THE COMMISSIONER OF INCOME TAX - INTERNATIONAL TAXATION-2 vs. NORTEL NETWORK INDIA INTERNATIONAL INC.

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ITA/417/2018HC DelhiDLHC01075401201811 April 2018Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE A. K. CHAWLA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arises in this appeal. This decision is based on the Court's previous rulings on the first three questions concerning the existence of a Permanent Establishment (PE), the applicability of the India-US Double Taxation Avoidance Agreement (DTAA), and the characterization of payments for embedded software as royalty. The Court explicitly referenced its order dated 20.03.2018 in related appeals (ITA No.322/2018, 326/2018 and 330/2018) and the ruling in the case of 'Commissioner of Income Tax, International Taxation-2 vs. ZTE Corporation', (2017) 392 ITR 80. Consequently, the appeal was dismissed. No specific issue was left undecided; rather, the Court found no substantial question of law to warrant interference.

What were the facts?

The appeal by the Commissioner of Income Tax - International Taxation-2 (Revenue) challenges a decision concerning Nortel Network India International Inc. (assessee). The assessment year(s) are not explicitly stated for this specific appeal but the issues relate to previous assessment years. The Revenue is appealing an order passed by an authority below, challenging the deletion of certain additions made to the assessee's income. The core dispute revolves around the existence of a Permanent Establishment (PE) in India, the applicability of the India-US Double Taxation Avoidance Agreement (DTAA), and whether payments for embedded software constitute royalty. The High Court notes that these issues were considered for previous assessment years in related appeals.

What were the issues?

The Tribunal had to decide the following questions of law: 1. Whether a Permanent Establishment (PE) of the respondent existed in India. 2. Whether the assessee's income was covered by the India-US Double Taxation Avoidance Agreement (DTAA), irrespective of the PE finding. 3. Whether outgoings towards embedded software constituted royalty within the meaning of Indian law. Assessee's Contentions: The judgment does not record specific contentions made by the assessee. Revenue's Contentions: The Revenue urged the aforementioned questions. The judgment does not detail the specific arguments or authorities relied upon by the Revenue for these contentions.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

$~88 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 417/2018 & CM APPL. 13878/2018 THE COMMISSIONER OF INCOME TAX - INTERNATIONAL TAXATION-2

..... Appellant

Through: Mr. Ruchir Bhatia, Advocate.

versus

NORTEL NETWORK INDIA INTERNATIONAL INC. ..... Respondent

Through: Ms. Manasvini Bajpai, Advocate.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A. K. CHAWLA

O R D E R %

11.04.2018

The first question urged by the Revenue in its appeal under Section 260-A of the Income Tax Act, 1961 (hereafter ‘the Act’) is with respect to the existence of a Permanent Establishment (PE) of the respondent in India; the second, notwithstanding the answer to the first, is with respect to the coverage of the assessee’s income by the Indio-US Double Taxation Avoidance Agreement (DTAA); the third and the fourth questions are whether the outgoings towards embedded software constitute royalty within the meaning of the expression of the Indian law.

These questions were considered for a previous Assessment Year 2006-07 and the other years in ITA No.322/2018, 326/2018 and 330/2018. This Court, following the previous rulings on the first three

questions and the ruling in the case of ‘Commissioner of Income Tax, International Taxation-2 vs. ZTE Corporation’, (2017) 392 ITR 80, by its order dated 20.03.2018 had stated that no question of law arises. For the same reasons, it is held that no question of law arises in this appeal, which is consequently dismissed along with the pending application.

S. RAVINDRA BHAT, J

A. K. CHAWLA, J APRIL 11, 2018 nn

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