THE COMMISSIONER OF INCOME TAX - INTERNATIONAL TAXATION -2 vs. NETAPP B.V.

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ITA/1186/2017HC DelhiDLHC01452680201722 December 2017Bench: CASES PERTAINING TO SPL.DIVISION BENCHES2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises in the present appeal. This conclusion was reached by following its own prior decision in ITA 884-885/2017, dated 23.10.2017, which dealt with the same assessee and similar issues for other assessment years. The Court found that both issues raised in the current appeals were covered by the earlier decisions. Specifically, the taxability of software and subscription amounts was decided in line with Commissioner of Income Tax versus ZTE Corporation, and the interest liability under Section 234B was decided by following Director of Income Tax versus GE Package Power Corporation Inc. Consequently, the Revenue's appeals were dismissed.

What were the facts?

This appeal by the Revenue challenges the order of the Income Tax Appellate Tribunal (ITAT) concerning the assessment years 2008-2009 and 2010-2011. The Revenue sought to tax amounts received by the assessee, NetApp B.V., from the sale of software and subscription fees. The Revenue had invoked Section 9(1)(vii) of the Income Tax Act, 1961, read with Article 12 of the Indo-Dutch Double Taxation Avoidance Agreement. The ITAT had previously ruled on similar issues for the same assessee in other assessment years, and the High Court had dismissed the Revenue's appeals in those instances. The present appeal also concerns the applicability of interest liability under Section 234B, which the ITAT had decided by following a prior High Court ruling.

What were the issues?

1. Whether the amounts received by the assessee from the sale of software and subscription fees are taxable in India under Section 9(1)(vii) read with Article 12 of the Indo-Dutch Double Taxation Avoidance Agreement. The Revenue contended that these amounts constitute royalty and are taxable. The assessee argued that the sale of software and subscription fees do not fall within the definition of royalty as per the DTAA. The High Court had previously decided this issue in favor of the assessee for other assessment years, relying on the decision in Commissioner of Income Tax versus ZTE Corporation (2017) 392 ITR 80. 2. Whether interest liability under Section 234B is applicable. The Revenue likely argued for its applicability. The ITAT had followed the decision in Director of Income Tax versus GE Package Power Corporation Inc. (2015) 370 3 ITR 65, which presumably supported the assessee's position on this issue.

Which sections of the Income-tax Act were involved?

Section 9(1)(vii),Section 234B,Section 260A

AI-generated summary — verify with the full judgment below

ITA 1186/2017 Page 1 $~4 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 1186/2017 THE COMMISSIONER OF INCOME TAX - INTERNATIONAL TAXATION -2 ..... Appellant Through : Mr Puneet Rai, Advocate. versus NETAPP B.V. ..... Respondent Through CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A.K.CHAWLA O R D E R % 22.12.2017 1. The common question of law urged in this Appeal is in respect of taxability of sale of software and subscription amount received by the Assessee. 2. The Revenue had brought to tax these amounts under Section 9(i)(vii) read with Article 12 of the Indo-Dutch Double Taxation Avoidance Agreement. This Court had, by relying upon Commissioner of Income Tax versus ZTE Corporation, (2017) 392 ITR 80 for other years, i.e. Assessment Years 2008-2009 and 2010- 2011, rejected the Revenue’s Appeals under Section 260A in ITA 884-885/2017(Commissioner of Income Tax – International Taxation-2 versus NET APP BV) decided on 23.10.2017.

ITA 1186/2017 Page 2 3. The other question urged for both years is with respect to the applicability of interest liability under Section 234B; the Income Tax Appellate Tribunal (ITAT) had followed Director of Income Tax versus GE Package Power Corporation Inc. (2015) 370 3 ITR 65. 4. Following order in ITA 884-885/2017(dated 23.10.2017), it is held that no substantial question of law arises as both the issues urged in these appeals are covered by the said two decisions. 5. The Appeal is accordingly dismissed. S. RAVINDRA BHAT, J A.K.CHAWLA, J DECEMBER 22, 2017 ‘Sn’

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