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Income Tax Appellate Tribunal, “I”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM
आदेश / O R D E R PER R.C.SHARMA (A.M):
These are the appeals filed by the assessee against the order of DRP-1, Mumbai dated 02/08/2017 for A.Y.2013-14 in the matter of order passed u/s.143(3) r.w.s. 144C(13) of the IT Act, 1961. 2. Common grievance of the assessee in both the years relate to taxability of receipts towards sale of software products as royalty under Explanation-2 to Section 9(i)(vi)of the IT Act.
2 320/Mum/2018 M/s. Dassault Systemes Solidworks Corporation 3. At the outset, Ld. AR placed on record series of the order of the Tribunal in assessee’s own case for the A.Y. 2003-04 order dated 15/12/2009, A.Y. 2005-06 order dated 01/04/2010, A.Y.2006-07 order dated 08/02/2012, A.Y.2007-08 order dated 31/03/2016, A.Y.2009-10 order dated 31/03/2016 and A.Y.2011-12 order dated 28/02/2017 wherein exactly similar issue was decided in favour of the assessee and it was held that receipts towards sale of software products was not liable to tax as royalty. The precise observation of the Tribunal for the A.Y.2011- 12 order dated 28/02/2017 reads as under:- ISSUE NO.1 TO 7:- 4. Issue no. 1 to 7 are interconnected, therefore, are being taken up together for adjudication. Under these issues, it is to be determined that the receipt from the sale of software products to clients in India through its distributor / reseller amounting to USD 6.05 millions is in the nature of royalty or not. The learned representative of the assessee has argued that the case of the assessee has duly been covered by the decision of the Hon’ble Income Tax Appellate Tribunal in the assessee’s own case for the A.Y.2002-03 in ITA No. 3095/Mum/2007 order dated 15th December 2009 and for the A.Y.2005-06 in ITA No.5097/Mum/2008 order dated 1st April 2010 and for A.Y.2006-07 in ITA No.3219/Mum/2010 order dated 08.02.2012 and for A.Y.2007-08 in ITA No.8721/Mum/2010 order dated 31.03.2016 and for A.Y.2009-10 in ITA No.7790/Mum/2012 order dated 31.03.2016. Therefore, in the said circumstances, the order passed by the Assessing Officer on the direction of the DRP is wrong against law and facts and is liable to be set aside and the receipt is not liable to be treated as royalty. It is also argued that when no patent right was sold however computer programs were sold which could not be taxed in view of the provision u/s.9(1) of the Act therefore in the said circumstances the amount in question is not liable to be treated as royalty. However, on the other hand, the learned representative of the department has refuted the said contentions and argued that the Hon’ble Karnataka High Court has decided the issue in favour of the revenue in the cases of CIT Vs. Synopsis International Old Ltd., 212 Taxman 0454 (Kar. HC), dated 03.08.2010, CIT V. Samsung Electronics Co. Ltd. & Others, (2011) 345 ITR 0494, Kar HC, dated 15.10.2011, CIT V. Wipro Ltd. (2011), 355 ITR 0284 (Kar) / 203 Taxman 621 (Kar.) HC, dated 15.10.2011 and CIT Vs. CGI Information Systems and Management Consultants (P) Ltd., (2014) 48 Taxmann.com 264 (Kar), dated 09.06.2014. It is also specifically argued that the Jurisdictional Tribunal in case of the DIT(IT) Vs. Reliance Infocomm Ltd. (Mum Trib) dated 06.09.2013 has followed the decision of Hon’ble Karnataka High Court in the case of CIT Vs. Synopsis International Old Ltd., 212 Taxman 0454 (Kar. HC), dated 03.08.2010 and CIT 3 320/Mum/2018 M/s. Dassault Systemes Solidworks Corporation Vs. Samsung Electronics Co. Ltd. & Others, (2011) 345 ITR 0494, Kar HC, dated 15.10.2011. Therefore, in the said circumstances the order passed by the Assessing Officer is justifiable which is not liable to be interfere with at this appellate stage. Keeping in view of the argument advanced by the parties and perused the record carefully, it is apparent on record that the said issue has been decided in favour of the assessee by the Hon’ble Income Tax Appellate Tribunal in the assessee’s own case for the A.Y.2002-03 in ITA No. 3095/Mum/2007 order dated 15th December 2009 and for the A.Y.2005-06 in ITA No.5097/Mum/2008 order dated 1st April 2010 and for A.Y.2006-07 in ITA No.3219/Mum/2010 order dated 08.02.2012 and for A.Y.2007-08 in ITA No.8721/Mum/2010 order dated 31.03.2016 and for A.Y.2009-10 in ITA No.7790/Mum/2012 order dated 31.03.2016. On appraisal of the latest order for the A.Y.2009-10, we found that the Hon’ble Income Tax Appellate Tribunal considered the order passed by the Hon’ble Karnataka High Court which was favour of the assessee. In the said order, the discussion in this regard is hereby reproduced below:- “5. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. There is nothing much that we can add to such a w ell researched and erudite order either. The decisions of non jurisdictional High Courts, in favour of the revenue on this point, have already been dealt with in this order. As to what should be done in a situation in which there are conflicting views of Hon’ble non jurisdictional High Courts and in which we do not have the benefit of guidance from Hon’ble jurisdictional High Court, we can only add, with respectful concurrence, the views expressed below by the coordinate benches: …..It will be wholly inappropriate for us to choose views of one of the High Courts based on our perceptions about reasonableness of the respective viewpoint, as such an exercise will be de facto amount to sitting in judgment over the views of the High Courts something diametrically opposed to the very basic principles of hierarchical judicial system. We have to, with our highest respect of both the Hon’le High Courts, adopt an objective criterion for deciding as to which of the Hon’ble High Court should be followed by us.
