ATOS NEDERLAND B.V.,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION) RANGE- 1(1)(2), MUMBAI

आयकर अपीलीय अिधकरण �ायपीठ मुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM I.T.A. No. 2328/Mum/2022 (Assessment Year: 2019-20) Atos Nederland BV (as Deputy Commissioner of Income-tax successor in interest to Atos IT (International Taxation) Range- Systems Management 1(1)(2), Mumbai 5th Floor, Room No.528, Air India Nederland B.V.) C/o Atos India Pvt Ltd. Bldg, Nariman Point, Mumbai-400020 Vs. 7th & 8th and 9th Floor, Building No.3, Gigaplex Estate Private Limited, Plot No.IT 5, Airoli, Knowledge Park, TTC Industrial Area, Thane-400708 PAN: AAMCA5936E Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :

Assessee by : Ms. Hirali Desai a/w Ms. Urvi Jhaveri & Shri Hardik Nirmal : Shri Sridhar G. Menon (Sr. DR) Revenue by Date of Hearing : 08.07.2026 Date of Pronouncement : 06.10.2026

O R D E R Per Arun Khodpia, AM: The captioned appeal is filed by the assessee challenging the order passed by Deputy Commissioner of Income Tax International Circle – 1(1)(2), Mumbai [in short, “the Ld. AO”] dated 22nd July, 2022 u/s 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 [in short, “the Act”] for the Assessment Year (AY) 2019-

. 20, in pursuance to directions of Dispute Resolution Panel (in short, “the DRP”) vide order dated 7th June, 2022.

. 6. On the facts and in the circumstances of the case and in law, the Learned AO has erred in adding the interest on income tax refund amounting to Rs. 1,60,660 twice while computing the total income. The Appellant prays that Learned AO be directed to kindly delete the double addition in relation to the interest on income tax refund. 7. On the facts and in the circumstances of the case and in law, the Learned AO has erred in holding that refund of Rs. 5,90,794 (including interest under section 244AA of the Act) has already been issued to the Appellant. The Appellant prays that the Learned AO be directed to not treat the amount of Rs. 5,90,794 as refund already issued to the Appellant 8. On the facts and in the circumstances of the case and in law, the Learned AO has erred in initiating penalty proceedings under section 270A of the Act without appreciating that none of the provisions of section 270A of the Act gets attracted in the facts of the Appellant's case. The Appellant humbly prays to Your Honours to kindly diret the Learned AO to drop/abate the penalty proceedings and oblige.”

Amount (in S.No. Particulars Entities Rs.) 1 Stepping Stone services 1,52,33,917 Atos Global IT Solutions and Services Private Limited and Authentication, Identity and Access Atos IT Services Private Limited 2 Management Services

Atos India Private Limited 1,30,44,711 3 Project and IT Support Services

Philips India Limited ('Philips') 4 Cloud Application Services 10,03,93,161

. receipts are taxable as royalty and alternatively as Fee for Technical Services (FTS) under the Act as well as under India-Netherlands DTAA.

Sr Amount Particulars Entity Remarks No. (INR) Receipts are taxable as Cloud Philips Royalty / FTS under Application India 10,03,93,161 1 the India-Netherlands Services Limited DTAA and the Act

IT/Project and Atos India Receipts are taxable as IT Support Private 1,30,44,711 Royalty / FTS under 2 Services Limited the India-Netherlands DTAA and the Act

. Being dissatisfied with the final assessment order dated 22nd July, 2022, 9. the assessee is in appeal before the Tribunal.

. and executed the migration of Philips India application and data from its existing physical servers to the cloud environment without affecting the business continuity of Philips India. In cloud management services, the assessee provides support service-based migration to ensure that the application and data remained continuously available to Philips India and function in a consistent and effective manner.

. to remain on Philips in its premises in a compact local infrastructure, such infrastructure is commonly referred as data center inbox. These applications were essential for Philips India’s day to day operations and were required to remain available without interruption.

. “3. Case of the Ld. AO and Ld. DRP: 3.1 The Ld. AO characterized the impugned receipts amounting to INR 11,34,37,872, virtually with every limb of Article 12 of the DTAA. According to the Id. AO the receipts constituted royalty for use of equipment, process, commercial/scientific knowledge/ experience, software copyright etc. Alternatively, the Ld. AO held that the ongoing services were ancillary to the alleged software provided by the Appellant and therefore, constituted fees for technical services. On this broad and overlapping reasoning, the Ld. AO characterized the composite receipts as "Royalty and/or FTS". 3.2 The Ld. DRP, however, restricted its directions to hold that principally the receipts represented consideration for the use of the Appellant's equipment and infrastructure, and therefore, was taxable as 'Royalty' under the Act as well as India-Netherland DTAA. While the Ld. DRP also made a passing observation that the associated maintenance services would fall within Article 12(5)(a) of the DTAA, it did not independently furnish separate reasons for treating the receipts as FTS. 3.3 The Ld. DRP, in paragraphs 5.1 to 5.14 of its directions, examined the nature of the cloud application services provided by the Appellant. The crux of the directions of the Ld. DRP, which are vague and unsubstantiated, is as under:  That the cloud application services typically involved making available servers with the help of which the recipients carry out functions.  That the Appellant's factual assertion, that Philips India had no possession, access or control of Appellant's equipment and that the services merely constituted standard cloud application services was "factually incorrect".  Referring to certain clauses of the service agreement relating to re-hosting and connectivity services, the Ld. DRP held that the services involved the use of the Appellant's infrastructure and equipment.  A Managed server services inherently involved leasing of servers to the customer and that the associated database management and maintenance services were ancillary thereto. 3.4 Analyzing the various aspects of the relevant agreement, the Ld. DRP finally concluded that the receipts under consideration were taxable under Explanation 2, clause (iva) of section 9(1)(vi) of the Act and the India-Netherland DTAA as Equipment royalty.”

