ASSISTANT COMMISSIONER OF INCOME TAX 6(1)(1), MUMBAI, MUMBAI vs. CMA CGM AGENCIES INDIA PRIVATE LIMITED, PUNE

This appeal filed by the Revenue is directed against the order dated 14.12.2023 passed by LD. Commissioner of Income Tax (Appeals)-13, Pune [‘CIT(A)’] for the assessment year 2014-15.

The Revenue has raised the following grounds of appeal :-

The facts of the case, in brief, are that the assessee is a domestic company and is engaged in the business of shipping agents. The original return of income was filed on 28.11.2014 declaring total income of Rs.8,74,84,750/-. Thereafter, the return was revised on 16.02.2016 declaring total income at Rs.10,88,26,320/-. The return was processed u/s 143(1) of the IT Act. Subsequently, the case was selected for scrutiny and notices u/s 143(2) and 142(1) were issued to the assessee. During the course of assessment proceedings, it was found by the Assessing Officer that the assessee has debited an amount of Rs.9,06,53,035/- as software maintenance charges but TDS was not made on this payment. It was further found by the Assessing Officer that an amount of Rs.43,91,965/- was incurred towards leased line/ data link charges but TDS was also not deducted on this payment. The Assessing Officer enquired about the reason for non-deduction of TDS on both the above payments. In response, it was submitted by the assessee that TDS is not required to be made on above payment of Rs.9,06,53,035/- being payment made to parent company and it FTS and Rs.43,91,965/- payment towards leased line charges/ data link charges also does not attract liability of TDS. Being unsatisfied with the reply of the assessee, the Assessing Officer disallowed both these expenses & completed the assessment on an income of Rs.20,38,71,320/- against the income returned by the assessee at Rs.10,88,26,320/-. The above assessed income includes disallowance u/s 40(a)(ia) of Rs.9,50,45,000/- (Rs.9,06,53,035/- + Rs.43,91,965/-).

Being aggrieved with the above assessment order, an appeal was preferred before ld. CIT(A), who vide impugned order dated 14.12.2023 allowed the appeal of the assessee, by following the order passed by the ITAT, Pune Benches, Pune in assessee’s own case for the assessment year 2012-13 dated 02.01.2020.

Being aggrieved with the above decision of deletion of Rs.9,06,53,035/- & Rs.43,91,965/- by Ld. CIT(A), the Revenue is in appeal before this Tribunal and has only challenged the deletion of Rs.9,06,53,035/- which was disallowed by the AO u/s 40(a)(ia) of the IT Act.

During the course of hearing, ld. DR submitted before us that the order passed by ld. CIT(A) is not correct and requested to treat the payment of Rs.9,06,53,035/- as fees for technical services, TDS and consequently requested to set-aside the order passed by Ld CIT(A) & confirm the order passed by the Assessing Officer.

On the other hand, ld. AR submitted before us that the issue involved in this appeal is squarely covered by the orders passed by the Co-ordinate Bench of this Tribunal in the case of assessee itself for assessment years 2012-13, 2013-14, 2015-16 and 2017-18. It was submitted by ld. AR that identical disallowance/ addition was made in assessee’s own case for Asstt Year 2012-13, 2013-14, 2015-16 & 2017-18 & the same was deleted by ITAT Pune Benches, Pune by order dated 02-01-2020 passed in for Asstt Year 2012-13. The above order was again followed by the Co-ordinate Bench of this Tribunal in the case of assessee itself for assessment year 2013-14 in ITA No.1454/PUN/2023. It was therefore requested by ld. AR of the assessee that the matter is already covered in favour of assessee and accordingly it was requested to dismiss the appeal filed by the Revenue.

We have heard ld. Counsels from both the sides and perused the material available on record. We find that in the case of assessee itself for assessment years 2012-13, identical additions Co-ordinate Bench of this Tribunal has already decided the issue in favour of the assessee in by observing as under :- “38. The ld. CIT(A) has discussed this aspect on page 22 onwards of the impugned order. He found that the word `or’ and not the word `and’ has been used between the clauses (a) and (b) of Article 12(4) of the DTAA with Portuguese. He held the case of the assessee to be falling under clause (a). Thus it is seen that the ld. CIT(A) admitted that the clause (b) is not attracted to the facts of the instant case because CMA CGM, France did not make available any technical knowledge, experience or skill etc. to the assessee. In so far as clause (a) is concerned, it talks of any payment for services which are ancillary and subsidiary to the application or enjoyment of the right, property or information for which payment described in paragraph 3 is received. It is only if the services ancillary to the enjoyment of right, property or information as per para 3 are availed that they will fall within the ambit of `fees for included services’. Para 3, in turn, defines the term ‘Royalties’ to mean : `payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work ….’. To this extent, the definition of `royalties’ as per the DTAA with Portuguese is similar to that given under section 9(1)(vi) of the Act in as much as it also talks of `consideration for the use or, or the right to use, any copyright of literary, artistic or scientific work..’ . While discussing the Royalty aspect under the Act supra, we have held that payment for use of software made by the assessee to CMA CGM, France does not satisfy the requirement of `use of, or the right to use, any copyright of software’. Once it is held that para 3 of Article 12 is not attracted, as a sequitur, the application of clause (a) of para 4 of Article 12 of the DTAA with Portuguese would automatically be ousted, thereby making the amount of Rs.6.85 crore paid by the assessee to CMA CGM, France for use of LARA, DIVA and Ocean software as immune from taxation in India. Going by the beneficial provision in the DTAA vis-à-vis the Act, it is held that there was no requirement on the part of the assessee to deduct tax at source which should have called for any disallowance u/s.40(a)(i) of the Act. We, therefore, order to delete the addition.”

We also find that the above order was again followed by the Co-ordinate Bench of this Tribunal in the case of assessee itself for assessment year 2013-14 in wherein