Payment received from Indian clients on licensing of software, where equipments were delivered at port of Sweden and company had no PE in India-Not taxable in India

Payment received from Indian clients on licensing of software, where equipments were delivered at port of Sweden and company had no PE in India-Not taxable in India

[2012] 25 taxmann.com 466 (Delhi - Trib.)

IN THE ITAT DELHI BENCH 'B'

Ericsson AB

v.

Deputy Director of Income-tax, International Taxation, Circle 1(2), New Delhi*

IT APPEAL NOS. 1735 TO 1740 (DELHI) OF 2011

[ASSESSMENT YEARS 1999-2000 TO 2004-05]

Section 9 of the Income-tax Act, 1961, read with articles 12 and 5 of DTAA between India and Sweden (Royalty) - Income - Deemed to accrue or arise in India - Assessment years 1999-2000 to 2004-05 - Assessee a Swedish company derived income from supply of telecom hardware and software - Assessee claimed that they had supplied equipment at port of Sweden and their income was not liable to tax in India as per provisions of Act or relevant DTAA - Assessee contended that issue in question stood covered in assessee's own case for assessment years 1997-98 and 1998-99 by decision of Special Bench of Tribunal in Motorola Inc. v. Dy. CIT [2005] 95 ITD 269/147 Taxman 39 (Delhi) (Mag.) (SB) - Commissioner (Appeals) however, found that adjudicating authority got some additional facts by way of evidence during survey - He held that there was change in facts as compared to facts of earlier year and, accordingly, assessee had fixed place of business in India as well as it had dependent agents in India and that revenue arising to assessee from licensing of software to Indian clients were taxable as royalty in terms of article 12 of DTAA, read with section 9(1)(vi) of Income-tax Act, 1961 - Whether since new facts/evidences gathered by Commissioner (Appeals) during survey were not put before assessee nor explanation were called from assessee to confront same, views of Commissioner (Appeals) that facts of case in relevant years were different from that of earlier years could not be accepted - Held, yes - Whether further since facts and circumstances of relevant years were same as in previous years, matter was to be decided in favour of assessee - Held, yes [In favour of assessee]

Circulars and Notifications: Notification No. GSR 705 (E), 17-12-1997

FACTS

________________________________________

Facts

• The assessee-company was incorporated in Sweden with the main business of supply of GSM Mobile Telecommunication system comprising of hardware and software to various cellular companies operation in India (ICO's).

• The income of the assessee has arisen from the following

(i) supply of telecom hardware; and

(ii) supply of software.

• The Assessing Officer held that as in preceding years the claim of the assessee was that they had supplied the equipment at the port in Sweden and their income was not liable to tax in India as per provision of the Indian Income-tax Act, and the Indo Swedish Double Taxation Avoidance Agreement (DTAA) vide Notification No. GSR 705(E). This issue had been examined at length in the orders passed during earlier years for the assessment years 1997-98, 1998-99 and 2000-01.

• In these orders it was held that the assessee was liable to tax in India both under the Income-tax Act, 1961 and the DTAA. It was held that the assessee had fixed place of business in India as well as it had dependent agents in India by virtue of which permanent establishment of the assessee was constituted in India within the meaning of article 5 of the DTAA.

• The Assessing Officer held that the facts and circumstances of the case remained the same for this year as in preceding years. The nature of activities carried out and the contracts under which such activities have held to be business profits liable to tax in India under this head. The payments received by the assessee for the supply of software was held to be 'royalty' within the meaning of the DTAA and was to be taxed, as such.

• On appeal, the assessee pleaded that the issue in question stood covered in assessee's own case in earlier assessment years by the decision of the Special Bench of the Tribunal in Motorola Inc. v. Dy. CIT [2005] 95 ITD 269/147 Taxman 39 (Delhi) (Mag.) (SB). It was also brought to the notice of the Commissioner (Appeals), that the revenue had filed an appeal against the order of the Special Bench and the Delhi High Court had dismissed the same in the case of DIT v. Jacob Civil Incorporated/Mitsubishi corporation [2010] 194 Taxman 495 (Delhi).

• The Commissioner (Appeals) however, considered some additional facts before him by way of evidence found during a survey conducted on 22-11-2007 and after summarizing said facts held that the assessee had PE in India under Article 5(1) of DTAA by way of fixed place of business maintained by ECI and had dependent agent under article 5(6)(a) of the DTAA in form of ECI who had habitually exercised to conclude the contract on behalf of the assessee and also had a dependent agent under article 5(6)(c) of the DTAA in the form of ECI who had habitually secured the order on behalf of the assessee.

• That the revenue arising to the assessee from the licensing of software to Indian clients were taxable as royalty in terms of article 12 of DTAA read with section 9(1)(vi) and that the action of the Assessing Officer was correct and hence sustained. Accordingly, he held that facts and circumstances during the impugned assessment year were materially different from the facts and circumstances of the earlier year.

Assessee's arguments

• The assessee contended that the Commissioner (Appeals) without confronting the assessee with the documents and evidences found during the course of survey, on which he proposed to rely upon, has drawn certain surmises and conjectures and erroneously came to a conclusion that these evidences had relevance to the facts in the years under appeal.

• It further contended that none of the evidences found during the course of survey related to the period between 1999-2000 to 2003-04 and hence that there was no change in facts. It emphasized that the documents/ evidences in question were for the period pertaining to the year 2005 and thereafter and have no relevance to the years under appeal.

