IS NOT LEVIABLE IF THE CONSIDERATION IS SUBJECT TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT. 16. WE HAVE HEARD BOTH THE PARTIES AND FIND THAT THI S ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF HON'BLE J URISDICTIONAL HIGH COURT IN THE CASE OF DIT-I INTERNATIONAL TAXAT ION VS. ALCATEL LUCENT USA INC. AND ANOTHER VIDE ITA NO.327/2012 330/2012 338/2012 AND 339/2012 WHEREIN THEIR LORDSHIPS VIDE ORDER DATED 7 TH NOVEMBER 2013 HELD AS UNDER:- 21. WE ARE UNABLE TO UPHOLD THIS PART OF THE DECISIO N OF THE TRIBUNAL. IT MUST BE REMEMBERED THAT IN THE NOTE APPENDED TO THE RETURN THE ASSESSEE WAS QUITE CATEGORICA L IN DENYING ITS LIABILITY TO BE ASSESSED IN INDIA. IT RE LIED ON THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN IND IA AND USA AND POINTED OUT THAT THERE WAS NO PERMANENT ESTABLISHMENT IN INDIA. IT FURTHER STATED THAT THE TEL ECOM EQUIPMENTS WERE SOLD OUTSIDE INDIA AND THE PAYMENTS WERE ALSO RECEIVED OUTSIDE INDIA AND THUS THE ASSESSEE DID NOT HAVE ANY TAXABLE PRESENCE IN INDIA SO AS TO BE LIA BLE FOR TAX ON ITS INDIAN INCOME. IF THIS WAS THE STAND OF THE ASSESSEE IT IS NOT IMPERMISSIBLE OR UNREASONABLE TO VISUALISE A SITUATION WHERE THE ASSESSEE WOULD HAVE REPRESENTED TO ITS INDIAN TELECOM DEALERS NOT TO DEDUC T TAX FROM THE REMITTANCES MADE TO IT. ON THE CONTRARY IT WOULD BE SURPRISING IF THE ASSESSEE DID NOT MAKE ANY SUCH REPRESENTATION; SUCH A REPRESENTATION WOULD ONLY BE CONSISTENT WITH THE ASSESSEE'S STAND REGARDING ITS TAX LIABILITY IN INDIA. MOREOVER NO PURPOSE WOULD HAVE BEEN SERVED BY THE ASSESSEE TAKING SUCH A CATEGORICAL STAND REGARDING ITS TAX LIABILITY IN INDIA AND AT THE SAME TIME SUFFERING TAX DEDUCTION UNDER SECTION 195(1). THEREF ORE IN OUR OPINION EVEN THOUGH THERE MAY NOT BE ANY POSITI VE OR DIRECT EVIDENCE TO SHOW THAT THE ASSESSEE DID MAKE A REPRESENTATION TO ITS INDIAN TELECOM DEALERS NOT TO DE DUCT TAX FROM THE REMITTANCES SUCH A REPRESENTATION OR INF ORMAL COMMUNICATION OF THE REQUEST CAN BE REASONABLY INFERR ED OR PRESUMED. THE TRIBUNAL OUGHT TO HAVE ACCORDED DUE WEIGHTAGE TO THE STRONG POSSIBILITY OR PROBABILITY OF SUCH A REQUEST HAVING BEEN MADE BY THE ASSESSEE TO THE INDIAN ITA-4866/DEL/2010 & 41 OTHERS 16 PAYERS SINCE OTHERWISE THE DENIAL OF ITS TAX LIABILITY ON ITS INDIAN INCOME WOULD HAVE SERVED LITTLE PURPOSE FOR TH E ASSESSEE. 17. RESPECTFULLY FOLLOWING THE ABOVE WE HOLD THAT T HE ASSESSEE WAS LIABLE TO PAY INTEREST UNDER SECTION 234B. ACCORDI NGLY GROUND NO.1 & 1.1 OF THE ASSESSEES APPEAL ARE REJECTED. ITA NOS.5943 TO 5947/DEL/2012 ITA NOS.5943 TO 5947/DEL/2012 ITA NOS.5943 TO 5947/DEL/2012 ITA NOS.5943 TO 5947/DEL/2012 REVENUES REVENUES REVENUES REVENUES APPEALS FOR AY APPEALS FOR AY APPEALS FOR AY APPEALS FOR AY 2002 2002 2002 2002- -- -03 03 03 03 2004 2004 2004 2004- -- -05 2005 05 2005 05 2005 05 2005- -- -06 2006 06 2006 06 