TRANS UNION LLC,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX 4(1)(2), MUMBAI

The assessee is a company incorporated in United States of America (USA) and is a tax resident of USA. The assessee is part of the group i.e. engaged in the business of providing credit information and information management services. The assessee also provides data / insights and information to health consumers and businesses make informed decisions. The income of the assessee included consideration received towards licensing of software, provision of software development services, provision of software support services, etc. to its AEs in India. The total receipts of the assessee for the years under consideration included receipts from software licensing charges from its Indian AEs as tabulated below – Receipts during the year (in INR) S. No Nature of software AY 2016-17 AY 2017-18 AY 2018-19 AY 2019-20 1 iCRS platform - 10,46,01,496 2 Adviser platform - 8,26,88,104 10,28,83,694 1,65,55,352 3 Risk Scoring - 31,34,50,000 - - 4 Decision center 12,12,15,182 3,98,34,211 2,31,24,927 6,24,52,643 Total 12,12,15,182 43,59,72,315 12,60,08,621 18,36,09,491 to 1405 & 1441/Mum/2025 Trans Union LLC 4. Since the assessee was not clear about the taxability of the receipts towards software licensing on a conservative basis the assessee has offered the said receipts to tax in India in accordance with section 9(1)(vi) of the Act. The assessee's return for the year under consideration was processed under section 143(1) of the Act. Subsequently the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. (supra) has decided the issue of taxability of receipts towards software licences. In view of the said judgment of the Hon'ble Supreme Court the assessee made an application for rectification under section 154 of the Act on the ground that as per the above judgment the benefit of tax treaty is available to the assessee and that the impugned receipts are not taxable in India as per Article 12 of the India-USA DTAA. The Assessing Officer (AO) rejected the petition for rectification stating that the AO cannot revise or review his own orders and that the decision of the Hon'ble Supreme Court cannot be considered as "Record" within the meaning of section154 of the Act. The assessee filed further appeal before the CIT(A) against the order under section 154 of the Act. The CIT(A) dismissed the appeal of the assessee by holding that “6. Findings and Decision: The order under appeal, grounds of the appellant and facts of the case have been examined. Keeping in view the factual and legal underpinnings, I am of the following opinion as discussed below in detail. 6.1 The factual matrix is that the Appellant filed its return of income and at that time had voluntarily offered the receipts from the software licenses to tax. The return was processed by the CPC and intimation under section 143(1) of the Act was issued. 6.2 The Appellant applied for online rectification of the 143(1) intimation and orders under section 154 r.w.s. 143(1) of the Act was passed (latest one dated 20.03.2019). It is against this order that the Appellant filed a rectification application under section 154 before the AO [on account of pronouncement of the decision of the Apex Court in Engineering Analysis (supra)] and made a claim for the refund.

The assessee is in appeal before the Tribunal against the order of the CIT(A). The ld. AR at the outset submitted that the receipts towards software licence by the assessee are not taxable in India as per the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. (supra). The ld. AR further submitted that the subsequent decision of the Hon'ble Supreme Court is to be treated as a mistake apparent on record within the meaning of section 154 of the Act and in this regard drew our attention to Circular No. 68 (F.NO. 245/17/71-A&PAC) dated 17.11.1971. The extract of the Circular is as under: to 1405 & 1441/Mum/2025 Trans Union LLC “SECTION 154 . RECTIFICATION OF MISTAKES 899. Mistakes apparent from records - Whether can be treated as such on the basis of subsequent decision of Supreme Court 1. The Board are advised that a mistake arising as a result of a subsequent interpretation of law by the Supreme Court would constitute "a mistake apparent from the records" and rectificatory action under section 35/154 of the 1922 Act/the 1961 Act would be in order. It has, therefore, been decided that where as assessee moves an application under section 154 pointing out that in the light of a later decision of the Supreme Court pronouncing the correct legal position, a mistake has occurred in any of the completed assessments in his case, the application shall be acted upon, provided the same has been filed within time and is otherwise in order. Where any such applications have already been rejected and the assessee files fresh applications within the statutory time limit, the same may also be treated on par with the applications which may either be pending or received after the issue of this circular.