Revenue's arguments

• Department contended that the Tribunal, should set aside the matter to the file of the Assessing Officer to consider all this fresh material found during survey, as brought out by the Assessing Officer in the assessment year 2005-06 and adjudicate the issue afresh.

Issue for consideration

• Whether there was change in facts as compared to the facts of the earlier year ?

• Whether first appellate authority was justified in summarizing the facts, based on evidences found during course of survey without confronting the same to the assessee ?

HELD

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There is no change in facts and circumstances of case in relevant years

• The Assessing Officer in his order for the assessment year 1999-2000 observed that the facts and circumstances of the case remained the same for this year as in preceding years. The nature of activities carried out and the contracts under which such activities have been carried out remained the same. From this finding of fact, it is to be concluded that the Assessing Officer is clear that there is no change in the facts and circumstances of the case in these years as compared to the earlier years. [Para 21]

Order of Commissioner (Appeals) based on surmises and conjectures

• The first appellate authority came to a conclusion that new facts/evidences were gathered during the survey under section 133A and were also collected from cellular operators under section 133(6) much after the order of the Special Bench of the Tribunal in assessee's own case for the assessment year 1997-98. The Commissioner (Appeals), without confronting the assessee or the Assessing Officer tried to make out a case that the facts are different in these years. He summarized the new facts/evidences. The basis on which this summary is arrived is not stated. A perusal of this summary demonstrates that the Commissioner (Appeals) has not indicated as to what is the documentary evidence are relied upon by him for coming to a conclusion that the facts of the current years are different from that of the earlier years. General observations are made and vague conclusions are drawn. The documents were not put to the assessee, nor explanation was called for from the assessee. The views of the assessee and the Assessing officer on these new evidences are necessary to form an opinion or draw conclusions on these documents. Surmises and conjectures are drawn. The nature of evidence found, the nexus the particular document/evidence has with the impugned assessment years, the inference that the Commissioner (Appeals) seeks to draw from these documents and the reply of the assessee to such proposed inferences are not brought out or discussed in the order. Under these circumstances, the view of the Commissioner (Appeals) that the facts and circumstances of the case in these assessment years differ from the facts and circumstances of the case in the earlier assessment years based on which the jurisdictional High court has delivered a judgment could not be accepted. [Para 22]

Department cannot make new case on reconsideration of matter afresh

• Coming to the arguments of the department for setting aside the assessment to the file of the Assessing Officer so as to enable the Assessing Officer to undertake a fresh exercise. [Para 23]

• In short the department's argument that the Commissioner (Appeals) has not properly adjudicated the matter and hence the issue should be set aside cannot be accepted as Assessing Officer at the time of the assessment was of the view that the facts are same and when the issue travelled to the Commissioner (Appeals) without explaining the basis of coming to certain conclusions, made general observations. [Para 24]

• Even otherwise the points of distinction on facts tried to be brought out by the department are devoid of merit. The basis on which the High Court had decided the matter is, the intention of the parties, as gathered from the contracts entered between them. The department demonstrated that there is no change in the intention of the parties and the 'transfer clause' in the agreement entered into by the assessee during these years, when compared with the agreements entered into by the assessee during the years 1997-98 and 1998-99 as the risk and the title passed to the buyer abroad and that the acceptance/rejection clause has no relevance. Coming to the reliance placed by the Departmental Representative (DR) on the show cause notice given by the DRI, much water has flown thereafter and the revenue has no idea as to what is the fate of this show cause notice. A show cause notice of DRI cannot be the basis to say the facts have changed. The senior counsel states at the bar that CESTAT has accepted the appeal of the assessee on this show cause notice and subsequent proceedings. In such a situation, the show cause notice and the charges therein do not survive. Arguments have been advanced by the department without knowing the ultimate result of this show cause notice given by the DRI. Thus this argument is dismissed as without merit. Coming to the argument on the clause of cost recharge in the agreements, it is found that this does not affect the time and place of passing of risk and title in the property outside India. Nothing much turns on the fact that the software can be separately valued, as this argument was considered by the Special Bench of the Tribunal and the facts remained the same. Thus the department could not convince that the facts and circumstances during the impugned assessment year were materially different from the facts and circumstances of the earlier year. In view of the discussion, it is held that the department cannot make out a fresh case for the first time during the course of arguments of the case. [Para 25]

• Even otherwise, the department cannot make out a new case, which is not of the case of the Assessing Officer. [Para 26]

Conclusion

• As the facts and circumstances of these years are the same as in the previous years, it is held that the issues are squarely covered in favour of the assessee by the judgment of the jurisdictional High Court in the assessee's own case for the earlier assessment years and the Tribunal is bound by the same. The other case laws relied upon by the department are not relevant to the case on hand as all issues have been considered by the jurisdictional High Court and the judgment binds us. [Para 27]

EDITOR'S NOTE

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Following the judgment of the jurisdictional High Court in the case DIT v. Jacobs Civil Incorporated/Misubhishi Corporation [2011] 330 ITR 587/[2010] 194 Taxman 495 (Delhi) (Mag.) assessee being a non-resident Indian Company no interest would be charged under section 234B. [Para 29]

CASE REVIEW

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DIT v. Jacobs Civil Incorporated/Misubhishi Corporation [2011] 330 ITR 587/[2010] 194 Taxman 495 (Delhi) (paras 27 & 29) followed.

