×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
These cross appeals filed by the Assessee and Revenue are directed against the order passed by the ld. CIT(A)-22,Kolkata dated 16.02.2017, for assessment year 2007-08, which in turn arise out of an assessment order passed by the assessing officer under section 143(3)/144C of the Income Tax Act, 1961, ( In short, the ‘Act,), dated 28.01.2011.
2. Since the issues involved in these cross appeals are common and identical therefore, these appeals have been heard together and are being disposed of by this consolidated order.
3. First we take up the assessee's appeal in ITA No.982/Kol/2017,for A.Y.2007- 08. The only ground in the assesse's appeal is against the action of the ld. CIT(A) in confirming the disallowance of Rs.14,34,232/- made by the assessing officer u/s 40A(a)(i) of the Act on account of payment made to Microsoft license fee by the assessee.
4. Brief facts qua the issue are that during the relevant prev ous year under consideration the assessee company had incurred expenditure amounting to Rs. 2,03,36,851/- which has been reported as part of Note G- Expenditure in Foreign Currency’ in the financial statement [Refer Pg. 21 of the PB]. The same includedinter alia an amount of Rs. 14,34,232/- paid on account of Microsoft License Fees. The aforesaid amount of Rs.14,34,232/- represents payment made to Organon NV, a Netherlands based Associated Enterprise (AE) of the assessee in respect of a software license from Microsoft. M/s Organon NV had purchased the software license from Microsoft to be used by all the group entities and the license fees paid by Organon NV for the software was apportioned at actual to such group entities based on the number of employees. The share of the assessee worked out to Rs.14,34,232/- which was reimbursed to Organon NV.
This claim for deduction was not accepted by the Assessing Officer, since according to him, the amount has to be disallowed for non-deduction of TDS. The
Assessing Officer did not find any merit in the contention of the assessee that this amount represented purely reimbursement of expenses to M/s Organon NV and since it did not include any income element, the assessee was not liable to deduct tax at source from the payment of the same. The Assessing Officer did not agree and according to him the amount in question was paid by the assessee for the use of software and since it was taxable as royalty as per the provisions of the Act as well as DTAA between India and USA. The assessee was required to deduct tax at source u/s 195 of the Act from the payment made to Organon NV. As the assessee had failed to comply with the said requirement, the Assessing Officer invoked section 40(a)(i) of the Act and disallowed the sum of Rs. 14,34,232/-.
5. Aggrieved by the order of ld AO, the assessee carried the matter in appeal before the ld CIT(A), who has confirmed the order passed by the ld AO. Aggrieved the assessee is in appeal before us.
6.When this appeal was called out for hearing, learned counsel for the assessee invited our attention to the order dated 15.05.2019, passed by the Division Bench of this Tribunal in assessee’s own case in ITA No.1335/Kol/2010 for the Assessment Year 2005-06 whereby the issue of Royalty on Microsoft license fees have been discussed and adjudicated in favour of assessee. Learned counsel for the assessee submitted that the present appeal is squarely covered by the aforesaid order of the Tribunal, a copy of which was also placed before the Bench.
7. Learned Departmental Representative relied upon the orders of the authorities below.
8. We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in assessee’s own case vide order dated 15.05.2019. In this order, the Tribunal has inter alia observed as follows:
“8. We have considered the rival submissions and also perused the relevant material available on record. It is observed that a similar issue involving identical facts and circumstances was considered by the Tribunal in assessee’s own case for A.Ys. 2003-04 and 2004-05 vide its common order dated September 20, 2017 and after considering all the relevant aspects including the provisions of DTAA, the case laws on the points etc. it was held by the Tribunal that the amount in question paid by the assessee was not in the nature of royalty. It was held that since the said amount was paid towards purchase of software, it would have been assessable as business profits in the hands of Netherland based Associated Enterprise and since the said Associated Enterprise did not have a permanent establishment in India, the business profits could not be taxed in India under Article 7 of the Indo Netherland DTAA. It was held by the Tribunal that there was