The Board desire that any appeals or references pending on the point at issue may please be withdrawn. Circular: Ne 68 [FN. 245/17/71-A&PAC], dated 17-11-1971”

Accordingly, the ld. AR argued that the revenue is bound by the above Circular and therefore the lower authorities are not right in rejecting the claim of the assessee. The ld AR made a detailed written submission raising the following contentions – a. Binding and retrospective nature of applicability of a decision rendered by the Hon’ble Supreme Court – The Hon’ble Supreme Court decision in case of Engineering Analysis (supra) is binding in nature and applicable retrospectively and constitutes mistake apparent from record b. Assessment Order/ intimation not in line with subsequent decision of Hon’ble Supreme Court constitute a mistake apparent from record which is amenable by way of rectification – The CBDT Circular are binding on the tax authorities and therefore the learned AO/ CIT(A) ought to have accepted the rectification application filed by the assessee c. Subsequent Supreme Court decision is akin Retrospective amendment in Act and both applicable retrospectively and thus, rectification of order in such to 1405 & 1441/Mum/2025 Trans Union LLC cases is valid - Applying similar analogy to decision of subsequent supreme court, it is clear that it will operate from retrospective date and it has to be given effect even though it is not available at the time of passing of order and thereby appeal of the Assessee should be allowed. d. Mistake apparent from record includes taxpayer’s own mistake (whether of law of fact) which is required to be rectified - The Appellant had offered on conservative basis the software receipts to tax. However, based on the subsequent Hon’ble Supreme Court decision in case of Engineering Analysis (supra) the Appellant has filed rectification application since it is mistake apparent from record and is required to be rectified. e. Tax authorities must compute correct income of the assessee, even if the same is wrongly offered to tax by the Appellant in his return of income – The assessee had already offered the software receipts to tax and the tax authorities must compute the correct income to tax and thus, the tax authorities must consider the principle laid down by the Hon’ble Supreme Court in case of Engineering Analysis (supra) 7. The ld AR in support of each of the above contentions relied on various judicial precedence the copies of which are submitted as legal paper book and the same is taken on record. The ld. AR argued that the decision of the Co-ordinate Bench in the case of DCIT vs. ANI Integrated Services Ltd. (MA No. 167/Mum/2023 arising out of dated 29.05.2024) which is confirmed by the Hon'ble Bombay High Court holding that subsequent decision of the Hon'ble Supreme Court cannot be the reason for recalling the order under section 254(2) is not applicable in assessee's case. In this regard the ld AR submitted a table distinguishing the facts in ANI Integrated Services Ltd., (supra) with that of the assessee. The ld. AR further argued that in the said decision the reason quoted by the Co-ordinate Bench by placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Telecom Ltd. [2022] 440 ITR 1 (SC) is that the powers under section 254(2) are there only to rectify any mistake apparent on record and that the subsequent decision of a higher forum by itself to 1405 & 1441/Mum/2025 Trans Union LLC cannot be a ground for review. The ld. AR also argued that in assessee's case there is no review or revision by the AO since in the intimation under section 143(1) of the Act the AO has accepted the impugned receipt as income of the assessee as declared in the return of income. Therefore, the ld. AR submitted that assessee's case is clearly distinguishable. The ld. AR further submitted that in all the decisions relied on by the Co-ordinate Bench in ANI Integrated Services Ltd. (supra) the issue was review of orders passed by the Tribunal whereas in the present case the assessee is seeking to rectify a mistake which is arising as a result of Hon'ble Supreme Court decision and falls well within the purview of under section 154 as per the Circular and the various judicious precedents

The ld. DR on the other hand submitted that the assessee itself has offered the income to tax and has paid tax on the same for all the four AYs under consideration. The ld DR further submitted that though the assessee is aware of the issue pending before the Hon'ble Supreme Court, chose to offer the income to tax. The ld DR also submitted that the claim made by the assessee now stating that the income as not taxable is a fresh claim which cannot be entertained under section 154 and that the assessee should have filed the revised return of income under section 139(5). The ld AR argued that Circular No. 68 as relied on by the ld. AR is to correct a mistake that has occurred in any completed assessments and in assessee's case intimation under section 143(1) cannot be considered as an assessment. The ld DR further argued that the statutory provisions were sweepingly changed w.e.f. 01.04.1989 introducing the system of summary assessment (processing of returns) under section 143(1). Accordingly, the ld. DR submitted that the Circular is not applicable to assessee's case where the returns are processed under section 143(1) and even under the scrutiny assessment the impugned issue has not been examined. The ld. DR further submitted that the applicability of the decision of the Hon'ble Supreme Court in the to 1405 & 1441/Mum/2025 Trans Union LLC case of Engineering Analysis Centre of Excellence (P) Ltd. (supra) to the impugned receipts towards software licenses in assessee's case needs factual examination which is beyond the purview of section 154 of the Act. Accordingly, the ld. DR argued that the lower authorities have correctly rejected the claim of the assessee.