CASES REFERRED TO

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Motorola Inc. v. Dy. CIT [2005] 95 ITD 269/147 Taxman 39 (Delhi) (Mag.) (SB) (para 4), DIT v. Jacobs Civil Incorporated/Mitsubhishi Corporation [2010] 194 Taxman 495 (Delhi) (para 5), Asstt. DIT v. Siemens Aktiengesellschaft [IT Appeal no. 4502 (Mum.) of 2009, dated 18.5.2012] (para 12), B4U International Holdings Ltd. v. Dy. CIT [2012] 21 taxmann.com 529 (Mum.-ITAT) (para 12), Graceman Corpn. v ADIT [IT Appeal Nos. 1331 to 1336 (Delhi) of 2008] (para 15), Microsoft Corpn. v. ADIT [IT Appeal no. 1392 (Delhi) of 2005] (para 15), . CIT v. Samsung Electronics Co. Ltd. [IT Appeal No. 2809 of 2005] (para 15), Aramex International Logistics (P.) Ltd. v. DIT(International Taxation) [AAR No. 1061 of 2011, dated 7-6-2012] (para 15), Zuari Leasings & Finance Corporations Ltd. v. ITO [2008] 112 ITD 205 (Delhi) (TM) (para 17), Asstt. CIT v. Ms. Aishwarya K. Rai [2010] 127 ITD 204 (Mum), ITO v. Anant Y. Chavan [2009] 126 TTJ 984(Pune) (para 26), Jeypore Timber & Veneer Mills (P.) Ltd. v. CIT [1982] 137 ITR 415/[1983] 12 Taxman 191 (Gau.) (para 26), CIT v. Assam Travels Shipping Service [1993] 199 ITR 1/67 Taxman 269 (SC) (para 26), Jt. CIT v. Sakura Bank Ltd. [2006] 100 ITD 215/[2006] SOT 684 (Mum.) (para 26), Mcorp Global (P) Ltd. v. CIT [2009] 309 ITR 434/178 Taxman 347 (SC) (para 26), Mahindra & Mahindra Ltd. v. Dy. CIT [2010] 122 ITD 216/30 SOT 374 (Mum.) (SB) (para 26) and Kwal Pro Exports v. Asstt. CIT [2008] 110 ITD 59 (Jodh.) (para 26).

Perci Pardiwala, Sandeep Chaufla, Nitin Vaid and Naveen Dhamija for the Appellant. D.K. Gupta for the Respondent.

ORDER

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J. Sudhakar Reddy, Accountant Member - All these appeals are filed by the assessee and are directed against a common order passed by the CIT(A)-XI, New Delhi dated 23.2.2011 for the A.Ys 1999-2000 to 2004-05.

2. As both parties submitted that the issues are common in all these appeals, for the sake of convenience they are heard together and disposed off by way of this common order.

3. The facts of the case as brought out by the A.O. at paras 1,2,3,4 and 5 of the assessment order which is extracted for ready reference.

"1. The assessee, M/s Ericsson Radio Systems AB, is a company incorporated in Sweden and is a tax resident of Sweden. The company is a wholly owned subsidiary of Telefonaktiebolaget LM Ericsson, Sweden. The main business of the assessee is supply of GSM Mobile Telecommunication system comprising of hardware and software to various cellular companies operation in India (ICO's).

2. The assessee company was not filing its return of income in India. Pursuant to the notices sent by the ITO returns were filed. The return of income for this year was filed on December 4,2001 declaring NIL income. Notice u/s 148 was issued on October 4,2002. Vide letter dated 17.10.2002, it was stated that the return filed on 4.12.2001 may be treated as the return filed in response to notice u/s 148 of the I.T. Act. In response to the notice issued u/s 143(2) of the I.T. Act, 1961, Sh. Krishan Malhotra, Sh. Rajiv Monga and Sh. A. Jain of M/s RSM & Co. appeared from time to time. The submissions and details were filed which have been placed on record.

3. The assessee company is globally renowned for its telecom hardware and software products, equipment and expertise. During the year, the assessee has supplied GSM system comprising of hardware and software to the undermentioned ICO's under contracts. These supplies were made under pre-existing contracts signed in earlier years and no fresh contract was entered into by the assessee. The chart showing supplies of hardware and software is as follows.

S. No. Customers Software US $ Hardware US $

1. Hutchison Max 419,491 279,196

2. RPG Cellular services-Chennai 500,00 31,472

3. Birla AT & T Communications Ltd. 3,331,967 2,954,252

4. TPG Cellcom Limited 396,769 468,507

5. Srinivas Cellcom Limited 760,000 12,035,453

6. Reliance Telecom Limited 391,568 1,237,451

7. JT Mobiles Limited 117,704 1,568,223

8. Hexacom India Ltd. 0 454,734

9. Bharti Televenture Limtied 72,657 363,943

10. Bharti Cellular Limited 0 4,336,896

Total 5,990,156 23,730,127

4. The assessee (also referred to as ERA) and M/s Ericsson Communications P. Ltd. (now known as Ericsson India Pvt. Ltd. and hereinafter referred to as ECI) are wholly owned subsidiaries of LME Sweden. The nexus between them is represented in the chart below:

Eriscsson Radiosystems AB Ericsson Communications Ltd.

