Income Tax Appellate Tribunal - Delhi
Microsoft Regional Sales Corporation, vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : E : NEW DELHI
BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER
AND
SHRI K.D. RANJAN, ACCOUNTANT MEMBER
ITA Nos.1780, 1782 & 1784/Del/2008
Assessment Years : 2001-02, 1999-2000 & 2000-01
ITA Nos.1751, 1783, 1779 &1781/Del/2008
Assessment years : 2002-03, 2003-04, 2004-05 & 2005-06
Asstt. Director of Income-tax, Vs. M/s Microsoft Regional Sales
Circle 3 (1), Corpn., C/o S.R. Botliboi & Co.,
Intl. Taxation, 2nd Floor, the Capital Court LSC
New Delhi. Phase-III, Old Palam Marg,
Munirka,
New Delhi.
PAN : AADCM1638A
ITA No.4588/Del/2010
Assessment Year : 2006-07
M/s Microsoft Regional Sales Vs. Asstt. Director of Income-tax,
Corpn., Circle 3 (1),
C/o S.R. Botliboi & Co., Intl. Taxation,
Golf View Corporate Tower, New Delhi.
B, Sector 42, Sector Road,
Gurgaon.
PAN : AADCM1638A
(Appellant) (Respondent)
Assessee by : Shri Rajan Vora, CA, Mrs. Priti Goel,
Advocate, Shri Ravindranath & Shri
Manish Khurana, CA's
Revenue by : Shri Ashwani Mahajan, CIT, DR
ORDER
PER BENCH:
ITA Nos.1751, 1783, 1779 & 1781/Del/2008 and ITA Nos.1780, 1782 & 1784/Del/2008 are appeals filed by the revenue. ITA No.4588/Del/2010 is an appeal filed by the assessee. ITA Nos.1751, 2 ITA Nos.1780, 1782 & 1784/Del/2008, ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 1783, 1779 & 1781/Del/2008 are appeals filed by the department relating to quantum appeals. ITA Nos.1780, 1782 & 1784/Del/2008 are appeals filed by the revenue against deletion of concealment penalty and ITA No.4588/Del/2010 is the appeal filed by the assessee in quantum proceedings. Grounds of appeal by the revenue in quantum proceedings relate to Assessment Year 2002-03, 2003-04, 2004-05 and 2005-06. The grounds of appeal raised in all these appeals are identical and read as under:-
"1. In the facts and circumstances of the case and in law the ld. CIT (A) erred in holding that the A.O. had wrongly taxed the royalty income in the hands of the assessee.
2. In the facts and circumstances of the case and in law the ld. CIT (A) erred in holding that the license fee collected by the assessee can be taxed only in the hands of M/s Gracemac Corpn. and not in the hands of the assessee.
3. In the facts and circumstances of the case and in law the ld. CIT (A) erred in holding that the proceeds received on distribution of software in India is a business profit.
4. In the facts and circumstances of the case and in law the ld. CIT (A) failed to appreciate that copyright is a collection of various rights including the right to distribute to the public.
5. In the facts and circumstances of the case and in law the ld. CIT (A) failed to appreciate that the amount received by the assessee is consideration for transfer of distribution right in respect of copyright in computer program.
6. In the facts and circumstances of the case and in law the ld. CIT (A) failed to appreciate that the amount received by the assessee is royalty as per Explanation 2 (v) to section 9(1) (vi) of the IT Act, 1961.
7. In the facts and circumstances of the case and in law the ld. CIT (A) failed to understand that the amount received by the assessee is consideration for the use of or the right to use of any copyright of a "Literary work" which includes computer programs, tables and compilation including computer databases.
8. In the facts and circumstances of the case and in law the ld. CIT (A) failed the understand that the amount received by the 3 ITA Nos.1780, 1782 & 1784/Del/2008, ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 assessee is "Royalty" as per article 12 (3)(a) of the Double Taxation Avoidance Agreement (DTAA) entered between India and USA.
9. The order of the CIT (A) be set-aside and that of A.O. be restored.
10. The appellant prays for leave to add, alter, amend or vary the Grounds of appeal at or before the time of hearing."
2. Quantum appeal filed by the assessee is in respect of Assessment Year 2006-07. Grounds of appeal relates to an addition made on account of royalty of an amount of ` 993,19,78,224/- which amount has been assessed in the hands of the assessee as royalty against the returned nil income filed by the assessee. The said addition has been upheld by the DRP and order in conformity has been passed by the Assessing Officer against which the assessee has filed an appeal raising various grounds which read as under:-
"1. That on facts and in law, while passing the assessment order, the Assistant Director of Income Tax, Circle 3(2), New Delhi ('Learned AO') has erred in computing the total income of the Appellant at INR 9,931,978,224 as against 'nil' income returned by the Appellant and therefore, the order of the Learned AO is bad in law and needs to be annulled.