The ld. AR in counter arguments submitted that the Circular No. 68 is very much applicable for the reason that the Circular states that subsequent decision of the Hon'ble Supreme Court would constitute a "mistake apparent on record" which is the assessee's case. The ld. AR further brought to our attention that the CIT(A) in subsequent AYs has allowed the claim of the assessee that the software licenses as not taxable in India by placing reliance on the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. (supra) and therefore the claim that the impugned issue needs examination which is outside the purview of section 154 of the Act is not correct. The ld. AR prayed that in any case the issue may go back to the AO for limited purpose of examining the impugned receipts towards software licenses whether not taxable in India as per the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. (supra).

From the plain reading of the above provisions it is clear that for applying the provisions of section 154 there should be a "(i) mistake, (ii) apparent and (iii) from the records". The "mistake" can be a mistake of law or a mistake of fact i.e. Mistakes that are typically simple, obvious errors like clerical or arithmetical mistakes or the misapplication of clear legal provisions, which can be corrected without debate or interpretation. It is a settled position that the mistakes arising from conscious decisions, deliberate interpretations, or logical reasoning will not fall within the scope of Section 154. For the mistake to be “apparent” it needs to be conspicuous, obvious or self-evident mistake and not something which can be established as a mistake by a long-drawn process of reasoning / examination. The plain meaning of the word "apparent" is that it must be something which appears to be so ex facie and it is incapable of argument or debate. The word "record" refers to the documents and information that the revenue is obligated to examine while addressing mistakes in orders. Section 154 does not provide for any restriction to the to 1405 & 1441/Mum/2025 Trans Union LLC scope of authority's review and the authorities are empowered to examine the entire record, which may include all related documents and materials relevant to the rectification of the mistake. In other words the power to rectify the mistakes is not within the confines of the original order, but by considering all relevant materials within the record. The following observations of the Hon'ble Supreme Court in the case of M/s. Deva Metal Powders Pvt. Ltd vs Commissioner, Trade Tax, U.P. (Appeal (civil) 5607 of 2007) dated 04.12.2007) on the issue of rectification mistake apparent on record under Uttar Pradesh Sales Tax Act, 1948 are relevant in the context of the Act also –

From the perusal of the above observations of the Hon'ble Supreme Court, the following propositions arise – (i) The ‘mistake’ in the order sought to be rectified must exist and the same must be apparent from the record. (ii) “Mistake” means to take or understand wrongly or inaccurately; to make an error in interpreting; it as an error, a fault, a misunderstanding, a misconception. “Apparent” means visible; capable of being seen, obvious; plain. It means “open to view, visible, evident, appears, appearing as real and true, conspicuous, manifest, obvious and seeming.” (iii) A mistake which can be rectified is one which is patent, which is obvious and shows discovery and is not dependent or at argument or elaboration. Though a mistake capable of being rectified is not confined to clerical or arithmetical mistake, it does not however, cover any mistake which may be discovered by a complicated process of investigation, argument or proof. The decision on a debatable point of law or fact or failure to apply the law to a set of facts which remains to be investigated cannot be corrected by way of rectification. (iv) Rectification of an order does not mean obliteration of the order originally passed and its substitution by a new order. (v) Where an error is far from self evident, it ceases to be an apparent error and, therefore, not capable of being rectified. to 1405 & 1441/Mum/2025 Trans Union LLC 13. We will now proceed to consider the facts in assessee's case before us in the light of the above elaborated position of law pertaining to section 154 of the Act. The primary contention before us is that the CBDT has issued a circular 68 of 1971dated 17.11.1971 wherein it is stated that the subsequent decision of the Supreme Court would constitute a mistake apparent of record. The ld AR during the course of hearing took us through various decision to submit that the Courts have been consistently holding that the subsequent decision of the Hon'ble Supreme Court would be a mistake apparent on record. From the perusal of the various decisions relied on by the ld AR we notice that the following propositions have been laid down by the courts –