. “4. Submissions of the Appellant on Ground No. 2-4-Characterization of receipts from cloud application and IT support services as Royalty / Fees for Technical Services: Absence of Equipment Royalty clause in the India-Netherland DTAA: 4.1 At the very outset, the Appellant would like to draw Your Honors' kind attention to the definition of "royalties" as provided in Article 12(4) of the India-Netherlands DTAA. The relevant extract of Article 12 is reproduced hereunder for Your Honors' ready reference: "4. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience." 4.2 A plain reading of the above definition demonstrates that Article 12 does not include within its ambit payments for the use or right to use industrial, commercial or scientific equipment C Equipment royalty). 4.3 The Appellant would like to submit that the India-Netherlands DTAA was amended and notified vide Notification No. GSR 693(E) dated 30 August 1999. Originally, with effect from 01 April 1991 the definition of "royalties" in Article 12(4)(b) expressly covered payments of any received as a consideration for use of or right to use, industrial, commercial or scientific equipment within the ambit of the term 'royalty' - kindly refer Para III of Notification during the hearing. 4.4 Vide the same notification, with effect from 01 April 1998, the above referred definition of Royalty under Article 12(4) of India-Netherlands DTAA was amended to expressly remove the 'consideration for use of or right to use, industrial, commercial or scientific equipment' from the scope of term 'royalties'. Relevant extract of the above referred Notification is reproduced hereunder: VI. With effect from Ist April, 1998 for paragraph 4 of Article 12 relating to Royalties and fees for technical services referred to in paragraph III above the following paragraph shall be read "4 The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience” 4.5 The above facts are substantiated by the decision of the Hon'ble Madras High Court in the case of Van Oord ACZ Equipment BV v. CIT [2015] 373 ITR 133, wherein the Court examined the effect of the ameugment to the India-Netherlands DTAA and held that with effect from on April 1998, the Indie Netherlands DIAA does not provide for taxation of 'equipment royalty. The relevant extract of the findings of the Hon'ble Court is as under:

. "28. The above would show that for all practical purposes, the payments for the use of incorporated in the definition of the term "Royalties" in clause 4 weL.1.4.1991 and equipment originally found in clause (1) of Article 12 as defined in clause (6) subsequently deleted weft.4.1998 and thereby completely taken out from clauses (1) and (2) of Article 12. This means that the payment for the use of equipment or any consideration for the use of, for the right to use industrial, commercial or scien equipment is deleted and it is not taxable in the contracting State in which they arise viz in the given case India. 29. Sec. 90 of the Income-tax Act 1961 enables and empowers the Central Government to issue Notification for implementation of the terms of Double Taxation Avoidance Agreement. In Azadi Bachao Andolan's case (supra), the Hon'ble Supreme Court considered Sec.90 of the Act and held as follows: "No provision of the Double Taxation Avoidance Agreement can possibly fasten a tax liability where the liability is not imposed by the Act. If a tax liability is imposed by the Act, the Agreement may be resorted to for negativing or reducing it; and, in case of difference between the provisions of the Act and the Agreement, the provisions of the Agreement would prevail over the provisions of the Act and can be enforced by the appellate authorities and the court. Section 90 is specifically intended to enable and empower the Central Government, to issue notification for implementation of the terms of a Double Taxation Avoidance Agreement. The provisions of such an Agreement, with respect to cases to which they apply, would operate even if inconsistent with the provisions of the Income-Tax Act. If it was not the intention of the Legislature to make a departure from the general principles of chargeability to tax under section 4 and the general principle of ascertainment of taxable income under section 5, then there was no purpose in making those sections "subject to the provisions of the Act". Section go was brought into the statute book precisely to enable the executive to negotiate a Double Taxation Avoidance Agreement and quickly implement it. Even accepting that the powers exercised by the Central Government under section 90 are delegated powers of legislation, there is no reason why a delegatee of legislative power, in all cases, has no power to grant exemption. The delegate of a legislative power can exercise the power of exemption in a fiscal statute. When the requisite notification has been issued under section 90, the provisions of sub-section (2) of section go spring into operation and an assessee who is covered by the provisions of the Double Taxation Avoidance Agreement is entitled to seek the benefits thereunder, even if the provisions of the Double Taxation Avoidance Agreement are inconsistent with those of the Act." Therefore, a Notification No. 54693(E) dated 30.8.1999 was issued under Sec.90 of the Income Tax Act bringing in the above said modification, as India and Netherlands are members of the Organisation for Economic Co-operation and Development (OECD) to limit the taxation in line with the conventions between India and other countries. Therefore the provisions of the Agreement would prevail over the provisions of the Act. 11

. infrastructure. In fact, the purpose which entities like Philips migrate the applications and data to the cloud from its physical servers - is to do away with the responsibility of managing or operating the infrastructure. The scale and nature of the engagement itself further demonstrates that the arrangement was a cloud transformation and managed services engagement rather than a leasing of servers or equipment. The Appellant migrated over 4,200 applications to cloud environments, resulting in the closure of more than 130 data centers and the decommissioning of approximately 1,800 legacy systems globally. These activities reflect a large-scale transition from legacy infrastructure to cloud-based environments, with Philips India procuring migration and managed cloud services rather than the use of any specific server or equipment. Therefore, the consideration paid by Philips India is for the receipt of services and not for the use or hire of equipment. 4.12 To draw an analogy, where a passenger pays a baggage allowance to airline, the payment by any stretch of imagination cannot be treated as payment for hiring a space on the aircraft or equipment, being the aircraft per se; rather, the payment is for the service provided by the airline. This is because, while the space on the airline is used, such space/ equipment is used by the airline to provide services and at no point is any identified portion of the cargo hold placed at the passenger's disposal, nor does the passenger acquire possession of, control over, or an independent right to operate the aircraft or its cargo space. 4.13 In this context, the Ld. DRP's finding that the managed servers were "leased out" and were under the control and possession of the alleged lessee is inconsistent with the contractual arrangement and the technical nature of managed public-cloud services. A payment may be characterized as equipment royalty only when the customer is granted possession or control of, or an independent right to operate or use, identified equipment. The mere deployment of servers, networks or other infrastructure by a service provider in the course of rendering services does not convert the service arrangement into a contract for the hire of equipment. 4.14 In the present case, Philips India neither has physical access to the cloud infrastructure nor any ability to independently operate, administer or control the same. It does not determine the exact location of the servers, identify the particular hardware on which its applications or data may reside, select the equipment to be used for service delivery, or exercise any possessory, or operational or commercial rights over the servers, storage systems, networks or related infrastructure. 4.15 This, in fact, is inherent in the very nature of a public cloud environment. The allocation of computing resources is dynamic and automated; it functions on the principle of redundancy, under which workloads may be automatically shifted from one server to another depending on the requirements. Further, the number of servers deployed may vary dynamically, without any involvement or control of Philips India's knowledge, participation or consent. 4.16 This clearly demonstrates that Philips India is merely receiving cloud application services, and no identified equipment is being granted to Philips India, and thereby, no right to use, possess or control any equipment is conferred to Philips India. 4.17 As a matter of fact, AWS operates large-scale data centers across multiple geographical locations, and Philips India may not be aware of the precise physical 13