2006 06 2006- -- -07 & 2008 07 & 2008 07 & 2008 07 & 2008- -- -09 0909 09 : : : :- -- - 18. THE COMMON GROUNDS RAISED IN THESE APPEALS BY THE R EVENUE READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MAD E BY THE AO TAXING THE INCOME FROM SUPPLY OF SOFTWARE AS ROYAL TY IN NOT APPRECIATING THE FACTS THAT THE ADDITION WERE MA DE BY THE AO WERE BASED ON DETAILED ANALYSIS OF INFORMATION GATHERED DURING SURVEY OPERATION CONDUCTED U/S 133A O F THE ACT AND FURTHER IGNORING THE FACT THAT THIS MAKE S THE INSTANT CASE DISTINGUISHABLE FROM THE RELIED UPON CASE O F DIT VS ERICSSON AB DECIDED BY THE HON'BLE DELHI HIGH COURT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN NOT CONSIDERING THE APPLIC ABILITY OF RETROSPECTIVE CLARIFICATORY AMENDMENTS THROUGH INSERTION OF EXPLANATION 5 & 6 TO SECTION 9(1)(VI) O F THE ACT VIDE FINANCE ACT 2012 WHICH HELPS IN DEFINING THE TERM ROYALTY INCOME MORE CLEARLY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO WITHD RAW INTEREST U/S 234B BY RELYING UPON THE DECISION OF DELH I HIGH COURT IN THE CASE OF M/S JACOB CIVIL INCORPORATED. 4. THE APPELLANT CRAVES TO ADD AMEND MODIFY OR AL TER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEAR ING OF THE APPEAL. ITA-4866/DEL/2010 & 41 OTHERS 17 19. THE ISSUE RAISED VIDE GROUND NO.1 & 2 IS IDENTICAL TO GROUND NO.2 OF THE REVENUES APPEAL FOR AY 2003-04. THEREFORE FOR THE DETAILED DISCUSSION IN PARAGRAPH NOS.12 TO 14 ABOVE THESE GROUND S OF THE REVENUES APPEALS ARE REJECTED. 20. GROUND NO.3 OF THE REVENUES APPEAL IS SIMILAR TO GROUND NO.1 & 1.1 IN ASSESSEES APPEAL FOR AY 2003-04. FOR THE DETAIL ED DISCUSSION THEREIN THIS GROUND OF THE REVENUES APPEAL IS ALLOWE D AND WE HOLD THAT THE ASSESSING OFFICER RIGHTLY CHARGED INTEREST UNDE R SECTION 234B. ITA NO.2519/DEL/2010 ITA NO.2519/DEL/2010 ITA NO.2519/DEL/2010 ITA NO.2519/DEL/2010 ASSESSEES APPEAL FOR AY 2007 ASSESSEES APPEAL FOR AY 2007 ASSESSEES APPEAL FOR AY 2007 ASSESSEES APPEAL FOR AY 2007- -- -08 : 08 : 08 : 08 :- -- - 21. GROUND NOS.1 & 4 OF THE ASSESSEES APPEAL ARE AGAINST THE CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT. WE HAVE CONSIDERED THIS ISSUE WHILE DECIDING THE ASSESSEES APPEAL F OR AY 2003- 04 AND FOR THE DETAILED DISCUSSION IN PARAGRAPH NOS.16 & 17 ABOVE GROUND NOS.1 1.1 AND 4 OF THE ASSESSEES APPEAL ARE REJE CTED AND WE HOLD THAT THE ASSESSING OFFICER RIGHTLY CHARGED INTEREST UNDER SECTION 234B. 22. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UNDER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED AO HAS ERRED IN HOLDING THAT THE PAYMENTS RECEIVED BY THE ASSESSEE FOR SUPPLY OF SOFTWARE IS ROYALTY INCOME UNDER SECTION 9(1)(VI) OF THE ACT AS WELL AS UNDER ARTICLE 13 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED INTO BETWEEN INDIA AND FRANCE (DTAA/TAX TREATY). 