Accordingly for the purpose of adjudication, what we are required to examine in assessee's case whether the mistake has arisen in the AO's order in assessee's case consequent to the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. (supra) i.e. taxing the impugned receipts towards software license in the hands of the assessee is an apparent mistake that can be decided without further investigation or collecting any fresh material. For this purpose it is important to understand the propositions laid down by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. (supra) with regard to taxability of receipts towards software licenses. The Hon'ble Supreme Court examined the four types of transaction while rendering the decision – (i) Indian end-users purchase software from foreign suppliers (ii) Indian entities, as distributors/resellers, purchase software from foreign suppliers and resell to Indian end-users (iii) Foreign entities, as distributors/resellers, purchase software from foreign suppliers and resell to Indian distributors/ end-users (iv) Software affixed onto hardware and sold as integrated unit by foreign suppliers to Indian distributers/end-users 16. The summary of the principles laid down are – (i) Between the DTAA and the Act the provisions can only be applied to the extent they are more beneficial to the assessee. to 1405 & 1441/Mum/2025 Trans Union LLC (ii) Tax Deduction at Source under Section 195 of the Act can only be made if a nonresident is liable to pay tax under the charging provision in Section 9 read with Section 4 of the Act and the DTAA. (iii) As per amended Sections 14(b)(ii) and 52(1)(aa), making of copies or adaptation of a computer program in order to utilise the said computer program for the purpose for which it was supplied, or make back-up copies does not constitute infringement of Copyright and does not amount to parting with copyright. (iv) The right to reproduce would entail parting of copyright and whereas right to use does not entail any copyright. (v) The End User License Agreements (EULAs) have to be read as a whole to ascertain the true nature of a transaction to understand whether it is a sale of goods i.e. sale of a physical object which contains an embedded computer program (vi) Explanation 4 to Section 9(1)(vi) of the Act cannot have retrospective application.

Based on the above principles the Hon'ble Supreme Court held all four categories as not taxable in India. Thus it is clear that in the decision of the Hon'ble Supreme Court laid down the principles with regard to the taxability of the four categories of software licenses under the provisions of the Act as well as under the applicable DTAA. The assessee placed heavy reliance on the decision of the Hon'ble Karnataka High Court in the case of Citrix Systems Asia Pacific Proprietary Ltd (supra) where it is held that there is a mistake apparent on record in taxing the receipts towards software license as a result of the the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd. (supra). According to the ld AR the facts are identical to that of the assessee and therefore the lower authorities erred in rejecting the rectification petition of the assessee. On careful consideration of the facts pertaining to the said case, we notice that in the said case, the Authority for Advance Ruling originally held that the software receipts of the assessee were taxable in the hands of the said assessee and the assessee under protest included the to 1405 & 1441/Mum/2025 Trans Union LLC said software receipts as income. The impugned decision of AAR ruling was subsequently reversed by the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd. (supra). Therefore the assessee sought the order of the lower authorities to be rectified based on the decision of the decision of the Hon'ble Supreme Court and in that regard applied clarification provided in the CBDT circular no.68. The Hon'ble High Court while considering the said plea held that "Hon'ble Apex Court has expressly overruled the order of Advance Rulings Authority in respect of the Citrix Systems i.e., petitioner and consequently, taxes paid by the petitioner under protest deserves to be refunded by rectifying the income tax returns filed by the petitioner pursuant to the order of Advance Rulings Authority". In other words, the Hon'ble Supreme Court has specifically considered the issue pertaining to the assessee and has held the receipts towards software license as not taxable and accordingly the Hon'ble High Court directed the revenue to rectify the mistake. To this limited extend we agree with the argument of the ld. DR that facts in assessee’s case are distinguishable.

The assessee also placed reliance on the decision of the Hon'ble Andhra Pradesh High Court in the case of IV. B.V.K. Seshavataram vs CIT [1995] 124 CTR 332 (Andhra Pradesh). On perusal of the said decision we notice that in the said case the assessee has made refund claim of tax on excess dividends under section 154 based on the decision of Hon'ble Bombay High Court in the case of Khatau Makanji Spg. &Wvg. Co. Ltd. v. CIT [1956] 30 ITR 841. The said claim was not allowed by the revenue but the Hon'ble Bombay High Court directed the revenue to grant refund. By the time the assessee's case travelled up to Hon'ble Supreme Court, the decision in the case of Khatau Makanji Spg. &Wvg. Co. Ltd (supra) was affirmed by the Hon'ble Supreme Court. Therefore in assessee's case it was held to be a mistake apparent on record. to 1405 & 1441/Mum/2025 Trans Union LLC 19. A combined perusal of the above decision and also the other decision relied on by the assessee we notice that the basic premise for holding that the subsequent decision results in a mistake is that it is a rectifiable mistake which is apparent from the record that is self-evident and does not involve collecting any fresh records or complicated process of investigation, argument or proof. In other words for a mistake to be apparent on record falling within the purview of section 154 it need to be conspicuous, obvious or self-evident mistake and not something which can be established as a mistake by a long-drawn process of reasoning / examination. Accordingly in the present case, if the principles laid down by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. (supra) can be applied without any long drawn process of reasoning or analysis, or collecting fresh material then we will not have any hesitation to hold that there is a mistake apparent on record which needs to be rectified.