2. Tax on revenue alleged 'as royalty' under the Income-tax Act, 1961 ('the Act') 2.1 That on facts and in law, the Hon'ble Dispute Resolution Panel ('DRP') has erred in confirming the variations proposed by the Learned AO in the draft assessment order as against the Returned Income by holding that the revenue earned by the Appellant from the sale of Microsoft Retail Products to the Indian Distributors is taxable in the hands of the Appellant as royalty under the provisions of section 9(1 )(vi) of the Act. Accordingly, the order passed by the Learned AO on the basis of DRP's directions is also erroneous both in law and on facts.
2.2 That on facts and in law, the Hon'ble DRP has erred in confirming the variations proposed by the Learned AO in the draft assessment order, wherein it has been held that:4 ITA Nos.1780, 1782 & 1784/Del/2008,
ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 2.2.1 the payment made by the Indian distributors is towards the use of copyright and not for the purchase of copyrighted article and therefore, is royalty under section 9(1 )(vi) of the Act;
2.2.2 alternatively, consideration received for use of software can also be held to have been received towards use of 'information developed out of scientific experience', literary or scientific work, patented article, 'scientific knowledge, invention, secret formula or process' and, hence, taxable as royalty under the Act.
2.2.3 second proviso to section 9(1 )(vi) of the Act excludes such royalty payments from the purview of section 9(1 )(vi) of the Act only when the computer software is supplied by a non-resident manufacturer along with computer or computer based equipment under any approved scheme.
Accordingly, the order passed by the Learned AO on the basis of DRP's directions is also erroneous both in law and on facts.
3. That on facts and in law, the Hon'ble DRP has erred in confirming the conclusion drawn by the Learned AO in the draft order that the provisions of section 115A of the Act characterizes the income from sale of software (deemed to be income of Appellant) as 'Royalty' under the Act. Accordingly, the order passed by the Learned AO on the basis of DRP's directions is also erroneous both in law and on facts.
4 Tax on revenue alleged as 'Royalty' under the Double Taxation Avoidance Agreement between India and US ('India US tax treaty') 4.1 That on facts and in law, the Hon'ble DRP has erred in confirming the variations proposed by the Learned AO in the draft assessment order as against the Returned Income by holding that revenue earned by the Appellant from sale of Microsoft Retail Products to distributors in India is royalty under Article 12 of the India US tax treaty. Accordingly, the order passed by the Learned AO on the basis of DRP's directions is also erroneous both in law and on facts.
4.2 That on facts and in law, the Hon'ble DRP ,and Learned AO failed to appreciate that the sale of software is sale of 'Copyrighted Article' and not 'Copyright' in Microsoft software and accordingly, the revenue from sale of software is in the nature of business income not taxable under Article 7 of India US tax treaty in the absence of the 'Permanent Establishment' of the Appellant in India.
5 ITA Nos.1780, 1782 & 1784/Del/2008,ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 4.3 That on facts and in law, the Hon'ble DRP has erred in confirming the conclusion drawn by the Learned AO that inclusion of word 'computer software' in the definition of royalty in some of the treaties recently executed by India is clarificatory in nature and that the concept of taxability of software is already embedded in the definition of royalty, given in old treaties. Accordingly, the order passed by the Learned AO on the basis of DRP's directions is also erroneous both in law and on facts.
5 That on facts and in law, the Hon'ble DRP and Learned AO have erred in not passing a speaking order by not considering the binding jurisdictional precedents relied upon by the Appellant, which squarely apply to the facts of the Appellant's case.
6 That on facts and in law, the Hon'ble DRP and Learned AO have erred in disregarding OECD commentaries, US IRS regulations on classification of transactions involving computer software, International tax commentaries, relevance of OECD & UN model convention, International Revenue rulings, while interpreting tax treaties.
7 That on facts and in law, the Hon'ble DRP has erred in confirming the conclusion drawn by Learned AO by placing reliance on the appellate order passed under section 250 of the Act, in Appellant's own case for Assessment Years 1999-00, 2000-01 and 2001-02, thereby completely disregarding the factual legal position. Accordingly, the order passed by the Learned AO on the basis of DRP's directions is also erroneous both in law and on facts.