23. WE HAVE CONSIDERED THIS ISSUE IN ASSESSEES OWN CASE FO R AY 2003-04. IN THAT YEAR THE CIT(A) HAD ACCEPTED THE ASSESSEES CLAIM AND HAD HELD AS UNDER:- ITA-4866/DEL/2010 & 41 OTHERS 18 IN VIEW OF THE DISCUSSION MADE ABOVE IT IS HELD THAT THE REVENUE RECEIVED BY THE APPELLANT ON ACCOUNT OF LIC ENSING OF SOFTWARE IS NOT IN THE NATURE OF ROYALTY. HOWEVER THE SOFTWARE RECEIPTS WILL BE TREATED AS BUSINESS RECEIPTS AND WOULD BE TAXED AS BUSINESS PROFITS IN ACCORDANCE WITH ARTICLE 7 OF THE DTAA. 24. THAT THE REVENUE HAD FILED APPEAL AGAINST THE AB OVE ORDER OF LEARNED CIT(A) IN AY 2003-04. WE HAVE ALREADY DISCU SSED THIS ISSUE IN DETAIL AND FOR THE DETAILED DISCUSSION FROM PARAGRAPH NOS.12 TO 14 ABOVE UPHELD THE ORDER OF LEARNED CIT(A). THEREFO RE FOR THE SAME REASONING WE REVERSE THE ORDER OF LEARNED CIT(A) IN THIS YEAR AND HOLD THAT THE REVENUE RECEIVED BY THE APPELLANT ON ACCOU NT OF SUPPLY OF SOFTWARE WHICH IS EMBEDDED IN HARDWARE IS NOT IN THE NATURE OF ROYALTY. HOWEVER THE ENTIRE RECEIPT FROM SUPPLY OF EQUIPMENT INCLUDING HARDWARE AND SOFTWARE BOTH WILL BE TREATED AS BUSINESS RECEIPT AND WOULD BE TAXED AS BUSINESS PROFITS IN ACCORDANCE WITH A RTICLE 7 OF THE DTAA. ITA NOS.1046/DEL/2013 TO 1052/DEL/2013 ITA NOS.1046/DEL/2013 TO 1052/DEL/2013 ITA NOS.1046/DEL/2013 TO 1052/DEL/2013 ITA NOS.1046/DEL/2013 TO 1052/DEL/2013 REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY 2002 2002 2002 2002- -- -03 TO 2008 03 TO 2008 03 TO 2008 03 TO 2008- -- -09 : 09 : 09 : 09 :- -- - 25. IN THESE APPEALS BY THE REVENUE FOLLOWING COMMON GROUNDS ARE RAISED:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MAD E BY THE AO TAXING THE INCOME FROM SUPPLY OF SOFTWARE AS ROYALT Y WITHOUT CONSIDERING THAT THE ADDITIONS MADE BY THE A O WERE BASED ON DETAILED ANALYSIS OF INFORMATION GATHERE D DURING SURVEY OPERATION U/S 133A AND THE CASE WAS THEREFORE DISTINGUISHABLE FROM THE CASE OF DIT VS ER ICSSON AB DECIDED BY THE HON'BLE DELHI HIGH COURT IN ITA NO.504/2007 AND OTHER SIMILAR CASES RELIED UPON BY THE LD.CIT(A). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DIRECTING THE AO TO WITHDRA W INTEREST CHARGED U/S 234B BY RELYING UPON THE DECISION OF ITA-4866/DEL/2010 & 41 OTHERS 19 HON'BLE DELHI HIGH COURT IN THE CASE OF JACOB CIVIL INCORPORATED WITHOUT APPRECIATING THAT THE LEVY OF INTEREST U/S 234B IS MANDATORY AS HELD IN THE CASE OF CIT VS. ANJ UM GHASWALA & OTHERS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN NOT CONSIDERING THE PROVISIONS OF EXPLANATION 4 TO SECTION 9(1)(VI) OF THE ACT INSERTE D BY THE FINANCE ACT 2012 WITH EFFECT FROM 01.06.1976 WHIC H CLARIFIED THAT THE ROYALTY INCLUDES AND HAS ALWAYS INC LUDED CONSIDERATION IN RESPECT OF ANY RIGHT PROPERTY OR INFORMATION WHETHER OR NOT THE POSSESSION OR CONTROL O F SUCH RIGHT PROPERTY OR INFORMATION IS WITH THE PAYE R OR CONTROL OF SUCH RIGHT PROPERTY OR INFORMATION IS USED DIRECTLY BY THE PAYER ON THE LOCATION OF SUCH RIGHT PROPERTY OR INFORMATION IS IN INDIA. