DASSAULT SYSTEMES SIMULI CORP,CHENNAI vs. DCIT, INTERNATIONAL TAXATION-1(1), CHENNAI

आदेश /O R D E R आदेश आदेश आदेश

PER MAHAVIR SINGH, VICE PRESIDENT:

This appeal by the assessee is arising out of final assessment order No. ITBA/COM/F/17/2023-24/1057643769(1) dated 21.09.2023 passed by the Deputy Commissioner of Income Tax, International

Taxation Circle-1(1), Chennai u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, (hereinafter referred to as “Act”) pursuant to the directions of Ld. Dispute Resolution Panel-2, Bengaluru (DRP) u/s

144C(5) dated 31.08.2023.

- 2 - IT(TP)A No.79/Chny/2023 2. The only issue in the appeal of the assessee is as regards to order

of the DRP directing the Assessing Officer in not granting TDS credit

available as per Form 26AS. For this, the assessee has raised the

following grounds:-

“Restriction of TDS credit 2.1. On the facts and the circumstances of the case and in law, the learned AO and DRP has erred in not granting the TDS credit available as per Form 26AS. 2.2 The learned AO and DRP has erred in law and on facts in restricting the TDS credit to a proportion of the royalty income offered to tax. 2.3. The learned AO and DRP failed to appreciate the fact that the entire income as per Form 26AS has been offered to tax after considering the credit notes raised by the Appellant. 2.4. The learned AO and DRP failed to appreciate the fact that as per section 199 of the Act read with Rule 37BA(3)(i) of the Income tax rules, credit for TDS shall be given in the assessment year for which such income is assessable. 2.5. The learned AO and DRP failed to appreciate the fact that proviso to Section 155(14) of the Act is applicable only in cases where the Appellant has not disclosed income in the return of income.”

Corp is a company incorporated in the United States of America ("USA")

and a tax resident of USA. The assessee is engaged in the provision of

Product Life Cycle Management Software solutions, application and

services to digitally define and simulate products. The assessee had

entered into an Inter-company distribution and licence agreement with

Dassault Systemes India Private Limited ("DSIPL") to grant the license to

reproduce, market and distribute its software products directly or

indirectly in India and in relation to the services rendered as per the

agreement the assessee had raised invoices amounting to Rs.

- 3 - IT(TP)A No.79/Chny/2023 43,87,96,966/- and TDS amounting to Rs. 4,79,16,628/- was deducted by

DSIPL. Subsequently, the assessee raised credit notes amounting to

Rs.4,55,85,552/- in order to align the margin earned by the Indian AE in

accordance with the Transfer Pricing provisions and offered the net

royalty income of Rs. 39,32,11,413/- for the relevant assessment year

2021-22 and paid tax accordingly. The Assessing Officer in the draft assessment order dated 14.12.2022 passed u/s.143(3) r.w.s 144C(1) of

the Act restricted the TDS credit at Rs. 4,30,30,086/- as against claim of

the assessee for Rs.4,79,16,628/- i.e., restricted to proportion of the

royalty income offered to tax, instead of granting the full TDS credit

available as per Form 26AS of the assessee. The assessee moved to

DRP against the order of the Assessing Officer u/s.144C(1) of the Act

and the DRP passed order u/s.144C(5) dated 31.08.2023, confirming

action of the Assessing Officer. Subsequently, final assessment order

was passed u/s.143(3) r.w.s 144C(13) of the Act dated 21.09.2023 by

restricting the TDS to proportion of the royalty income offered to tax, instead of granting full TDS credit available as per Form 26AS of the

assessee. Aggrieved, the assessee preferred appeal before the

Tribunal.

squarely covered by the decision of co-ordinate bench of this Tribunal in

assessee’s own case for earlier assessment year in ITA

- 4 - IT(TP)A No.79/Chny/2023 No.365/Chny/2023 dated 23.01.2024. We find that the Tribunal exactly on similar facts for the earlier assessment year has observed in para 5 of its order in ITA No.365/Chny/2023 dated 21.03.2024 which is reproduced as under:- “5. From the fact, it emerges that the assessee has received contractual royalty payment from the Indian entity. The assessee would raise invoices on the payer entity who would deduct TDS and remit the remaining amount to the assessee. However, at year-end, the payment of royalty would be re-computed as per the terms of the agreement. Pursuant to the same, the assessee has issued credit notes to the payer entity. The income thus accrued to the assessee is gross invoices less the credit notes issued by the assessee. The same amount, on net basis, would be reflected by the assessee in the financial statements. This figure tallies with the financial statement of the payer entity. The assessee has duly reconciled the amounts reflected in financial statement vis-à-vis amount reflected in Form 26AS. Though income to the extent of credit notes issued by the assessee would never accrue to the assessee, nevertheless, TDS as been deducted against these payments and the same has been deducted against the assessee. Therefore, the assessee would be entitled for the credit of the same. The amount of credit notes could not be held to be the income of the assessee. Therefore, lower authorities are not justified in denying the credit of the same. The provisions of Sec. 155(14) would not apply since these provisions would apply only in cases where the TDS certificate is furnished later and where the income has not been disclosed in the return of income. In the present case, the income to the extent of credit notes would never accrue to the assessee and hence, there is no question of offering the same to tax. The Ld. CIT-DR has submitted that the assessee could have insisted deductor to file revise TDS return and claim the excess TDS amount from the deductor. However, once TDS is deducted and deposited with the Central government, the only mechanism with the

- 5 - IT(TP)A No.79/Chny/2023 assessee to claim the refund of the same would be through filing of Income Tax Return which is the correct way of claiming the TDS credit. Therefore, considering the facts and circumstances of the case, we direct Ld. AO to allow full TDS credit to the assessee which is otherwise available as per Form 26AS.”

Bench decision of this Tribunal in assessee’s own case cited supra, we

direct the Assessing Officer to allow full credit of TDS available as per

Form 26AS of the assessee. Ordered accordingly.

Sd/- Sd/- (महावीर �सह महावीर �सह महावीर �सह ) महावीर �सह (एस एस एस.आर एस आर आर. . . . रघुनाथा आर रघुनाथा रघुनाथा) रघुनाथा (MAHAVIR SINGH) (S.R. RAGHUNATHA) उपा�य� /VICE PRESIDENT लेखा सद�य/ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 14th August, 2024 DS आदेशक��ितिलिपअ$ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकरआयु% /CIT, Chennai. 4. िवभागीय�ितिनिध/DR 5. गाड*फाईल/GF.