8 That on facts and in law, the Hon'ble DRP has erred in confirming the conclusion drawn by Learned AO by distinguishing from decisions of the Hon'ble Supreme Court in case of Associated Cements Companies Ltd (2001) [AIR 862] and Tata Consultancy Services Ltd (271 ITR 401). Accordingly, the order passed by the Learned AO on the basis of DRP's directions is also erroneous both in law and on facts.
Factual inaccuracies:
9 That on facts, the Hon'ble DRP and Learned AO have failed in comprehending the facts of the Appellant's case and erroneously observed the following:
(a) That the Appellant is engaged in licensing of software through independent distributors under EULA;
(b) Reproducing from submissions of the Appellant purportedly filed on 5 November 2008 whereas the reproduced portions 6 ITA Nos.1780, 1782 & 1784/Del/2008, ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 were never filed by the Appellant. He completely failed in taking cognizance of the submissions actually filed by the Appellant for the relevant assessment year;
(c) That the Appellant has agreed that payment is made only for right to use software;
(d) That the copyright of software remains with the Appellant, however, it allows the use of copyright to the Indian distributors;
(e) That the license of mere usage is sort of a lease of a software and thus, the software has been merely given on rental;
(f) The Appellant possesses right over the Intellectual Property Right (IPR) in the software which it is further licensing for distribution to the end users in India;
(g) That the Appellant possesses right in copyright, which it can enforce in India, if any violation of such right is noticed by it;
(h) That the source of revenue derived by the Appellant is from licensing of software from utilization of the license granted to the users in India;
(i) That delivery of the product to distributors outside India does not affect taxability of the receipt, as per section 9(1 )(vi) of the Act, the place of utilisation/ exploitation of the software is important;
(j) That the Appellant has shown the receipts from companies in India as 'royalty' and has paid taxes.
10 That on facts and in law, the Hon'ble DRP has erred in confirming the conclusion drawn by Learned AO by relying on the decisions of Hon'ble Supreme Court and Hon'ble High Courts which are on completely different facts and questions of law therein. Accordingly, the order passed by the Learned AO on the basis of DRP's directions is also erroneous both in law and on facts.
11 Without prejudice to the above grounds, the Hon'ble DRP and the Learned AO have erred in holding that toe revenue earned by the Appellant from sale of products is 'Royalty' under the Act/India US tax treaty, whereas the AO of Gracemac has already taxed the same in the assessment of Gracemac for AY 2006-07, which has resulted in double taxation of same sourced income.
7 ITA Nos.1780, 1782 & 1784/Del/2008,ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 12 Without prejudice to the above grounds, the Hon'ble DRP has erred in confirming the conclusions drawn by Learned AO in levying interest under section 2348 of the Act while completely disregarding the provisions of the Act and the judicial precedents.
The above grounds of appeal are mutually exclusive and without prejudice to each other. The appellant craves leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the appeal.
The appellant prays for appropriate relief based on the said grounds of appeal."
3. ITA Nos.1782, 1784 and 1780/Del/2008 are appeals filed by the revenue in respect of assessment years 1999-2000, 2000-01 and 2001-02 respectively against the deletion of penalty levied u/s 271(1)(c). The grounds of appeal for all these years are identical and read as under:-
"1. In the fats and circumstances of the case and in law the learned CIT (A) erred in deleting the penalty of Rs.6,45,31,340/- imposed by the Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961.
2. The order of the CIT (A) be set aside and that of A.O. be restored.
3. The appellant prays for leave to add, alter, amend or vary the grounds of appeal at or before the time of hearing."
4. The basic facts as found mentioned in the consolidated order passed by the CIT (A) in respect of assessment years 1999-2000, 2000- 01 and 2001-02 are as under:-
"4. Facts of the case The Appellant is a company incorporated in US and is a wholly owned subsidiary ("WOS") of Microsoft Corporation, USA ("MS Corp") with a branch in Singapore. The operating structure of the distribution model along with the flow of distribution rights 8 ITA Nos.1780, 1782 & 1784/Del/2008, ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 from MS Corp to Appellant through Gracemac Corporation, USA ("Gracemac") and Microsoft Operations Pte Limited, Singapore ('MO") was explained by appellant as follows:
Gracemac is a company incorporated under the laws of USA on September 23, 1994 having its registered office at 300 South Fourth Street, Suite 1100, Las Vegas, Nevada, USA-89109. Gracemac is a WOS of MS Corp. MS Corp entered into a Parent Subsidiary agreement ("PSA"') with Gracemac on January 1, 1999 wherein MS Corp had granted Gracemac the:
a) exclusive license to manufacture Microsoft products
b) exclusive license to distribute the products so manufactured directly to retailers or to MS Corp or to subsidiaries of MS Corp; and
c) exclusive right to license any third party to directly grant customers the right to reproduce Microsoft software products for internal use.
