|
II. Direct Taxes Case Law:
1. Elektrobit Automotive GmbH Vs. Deputy DIT, I.T.A. No. 678/Del/2013, Date of Pronouncement: 22.05.2018, ITAT - Delhi
Issue
Whether the amount received by grant of user rights in a copyright software qualify as “royalty income”.
Held: Yes
Brief Facts
The assessee is a company incorporated in and a tax resident of
Germany. It is engaged in supplying software products, software
consultation programming services etc. for the automotive industry. As
per analysis of Indo German DTAA, business income of assessee was not
taxable in India while royalty income attracted a tax rate of 10%.
During AY 2009-10, assessee earned receipt from grant of user rights in
its software from Bosch India which was declared as business income by
the assessee. The Ld.AO treated the income as ”royalty” and made the
addition vide assessment order u/s 143(3) r/w s.144C of Income Tax Act.
Being aggrieved, the assessee has filed an appeal before the Hon’ble
ITAT.
Held
The Hon’ble ITAT held that license agreement as entered by the
assessee itself points out the word ”royalty”. Moreover, considering the
facts of case, that license terms obliges the licensee to furnish to
assessee monthly statement of supplied products to customers using his
software and consequent raising of invoice on that basis, signifies the
commercial exploitation of the licensed software and licensee fee for
the same shall be treated as “royalty”. Therefore, the appeal was held against the assessee and favour of revenue.
Cases Referred
1. DIT v. Infrasoft Ltd. [2013] 39 ITR 88.9(HC).
(Please click here for judgment)
2. Bank Note Paper Mill India Pvt. Ltd. Vs. ITO, I.T.A. Nos.
165 & 166/Bang/2018, Date of Pronouncement: 23.05.2018. ITAT -
Bangalore
Issue
Whether interest earned on funds which are to be deployed for
construction of plant in future be treated as Income in the hands of
assessee.
Held:- No
Brief Facts
The assessee was in process of setting up of plant at Mysore for the
purpose of manufacturing of currency paper for which it received share
capital from Govt.of India and RBI. The funds, not immediately required,
were invested in deposits with bank on which interest income of Rs.
21,52,81,724 was earned by the assesse and consequently reduced from
preoperative expenses incurred on construction of the plant. The Ld.AO
brought to tax the interest income under “Income u/h Other Sources”. The
decision was upheld by first appellate on appeal by the assessee. Being
aggrieved, the assesse has filed an appeal before the Hon’ble ITAT.
Held
The Hon’ble ITAT by placing reliance on the decision of Hon’ble
Supreme Court in case of Bokaro Steel Ltd. held that where the interest
receipt is directly connected or incidental to working of construction
of assessee plant, it should be reduced from the capital cost of project
and not be treated as income. Statement provided by assesse in form of
Annexure proves the inextricable link between the interest income earned
and project expenditure. The hon’ble ITAT observed that the decision of
the Hon’ble Supreme Court in Tuticorin Alkali Chemicals &
Fertilizers Ltd. 227 ITR 1721 was distinguished by the Hon’ble Supreme
Court in the case of Bokaro Steel Ltd. (236 ITR 315) wherein it was held
that the ratio of decision in Tuticorin Alkali Chemicals &
Fertilizers Ltd. is not applicable where interest receipt is directly
connected with or incidental to working of construction of the
assessee’s plant. Therefore, the appeal was held in favour of assessee and against the revenue.
Cases Referred
1. Tuticorin Alkali Chemicals & Fertilisers Ltd. Vs. CIT (227 ITR 1721) (SC)
2. Bokaro Steel Ltd. (236 ITR 315) (SC).
3. CIT vs. Karnal Co-operative Sugar Mills Ltd. (243 ITR 2) (SC).
4. CIT v. Karnataka Power Corporation, (247 ITR 268) (SC).
(Please click here for judgment)
|
New User? 
Subscribe Now