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN NOT CONSIDERING THE PROVISIONS OF EXPLANATION 5 TO SECTION 9(1)(VI) OF THE ACT INSERTE D BY THE FINANCE ACT 2012 WITH EFFECT FROM 01.06.1976 WHIC H CLARIFIED THAT THE EXPRESSION PROCESS INCLUDES AND SH ALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE (INCLUDING UPLINKING AMPLIFICATION CONVER SION FOR DOWNLINKING OF ANY SIGNAL) CABLE OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY WHETHER OR NOT SUCH PROCESS IS SECRET . 5. THE APPELLANT CRAVES TO ADD AMEND MODIFY OR AL TER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEAR ING OF THE APPEAL. 26. GROUND NOS.1 3 & 4 ARE WITH REGARD TO TAXABILIT Y OF INCOME FROM THE SUPPLY OF SOFTWARE AS ROYALTY. THIS ISSUE HAS BEEN C ONSIDERED BY US IN THE CASE OF ALCATEL-LUCENT FRANCE FOR AY 2003-0 4 IN ITA NO.4855/DEL/2010 AND FOR THE DETAILED DISCUSSION IN P ARAGRAPH NOS.12 TO 14 OF THIS ORDER WE UPHOLD THE ORDER OF LEARNED CIT(A) AND REJECT GROUND NOS.1 3 & 4 OF THE REVENUES APPEALS. 27. GROUND NO.2 IS AGAINST THE CHARGING OF INTEREST UN DER SECTION 234B. THIS ISSUE HAS ALSO BEEN CONSIDERED BY US IN THE CA SE OF ALCATEL- LUCENT FRANCE FOR AY 2003-04 IN ITA NO.4866/DEL/201 0 IN PARAGRAPH ITA-4866/DEL/2010 & 41 OTHERS 20 NOS.16 & 17 OF THIS ORDER AND FOR THE DETAILED DISCU SSION THEREIN WE REVERSE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND H OLD THAT THE ASSESSING OFFICER RIGHTLY CHARGED INTEREST UNDER SECTION 234B OF THE ACT. ACCORDINGLY GROUND NO.2 OF THE REVENUES APPE ALS IS ALLOWED. ITA NOS.6360/DEL/2012 TO 6365/DEL/2012 ITA NOS.6360/DEL/2012 TO 6365/DEL/2012 ITA NOS.6360/DEL/2012 TO 6365/DEL/2012 ITA NOS.6360/DEL/2012 TO 6365/DEL/2012 REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY 2003 2003 2003 2003- -- -04 TO 2008 04 TO 2008 04 TO 2008 04 TO 2008- -- -09 : 09 : 09 : 09 :- -- - 28. IN THESE APPEALS BY THE REVENUE FOLLOWING COMMON GROUNDS ARE RAISED:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MAD E BY THE AO TAXING THE INCOME FROM SUPPLY OF SOFTWARE AS ROYALT Y WITHOUT CONSIDERING THAT THE ADDITION AS MADE BY THE AO WERE BASED ON DETAILED ANALYSIS OF INFORMATION GATHERE D DURING SURVEY ACTION U/S 133A AND THE CASE WAS THEREFO RE DISTINGUISHABLE FROM THE RELIED UPON CASE OF DIT VS ERICSSON AB DECIDED BY HON'BLE DELHI HIGH COURT IN IT A NO.504/2007 AND OTHER SIMILAR CASES RELIED UPON BY THE LD.CIT(A). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE INTEREST UNDER SECTION 234B IS NOT CHARGEABLE IN THE CASE FOLLOWING T HE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF D IT VS JACOB CIVIL INCORPORATED WITHOUT APPRECIATING THAT THE LEVY OF INTEREST UNDER SECTION 234B IS MANDATORY AS HELD IN THE CASE OF CITVS ANJUM M.H. GHASWALA 252 ITR 1(SC). 