In lieu of the abovementioned rights, Gracemac has issued its entire share capital to MS Corp.
In pursuance of the rights granted under the PSA, Gracemac has entered into a License Agreement with MO, (a company incorporated under the laws of Singapore and a WOS of MS Corp), on January 1, 1999 wherein Gracemac has granted MO the:
a) non-exclusive license to manufacture Microsoft products in Singapore;
b) non-exclusive license to distribute the products so manufactured to retailers or to MS Corp or to subsidiaries of MS Corp; and
c) non-exclusive right to license or sublicense the right to reproduce Microsoft software products to certain end users (large account customers) for their internal use.
In lieu of the abovementioned rights, Gracemac earns royalty from MO. The royalty was computed on the basis of the net selling price of Microsoft products manufactured by MO and distributed to retailers, MS Corp or subsidiaries of MS Corp.
4.1 In turn, MO has entered into a non-exclusive distribution and inter-company services agreement ("distribution agreement") with the Appellant, wherein Appellant was appointed as a distributor of Microsoft products manufactured by MO. Appellant 9 ITA Nos.1780, 1782 & 1784/Del/2008, ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 was given the right to distribute Microsoft products in Asia (with restrictions in China, Korea and Taiwan), Japan, South East Asia and the South Pacific. The assessee did not have any right to copy, adapt etc. the software. The distribution agreement specifies that MO would ship the products to such addresses (of the assessee or its approved distributors) as specified by the appellant. Further, except for Australia and Japan, the title of the products has been agreed to be transferred to Appellant in Singapore which evidences the fact that delivery takes place outside India.
4.2 MO had agreed to sell the products to Appellant at a price equal to 95% of the price at which Appellant sells the product to approved distributors or other MS Corp affiliates. Pursuant to the distribution agreement, the assessee had entered into agreements with various distributors in "approved territories". The distributors had a right to distribute the products in India. The products supplied by the assessee are often stocked by distributors and then supplied against specific orders. The products were delivered by the assessee to distributors "ex warehouse" from the warehousing facility nominated by the assessee. Further, the distributor sold the products to a reseller in India who in turn sold it to a consumer/ distributor sells directly to consumers. The resellers/ consumers did not have the right to make copies of the software for "commercial exploitation". The distributor was not liable to pay the assessee only upon sale by the distributor to the reseller/ consumer. It was liable to pay the assessee even if it was not able to sell the products to the reseller/ consumer.
4.3 According to appellant the income earned from the sale of computer software to independent distributor in India was in the nature of business profit in the years under consideration and was not taxable in India as appellant did not have a PE in India under provisions of Double Taxation Avoidance Agreement between India and USA (in short DTAA). It was also contested that royalty income from sale of software could not be taxed in hand of appellant which was only distributor of the software of MS Corp and copyrights of these software were owned by MS Corp not by appellant. For these reasons it was claimed that business income of appellant was not taxable in India for the years under consideration accordingly, appellant did not file returns of income for the years under consideration. Later on, the AO issued notice to the appellant for the years under consideration u/s 148 of the Act. In response to notice appellant filed return of income declaring Nil income for the years under consideration stating above reasons for non taxability of its business profit in India. Later on, the cases of appellant for the years were selected for scrutiny by issue and service of notice U/S .143(2). During the course of scrutiny assessment the A.O 10 ITA Nos.1780, 1782 & 1784/Del/2008, ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 assessed the income of the appellant for the years under consideration at US$ 1,01,75,235, US$ 5,87,64,099 and US$ 8,35,51,260 under the head 'Royalty' against the Nil income disclosed by the appellant in the returns of income filed for the years under consideration for following grounds:
a) The software falls under the category 'secret formula or process' and the software when installed on a computer respond to every instruction in a specific way. Accordingly, the total revenue received by the appellant from sale of software in India was royalty.
b) The appellant was taxable in India under provisions of Act and the DTAA as income from sale of software was in the nature of royalty u/s 9(1)(vi) and article 12 of DTAA."