. location at which its applications or data are hosted at any given point in time. Consequently, there can be no question of Philips India accessing, operating or exercising control over the underlying infrastructure; Philips India only regulates control access to its own applications and data which is distinet from grant of access of the equipment. 4.18 This may be understood through a simple everyday example: A person may store photographs on Google Drive by paying a subscription fee. However, payment of the subscription fee does not mean that the person has obtained access to, or control over, Google's servers and infrastructure. The subscriber can access the photographs stored on Google Drive but does not know the precise server on which they are stored or the physical location of that server, which may be in Singapore, Australia or elsewhere. Similarly, Philips India receives and uses the Cloud Application Services but does not access, operate or control the underlying servers and infrastructure used to provide those services. 4.19 It is the humble submission of the Appellant that, where equipment remains exclusively under the control of the service provider and the customer merely receives the benefit of the services rendered, the consideration retains the character of service income. It is only where the customer itself is enabled to use or exercise control over the equipment that the payment can be regarded as consideration for the use of equipment. Such circumstances are entirely absent in the present case. 4.20 Further, it is also a settled legal position that the true test to determine the character of the payment is to ascertain what the service recipient is paying for. In the present case, Philips India is not paying for access to servers, storage devices or networking equipment; rather, it is paying for the seamless delivery of Cloud Application Services. The infrastructure used in delivering those services is merely the means adopted by the Appellant to fulfil its contractual obligations. 4.21 The facts of the present case are directly analogous to Paragraph 9.1 of the OECD Commentary on Article 12, which explains the tax treatment of payments made under satellite transponder arrangements. The Commentary clarifies that although a customer may contractually obtain the transmission capacity of a satellite transponder, it neither obtains possession nor any right to use the transponder itself. The satellite continues to be operated and controlled exclusively by the service provider, and the customer merely receives the benefit of the transmission service. Accordingly, the payment is characterized as consideration for services and not as royalty, since no equipment or secret process is made available to the customer. 4.22 At this point, attention is drawn to the decision of Hon'ble Jurisdictional Tribunal in case of Rackspace, US Ine. DCIT [ITA No. 1634/MUM/2016, 3507/MUM/2017 & 1075/MUM/2017]. In this case, the Hon'ble Tribunal categorically held that the consideration received for cloud hosting services (provision of infrastructure on cloud) is not in the nature of royalty since the customers merely avail the services and are not granted the use or right to use any industrial, commercial or scientific equipment. The Hon'ble Tribunal explained the scope of the expression "use or right to use equipment" as under:

. "14.... The term 'use' or 'right to use' for the purpose of the tax treaty entails that the prayer has a possession/control over the property and/or the said property is at its disposal. There is no privilege or right granted to the Indian customers over the servers and other equipment used to provide cloud hosting services. The equipments are not used by the customers and the same are used by Rackspace USA to provide service to the customers. The services provided by the Rackspace USA are in the nature of cloud hosting, data warehousing services etc. which are standard services provided to customers. There is no agreement to hire or lease out any equipment but only a service level agreement." Further, the findings of the Hon'ble Tribunal are reproduced hereunder for Your Honors' ease of reference: "16. From the above facts and circumstances, we are of the view that the agreement between the assessee and its customer is for providing hosting and other ancillary services to the customer and not for the use of/leasing of any equipment. The Data Centre and the Infrastructure therein is used to provide these services belong to the assessee. The customers do not have physical control or possession over the servers and right to operate and manage this infrastructure / servers vest solely with the assessee. The agreements entered into the service level agreements. The agreement is to provide hosting services simpliciter and is not for the purpose of giving the underlying equipment on higher or lease. The customer is not even aware of the specific location of the server in the Data Centre where the customer application, web mail, websites etc. In view of these facts, we are of the view that income from cloud hosting services has erroneously held as royalty within the meaning of explanation (2) to section 9(1)(vi) of the Act as well as Article 12(3)(b) of the Indo-USA DTAA by the AO and DRP. Even otherwise, there is no PE of the assessee in India and hence, no income can be taxed in India in term of Indo-US DTAA. We reverse the orders of the lower authorities and allow this issue of assessee's appeal." (Emphasis supplied) 4.23 Reliance is also placed to the decision of the Hon'ble Jurisdictional Tribunal in DDIT (International Taxation) v. Savvis Communication Corporation [ITA No. 7340/MUM/2012]. In this case, the assessee provided Managed web hosting services, on which the Assessing Officer held that such services were towards the right to use scientific equipment. The Ld. CIT(A) in his order held that the services are provided by the assessee using its own of customer provided equipment payments received are towards uninterrupted use of service and not for any equipment and that the assessee does not exercise any control over the customers' content nor is responsible for the same. The Ld. CIT(A) finally concluded that providing web hosting services, with all backup, maintenance, security and uninterrupted services does not amount to Royalty. The Hon'ble Tribunal upheld the order of the Ld. CIT(A) and held as under: "9. We have noted that the very basis of the impugned addition is Assessing Officer's finding that the receipts in question were on account of use of scientific equipment, and, for that reason, giving rise to an income taxable under section 9(1)(vi) of the Act as also article 13(1)(b) of the Indo US tax treaty. This finding, however, proceeds on the fallacy that when a scientific 15