3. THE APPELLANT CRAVES TO ADD AMEND OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. 29. GROUND NO.1 IS IDENTICAL TO GROUND NO.2 OF THE R EVENUES APPEAL FOR AY 2003-04 IN ITA NO.4855/DEL/2010. FOR THE DE TAILED DISCUSSION IN PARAGRAPH NOS.12 TO 14 OF THIS ORDER WE UPHOLD THE O RDER OF LEARNED CIT(A) AND REJECT GROUND NO.1 OF THE REVENUES APPEA LS. ITA-4866/DEL/2010 & 41 OTHERS 21 30. GROUND NO.2 IS AGAINST THE CHARGING OF INTEREST UN DER SECTION 234B. THIS ISSUE HAS ALSO BEEN CONSIDERED BY US IN THE CA SE OF ALCATEL- LUCENT FRANCE FOR AY 2003-04 IN ITA NO.4866/DEL/201 0 IN PARAGRAPH NOS.16 & 17 OF THIS ORDER AND FOR THE DETAILED DISCU SSION THEREIN WE REVERSE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND H OLD THAT THE ASSESSING OFFICER RIGHTLY CHARGED INTEREST UNDER SECTION 234B OF THE ACT. ACCORDINGLY GROUND NO.2 OF THE REVENUES APPE ALS IS ALLOWED. ITA NOS. ITA NOS. ITA NOS. ITA NOS.1928/DEL/2013 TO 1931/DEL/2013 1928/DEL/2013 TO 1931/DEL/2013 1928/DEL/2013 TO 1931/DEL/2013 1928/DEL/2013 TO 1931/DEL/2013 REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY 2003 2003 2003 2003- -- -04 2002 04 2002 04 2002 04 2002- -- -03 2003 03 2003 03 2003 03 2003- -- -04 & 2008 04 & 2008 04 & 2008 04 & 2008- -- -09 : 09 : 09 : 09 :- -- - 31. IN THESE APPEALS BY THE REVENUE FOLLOWING COMMON GROUNDS HAVE BEEN RAISED:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MAD E BY THE AO TAXING THE INCOME FROM SUPPLY OF SOFTWARE AS ROYALT Y WITHOUT CONSIDERING THAT THE ADDITION AS MADE BY THE AO WERE BASED ON DETAILED ANALYSIS OF INFORMATION GATHERE D DURING SURVEY ACTION U/S 133A AND THE CASE WAS THEREFO RE DISTINGUISHABLE FROM THE RELIED UPON CASE OF DIT VS. ERICSSON AB DECIDED BY HON'BLE DELHI HIGH COURT IN IT A NO.504/2007 DATED 23.12.2011 AND OTHER SIMILAR CASES RELIED UPON THE LD.CIT(A). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO WITHD RAW INTEREST U/S 234B BY RELYING UPON THE DECISION OF HON' BLE DELHI HIGH COURT DATED 30.08.2010 IN THE CASE OF DIT VS JACOB CIVIL INCORPORATED WITHOUT APPRECIATING THAT THE LEVY OF INTEREST U/S 234B IS MANDATORY AS HELD IN THE CASE O F CIT VS ANJUM M.H. GHASWALA 252 ITR 1 (SC). 3. THE LD.CIT(A) ERRED IN NOT CONSIDERING THE PROVISI ONS OF EXPLANATION 4 OF THE SECTION 9(1)(VI) OF THE INCO ME TAX ACT INSERTED BY THE FINANCE ACT 2012 WITH EFFECT F ROM 01.06.1976 WHICH CLARIFIED THAT THE TRANSFER OF ALL OR ANY RIGHTS IN RESPECT OF ANY RIGHT PROPERTY OR INFORMATI ON INCLUDES AND HAS ALWAYS INCLUDED TRANSFER OR ALL OR ANY RIGHT FOR USE OR RIGHT TO USE A COMPUTER SOFTWARE (INC LUDING ITA-4866/DEL/2010 & 41 OTHERS 22 GRANTING OF A LICENSE) IRRESPECTIVE OF THE MEDIUM THR OUGH WHICH SUCH RIGHT IS TRANSFERRED. 