We find guidance from the judgment of Hon’ble Supreme Court in the matter of CIT Vs. Vegetable Products Ltd. 1973 CTR (SC) 177 : (1972) 88 ITR 192 (SC). Hon’ble Supreme Court has laid down a principle that “if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted”. This principle has been consistently followed by the various authorities as also by the Hon’ble Supreme Court itself. In another Supreme Court judgment Petron Engg. Construction (P.) Ltd. & Anr. Vs. CBDT & Ors. (1998) 75 CTR (SC) 20: (1989) 175 ITR 523 (SC), it has been reiterated that the above principle of law is well established and there is no doubt about that. ITA No.936/M/2015 A.Y.2011-12 8 Hon’ble Supreme Court had, however, some occasions to deviate from this general principle of interpretation of taxing statute which can be construed as exceptions to this general rule. It has been held that the rule of resolving ambiguities in favour of tax-payer does not apply to deductions, exemptions and exceptions which are allowable only when plainly authorized. This exception, lain down in Littman vs Barron 1952(2) AIR 393 and followed by apex Court in Mangalore Chemicals & Fertilizers Ltd. vs Dy. Commr. of CT (1992) Suppl. (1) SCC 21 and Novopan India Ltd. vs CCE & C 1994 (73) ELT 769 (SC), has been summed up in the words of Lord Lohen, in case of ambiguity, a taxing statute should be construed in favour of a tax-payer does not apply to a provision giving tax-payer relief in 4 320/Mum/2018 M/s. Dassault Systemes Solidworks Corporation certain cases from a section clearly imposing liability. This exception, in the present case, has no application. The rule of resolving ambiguity in favour of the assessee does not also apply where the interpretation in favour of assessee will have to treat the provisions unconstitutional, as held in the matter of State of M.P. vs Dadabhoy’s New Chirmiry Ponri Hill Colliery Co. Ltd. AIR 1972 (SC) 614. [Tej International Pvt. Ltd. Vs. DCIT (2000) 69 TTJ 650 (Del)] 52. Even otherwise, the Revenue has not cited any direct case law of the jurisdictional High Court of Bombay before us. In the case laws cited by the Revenue of the Hom’le Karnataka High Court in the matter of CIT Vs. Samsung Electronics Company Ltd.” (supra) and CIT Vs. Synopsis International Old Ltd. (supra) though a view in favour of the Revenue has been taken, but, the Hon’ble Delhi High Court in the case of DIT Vs. Infrasoft Ltd. (supra) which is a latter decision and has discussed the Samsung case also has taken the view in favour of the assessee. The Hon’ble Delhi High Court has taken the identical view favouring the assessee in the case of DIT Vs. Nokia Network (supra) and in the case of DIT Vs. Ericson A.B. (supra) also. The Hon’ble Bombay High Court in the case of the Addl. Commissioner of Sales Tax Vs/ M/s. Ankit International, Sales Tax Appeal No.9 of 2011 vide order dated 15th September, 2011 while relying upon the decision of the Hon’ble Supreme Court in the Commissioner of Income Tax V. Vegetable Product Ltd. (1973) 88 ITR 192 and in Mauri Yeast India Pvt. Ltd. Vs. Stte of U.P. (2008) 14 VST 259 (SC) : (2008) 5 S.C.C. 680 has held that, if two views in regard to the interpretation of a provision are possible, the Court would be justified in adopting that construction which favours the assessee. Reliance can also be placed in this regard on the decision of Hon’ble Supreme Court in Bihar State Electricity Board and another Vs. M/s. Usha Martin Industries and another : (1997) 5 SSC 289. We accordingly adopt the construction in favour of the assessee. [Capgemini Business Services India Ltd. Vs. ACIT (TS 100 ITAT 2016 (Mum)] 6. In view of the above discussion and having noted that there is no material difference in the facts of the case for this year vis-à-vis the facts of the assessment year 2006-07 as discussed above, respectfully following the views of the coordinate benches, we uphold the grievance of the assessee. It is, therefore, held that the receipts of Rs.19,20,14,000/- on account of receipts for software are not exigible to tax in India. The Assessing Officer is, therefore, directed to delete the impugned addition of Rs.19,20,14,000/-.
In the result, the appeal is allowed. Pronounced in the open court today on 31st day of March, 2016.”
However, the present case has been decided in view of the latest law settled by the Hon’ble Delhi High Court in case of Ericsson AV (343 ITR 470) (Del.) On appraisal of the above mentioned finding, it came into the notice that the Hon’ble Delhi High Court in case of DIT Vs. Infrasoft Ltd. 264 CTR 329 (Del.) and in case of CIT Vs. Vegetable Products Ltd. 88 ITR 192 (SC) has decided this issue in favour of the assessee. Since, the matter has also been considered by the Hon’ble Income Tax Appellate Tribunal and decided this issue in favour of the assessee specifically for the A.Y.2002-03 in ITA No. 3095/Mum/2007 order dated 15th December 2009 and for the A.Y.2005-06 in ITA No.5097/Mum/2008 order dated 1st April 2010 and for A.Y.2006-07 in ITA No.3219/Mum/2010 order dated 08.02.2012 and for A.Y.2007-08 in ITA No.8721/Mum/2010 order dated 31.03.2016 and for A.Y.2009-10 in ITA No.7790/Mum/2012 order dated 31.03.2016 in which the receipt on account of sale of Shrink-wrap software is