(ERA) (ECI)

Subsidiary of LME Subsidiary of LME

(Equipment and software supplier to Indian Customers) (Installation contractor and marketing support after July, 1996)

Non-Resident company Indian company

5. The income of the assessee has arisen from the following:

(i) Supply of telecom hardware; and ii. Supply of software As in preceding years the claim of the assessee is that they had supplied the equipment at the port in Sweden and their income is not liable to tax in India as per provision of the Indian Income Tax Act, 1961 (the Act) and the Indo Swedish Double Taxation Avoidance Agreement (DTAA) vide Notification no. GSR 705(E). This issue has been examined at length in the orders passed during earlier years for A.Y. 1997-98, 1998-99 and 2000-01. In these orders my predecessors had held that the assessee company was liable to tax in India both under the Income Tax Act, 1961 and the DTAA. It was held that the assessee had fixed place of business in India as well as it had dependent agents in India by virtue of which permanent establishment of the assessee was constituted in India within the meaning of Article 5 of the DTAA. The facts and circumstances of the case remain the same for this year as in preceding years. The nature of activities carried out and the contracts under which such activities have held to be business profits liable to tax in India under this head. The payments received by the assessee for the supply of software is held to be 'royalty' within the meaning of the DTAA and is to be taxed, as such. The position regarding royalty payments has also been upheld by the Hon'ble CIT(A)."[Emphasis supplied]

4. Aggrieved, the assessee carried the matter in appeal before the First Appellate Authority. It was pleaded that the issue in question stands covered in assessee's own case by the decision of the Special Bench of the Tribunal in Motorola Inc. v. Dy. CIT [2005] 95 ITD 269/47 Taxman 39 (Delhi) (Mag.) (SB). It was also brought to the notice of the Ld. CIT(A), that the Revenue has filed an appeal against the order of the Special Bench and the Hon'ble Delhi High Court had concluded the hearings on 27.9.2010 and the judgment was reserved. (Subsequently the judgment was delivered). It was also pointed out that the A.O. has recorded a finding that there was no change in the facts and circumstances of the case from the facts and circumstances of the earlier years i.e. for A.Y. 1997-98 and 1998-99. Reliance was also placed on the decision of the Jurisdictional High Court in the case of DIT v. Jacob Civil Incorporated/Misubhishi Corporation [2010] 194 Taxman 495 (Delhi).

5. The First Appellate Authority at para 3.0 formulated the following questions which are extracted for ready reference:- The short question of law to be answered in the instant case - i) whether the appellant has PE in India u/Art.5(1) of DTAA by way of a fixed place of business being maintained by ECI and used by the appellant; ii) whether the appellant has a dependent agent u/Art.5(6)(a) of the DTAA in the form of ECI; iii) whether the appellant has a dependent agent u/Art.5(6)(c) of DTAA in the form of ECI; iv) whether the appellant is having supervisory PE in terms of Art.5(3) of DTAA; v) whether the appellant is having business connection in India; vi) whether the sale of equipment is deemed to have taken place in India and software has been licensed in India and viii) whether the revenue arising to the appellant from the licensing of software to Indian clients are taxable as royalty in terms of Art.12 of DTAA and S.9(1)(vi) of the Act."

6. There after he held that at the time of adjudication of the appeal he had some additional facts before him by way of evidence found during survey on 22.11.2007, in addition to the order of the Special Bench of the ITAT. He stated that the fresh facts have been narrated in the assessment order for the year 2005-06. Thereafter he distinguished the decision of the Special Bench of the Tribunal in the following words.

"3.2. I would first like to discuss the issue from factual point of view. The order of the Ld. ITAT in the case of the appellant for A.Y. 1997-98 relates to a period when the appellant had a very small turnover of US $49147.248 and had just made entry in the Indian Market. By the passage of time, it has established itself in the Indian market and turnover of the appellant has also been substantially increasing day by day. In background of this fact, the extent of business presence in India in the years under consideration cannot be compared with its business presence in initial year of its entry in Indian market. The appeals under consideration consist of six years from 1999-2000 onwards upto 2004-05. The issues have been same in all the years and in later years also. Therefore, it would be pertinent to take the later developments in the case of the appellant into consideration for better clarity of the facts and issues involved in the case, and the same is discussed in the subsequent paragraphs."

7. Thereafter he referred to the survey conducted on 22.11.2007 and after summarizing the facts found during the survey held as follows.

"4.0. Gist of the order:- In the light of above facts and circumstances the gist of my order is given below :-

* That the appellant has PE in India under Art.5(1) of DTAA by way of fixed place of business maintained by ECI and has dependent agent under Art 5(6)(a) of the DTAA in form of ECI who has habitually exercised to conclude the contract on behalf of the appellant, and also has a dependent agent under Art.5(6)(c) of the DTAA in the form of ECI who has habitually secured the order on behalf of the appellant.

* That the appellant is having also supervisory PE in terms of Art.5(3) of DTAA.

* That the appellant is having business connection in India ;within the meaning of S.9(1)(i) of the Act.

* That the sale of equipment is deemed to have taken place in India and software has been licensed in India.

* That the revenue arising to the appellant from the licensing of software to Indian clients are taxable as Royalty in terms of Art.12 of DTAA read with S.9(1)(vi) of the I.T. Act, 1961.

