Partha Sarathi Chaudhury ORDER
R.S. Syal, Vice President
1. These two appeals by the assessee are directed against the final assessment orders dated 20-11-2017 and 14-09-2018 passed by the Assessing Officer (AO) u/s. 147 r.w.s. 144(1)(b) r.w.s. 144C(13) in relation to the assessment year 2009-10 and u/s. 144C(13) r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') in relation to the assessment year 2014-15. Since a common issue is raised in these appeals, we are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience.
A.Y. 2009-10 :
2. The only issue raised on merits is against the taxability of Rs. 2,42,02,485/- as income from 'Royalty' within the meaning of section 9(1)(vi) of the Act r.w. Article 12 of the Double Taxation Avoidance Agreement between India and USA (hereinafter also called as 'DTAA'). Briefly, the facts of the case are that the assessee is a company registered in, and a tax resident of the United States of America. No return of income was filed for the year under consideration. The AO initiated the re-assessment proceedings by recording that a receipt of Rs. 2.42 crore as a consideration for sale of Software/License relating to Development of Software from M/s. Honeywell Technology Solutions Lab Pvt. Ltd. escaped assessment as it was in the nature of Royalty chargeable to tax in India. Apart from raising objections against and challenging the initiation of re-assessment proceedings, the assessee, on merits, relied on Article 12 of the DTAA to contend that the amount received from M/s. Honeywell Technology Solutions Lab Pvt. Ltd. was not in the nature of Royalty. Taking cognizance of Explanation 4 to section 9(1)(vi), the AO held that the receipt was in the nature of income, chargeable to tax in India not only under the Act but also under the DTAA. In reaching this conclusion, the AO relied on certain judgments upholding his point of view. It is this taxability of Rs. 2.42 crore as income from Royalty by the AO in the final assessment order that has been assailed before the Tribunal.
3. We have heard both the sides through Virtual Court and gone through the relevant material on record. Whereas the case of the assessee is that the receipt from M/s. Honeywell Technology Solutions Lab Pvt. Ltd. is `Business Profits' covered under Article 7 of the DTAA, the Revenue has set up a case that it is in the nature of Royalties under the Article 12. The assessee is an American company and hence governed by the DTAA. Article 12 of the DTAA defines the term 'Royalties' in para 3 as under:
The term 'royalties' as used in this Article means:
(a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and
(b) payment of any kind received as consideration for the use of, or the right to use, the industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 or Article 8.
4. The above paragraph clearly indicates........