4. THE LD.CIT(A) ERRED IN NOT CONSIDERING THE PROVISI ONS OF EXPLANATION 5 OF SECTION 9(1)(VI) OF THE INCOME T AX ACT INSERTED BY THE FINANCE ACT 2012 WITH EFFECT FROM 01.04.1976 WHICH CLARIFIED THAT ROYALTY INCLUDES AN D HAS ALWAYS INCLUDED CONSIDERATION IN RESPECT OF ANY RIGHT PROPERTY OR INFORMATION WHETHER OR NOT THE POSSESSION OR CONTROL OF SUCH RIGHT PROPERTY OR INFORMATION IS WI TH THE PAYEE OR SUCH RIGHT PROPERTY OR INFORMATION IS USED DIRECTLY BY THE PAYER OR THE LOCATION OF SUCH RIGHT PROPERTY OR INFORMATION IS IN INDIA. 5. THE APPELLANT CRAVES TO ADD AMEND MODIFY OR AL TER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEAR ING OF THE APPEAL. 32. GROUND NOS.1 3 & 4 ARE WITH REGARD TO TAXABILIT Y OF INCOME FROM THE SUPPLY OF SOFTWARE AS ROYALTY. THIS ISSUE HAS BEEN C ONSIDERED BY US IN THE CASE OF ALCATEL-LUCENT FRANCE FOR AY 2003-0 4 IN ITA NO.4855/DEL/2010 AND FOR THE DETAILED DISCUSSION IN P ARAGRAPH NOS.12 TO 14 OF THIS ORDER WE UPHOLD THE ORDER OF LEARNED CIT(A) AND REJECT GROUND NOS.1 3 & 4 OF THE REVENUES APPEALS. 33. GROUND NO.2 IS AGAINST THE CHARGING OF INTEREST UN DER SECTION 234B. THIS ISSUE HAS ALSO BEEN CONSIDERED BY US IN THE CA SE OF ALCATEL- LUCENT FRANCE FOR AY 2003-04 IN ITA NO.4866/DEL/201 0 IN PARAGRAPH NOS.16 & 17 OF THIS ORDER AND FOR THE DETAILED DISCU SSION THEREIN WE REVERSE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND H OLD THAT THE ASSESSING OFFICER RIGHTLY CHARGED INTEREST UNDER SECTION 234B OF THE ACT. ACCORDINGLY GROUND NO.2 OF THE REVENUES APPE ALS IS ALLOWED. ITA NOS.1336/DEL/2012 TO 1339/DEL/2012 ITA NOS.1336/DEL/2012 TO 1339/DEL/2012 ITA NOS.1336/DEL/2012 TO 1339/DEL/2012 ITA NOS.1336/DEL/2012 TO 1339/DEL/2012 REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY 2005 2005 2005 2005- -- -06 TO 2008 06 TO 2008 06 TO 2008 06 TO 2008- -- -09 : 09 : 09 : 09 :- -- - ITA-4866/DEL/2010 & 41 OTHERS 23 34. IN THESE APPEALS BY THE REVENUE FOLLOWING COMMON GROUNDS HAVE BEEN RAISED:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITIONS MAD E BY THE AO TREATING THE CONSIDERATIONS RECEIVED BY THE ASSESSEE FOR SUPPLY OF EMBEDDED SOFTWARE AS TAXABLE AS ROYALTY BY HOLDING THAT THE SUCH CONSIDERATION REC EIVED BY THE ASSESSEE IS TO BE TREATED AS CONSIDERATION RECEIVE D FOR SUPPLY OF GOODS AND NOT AS ROYALTY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DELETING THE INTEREST LEV IED UNDER SECTION 234B BY THE AO HOLDING THAT THE ENTIRE CONSIDERATION IN THE HANDS OF THE PAYEE WAS NOT SUBJEC T TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE A CT. 35. GROUND NO.1 IS WITH REGARD TO TAXABILITY OF INCO ME FROM THE SUPPLY OF SOFTWARE AS ROYALTY. THIS ISSUE HAS BEEN CONSID ERED BY US IN THE CASE OF ALCATEL-LUCENT FRANCE FOR AY 2003-04 IN ITA NO.4855/DEL/2010 AND FOR THE DETAILED DISCUSSION IN P ARAGRAPH NOS.12 TO 14 OF THIS ORDER WE UPHOLD THE ORDER OF LEARNED CIT(A) AND REJECT GROUND NO.1 OF THE REVENUES APPEALS. 