* That the action of the AO is correct and hence sustained. (Grounds of the appellant dismissed).

* Charge of interest u/s 234B is consequential."

8. Aggrieved the assessee is in appeal on various grounds.

9. The Ld. Sr. Advocate Mr. Percy Pardiwala appearing for the assessee submitted that the A.O. in his order at para 5 has recorded a finding that the facts and circumstances of the case remained the same for this year as compared with the preceding years and that the nature of activities carried out and the contracts under which such activities have been carried out remained the same. He relied on the decision of the Jurisdictional High Court in the assessee's own case, where the order of the Special Bench of the Tribunal in the case of Motorola Inc. (supra) as has been upheld and argued that the issue is no more res integra. He took this Bench through the arguments made before the Special Bench of the Tribunal as well as before the Hon'ble Delhi High Court on these very issues framed by the Ld. CIT(A) and pointed out the findings and judgement of the Hon'ble High Court on these issues. He submitted that the order of the First Appellate Authority is contrary to the judgement of the Jurisdictional High Court.

10. On the issue of survey and evidence found during the survey, he submitted that, the survey was conducted on 22.11.2007 which is before the completion of assessment and the Assessing Officer has not referred to the survey documents. The CIT(A) without confronting the assessee with the documents and evidences found during the course of survey, on which he proposed to rely upon, has drawn certain surmises and conjectures and erroneously came to a conclusion that these evidences have relevance to the facts in the years under appeal. He contends that legally the CIT(A) could not have come to any conclusions on facts, without confronting the assessee with the documents, evidences he proposed to rely upon. Without prejudice he submits that none of the evidences found during the course of survey relates to the period between 1999-2000 to 2003-04 and hence that there is no change in facts. He emphasized that the documents/evidences in question were for the period pertaining to the year 2005 and thereafter and have no relevance to the years under appeal.

11. Without prejudice he submits that the CIT(A) has not pointed out as to which are the documents/evidences that are relied upon by and how such document enabled him to draw certain presumptions on facts. He argued that under these circumstances it was not possible for the company to explain its point of view on the material found during the course of survey in the year 2007.

12. He further argued that the issues are covered in favour of the assessee in its own case and that the retrospective amendment made to S.9(1)(vi) of the Income Tax Act by the Finance Act, 2012 is of no consequence to the assessee's tax liability as there was no change in the DTAA. He relied on the following decision of the Tribunal: (i) Asstt. DIT v. Siemens Aktiengesellschaft [IT Appeal no. 4502 (Mum.) of 2009 order dt. 18.5.2012] (ii) B4U International Holdings Ltd. v. Dy. CIT [2012] 21 taxmann.com 529 (Mum.-ITAT).

13. The Ld. D.R. Mr. D.K. Gupta on the other hand opposed the contentions of the assessee's counsel and submitted that all these cases should be heard along with the appeal for A.Y. 2006-07. He further submitted that the order of the A.O. as well as the CIT(A) for the A.Y. 2006-07 were based on the assessment order for the A.Y. 2005-06 and hence should be heard together. On a query from the Bench it was submitted that the assessment order for the A.Y. 2005-06 is before the CIT(A) and the matter is not yet disposed off and hence it has not reached the Tribunal. On a further query from the Bench the Ld. D.R. submitted that, it would be his effort to refer to the assessment orders for the A.Y. 2005-06 and 2006-07 and convince the Bench that there are certain evidences which were found during the course of survey which have a bearing on the facts of the present cases and pleaded that the Tribunal, if convinced, should set aside the matter to the file of the A.O. to consider all this fresh material found during survey, as brought out by the Assessing Officer in the Assessment Year 2005-06 and adjudicate the issue afresh. On a query from the Bench the ld. D.R. fairly submitted that the CIT(A) has not referred to any specific evidence or document nor has he stated as to how a particular evidence has relevance to the facts of a particular year under appeal and in view of this, the matter should go back to the Assessing Officer He agreed that the First Appellate Authority has summarized the facts, based on evidences without confronting the same to the assessee and it would be just and proper if the matter is set aside to the file of the A.O. for fresh adjudication in light of the evidences found within the course of survey on 22.11.2007.

14. On a query from the Bench, the ld. D.R. agreed that the matter cannot be kept pending for want of decision of the CIT(A) for the A.Y. 2005-06 and subsequent filing of appeals by either the department or the assessee, as the case may be and went ahead with his arguments for the Assessment Year 1999-2000 to 2004-05 by placing reliance of the assessment order for Assessment Year 2005-06. He reiterated his contention that the matter should be restored back to the file of the A.O. or the CIT(A) and for convincing the Bench on this point, referred to various documents filed by the assessee in the paper book, as well as to the order for Assessment Year 2005-06 and 2006-07.

15. Referring to various pages in the paper book filed by the assessee the Ld. D.R. tried to impress the Bench that there is change in facts as compared to the facts of the earlier year.