5. Accordingly, aforementioned income was assessed in the hands of the assessee as royalty upon which the penalty has been levied by the Assessing Officer as follows:-
Assessment Year 1999-2000 ` 6,45,31,340/- Assessment Year 2000-2001 ` 38,30,83,161/- Assessment Year 2001-2001 ` 58,18,92,771
6. The aforementioned additions were also upheld by learned CIT (A) against which a further appeal to the Tribunal was filed and the said appeals have been decided by the Tribunal along with the appeals in the case of M/s Gracemac Corpn. vs. Asstt. Director of Income-tax, International Tax Division, Circle 2 (1), New Delhi and appeals of M/s Microsoft Corporation vs. Asstt. Director of Income-tax vide order dated 26th October, 2010 which is since reported as 132 TTJ 257 (Del); 8 ITR (Trib.) 522 (Del); 42 SOT 550 (Del). Though it has been held by the Tribunal that the said amount was in the nature of royalty, but it was held that the said amount cannot be assessed in the hands of the present assessee and it has been held to be taxable in the hands of the Gracemac Corpn. The relevant observations of the Tribunal while holding so are contained in para 128 and 132 and it will be relevant to 11 ITA Nos.1780, 1782 & 1784/Del/2008, ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 reproduce the said observations of the Tribunal with regard to taxability or otherwise of the aforementioned amount in the hands of the assessee:-
"128. From the above it is evident that MRSC was also authorized to reproduce certain products and distribute the same to end users through the distributors appointed by MRSC. MRSC vide agreement dated 3rd May, 1999 was authorized to copy the marketing programmes in object code form from the master copy provided by Microsoft Operations (MO) on to either diskettes or such approved media and prepare the product documentation and packaging based on the material provided and approved by MO. We would like to mention here that source code and object code have copyright.
Therefore, MRSC also got right to use copyright in computer products from sub-licencee (MO). Each product package would include a pre-approved diskettes label attached to the diskettes and MS Corp. standard End User Licence Agreement for the territory. From the above it is evident that MRSC is not simply a distributor appointed by Microsoft Operations, but was authorized to reproduce certain computer programmes. The End User Licence Agreement was to be in the standard format of Microsoft Corporation. Article 3.2 also provides that the marketing programme released by the distributor will be approximately equivalent in quality of the software product manufactured by MS Corp. The Microsoft Operation also provided up-dated master copies of marketing programmes as and when the same were up-dated by MS Corp. Since the Microsoft Corporation has granted the right to reproduce and distribute Microsoft Products in lieu of Shares to Gracemac and no further royalty is payable by Gracemac and also the End User Licence Agreement is to be in the standard format of Microsoft Corporation, the Microsoft Corp. is under obligation to sign EULA on behalf of Gracemac. Thus it has to be logically concluded that Microsoft Corporation has signed the EULA on behalf of Gracemac to whom exclusive rights to manufacture and distribute Microsoft products have been granted otherwise the products would have been rendered useless and no revenue could have been earned by anyone in the supply chain. Microsoft Corporation has devised a scheme under which EULA has to be signed by Microsoft Corp. and not by Gracemac Corporation. Hence assessee cannot be permitted to take a plea that since EULA has been signed between end users and Microsoft Corp. no licence was granted by Gracemac and consequently the royalty payments will not be chargeable to tax in the hands of Gracemac. The agreements entered into between group companies have drafted in such a way which give an impression that 12 ITA Nos.1780, 1782 & 1784/Del/2008, ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 Gracemac Corporation has no connection with the granting of licence. The real transaction of the granting of the licence in respect of copyrights in computer programmes have camouflaged by entering into various agreements between Microsoft and Gracemac; Gracemac and Microsoft operations; Microsoft operation and MRSC; and MRSC and Indian distributors but when real intention is gathered from the in-depth reading of the agreements, the matter becomes crystal clear. Since we have held that end users have made payments in respect of the granting of licence in respect of copyright in computer programmes the payments made by end-users as consideration for the same will be taxable in the hands of Gracemac.
132. As discussed above, MRSC reproduced certain software products and distributed the same through chain of distributors in India. Therefore, the very appointment of distributors by MRSC in India, had business connection in India and the portion of income earned by MRSC perhaps could have been chargeable to tax as business income under section 9(1)(i) of the Act. But since the assessing officer as well as the ld. CIT (Appeals) has chosen to assess the entire receipts under the head 'royalty' in the hands of MRSC also, in our considered opinion, MRSC cannot be taxed again on the same income by way of royalty for exploitation of same rights which had been assessed in the hands of Gracemac, otherwise it would result in double taxation. Therefore, we delete the addition in the hands of MRSC for all the three years."