. equipment is used by the assessee for rendering a service, the receipt will be construed as a receipt for use of scientific equipment. Undoubtedly, when the assessee receives an income on account of allowing a customer to use a scientific equipment, it does become taxable for the reason of its being characterized as such, but the use of a scientific equipment by the assessee, in the course of giving a service to the customer, is something very distinct from allowing the customer to use a scientific equipment. The true test is in finding out the answer to the fundamental question- is it the consideration for rendition of services, even though involving the use of scientific equipment, or is it the consideration for use of equipment simplictor by the assessee? In the case of former, the consideration is not taxable, in the case of the latter, the consideration is taxable. In the case of Kotak Mahindra Primus Ltd Vs DDIT [(2007) 11 SOT 578 (Bom)], a coordinate bench, dealing with a situation in which the mainframe computer and the specialized software was used for rendering data processing services to an Indian entity, held so and observed that, "No part of this payment can be said to be for the use of specialized software on which data is processed or for the use of mainframe computer because the Indian company does not have any independent right to use the computer or even physical access to the mainframe computer, so as to use the mainframe computer or the specialized software." A payment cannot be said to be consideration for use of scientific equipment when person making the payment does not have an independent right to use such an equipment and physical access to it. In the present case also, what the assessee is providing is essentially web hosting service, though with the help of sophisticated scientific equipment, in the virtual world. The scientific equipment used by the assessee enable rendition of such a service, and such a use, which is not even by the Indian entity, is not an end in itself. In this view of the matter, even though the services rendered by the assessee to the Indian entities may involve use of certain scientific equipment, the receipts by the assessee cannot be treated as "consideration for the use of, or right to use of, scientific equipment" which is a sine qua non for taxability under section 9(1)(vi) read with Explanation 2 (iva) thereto." (Emphasis supplied) 4.24 Attention is also drawn to the decision of the Hon'ble Delhi Tribunal rendered in the case of Criteo Singapore Pte. Ltd v. ACIT [ITA No. 2122/Del/2023] wherein, the Hon'ble Tribunal dealt on a issue similar to the present case of the Appellant. In this case, the assessee provided data center and hosting services to its Indian group entity, while the underlying servers and equipment remained under the exclusive control and possession of the assessee. Similar to the present case, the Indian customer merely availed the services and was neither granted possession nor any right to use the underlying infrastructure. The Hon'ble Tribunal accordingly held that receipts could not be characterized as "Equipment royalty" since there was no "use" or "right to use any industrial, commercial or scientific equipment by the customer. The relevant findings of the Hon'ble Tribunal are reproduced hereunder for Your Honors' ease of reference: "25. We find that the assessee has provided Criteo India with data storage facility in such data center outside India and the Assessee does not have any data center or any other equipment in India. Criteo India has been provided 16

. with login credentials for it to remotely access only the data stored in relation to Criteo India's advertisers, which is used by Criteo India to render advertising services to its customers. There is no software or application provided by the assessee to Criteo India. Further, there is no human intervention involved in the provision of data center related services by the assessee to Criteo India. Criteo India only has the right to remotely access only the data stored in relation to Criteo India's advertisers, which is used by Criteo India to render advertising services to its customers. The assessee has not placed any equipment in India nor has put the placed the equipment under the control/possession of Criteo India. These facts have not been controverted by the ld DR. 33. We therefore find that the expression "use or right to use" demands possession, active usage and control of the equipment in the hands of the customer. In the present case, the equipment relating to the data center related services is under control, possession, operation and use of the Assessee and not with Criteo India. There was no direct use by Criteo India either of the portal or of the server as was there in the case of Cargo Community Network Pte. Ltd placed reliance upon by the AO. By granting access to the information stored in the data center, the Assessee neither shares its own experience, technique or methodology employed in evolving data centers with Criteo India, nor imparts any information relating to them. In view of the above discussion and judicial pronouncements, we hold that the data center related receipts received by the assessee are not taxable as "Royalty" as per the provisions of India-Singapore DTAA as the Explanations 5 and 6 to section 9(1)(vi) of the Act cannot be imported into the tax treaties. We accordingly direct the AO to delete the said addition. (Emphasis supplied) 4.25 In the present case, Your Honors' will appreciate that, the Appellant leveraged the infrastructure of AWS to render the Cloud Application Services. The Ld. DRP's assumption that "managed servers are leased out and in control and possession of the lessee" is factually incorrect and legally unsustainable. For Managed Public Cloud, the physical hardware is owned, operated and controlled exclusively by AWS; Philips India's limited visibility is only limited to accessing its hosted applications and data, and not to the underlying servers or equipment. It is settled position that equipment royalty arises only where the customer has possession or control and a genuine right to use specific equipment, and not where it merely receives services performed using the provider's infrastructure. Accordingly, in this case, there is no use of the equipment by Philips India and hence, such services do not tantamount to 'Royalty' as contemplated under the DTAA and the Act. 4.26 In addition to the above, the Appellant submits that in course of hearing before the Ld. DRP it was submitted that a similar issue of taxing web-hosting and data center services as 'Royalty' arose in the Appellant's group concern's case, which is duly noted by the Ld. DRP in its directions. However, the Ld. DRP has not followed the said Hon'ble Jurisdictional Tribunal's decision as the Department has preferred an appeal against the said order before the Hon'ble High Court. For ease of reference, the relevant extract of the Ld. DRP's direction is produced hereunder:

. "5.14 The Assessee has also relied on the order of the Hon'ble Mumbai Bench of the Tribunal in case of Atos Information Technology Singapore Pte Ltd. v. DCIT (IT) dated 30 March 2021) (group company of the Assessee) wherein the Hon'ble Tribunal has held that the services such as mailbox hosting services, data centre services are not liable to tax as royalties/ FTS under India - Singapore DTAA. The same is considered, but it is also noted that Revenue has not accepted the order of the ITAT and has decided to prefer an appeal against the same in Bombay High court. As the Revenue is precluded, as per law, to contest a decision of the DRP, it is only fair that the issue is not closed before it reaches finality at the higher judicial forums." 4.27 On perusal of the above, an inference can be drawn that even the Ld. DRP is not disputing the fact that the issue is squarely covered by the decision of the Hon'ble Tribunal in its group concern's case, however, since department has preferred appeal before the Hon'ble High Court, the Ld. DRP chooses not to follow the same. 4.28 Attention is drawn to the decision of the Hon'ble Jurisdictional Tribunal in its group concern's case of Atos Information Technology Singapore Pte Ltd. v. DCIT (IT) [ITA No.7144 of 2017 & 5744 of 2018 (Mumbai Tribunal)]. In this case the assessee provided data center / managed services which included remote monitoring of server & database outside India, disaster recovery, delivery management etc. The Ld. DRP held the services provided by the assessee fall within the ambit of Royalty by observing that the managed servers are leased out to the service recipient and the said servers are in control and possession of the lessee. The Ld. DRP further observed that the provision of hosting service involves use of assessee's hardware and software by the person who has rented the server and the assessee is merely required to ensure 24 hour availability. In this regard the Hon'ble Tribunal held as under: "23. As discussed earlier, the assessee is simply providing mailbox hosting services and data centre services through servers maintained by it. The assessee is required to ensure proper functioning of the server with related software while providing such services.There is no material on record to suggest that while rendering such services, the assessee has allowed Atos India or any other party use of commercial or scientific experience. Further, there is no material to show that the assessee has allowed use or right to use of any copyright of literary, artistic or scientific work including cinematograph film or films or tapes used for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process. Further, though, the learned DRP has observed that the assessee has allowed use or right to use of any industrial, commercial or scientific equipment by renting out the server; however, that finding is not based on any cogent evidence brought on record. The agreement entered by the assessee for project related services does not show that the assessee is renting out either the servers or any other equipment to Atos India while providing services. In this regard, we may refer to the agreement entered with Atos India for the Standard Chartered Bank project. As per clause 5.1 of the said agreement, it has been made clear that the ownership of the intellectual property rights would all along remain with the assessee and no part of it would be transferred to Atos India. Rather, as per clause 5.2 of the agreement, the assessee, if necessary, can use Atos India's intellectual property including any software for providing services. There is nothing on record to suggest that the