He referred to the various clauses in the agreements, documents, letters and decision of the Hon'ble High Court and submitted that :-

(a) Acceptance Clause differs but warranty clause remains the same;

(b) Hon'ble High Court stated that the assessee had the power to reject the goods, the decision of the Court would be different;

(c) The Clauses in the agreement entered into by the assessee post 2003, were identical with the clauses entered into by the assessee prior to 2003, as far as, Acceptance Clause and Infringement Clause are concerned;

(d) Cost recharge Clause is freshly introduced and this changes the facts of the case;

(e) Filters and Antenna was supplied by EIL for two years without agreement;

(f) DRI has given a show cause notice which shows that the assessee's contention that there are no change in facts is incorrect;

(g) EIL was found to be making copies of software prior to change in business model. Annexure B to the survey documents consisting a vital document, were not available before the AO;

(h) Reliance was placed on the following decisions: Aramex International Logistics 2012-TII-29-ARA International;

(i) The plea that the issue whether the assessee has a P.E. in India or not was not adjudicated upon by the High Court;

(j) The thrust of the High Court order was that software was embedded in the hardware and hence cannot be royalty;

(k) That the software prices was separately quoted and ascertainable and hence there is change in the facts, situations;

(l) That after the year 2006-07 EIL was authorized to separately download software and this shows that software is separable;

(m) The Act has been amended in 2012 with retrospective effect and hence the decision of Jurisdictional High Court in assessee's own case is no more good law;

(n) Reliance was placed on the following decisions: (i) Samsung Electronics (Karnataka)-2011-TII-43-HC-Jar-Intl.

(ii) CIT v. RIX Systems Asia Pacific (P.) Ltd. -2011-TII-04-ARA-International;

(iii) GRACEMAC Corporation v. ADIT, Delhi 'H' Bench [ITA nos. 1331 to 1336/Del/2008 order dt. 26.10.2010].

The assessee admitted in the year 2006-07 that the software is taxable separately under the DTAA and hence it cannot plead otherwise in the earlier years. The Ld. D.R. relied on the following case laws :-

(i) Delhi 'H' Bench of the Tribunal in M/s Graceman Corp. v ADIT [ITA nos. 1331 to 1336/Del/2008] and in M/s Miscrosoft Corpn. v. ADIT [ITA 1392(Delhi) of 2005]

(ii) Citrix Systems Asia Pacific (P.) Ltd. v. DIT (International Taxation)

(iii) High Court of Karnataka CIT v. Samsung Electronics Co. Ltd. [ITA no. 2809/2005]

(iv) Aramex International Logistics (P.) Ltd. v. DIT (International Taxation) [AAR No. 1061 of 2011, dated 7-6-2012]

16. He concluded his arguments by submitting that the assessment order as confirmed by the CIT(A) may be set aside to either the CIT(A) or the A.O. for fresh adjudication in view of the new evidences found during the course of survey.

17. In reply the ld. Sr. Advocate Mr. Parci Pardiwala made every effort to demonstrate that there is no change whatsoever in the various clauses in the agreements. He pointed out that the basis on which the Hon'ble High Court has given its judgement was different from what the D.R. submitted and that the Hon'ble High Court has made it clear that acceptance clause is not relevant and it is the intention of the parties which would be vital for deciding an issue. He pointed out that the risk as well as the title in the property passed to the buyer abroad as per the agreement and that there is no change in the transfer clause. He submitted that the Ld. Sr. D.R. is trying to make out a fresh case, which was neither of the A.O. nor of the CIT(A) and submitted that such arguments should not be entertained. He pointed out that the parties had no right to repudiate the contract and argued that this is vital in coming to the conclusions in the matter and that there is no change in the facts. On the show cause notice issued by the DRI, he submitted that the Ld. Departmental Representative did not bring out as to how it is relevant and what happened after the show cause notice and submitted that all the charges were answered and the assessee won its case in CECSTAT. Hence he submitted that nothing turns on this show cause notice. He emphasized that all the material now be referred to by the D.R. was available with the A.O., when he passed the assessment order and the Assessing Officer has chosen not to rely on any of the material for the reasons that this might not be relevant. He further contended that the CIT(A) did not refer to the very specific evidence or document, nor did he call for a remand report from the A.O. nor he has put any document to the assessee and under these circumstances the Revenue cannot be given a second innings. He strongly objected to the plea for setting aside the matter to the file of the A.O. He relied on the following case law. Zuari Leasings & Finance Corpn. Ltd. v. ITO [2008] 112 ITD 205 (Delhi) (TM)

18. On survey material he submitted that reliance was placed by the Ld. D.R. on the notice given by the DRI which is no more relevant. On the issue of cost recharge agreement he submitted that it does not affect the passing of the property in assessee's equipment supplied outside India. He distinguished the judgements relied upon by the Ld. D.R. He tried to demonstrate that there is no change in the scope of the contracts during these years as compared to the earlier A.Ys, as the whole purpose of the agreement was to purchase of a system. On splitting of prices between hardware and software, he drew the attention of the Bench to para 41.11 of the Special Bench decision and para 58 of High Court's decision and submitted that similar facts prevailed in those A.Ys and such splitting was considered by the Courts. He pointed out that only in the case of BSNL, due to certain requirements by the Government, the sale was made on back to back basis. He distinguished the case laws relied upon by the Ld. Departmental Representative.

19. Mr. Parci Pardiwala pointed out that there was one more ground relating to charge of interest u/s 234B and submitted that the issue is covered in favour of the assessee.

20. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and a perusal of the papers on record and the orders of the authorities below, we hold as follows.

21. The A.O. in his order for the A.Y. 1999-2000 para 5 observed as follows:- "The facts and circumstances of the case remained the same for this year as in preceding years. The nature of activities carried out and the contracts under which such activities have been carried out remained the same." From this finding of fact, we have to conclude that the Assessing Officer is clear that there is no change in the facts and circumstances of the case in these years as compared to the earlier years.

