Income Tax Appellate Tribunal Mumbai Intech Billing Ireland, Mumbai vs Ddit (It) Rg 3(1), Mumbai on 8 January, 2018 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH "L", MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI MANJUNATHA, HON'BLE ACCOUNTANT MEMBER ITA NO.1535/MUM/2014 (A.Y: 201011) Intec Billing Ireland v. The Assistant Director of Income Tax C/o S.R.B.C & Associates LLP (International Taxation), 14th Floor, The Ruby, Range 3(1), Scindia House, 29 Senapati Bapat Marg, Mumbai 400 038 Dadar (West) Mumbai 400 028 PAN No: AADCA 7890 E (Appellant) (Respondent) Assessee by : Shri M.P. Lohia Shri Nikhil Tiwari Department by : Shri Samuel Darse Date of Hearing : 10.10.2017 Date of Pronouncement : 08.01.2018 ORDER PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Disputes Resolution Panel I, Mumbai dated 11.12.2013 for the Assessment Year 201011. 2 ITA NO.1535/MUM/2014 (A.Y: 201011) Intec Billing Ireland 2. The following grounds are raised by the assessee: "1. erred in assessing the total income of the Appellant at ₹.11,37,32,921/ as against ₹.6,64,72,920, reported by the Appellant. In its revised Return of Income ('ROI'). Supply of off the shelf software treated 'Royalty': 2. erred in holding that receipts from Reliance Industries Limited ('RIL') of ₹.4,72.60,001 on account of supply of off the shelf software to be 'royalty' under Section 9(l)(vi) of the Act and Article 12 of the Double Taxation Avoidance Agreement between India and Ireland ('India Ireland Tax Treaty). 3. should have appreciated that in view of beneficial provisions of IndiaIreland Tax Treaty, the, impugned payment towards supply of off the shelf software, would not be regarded as 'Royalty' under the IndiaIreland Tax Treaty and hence not chargeable to tax in India. Non granting of credit of Tax Deducted at Source ('TDS'): 4. erred in not granting the entire credit of TDS amounting to ₹.1,23,61,709/, disregarding specific direction of the Hon'ble DRP. Levying interest under Section 234B and 234C of the Act: 5. Erred in levying interest amount to ₹.51,17,981/ and ₹.3,22,384/ under sections 234B and 234C of the Act, respectively. 6. Should have appreciated the fact that as the Appellant is nonresident and its entire income is liable to tax deduction at source, interest under Section 234B and 234C of the Act cannot be levied. 7. alternatively should have appreciated the fact that as taxes were deducted on the receipts, question of payment of advance tax does not arise. Initiating Penalty Proceedings under Section 271(1)(c) of the Act: 8. erred in initiating penalty proceedings under Section 271(1)(c) of the Act. 3 ITA NO.1535/MUM/2014 (A.Y: 201011) Intec Billing Ireland 3. Briefly stated the facts are that, Intec Ireland (the assessee) is a company incorporated in Ireland and is a tax resident of Ireland. During the AY 201011 Intec Ireland had interalia supplied billing software to Reliance Industries Limited (Reliance') for the purpose of billing their customers. A Copy of Software License Agreement dated 26 February 2002 is placed at Page Nos. 133 to 151 of the paper book. The Software License Agreement has been originally entered into between Reliance and Intec Billing, America a group company of the assessee, earlier known as ADC Software System. America. The said agreement has been subsequently assigned in entirety to Intec Ireland the assessee vide assignment letter dated 08 April 2005. A copy of the assignment letter is placed at Pages 152 and 153 of the paper book. The assessee has licensed the same software to Reliance under the same agreement which was subsequently assigned to the assessee. 4. According to the assessee the software licensed to Reliance under the software licence agreement is an 'off the shelf'/Shrink Wrapped' software which assists telecom companies in billing in an efficient, profitable billing operation with strong focus on customers and Revenue management. The software licensed by assessee is standard products already developed and made available to other customers.