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10-01-2020, Shell Information Technology, Section 2(24), 234B, Tribunal Mumbai
1. This appeal is filed by the assessee against the order of the Dispute Resolution Panel–2, Mumbai [hereinafter for short “DRP”] dated 10.09.2018 for the A.Y. 2015-16.
2. Assessee has raised the following grounds in its appeal: -
“1. Erred in assessing the total income at Rs. 1,85,95,06,633 as against Rs. NIL total income offered in return of income by the Appellant.
Receipts towards access to use software and IT support services does not constitute 'income'
2. Erred in holding that the payments received by the Appellant constitutes 'income' without appreciating that the appellant works only on cost - only arrangement and the receipts were reimbursements being in the nature of cost allocation without markup and hence does not constitute 'income' under section 2(24) of the Act;
Receipts towards access to use software held as 'royalty' under the India-Netherlands DTAA
3. Erred in construing the payments of Rs. 48,18,78,884 received by the Appellant from Key Application Service provider and Shell group entities for access to use copyrighted software as royalty taxable under Article 12 of India - Netherlands Double Taxation Avoidance Agreement ('India - Netherlands DTAA');
4. Failed to appreciate that the payments received were only for the 'use of copyrighted article' as compared to 'use of copyright', 'use of process', 'use of property similar to patents, design, trademark and invention', which does not constitute 'royalty' under the IndiaNetherlands DTAA; Receipts towards IT Support services held as 'Fees for Technical Services' CFTS ) und r the Act as well as IndiaNetherlands DTAA
5. Erred in holding that payments of Rs. 1,37,76,27,749 received by the Appellant for IT Support Services constitutes 'FTS' under the provisions of the Act and under Article 12 of the India-Netherlands DTAA;
6. Failed to appreciate that IT support services do not 'make available' any technical knowledge, experience, skill, know-how or processes etc. to the service recipient under Article 12 of the IndiaNetherlands DTAA and hence not subject to tax in India. Interest under section 234B of the Act
7. Erred in levying interest under section 234B of the Act without appreciating the facts and circumstances of the case.
Refund adjusted against demand for earlier years
8. Erred in adjusting the refund without appreciating the fact there is no demand outstanding pertaining to earlier years as the appellant has already received a favorable ITAT order for earlier years.
Interest under Section 244A of the Act
9. Erred in recovering interest under Section 244A of the Act without appreciating the facts and circumstances of the case. Interest under Section 234D of the Act
10. Erred in levying interest under Section 234D of the Act without appreciating the facts and circumstances of the case.”
3. At the outset Ld. Counsel for the assessee submitted that Ground Nos. 3 and 4 are in respect of receipts towards access to use software held as “royalty” under the India– Netherlands DTAA, s decided by the Tribunal in favour of the assessee for the A.Ys 2012-13 and 2013-14 in ITA No. 2192 & 2193/Mum/2017 dated 24 10.2018 and also for the A.Y. 2014-15 in ITA No. 7428/MUM/2017 dated 05.03.2019. It was also submitted that the very same issue was also decided in its favour by the Tribunal for the A.Y. 2006-07 to 2010-11 and the orders were placed in the paper book.
4. Ld. DR vehemently supported the orders of the authorities below.
5. We have heard the rival submissions and perused the orders of the authorities below and the orders of the Tribunal for various assessment years. The Tribunal decided this issue in favour of assessee initially for the A.Y. 2006-07 to 2008-09 in ITA.No. 5051/MUM/2009, 3818/Mum/2011 and ITA.No. 728/Mum/2012 dated 15.03.2017 wherein the Tribunal held that the payments received by the assessee from Wipro/IBM in pursuance