22. The First Appellate Authority came to a conclusion that new facts/evidences were gathered during the survey u/s 133A and were also collected from Cellular operators u/s 133(6) of the Act much after the Order of the Special Bench of the Tribunal in assessee's own case for the A.Y. 1997-98. The Ld. CIT(A), without confronting the assessee or the Assessing Officer tried to make out a case that the facts are different in these years. He summarized the new facts/evidences at para 3.3 of his order at pages 6 to 11. The basis on which this summary is arrived is not stated. A perusal of this summary demonstrates that the Ld. CIT(A) has not indicated as to what is the documentary evidences are relied upon by him for coming to a conclusion that the facts of the current years are different from that of the earlier years. General observations are made and vague conclusions are drawn. The documents were not put to the assessee, nor explanations were called for from the assessee The views of the assessee and the Assessing Officer on these new evidences are necessary to form an opinion or draw conclusions on these documents. Surmises and conjectures are drawn. The nature of evidence found, the nexus the particular document/evidence has with the impugned Assessment Years, the inference that the CIT(A) seeks to draw from these documents and the reply of the assessee to such proposed inferences are not brought out or discussed in the order. Under these circumstances we are unable to concur with the view of the CIT(A) that the facts and circumstances of the case in these Assessment Years before us, differ from the facts and circumstances of the case in the earlier Assessment Years based on which the Jurisdictional High Court has delivered a judgment.

23. Coming to the arguments of the Ld.D.R. for setting aside the assessment to the file of the Assessing Officer so as to enable the Assessing Officer to undertake a fresh exercise, we find that, the Delhi Bench of the Tribunal in the case of Zuari Leasing & Finance Corpn. Ltd. (supra) held as under:-

"Therefore, the first question to be examined relates to the principles, which are to be followed by the appellate authorities while exercising discretion to remand the matter. For above proposition, I would like to quote and rely upon the following decisions:-

(1) In the case of M.G. Shahani & Co. (Delhi) Ltd. v. Collector of Central Excise 1994 (73) ELT 3 (SC) it is observed:-

"The complaint of the appellant before us, for which we find sufficient justification, is that the Tribunal should have itself gone through the evidence and rendered a finding because all the relevant materials were before the Tribunal. To our mind, it appears that the Tribunal has adopted an easy course in remanding the matter. The remand was superfluous when the parties have argued the matter at length. To characterize the order of the Collector as laconic is not correct since he has written a detailed order including reference to relevant case law.

The Tribunal has adopted an easy course of remanding the matter to Collector, when it could have decided the same. The remand was superfluous when the parties have argued the matter at length and relevant material for decision was available on record. The CEGAT should have itself analysed the ;evidence and given a factual conclusion."

(2) In the case of United Commercial Bank v. CIT [1982] 137 ITR 434 (Cal.) wherein it has been held that the Tribunal has power to remand a case for further investigation of facts but such power has to be exercised with proper discretion and it should not be exercised if all the basic facts necessary for the disposal of the matter are already on record and further if these facts appear in the order of the lower tax authorities.

(3) In the case of Maharani Kanak Kumar Sahiba v. CIT [1955] 28 ITR 462 (Pat.) - Remand should only be made in very rare cases and should be used sparingly and only in cases where the Tribunal, after examination of material already placed on record by way of evidence, takes a view that it is not possible for it to make a just order - Surinder Pal Verma v. ACIT [2004] 89 ITD 129 (Chd.)(TM)

(4) In the case of Karnataka Wakf Board v. State of Karnataka AIR 1996 Kar 55 at pages 63, 64, it has been held that:

"Where the party had an opportunity of adducing evidence in the case but with open eyes failed to adduce that evidence, the case should not be remanded to give a second chance to the party to adduce that evidence. The policy of the law is that once that matter has been fairly tried between the parties, it should not, except in special circumstances, be reopened and retired. In a recent decision their Lordships of the Supreme Court laid down that power to order retrial after ;remand, where there had already been a trial on evidence before the Court of first instance, cannot be exercised merely because the Appellate Court is of the view that the parties who could lead better evidence in the court of first instance have failed to do so."

(5) In the case of Ghasi Ram Dayanand v. CST 92 STC 478 at the rate of 480, 481 (All.) it has been held that remand cannot be made for the purpose of de novo trial for permitting the parties to adduce fresh evidence to fill up lacuna or to decide a point when material is already on record.

(6) Powers of the Tribunal in the matter of setting aside an assessment are large and wide, but these powers cannot be exercised to allow the AO an opportunity to patch up the week parts of his case and to fill up the omission by giving another innings -

ACIT v. Anima Investment Ltd. [2000] 73 ITD 125 (Delhi)

ACIT v. Arunodoi Apartments P. Ltd. [2002] 123 Taxman 48 (Gau.) (Mag.)

Smt. Neena Syal v. ACIT [1999] 70 ITD 62 (Chd.)

(7) The courts have held that appeals are not to be decided for giving 'one more innings' to the lower authorities in the appellate jurisdiction.

- Rajesh Babubhai Damania v. CIT [2001] 251 ITR 541 (Guj.)