7. The question involved in the quantum appeals filed by the revenue is whether learned CIT (A) is right in deleting the addition made by the Assessing Officer on account of aforementioned royalty. The learned AR of the assessee has referred to the aforementioned decision of the Tribunal wherein on similar facts, it has been held by the Tribunal that such royalty cannot be assessed in the hands of the assessee as it will tantamount to assess the same income which has been assessed in the hands of Gracemac and it has been held by the Tribunal that the aforementioned amount of royalty cannot be assessed in the hands of the assessee as the same is taxable in the hands of the Gracemac. Therefore, it is the case of the learned AR that for all the aforementioned years in which learned CIT (A) has granted 13 ITA Nos.1780, 1782 & 1784/Del/2008, ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 relief to the assessee in quantum, will be covered by the aforementioned decision and, hence, the order of the CIT (A) for deletion of the aforementioned amount should be upheld. As against that it is the case of the learned DR that royalty has rightly been assessed in the hands of the assessee and learned CIT (A) has wrongly deleted the same.
8. In the penalty proceedings, it is the case of the learned AR that it has been held by the Tribunal that income is not assessable in the hands of the assessee. Therefore, he pleaded that there is no question of levy of concealment penalty on the assessee. He submitted that learned CIT (A) though has deleted the penalty on merits and, therefore, it is the case of the learned AR that penalty has rightly been deleted by the CIT (A) and his order should be upheld.
9. In respect of appeal filed by the assessee, it is the case of the learned AR that the facts for Assessment Year 2006-07 are same and on the basis of similar facts, ld. DRP has held that the assessee is assessable in respect of royalty. He submitted that the order of DRP is not in conformity with the decision of the Tribunal in assessee's own case and the aforementioned decision of the Tribunal will be equally applicable for that year also and, therefore, the addition made by the department for that year should be deleted.
10. On the other hand, it is the case of the learned DR that the addition has rightly been made by the Assessing Officer and his order should be confirmed.
11. We have carefully considered the rival submissions in the light of the material placed before us. It has been held by the Tribunal in aforementioned decision that though the amount constitute royalty, but the same is not assessable in the hands of the present assessee.
14 ITA Nos.1780, 1782 & 1784/Del/2008,ITA Nos.1751, 1783, 1779 &1781/Del/2008 & ITA No.4588/Del/2010 One of us (AM ) is party to the aforementioned decision. No case has been made out by the department to differ from the earlier decision which has been found to be delivered on the basis of similar facts. The facts for all the years are similar and this fact is not disputed by the revenue. Therefore, respectfully following the aforementioned decision of the Tribunal, the relevant observations of which has already been reproduced, we hold in the quantum appeals that the additions have rightly been deleted by learned CIT (A) and we decline to interfere in his order. Similarly, for penalty appeals, as income has not been held to be assessable in the hands of the assessee, we find no justification in levy of penalty, therefore, the order of the CIT (A) deleting the penalty is upheld on the ground that as the income itself is not assessable in the hands of the assessee according to the aforementioned order of the Tribunal, there is no question of levy of penalty.
12. So far as it relates to assessee's appeal, the facts being similar, adopting the similar view which has been adopted by the Tribunal in earlier decision in the case of the assessee, we find no justification in assessability of aforementioned royalty in the hands of the assessee, therefore, the appeal of the assessee is allowed.
13. To sum up, in the result, all the departmental appeals are dismissed and the appeal filed by the assessee is allowed in the manner aforesaid.
The order pronounced in the open court on 30.11.2011.
Sd/- Sd/-
[K.D. RANJAN] [I.P. BANSAL]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated, 30.11.2011.
15 ITA Nos.1780, 1782 & 1784/Del/2008,
ITA Nos.1751, 1783, 1779 &1781/Del/2008 &
ITA No.4588/Del/2010
dk
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar,
ITAT, Delhi Benches
16 ITA Nos.1780, 1782 & 1784/Del/2008,
ITA Nos.1751, 1783, 1779 &1781/Del/2008 &
ITA No.4588/Del/2010
Date of Dictation 28.11.2011
Date of Presentation of the draft 29.11.2011
order to the Member
Date of return from the Bench
after pronouncement &signing
Date of dispatch of the order to
the Bench