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05-07-2019, Cummins Inc, Section 147, 9(1)(vi), 201(1), Tribunal Pune

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1 week 23 hours ago #10035 by amit
Section - 147, 9(1)(vi), 201(1),144C(13)
Order Date - 05-07-2019
Favouring - Partly
Court - Tribunal Pune
Appellant - Cummins Inc
Respondent - DDIT
Justice - D. KARUNAKARA RAO, AM & VIKAS AWASTHY, JM
Citation - 719Taxpundit129
Appeal No. - ITA Nos.73 & 74/PUN/2011
Asstt. Year - 2004-05 & 2006-07

Order

PER : VIKAS AWASTHY, JM

These two appeals by the assessee are directed against the assessment order dated 15-11-2010 for assessment year 2004-05 passed u/s. 143(3) r.w.s. 147 r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and assessment order dated 16-11-2010 for the assessment year 2006-07 passed u/s. 143(3) r.w.s. 144C(13) of the Act, respectively.

Since, the issues raised in both the appeals are identical, the appeals are taken up together for adjudication and are disposed of vide this common order.

Brief Facts :

2. The facts common to both the impugned assessment years are : The assessee/appellant is a non-resident company incorporated in the United States of America (USA). It is a tax resident of the USA. The assessee is engaged in manufacturing of heavy duty and mid-range engines for trucks and buses and marine lodging, agriculture and rail applications. During the period relevant to the assessment years under appeal the assessee entered into international transactions with its Indian associates (Joint Venture) i.e. Cummins India Limited (CIL) and Cummins Sales and Services India Limited (CSSIL) The assessee had provided off-the-shelf software and related support services to its associates in India to the tune of Rs.7,75,38,913/- in assessment year 2004-05 and Rs.6,27,69,649/- in
assessment year 2006-07. The assessee claimed the receipts in lieu of services provided as reimbursement of expenditure. The Assessing Officer as well as DRP held that the payments received by appellant are in the nature of „Royalty‟ u/s. 9(1)(vi) of the Act and hence, taxable in India.

3. This is second round of litigation before the Tribunal. The Coordinate Bench of Tribunal in the first round vide order dated 08-08-2013 had decided this issue against the assessee by following the judgment of Hon‟ble Karnataka High Court in the case of Commissioner of Income Tax & Ors. Vs. Samsung Electronics Co. Ltd. & Anr. reported as 345 ITR 494. Thereafter, the assessee filed Miscellaneous Applications No. 28 & 29/PUN/2017 for recalling the aforesaid order of Tribunal by placing reliance on the decision of Hon‟ble Bombay High Court rendered in the case of Reliance Communication Ltd. decided on 08-08-2017. The
Tribunal vide order dated 06-12-2017 in the aforesaid Miscellaneous Applications recalled its earlier order dated 08-08-2013, as the reasons for recalling the order in Reliance Communication Ltd. (supra) before the Mumbai Bench of Tribunal were similar.

ITA No. 73/PUN/2011, (A.Y. 2004-05)

4. The assessee has raised following grounds of appeal in the assessment year 2004-05 :

“On the facts and in the circumstances of the case and in law, the Hon‟ble DRP and consequently the learned AO have :

1. Ground – challenging the initiation of re-assessment proceedings under section 147

Erred in invalidly initiating re-assessment proceedings as the reason provided by the learned AO is a mere change of opinion in respect of already assessed transaction and such change in opinion cannot form the basis of initiating re-assessment proceedings.

2. Ground – challenging the taxability of consideration for facilitating grant of user rights in off-the-shelf software and provision of related support services of Rs.77,538,913

Erred in treating the consideration for facilitating grant of user rights in off-the-shelf software and provision of related support services received by the Appellant from Cummins India Limited („CIL‟) and Cummins Sales and Services (India) Limited („CSSIL‟) totaling to Rs.77,538,913 taxable as „Royalty‟ is defined in Explanation 2 to section 9(1)(vi) of the Act as well as under Article 12 of the Double Taxation Avoidance Agreement between India and USA („DTAA‟) and levying tax @ 15% on the same.

Erred in facts and law in not appreciating that the Appellant had provided to CIL and CSSIL, the user rights in the copyrighted article and not right to use the copyright and thus cannot be regarded as „royalty‟ under the provisions of the Act and the DTAA.

The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Honourable Income-tax Appellate Tribunal to decide this appeal according to law.”

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