36. GROUND NO.2 IS AGAINST THE CHARGING OF INTEREST UN DER SECTION 234B. THIS ISSUE HAS ALSO BEEN CONSIDERED BY US IN THE CA SE OF ALCATEL- LUCENT FRANCE FOR AY 2003-04 IN ITA NO.4866/DEL/201 0 IN PARAGRAPH NOS.16 & 17 OF THIS ORDER AND FOR THE DETAILED DISCU SSION THEREIN WE REVERSE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND H OLD THAT THE ASSESSING OFFICER RIGHTLY CHARGED INTEREST UNDER SECTION 234B OF THE ACT. ACCORDINGLY GROUND NO.2 OF THE REVENUES APPE ALS IS ALLOWED. ITA NOS ITA NOS ITA NOS ITA NOS.438/DEL/2013 TO 444/DEL/2013 .438/DEL/2013 TO 444/DEL/2013 .438/DEL/2013 TO 444/DEL/2013 .438/DEL/2013 TO 444/DEL/2013 REVENUES APPEALS FOR AY 2002 REVENUES APPEALS FOR AY 2002 REVENUES APPEALS FOR AY 2002 REVENUES APPEALS FOR AY 2002- -- - 03 TO 2008 03 TO 2008 03 TO 2008 03 TO 2008- -- -09 : 09 : 09 : 09 :- -- - ITA-4866/DEL/2010 & 41 OTHERS 24 37. IN THESE APPEALS THE REVENUE HAS RAISED FOLLOWING COMMON GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MAD E BY THE ASSESSING OFFICER BY TAXING THE INCOME FROM SUPPLY OF SOFTWARE AS ROYALTY WITHOUT CONSIDERING THAT THE ADD ITIONS MADE BY THE AO WERE BASED ON DETAILED ANALYSIS OF INFORMATION GATHERED DURING SURVEY ACTION U/S 133A AN D THE CASE WAS THEREFORE DISTINGUISHABLE FROM THE CASE OF DIT VS. ERICSSON AB DECIDED BY HON'BLE DELHI HIGH COURT DA TED 23.12.2011 AND OTHER SIMILAR CASES RELIED UPON THE LD.CIT(A). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO WITHD RAW INTEREST U/S 234B BY RELYING UPON THE DECISION OF HON' BLE DELHI HIGH COURT IN THE CASE OF JACOB CIVIL INCORPOR ATED WITHOUT APPRECIATING THAT THE LEVY OF INTEREST U/S 23 4B IS MANDATORY AS HELD IN THE CASE OF CIT VS ANJUM M.H. GHASWALA 252 ITR 1 (SC). 38. GROUND NO.1 IS WITH REGARD TO TAXABILITY OF INCO ME FROM THE SUPPLY OF SOFTWARE AS ROYALTY. THIS ISSUE HAS BEEN CONSID ERED BY US IN THE CASE OF ALCATEL-LUCENT FRANCE FOR AY 2003-04 IN ITA NO.4855/DEL/2010 AND FOR THE DETAILED DISCUSSION IN P ARAGRAPH NOS.12 TO 14 OF THIS ORDER WE UPHOLD THE ORDER OF LEARNED CIT(A) AND REJECT GROUND NO.1 OF THE REVENUES APPEALS. 39. GROUND NO.2 IS AGAINST THE CHARGING OF INTEREST UN DER SECTION 234B. THIS ISSUE HAS ALSO BEEN CONSIDERED BY US IN THE CA SE OF ALCATEL- LUCENT FRANCE FOR AY 2003-04 IN ITA NO.4866/DEL/201 0 IN PARAGRAPH NOS.16 & 17 OF THIS ORDER AND FOR THE DETAILED DISCU SSION THEREIN WE REVERSE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND H OLD THAT THE ASSESSING OFFICER RIGHTLY CHARGED INTEREST UNDER SECTION 234B OF THE ACT. ACCORDINGLY GROUND NO.2 OF THE REVENUES APPE ALS IS ALLOWED. ITA-4866/DEL/2010 & 41 OTHERS 25 ITA NOS.5420/DEL/2012 TO 5425/DEL/2012 ITA NOS.5420/DEL/2012 TO 5425/DEL/2012 ITA NOS.5420/DEL/2012 TO 5425/DEL/2012 ITA NOS.5420/DEL/2012 TO 5425/DEL/2012 REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY REVENUES APPEALS FOR AY 2003 2003 2003 2003- -- -04 TO 2008 04 TO 2008 04 TO 2008 04 TO 2008- -- -09 : 09 : 09 : 09 :- -- - 40. IN THESE