THE COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION)-1, NEW DELHI vs. EY GLOBAL SERVICES LTD

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ITA/447/2022HC DelhiDLHC01041690202211 November 2022Author: HON'BLE MR. JUSTICE MANMOHAN,HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA4 pages
AI SummaryDismissed

What did the High Court hold?

The Delhi High Court held that the issue involved in the present appeals was no longer res integra, as the Court had already set aside the AAR order dated August 10, 2016, in favour of the assessee in the case of EY Global Services Limited (supra). Consequently, the ITAT had rightly remanded the cases to the Assessing Officer to pass orders following the High Court's judgment in EY Global Services Limited (supra). Although a review petition against the Supreme Court's decision in Engineering Analysis (supra) was pending, there was no stay on that judgment. Therefore, in view of the judgments of the Supreme Court in Kunhayammed and Others vs. State of Kerala and Another, (2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1, the present appeals were covered by the High Court's judgment in EY Global Services Limited (supra). The Court concluded that no substantial question of law arose for consideration and dismissed the appeals. However, it clarified that the orders passed in these appeals would abide by the final decision of the Supreme Court in the review petition.

What were the facts?

The appeals were filed by the Commissioner of Income Tax (International Taxation)-1, New Delhi (Revenue) against a common order dated June 1, 2019, passed by the Income Tax Appellate Tribunal (ITAT). The ITAT had set aside the orders of the CIT(A) which had confirmed assessment orders passed pursuant to an Authority for Advance Rulings (AAR) decision dated August 10, 2016. The assessment years involved were 2014-15 and 2015-16. The Revenue contended that the ITAT erred in following the Delhi High Court's decision in the assessee's own case, EY Global Services Limited vs Asst. CIT & Anr. [2021 SCC Online Del 5254], which in turn followed the Supreme Court's judgment in Engineering Analysis Centre of Excellence Private Limited vs CIT [2021 SCC Online SC 159]. The Revenue argued that the facts in the present case, concerning income for the use of an online interactive platform, were distinguishable from the facts in Engineering Analysis, which dealt with income from the sale/transfer of software.

What were the issues?

1. Whether the income derived from the use or right to use an online interactive platform constitutes royalty under the Income Tax Act, 1961, and the relevant Double Taxation Avoidance Agreement (DTAA), considering the precedent set in the assessee's own case and the Supreme Court's decision in Engineering Analysis. Assessee's Contentions: The assessee argued that the ITAT correctly followed the Delhi High Court's decision in EY Global Services Limited (supra) and the Supreme Court's decision in Engineering Analysis (supra). The assessee's petitions were allowed by the High Court, and the ITAT rightly remanded the cases to the Assessing Officer to pass orders in line with this judgment. The assessee also noted that while a review petition against Engineering Analysis was pending before the Supreme Court, there was no stay on that judgment. Revenue's Contentions: The Revenue contended that the ITAT erred in following the High Court's decision in EY Global Services Limited (supra) because the issue in the present case (income for use/right to use an online interactive platform) is distinguishable from the issue in Engineering Analysis (income from sale/transfer of software). The Revenue stated that it had not accepted the decision in EY Global Services Limited (supra) and intended to file an SLP, and had also preferred a review petition against Engineering Analysis (supra).

Which sections of the Income-tax Act were involved?

Section 92E

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$~548 & 551 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 444/2022 THE COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION)-1, NEW DELHI ..... Appellant Mr.Puneet Rai, Sr.Standing Counsel for the Revenue. versus EY GLOBAL SERVICES LTD. ..... Respondent Mr.Kamal Sawhney with Mr.Prashant Meharchandani, Mr.Nishank Vashistha, Mr.Arun Bhadauria and Mr.Nikhil Agarwal, Advocates. + ITA 447/2022 THE COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION)-1, NEW DELHI ..... Appellant Mr.Puneet Rai, Sr.Standing Counsel for the Revenue. versus EY GLOBAL SERVICES LTD ..... Respondent Mr.Kamal Sawhney with Mr.Prashant Meharchandani, Mr.Nishank Vashistha, Mr.Arun Bhadauria and Mr.Nikhil Agarwal, Advocates.

CORAM: HON'BLE MR. JUSTICE MANMOHAN HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA O R D E R % 11.11.2022 C.M.No.47818/2022 in ITA No.444/2022 C.M.No.47910/2022 in ITA No.447/2022 Exemption allowed, subject to all just exceptions. Accordingly, the applications stand disposed of. ITA No.444/2022 ITA No.447/2022 Present income tax appeals have been filed challenging the common order dated 01st June, 2019 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA 7019/DEL./2019 for the Assessment Year 2014-15 & ITA 7010/DEL./2019 for the Assessment Year 2015-16. Learned counsel for the appellant states that the ITAT has erred in following the decision of this Court in assessee’s own case in EY Global Services Limited vs Asst. CIT & Anr. [2021 SCC Online Del 5254] vide which assessee’s petitions were allowed following the Supreme Court judgement in Engineering Analysis Centre of Excellence Private Limited CIT [2021 SCC Online SC 159]. He states that the ITAT has erred in not appreciating the fact that the issue raised in Engineering Analysis (supra) was whether income from sale/transfer of software is royalty, whereas the issue involved in the present case is whether the income for use/right to use of an online interactive

platform is royalty, therefore, the facts of present case are distinguishable with the facts involved in Engineering Analysis (supra). He also states that the decision of this Court in EY Global Services Limited (supra) has not been accepted and that the Revenue will be filing SLP against the same. He further states that the Revenue has not accepted the decision in Engineering Analysis (supra) and has preferred a review petition against the same. Admittedly the present appeals have been filed against the impugned order vide which the ITAT has set aside the orders of the CIT (A) confirming assessment orders passed in pursuance to the decision of AAR dated 10th August, 2016. Therefore, the issue involved in the present cases is no longer res integra, since this Court has already set aside the AAR order dated 10th August, 2016 by holding in favour of the assessee. Consequently, the ITAT rightly remanded the cases to the Assessing Officer to pass the orders following the judgement of this Court in EY Global Services Limited (supra). Though the review petition in Engineering Analysis (supra) is pending before the Supreme Court, yet there is no stay of the said judgment till date. Hence, in view of the judgments passed by the Supreme Court in Kunhayammed and Others vs. State of Kerala and Another, (2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1, the present appeals are covered by the judgment passed by this Court in EY Global Services Limited (supra). Accordingly, no substantial question of law arises for consideration in the present appeals and the same are dismissed. However, it is clarified that

the orders passed in the present appeals shall abide by the final decision of the Supreme Court in the aforesaid review petition. MANMOHAN, J MANMEET PRITAM SINGH ARORA, J NOVEMBER 11, 2022 KA

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