. assessee has either rented out its servers or allowed access to the servers to Atos India or any other party independently and in exclusion of the assessee. In our considered opinion, the services rendered by the assessee are purely IT infrastructure management and mailbox hosting services and for rendering which the assessee has neither allowed use or right to use of any copyright of literary, artistic or scientific work, etc. or use of information concerning industrial, commercial or scientific experience or has allowed use or right to use any industrial, commercial or scientific equipment. 24. In case of DCIT vs Suvvis Communication Corporation (supra), the co- ordinate bench has held, the true test for finding out whether the consideration is for rendition of services, though, involving the use of scientific equipment or the consideration is for use of equipment simpliciter. In the facts of the present case, there cannot be two opinions about the fact that, though, in course of rendition of services there may be involvement of or use of scientific equipments, but, the consideration received is not for use of equipment simpliciter, but for rendering services. 25. The observations of the co-ordinate bench in the aforesaid decision would squarely apply to the facts of the present case. Therefore, we are of the considered opinion that the payment received by the assessee for rendering services relating to various projects would not qualify as royalty under Article 12(3) of the India-Singapore DTAA." 4.29 In view of the above facts and legal jurisprudence, the Appellant humbly submits that the impugned receipts ought not be treated as consideration for use or right to use equipment and therefore, be taxable as Royalty. Payments received by the Appellant are not for the 'use' or 'right to use' of process: 4.30 The Appellant respectfully submits that while the Ld. DRP has concluded the impugned receipts constitute Equipment Royalty, it has also made a passing reference to the decision of the Hon'ble Madras High Court in Verizon Communications Singapore Pte. Ltd. v. ITO [(2014) 361 ITR 575 (Mad.)] where the Hon'ble High Court upheld that decision of the Tribunal that if IPLC charges were not be treated as one for the use of equipment, the same could treated as one for the use of process. 4.31 Therefore, for the sake of completeness, it is respectfully submitted that the reliance placed by the Ld. DRP on Verizon Communications (supra) is wholly misplaced, as the factual matrix as well as the nature of services involved in that case are fundamentally different from those in the present appeal. 4.32 In Verizon Communications (supra), the Court was concerned with payments received for international telecommunication and bandwidth services, where dedicated network capacity was made available to customers under a comprehensive telecommunications arrangement. On an examination of the Master Service Agreement, OSS one-stop billing arrangement, installation of customer premises equipment and dedicated bandwidth allocation, the Hon'ble Court concluded that the customers were, in substance, granted a dedicated share of Verizon's international transmission network and were therefore using the transmission process and the 19