APPEALS FOLLOWING COMMON GROUNDS HAVE BE EN RAISED BY THE REVENUE :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITIONS MAD E BY THE AO TAXING THE INCOME FROM SUPPLY OF SOFTWARE AS ROYALTY WITHOUT CONSIDERING THAT THE ADDITIONS MADE BY THE AO WERE BASED ON DETAILED ANALYSIS OF INFORMATION GATHERED DURING SURVEY U/S 133A AND THE CASE WAS THEREFORE DISTINGUISHABLE FROM THE CASE OF DIT VS. ER ICSSON AB DECIDED BY THE HON'BLE DELHI HIGH COURT IN ITA NO.504/2007 DATED 23.12.2011. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DIRECTING THE AO TO WITHDRA W INTEREST U/S 234B BY RELYING UPON THE DECISION OF HON' BLE DELHI HIGH COURT DATED 30.08.2010 IN THE CASE OF JAC OB CIVIL INCORPORATED WITHOUT APPRECIATING THAT THE L EVY OF INTEREST U/S 234B IS MANDATORY AS HELD IN THE CASE OF C IT VS. ANJUM GHASWALA & OTHERS REPORTED IN 252 ITR 1 (SC) . 41. GROUND NO.1 IS WITH REGARD TO TAXABILITY OF INCO ME FROM THE SUPPLY OF SOFTWARE AS ROYALTY. THIS ISSUE HAS BEEN CONSID ERED BY US IN THE CASE OF ALCATEL-LUCENT FRANCE FOR AY 2003-04 IN ITA NO.4855/DEL/2010 AND FOR THE DETAILED DISCUSSION IN P ARAGRAPH NOS.12 TO 14 OF THIS ORDER WE UPHOLD THE ORDER OF LEARNED CIT(A) AND REJECT GROUND NO.1 OF THE REVENUES APPEALS. 42. GROUND NO.2 IS AGAINST THE CHARGING OF INTEREST UN DER SECTION 234B. THIS ISSUE HAS ALSO BEEN CONSIDERED BY US IN THE CA SE OF ALCATEL- LUCENT FRANCE FOR AY 2003-04 IN ITA NO.4866/DEL/201 0 IN PARAGRAPH NOS.16 & 17 OF THIS ORDER AND FOR THE DETAILED DISCU SSION THEREIN WE REVERSE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND H OLD THAT THE ITA-4866/DEL/2010 & 41 OTHERS 26 ASSESSING OFFICER RIGHTLY CHARGED INTEREST UNDER SECTION 234B OF THE ACT. ACCORDINGLY GROUND NO.2 OF THE REVENUES APPE ALS IS ALLOWED. 43. IN THE RESULT - (I) THE APPEAL OF THE REVENUE FOR AY 2003-04 VIDE ITA NO.4855/DEL/2010 AND THE APPEAL OF THE ASSESSEE FOR AY 2003-04 VIDE ITA NO.4866/DEL/2010 ARE DISMISSED; (II) THE APPEALS OF THE REVENUE FOR AY 2002-03 2004-05 2005- 06 2006-07 & 2008-09 VIDE ITA NOS.5943 TO 5947/DEL/2012 ARE PARTLY ALLOWED; (III) THE APPEAL OF THE ASSESSEE FOR AY 2007-08 VIDE ITA NO.2519/DEL/2010 IS ALLOWED; AND (IV) THE APPEALS OF THE REVENUE FOR AY 2002-03 TO 2008-09 VIDE ITA NOS.1046 TO 1052/DEL/2013 FOR AY 2003-04 TO 200 8-09 VIDE ITA NOS.6360 TO 6365/DEL/2012 FOR AY 2003-04 2002- 03 2003-04 & 2008-09 VIDE ITA NO.1928 TO 1931/DEL/ 2013 FOR AY 2005-06 TO 2008-09 VIDE ITA NOS.1336 TO 1339/DEL/2012 FOR AY 2002-03 TO 2008-09 VIDE ITA NOS.438 TO 444/DEL/2013 AND FOR AY 2003-04 TO 2008-0 9 VIDE ITA NOS.5420 TO 5425/DEL/2012 ARE PARTLY ALLOWE D. DECISION PRONOUNCED IN THE OPEN COURT ON 4 TH APRIL 2014. SD/- SD/- ( (( (R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 04.04.2014 VK. ITA-4866/DEL/2010 & 41 OTHERS 27 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT ASSISTANT REGISTRAR