In this regard the ld AR brought to our attention the facts pertaining to subsequent AYs in assessee's case. The ld AR submitted that the assessee in subsequent AYs i.e. AY 2020-21 and 2021-22 has adopted the position that the identical receipts arising out of the same license agreements as not taxable. The ld AR further submitted that the AO did not accept the said position and the matter travelled to the CIT(A). The ld AR also submitted that CIT(A) after reviewing the detailed submissions of the assessee held that the receipts are not chargeable to tax as royalty under the India-USA DTAA by placing reliance on the decision in Engineering Analysis (supra). Our attention in this regard was drawn to the following observations of the CIT(A) in the order for AY 2021-22 dated 31.03.2024 – “Basis the above, given that the Apex Court’s decision in Engineering Analysis (supra) applies to the Appellant’s case, and further given that the Appellant is a tax to 1405 & 1441/Mum/2025 Trans Union LLC resident of USA and therefore eligible to invoke the favorable provisions of the India-USA DTAA, I hold the following:  The receipts earned by the Appellant from the software licenses are not chargeable to tax as ‘royalty’ as per the provisions of the India-USA DTAA  The nature of software licenses and rights granted by the Appellant as squarely covered factually by the Hon’ble Supreme Court’s decision in its decision of Engineering Analysis (supra) Accordingly, the grounds of the Appellant in Ground No. 1 to 5 are allowed in favour of the Appellant in its entirety.” (emphasis supplied) 21. From the above observations we notice that the CIT(A) has factually examined the nature software licenses and has applied the principles laid down by the Hon'ble Supreme Court in the case of Engineering Analysis (supra) to hold that it is not taxable in AY 2021-22. The claim of the assessee that the receipts towards software licenses for the years under consideration are part of the same license agreement and may not require any further investigation based on any new record needs to be established so that taxing the identical receipts in the years under consideration becomes a mistake apparent on record as a result of the decision of the Hon'ble Supreme Court in the case of Engineering Analysis (supra). We would also like to mention here that in terms of Article 265 of the Constitution of India, no tax is to be levied or collected except by the authority of law and it is trite law that true income is to be assessed so that there is no unjust enrichment.

In view of the above discussion and considering the facts we are remitting the appeals back to the CIT(A) for the limited purpose of understanding whether the facts pertaining to the impugned receipts are already examined as part of the records so that applying the decision in the case of Engineering Analysis (supra) would be within the purview of section 154 of the Act. Accordingly the CIT(A) is directed to to 1405 & 1441/Mum/2025 Trans Union LLC allow the claim raised under section 154 as per Circular No.68 if the facts pertaining to the years under consideration are identical to AY 2021-22 which has already analysed and do not require any long drawn reasoning or analysis to arrive at a decision. Needless to say that the assessee be given a reasonable opportunity of being heard. It is ordered accordingly.

The ld. DR during the course of hearing argued that the jurisdictional High Court has upheld the decision of the Co-ordinate Bench in the case of ANI Integrated Services Ltd. (supra) that no review u/s. 254(2) is permissible barred on subsequent decision of the Hon’ble Supreme Court. Accordingly the ld. DR submitted that section 154 being similar, the said ratio should be applicable in the present case also. The ld. AR on the other hand presented a detailed table distinguishing the facts with assessee’s case. Considering that circular No. 68, clarified only with respect to section 154 that the subsequent decisions of the Hon’ble Supreme Court as a mistake apparent on record which is directly applicable to assessee’s case and the circular being binding with respect to rectification u/s. 154. We see merit in the submission the above decision of the Co-ordinate Bench is distinguishable.

In result the appeals for AY 2016-17 to AY 2019-20 are allowed for statistical purposes.