. underlying network infrastructure. It was in these peculiar facts that the consideration was held to constitute royalty under section 9(1)(vi) of the Act as well as Article 12 of the India-Singapore DTAA. 4.33 Unlike the arrangement in Verizon Communications, Philips India is not granted any dedicated or exclusive right over any network, server or process. It neither controls nor operates any part of the underlying infrastructure, nor can it independently access, configure or exploit any process employed in rendering the services. The processes involved in managing and delivering cloud services remain entirely internal and are never made available to Philips India for its independent use. Philips India merely receives the benefit of the services rendered and nothing more. 4.34 In addition to the foregoing, the Appellant submits that the decision in Verizon Communications also, inter alia, held that Explanation 5 and 6 are clarificatory in nature and are to be read in the DTAA. However, the decision provides no reason for reading the amendments to the Act in the DTAA. This issue was considered by the Hon'ble Delhi High Court in the case of DIT v. New Skies Satellite BV [(2016) 382 ITR 114] wherein, the Hon'ble Court vide Para 31 and 41 categorically provided that in the absence of corresponding amendment to the DTAA, the amendments made to the Act have no effect on the taxability of income under the DTAA. For ease of reference, the relevant extracts of the findings of the Hon'ble Court are produced hereunder for Your Honors' ease of reference: "31. In a judgment by the Madras High Court in Verizon Communications Singapore Pte Ltd. v. ITO, International Taxation [2014] 361 ITR575/224 Taxman 237 (Mag.)/[2013] 39 taxmann.com 70, the Court held the Explanations to be applicable to not only the domestic definition but also carried them to influence the meaning of royalty under Article 12. Notably, in both cases, the clarificatory nature of the amendment was not questioned, but was instead applied squarely to assessment years predating the amendment. The crucial difference between the judgments however lies in the application of the amendments to the DTAA. While TV Today Network Ltd.'s case (supra) recognizes that the question will have to be decided and the submission argued, Verizon Communications Singapure Pte. Ltd.'s case (supra) cites no reason for the extension of the amendments to the DTAA. 41. This Court is of the view that no amendment to the Act, whether retrospective or prospective can be read in a manner so as to extend in operation to the terms of an international treaty. In other words, a clarificatory or declaratory amendment, much less one which may seek to overcome an unwelcome judicial interpretation of law, cannot be allowed to have the same retroactive effect on an international instrument effected between two sovereign states prior to such amendment. In the context of international law, while not every attempt to subvert the obligations under the treaty is a breach, it is nevertheless a failure to give effect to the intended trajectory of the treaty. Employing interpretive amendments in domestic law as a means to imply contoured effects in the enforcement of treaties is one such attempt, which falls just short of a breach, but is nevertheless, in the opinion of this Court, indefensible. (Emphasis supplied) 20 4-35 Further, the Appellant submits that the Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence (P) Ltd. v. CIT [(2021) 432 ITR 471], approved the decision of New Skies Satellite (supra). Accordingly, it may be concluded that provisions of Explanation 5 and 6 to section 9(1)(vi) of the Act cannot be read into or relied upon while interpreting the relevant provisions of the DTAA. 4.36 With regards to allegation of the Ld. DRP on process royalty, the Appellant humbly submits that there is a settled distinction between the use of a process by a service provider for rendering services and the grant of a right to use a process to the customer. The expression 'use of a process' in the context of royalty necessarily contemplates that the process should be 'divulged' to the payer and not merely 'executed / carried out' for the benefit of the payer in the course of rendering service. 4-37 Attention is drawn to the decision of the Hon'ble Jurisdictional Tribunal in case of TII Team Telecom International Ltd. v. ADIT [2011] 47 SOT 76 wherein the Hon'ble Tribunal has held that the determinative test is what the customer pays for- whether the underlying process itself or merely the end product/service generated through such process; where the customer only receives the benefit of the product or service and is not granted any right to use the underlying process, the consideration cannot be characterized as process royalty. The Tribunal further held that, applying the principle of noscitur a sociis, the expression "process" draws its color from the preceding words such as patent, trademark, design, model, plan and secret formula, and therefore refers to a process in the nature of know-how and not a product or service. The relevant finding of the Hon'ble Tribunal is as under: "17....... The next issue that we need to consider is whether a payment for software can be said to be a payment for "process" as a computer program is a nothing but a set of instruction lying in the passive state and this execution of instructions is 'a process' or'a series of processes. No doubt, in terms of the provisions of section 2(ffc) of the Indian Copyright Act, 1957, a computer program, i.e., software, has been defined as "a set of instructions expressed in words, codes, schemes or in any other form, including a machine readable medium, capable of causing a computer to perform a particular task or achieve a particular result", but the moot question is as to what is that a customer pays for when he buys, or to put it in technical terms 'obtains licence to use' the software - for the process of executing the instructions in the software, or for the results achieved on account of use of the software. To draw an analogy, it is akin to a situation in which a person hires a vehicle, and the question could be as to what does he pay for -for the use of the technical know-how on the basis of which vehicle operates, or for the use of a product which carries passengers or goods from one place to another. The answer is obvious. When you pay for use of vehicle, you actually pay for a product which carries the passengers or goods from one place to another and not the technical know-how on the basis of which such a product operates. Same is the case with the software, when someone paus for the software, he actually pays for a product which gives certain results, and not the process of execution of instructions embedded therein. As a matter of fact, under standard terms and conditions for sale of software, the buyer of software is not even allowed to tinker with the process on the basis of which such software runs or to even work around the technical limitations of the software. In Asia Satellite Telecommunications Ltd. v. Dy. CIT [2003] 78 21

. TTJ 489, 85 ITD 478 (Delhi), a coordinate bench of this Tribunal did take the view that when an assessee pays for transponder hire, he actually pays for the a process in as much as transponder amplifies and shifts the frequency of each signal, and, therefore, payment for use of transponder is in fact a payment for process liable to be treated as 'royalty' within meanings of that expression under Explanation 2 to section 9 (1)(vi) of the Income-tax Act. However, when this decision came up for scrutiny of Hon'ble Delhi High Court, in the case reported as Asia Satellite Telecommunications Co. Ltd. v. CIT [2011] 332 ITR 340/197 Таxman 263. Their Lordships, after a very erudite and detailed discussion, concluded that "we are unable to subscribe to the view taken by the Tribunal in the impugned judgment on the interpretation of section 9(1)(vi) of the Act". It cannot, therefore, be open to us to approve the stand of the revenue to the effect that the payment for software is de facto a payment for process. That is a hyper technical approach totally divorced from the ground business realities. It is also important to bear in mind the fact that the expression 'process' appears immediately after, and in the company of, expressions "any patent. trade mark, design or model, plan, secret formula or process". We find that these expressions are used together in the treaty and as it is well settled, as noted by Maxwell in Interpretation of Statutes and while elaborating on the principle of noscitur a sociis, that when two or more words which are susceptible to analogous meaning are used together they are deemed to be used in their cognate sense. They take, as it were, their colours from each other, the meaning of more general being restricted to a sense analogous to that of less general. This principle of interpretation of statutes, in our considered view, holds equally good for interpretation of a treaty provision. Explaining this principle in more general terms, a very distinguished former colleague of ours Hon'ble Shri M.K. Chaturvedi, had, in an article 'Interpretation of Taxing Statutes' (AIFTP Journal: Vol. 4 No. 7, July, 2002, at p. 7), put it in his inimitable words as follows 18. Viewed in this perspective, and taking note of lowest common factors in all the items covered by definition of the expression 'royalty' in Article 12(3), the 'process' has to be in the nature of know-how and not a product. In this view of the matter, and in view of Hon'ble Delhi High Court's declining to uphold the coordinate bench's decision in the case of Asia Satellite Telecommunication Co. Ltd. (supra), we we are of the considered view that the payment for software, by no stretch of logic, can be treated as a payment for "a process" liable to be taxed as royalty....." (Emphasis supplied) 4.38 Reference is also drawn to the decision of the Hon'ble Delhi Tribunal in case of Datamine International Ltd. v. ADIT [(2016) 48 ITR(T) 229 (Delhi Tribunal)] wherein while dealing with the Department's contention as to whether the sale of computer software be treated as 'use of process', the Hon'ble Tribunal held as under: "11. The Department has covered the case within the four corners of this Article on two counts. First is that the consideration from the alleged sale of software is nothing, but, for 'use' of 'process'. In our considered opinion, this approach is not correct because the assessee has not allowed end users to use any 'process'. Obviously, a 'computer software' cannot be treated as a 'process' because the 22

. end users by using the software do not have any access to the source codes. What is available for their use is software product as such and not the processes embedded in it. To cite an example, when we purchase a refrigerator and place vegetables etc. into if for cooling, what we use for cooling is refrigerator and not its inbuilt processes or technology which facilitated in the manufacturing of a refrigerator. In the same manner, several processes may be involved in making a computer software, but the customer uses the software as such and not the processes involved into it. We, therefore, refuse to accept the viewpoint of the Revenue that the assessee received consideration from end users for the use of or the right to use any process'." 4.39 Similar ruling is also pronounced by the Hon'ble Tribunal in following cases: Adore Technologies Pvt. Ltd. v. ACIT [(ITA No.702 of 2021 (Delhi Tribunal)] (Para 25-29) TII Team Telecom International Ltd. V. ADIT (IT) [(2017) 186 TTJ 589 (Mumbai Tribunal)] (Para 4.18) 4.40 In the present case, the Appellant provides IT support services and cloud application services. In rendition of such services, the Appellant has neither provided any 'know-how' nor provided any 'intellectual property' in provision of such services (which is not even alleged by the Ld. AO). Accordingly, the Appellant submits that the said receipts cannot be treated as 'use of or 'right to use' any process to constitute 'Royalty' under India Netherlands DTAA. In view of the above factual and legal analysis, the Appellant humbly wishes to submit that the impugned receipts ought not be characterized as consideration for use of or right to use process, under the India- Netherland DTAA. > Payments received by the Appellant are not in the nature of Fees for Technical Services: 4.41 The Department has also alleged that the associated services like security management performed by the Appellant are ancillary and subsidiary the equipment made available to Philips India and therefore, fall within the scope of Article 12(5)(a) of the India-Netherlands DTAA. 4.42 The relevant extract of Article 12 is reproduced hereunder for Your Honor's ready reference: "Article 12-Royalties and Fees for Technical Services 5. For purposes of this Article, "fees for technical services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 4 of this Article is received; or…” 4-43 In this regard, the Appellant humbly submits that, Article 12(5)(a) of the India- Netherlands DTAA applies only where the services are ancillary and subsidiary to the 23

. application or enjoyment of a right, property or information for which a payment covered under Article 12(4) is received. 4-44 In the present case, the consideration received towards Cloud Application services does not constitute Royalty under Article 12(4) of the India-Netherlands DTAA. Accordingly, in the absence of any underlying royalty payment, the prerequisite condition for invoking Article 12(5)(a) itself fails and therefore, the services cannot be brought within the ambit of FTS. 4.45 Without Prejudice to the above submissions, the Appellant humbly submits that the impugned services do not and cannot 'make available' any technical knowledge, experience, skill, know-how etc. which will enable Philips India (person acquiring the service) to apply such technology independently in future.”

. copies of service agreements and other relevant documents, we find that the services rendered in the present case are identical to those considered by the coordinate Bench of the Tribunal in Atos Information Technology Singapore Pte. Ltd. v. DCIT (IT) in ITA Nos. 7144/Mum/2017 & 5744/Mum/2018 for AY 2014-15, vide order dated 30.03.2021.

. the assessee and, upon consideration of the material available on record, concur with the same. Our findings in this regard are set out hereunder:

. services would not qualify as “royalty” within the meaning of Article 12(4) of the India–Netherlands DTAA.

. rendering services, whether the assessee has made available any technical knowledge, experience, skill, know-how or process in terms of section 12(4)(b). In our view, the material on record would not persuade one to conclude so. The true meaning of the aforesaid provision is, not only the payment is received for providing technical or managerial services, but, while doing so the service provider also makes available any technical knowledge, experience, skill, know-how or process, etc. to the recipient of services, which enables the person acquiring such services to apply the technology contained therein independent of the service provider. In other words, the service recipient must be in a position to apply the technical knowledge, experience, skill, know-how, etc. without requiring the permission or presence of the service provider. 28. In the facts of the present case, there is nothing on record to suggest that Atos India can use any technical knowledge, experience, skill, know-how or process, etc. independently on its own without requiring the involvement of the assessee. Therefore, in our considered opinion, the tests and conditions of Article 12(4)(b) are not satisfied. That being the case, the payment received by the assessee from various projects related services would not qualify as FTS either. That being the case, the payment received by the assessee has to be treated as business profits; hence, would not be taxable in absence of a permanent establishment in India. 29. At this stage we must deal with the submission of learned Departmental Representative that as per Article 12(2) of the India-Singapore DTAA the amount received can be taxed in India in accordance with the domestic law. On a careful reading of Article 12 of India-Singapore DTAA as whole, it is found, Article 12(1) provides for taxation of royalty and FTS in the country of residence of the recipient. Definitions of royalty and FTS have been given under Article 12(3) and 12(4) of the tax treaty. Of course, Article 12(2) provides for taxation of royalty and FTS in the source country. However, in our considered view, Article 12(2) has to be read in conjunction with Article 12(1), 12(3) and (4) of the tax treaty and not on standalone basis. In our view, Article 12(2) will get triggered only if the amount received qualifies as royalty and FTS under the treaty provisions. Since, in the facts of the present case we have held that the payment received towards various project related services does not qualify as royalty and FTS under the treaty provisions, the applicability of Article 12(2) of the tax treaty would not arise.” 26. On this aspect, we deem it apt to refer to Article 12(5) of the DTAA between India and Netherlands, which reads as under:

“Article 12 (5) and (6) 5. For purposes of this Article, "fees for technical services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 4 of this Article is received; or

. (b) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design 6. Notwithstanding paragraph 5, "fees for technical services" does not include amounts paid: (a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property, (b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic; (c) for teaching in of by educational institutions, (d) for services for the personal use of the individual or individuals, making the payment, or (e) to an employee of the person making the payments or to any individual or partnership for professional services as defined in Article 14 (Independent).

. 12(4) or “Fees for Technical Services” under Article 12(5) of the India– Netherlands DTAA. The impugned treatment of the said receipts, therefore, cannot be sustained on either of the aforesaid grounds. Accordingly, Ground Nos. 1 to 4 raised by the assessee are allowed.

. It is respectfully submitted that the as per section 153 of the Act, the due date for passing of final assessment order in this case for the assessment year 2019-20 was 12 months from the end of the assessment year, that is, 31.03.2021, which was extended to 30.09.2021 vide Notification No.10/2021. However, the final assessment order has been passed on 22.07.2022, that is, beyond the due date prescribed under section 153 of the Act. In this regard, the Appellant wishes to invite Your Honors' attention to the decision of Hon'ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Limited v. ACIT: WP No. 2340 of 2021, wherein the Hon'ble Jurisdictional High Court has held that the time limit prescribed under section 153 would prevail over and above the assessment time-limit prescribed under section 144C and therefore, the entire assessment procedure has to be concluded within the time limit prescribed under section 153 of the Act. Further, kind attention is also invited to the decision of division bench of the Hon'ble Madras High Court (HC) in the case of Roca Bathroom Products Private Limited (WA No 1609 and 1610 of 2021) wherein it was held that the assessment proceedings, including proceedings conducted under section 144C of the Act, shall be completed within the time limit prescribed under section 153 of the Act. Similar view has been taken by the Hon'ble Tribunal in the following cases: Superbrands (UK) (ITA No. 1949/Mum/2015) (Delhi ITAT) Hindustan Zinc Limited (ITA nos. 127 and 128/Jodh/2022) (Jodhpur ITAT) In view of the above, it is most respectfully submitted that since the final assessment order in the Appellant's case has been passed on 22.07.2022, the same is beyond the due date prescribed under section 153 of the Act, that is, 30.09.2021 and accordingly, is barred by limitation. In view of the above, the Appellant wishes to raise additional grounds to pray that the final assessment order dated 22.07.2022 is barred by limitation and therefore, is bad in law, void-ab-initio and is liable to be quashed. 6. Submission on Additional Ground No. 10 Challenging the validity of notice u/s 143(2) of the Act: The Appellant is a foreign company and being a non-resident, is assessed to tax under the 'International Tax Circle' by the Assessing Officer having charge vide office range Deputy Commissioner of Income-tax, Int Tax Circle 1(1)(2), Mumbai (hereinafter referred to as 'Ld. AO'). In the present case, the notice dated 31.03.2021 under section 143(2) of the Act was issued by the ACIT, NeAC-1(2)(2), Delhi. The Appellant submits that the said notice is without jurisdiction and thus, bad-in-law. Further, it is also submitted that though the notice under section 143(2) of the Act has been issued by the ACIT, NeAC-1(2)(2), Delhi the draft assessment order and the final assessment orders have been passed by the Ld. AO. However, nothing has been 31

. mentioned in the draft assessment order/final assessment order regarding the transfer of jurisdiction from ACIT, NeAC-1(2)(2), Delhi to the Ld. AO. Further, no valid notice under section 143(2) of the Act has been issued by the Ld. AO to assume jurisdiction to conduct assessment proceedings in the present case. Therefore, the Appellant wishes to raise an additional ground that the notice dated 31.03.2021 under section 143(2) of the Act issued by ACIT, NeAC-1(2)(2) is without jurisdiction and all proceedings pursuant to the aforesaid notice under section 143(2) of the Act are bad in law, void-ab-initio and liable to be quashed. 7. Submission on Additional Ground No. 11 - Challenging the validity of DRP directions and the consequential final assessment order: It is submitted that int the present case, the Ld. DRP issued its directions dated 07.06.2022, digitally signed by only one of the Panel Members viz. Mr. Neehar Ranjan Pandey and not signed by the other two Panel Members (Mr. Alok Singh and Mr. Yashawant Bhaskar). The Appellant submits that the absence of signatures of the other Panel Members on the Directions dated 07.06.2022 would render the Directions to be invalid, illegal and void-ab-initio and hence, liable to quashed. Consequently, the final assessment order dated 22.07.2022 passed in pursuance to such directions which are invalid and void-ab-initio would also be illegal, without jurisdiction, void-ab-initio and hence, liable to quashed. Thus, based on the aforesaid submissions, the Appellant most humbly prays vide the additional grounds of appeal that the DRP directions and the final assessment order are liable to be quashed. 8. The Appellant hereby submits that the aforesaid additional grounds of appeal are purely legal in nature and do not require any verification of facts. Moreover, all the facts are already on record and hence the Appellant humbly prays that the additional grounds of appeal may kindly be admitted in the interest of justice. We crave leave of Your Honour to rely upon the following decisions in support of our plea for admission and adjudication of the enclosed additional grounds of appeal: 1. Jute Corporation of India Ltd. [187 ITR 688 (SC)] In this case, the Hon'ble Apex Court at page 693, observed as under: "Even otherwise, an appellate authority while hearing the appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers, which the subordinate authority may have in the matter." 2. National Thermal Power Co. Ltd. v. CIT: 229 ITR 383 (SC) 32

. In the above case, the Hon'ble Apex Court, following its decision in the case of Jute Corporation of India Ltd. (supra) observed as under: The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income Tax (Appeals) takes too narrow view of the powers of the Appellate Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee." 3. Ahmedabad Electricity Co. Ltd. and Godavari Sugar Mills Ltd. vs. CIT [199 ITR 351 (Bom)] In the aforesaid case, the Hon'ble Bombay High Court held as under: "We do not find anything in section 254(1) of the Income Tax Act which limits the jurisdiction of the Appellate Tribunal in any manner. For reasons which we have set out earlier, the phrase "pass such order thereon" does not in any way restrict the jurisdiction of the Tribunal but, on the contrary, confers the widest possible jurisdiction of the appellate Tribunal including jurisdiction to permit any additional ground of appeal if, in its discretion, and for good reason, it thinks it necessary or permissible to do so." "it is quite clear that the Appellate Tribunal has jurisdiction to permit additional grounds to be raised before it even though these may not arise from the order of the Appellate Assistant Commissioner, so long as these grounds are in respect of the subject-matter of the entire tax proceedings." In the light of the above decisions and in the interest of substantial justice, we pray that the Hon'ble Members be pleased to admit the additional ground and adjudicate the same for which we shall remain most grateful.”

. 33. Additional Ground Nos. 10 and 11 are requested to be not pressed, accordingly, are treated to be dismissed as not pressed.

Order pronounced in the open court on 06-10-2026.

Sd/- Sd/- (AMIT SHUKLA) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated : 06-10-2026. Ankit K., Sr. PS

. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER, ABHINAV ANANT Digitally signed by ABHINAV ANANT GAVANDE GAVANDE Date: 2026.10.15 14:44:09 +05'30' (Dy./Asstt. Registrar) ITAT, Mumbai