- CIT v. Harikishan Jethlal Patal [1987] 168 ITR 472 (Guj.) Remand not for the benefit of the party seeking it to fill up gaps."

10. It is clear from above that primary power, rather obligation of the Tribunal, is to dispose of the appeal on merits. The incidental power to remand, is only an exception and should be sparingly used when it is not possible to dispose of the appeal for want of relevant evidence, lack of finding or investigation warranted by the circumstances of the case. Remand in a casual manner and for the sake of remand only or as a short cut, is totally prohibited. It has to be borne in mind that litigants in our country have to wait for long to have fruit of legal action and expect the Tribunal to decide on merit. It is, therefore, all the more necessary that matter should be decided on merit without allowing one of the parties before the Tribunal to have another inning, particularly when such party had full opportunity to establish its case. Unnecessary remands, when relevant evidence is on record, belies litigant's legitimate expectations and is to be deprecated. Having regard to aforesaid principle, it is necessary to look into records to see whether there is sufficient material on record to dispose of the issue on merit and there is no need to remand the issue to provide a fresh inning to the revenue."

24. In short the Ld. CIT, D.R.'s argument that the CIT(A) has not properly adjudicated the matter and hence the issue should be set aside cannot be accepted as A.O. at the time of assessment was of the view that the facts are same and when the issue traveled to the Ld. CIT(A) without explaining the basis of coming to certain conclusions, made general observations.

25. Even otherwise the points of distinction on facts tried to be brought out by the Ld. D.R., in our considered opinion are devoid of merit. The basis on which the High Court had decided the matter is, the intention of the parties, as gathered from the contracts entered between them. The Ld. Sr. Counsel demonstrated that there is no change in the intention of the parties and the "transfer clause" in the agreement entered into by the assessee during these years, when compared with the agreements entered into by the assessee during the years 1997-98 and 1998-99 as the risk and the title passed to the buyer abroad and that the acceptance/rejection clause has no relevance. Coming to the reliance placed by the Ld. D.R. on the show cause notice given by the DRI, much water has flown thereafter and the Revenue has no idea as to what is the fate of this show cause notice. A show cause notice of DRI cannot be the basis to say the facts have changed. The Ld. Sr. Counsel states at the Bar that CESTAT has accepted the appeal of the assessee on this show cause notice and subsequent proceedings. In such a situation, the show cause notice and the charges therein do not survive. Arguments have been advanced by the Ld. D.R. without knowing the ultimate result of this show cause notice given by the DRI. Thus we dismiss this argument as without merit. Coming to the argument on the clause of cost recharge in the agreements, we find that this does not affect the time and place of passing of risk and title in the property outside India. Nothing much turns on the fact that the software can be separately valued, as this argument was considered by the Special Bench of the Tribunal and the facts remained the same. Thus the Ld. Departmental Representative could not convince us that the facts and circumstances during the impugned Assessment Year are materially different from the facts and circumstances of the earlier Year.

26. Even otherwise, the Ld. Departmental Representative cannot make out a new case, which is not of the case of the Assessing Officer. The Mumbai Bench of the Tribunal in Asstt. CIT v. Ms. Aishwarya K. Rai [2010] 127 ITD 204 (Mum.) held that the learned D.R. can support the action of the A.O. with any arguments and that he can rely on any case law in support of the A.O's case but he cannot make out any new case which was not the subject matter of consideration by the A.O. or the first appellate authority. It further held that to find fault in the assessment order is outside the domain of the argument of the Ld. D.R. as such powers vests with the Commissioner u/s 263 for revising any order which is erroneous and prejudicial to the interests of Revenue. The Tribunal, Pune Bench in ITO v. Anant Y. Chavan [2009] 126 TTJ (Pune) 984 has held as follows:- 'The D.R. only represents the A.O. who can do better than to justify his own action on the grounds which have been discussed in the assessment order or perhaps even on extended grounds. Undoubtedly, there can be occasions when AO fails to bring an income to tax or grant excessive deduction and the remedy for these lapses are prescribed by the provisions of S.147, 154 and 263 etc. but all these sections have certain time limits within which these sections can be invoked. Whether it is a rectification of a mistake, or initiation of proceedings for income escaping assessment, or even a revision proceeding everything must be completed within the prescribed time limit. To suggest that even a proceeding before the Tribunal is a continuation of assessment proceedings and, therefore, the A.O. can be allowed to make up for his deficiencies will amount to rendering all these time limits as nugatory and redundant. It is indeed not open for the Tribunal to take away the benefit given by the A.O. When the AO decided to grant deduction u/s 80-113(10) in respect of residential units it was well considered and conscious decision on his part to have granted the benefit of deduction. With the benefit of hindsight this benefit of deduction might have been little more generous than what is found to be admissible by the Tribunal, but then the decision of the Tribunal has not yet reached finality and it is not an end of the route so far as legal developments in that regard are concerned. It is not the scheme of the Act that entire assessment is open before the Tribunal and it must consider the same. Ground which was raised by the Revenue was confined to profits relatable to commercial units and therefore, it is not really open to the Tribunal to go beyond the said ground. Jeypore Timber & Veneer Mills (P.) Ltd. v. CIT [1982] 137 ITR 415/[1983] 12 Taxman 191 (Gau.) applied; CIT v. Assam Travels Shipping Service [1993] 199 ITR 1/67 Taxman 269 (SC) and Jt. CIT v. Sakura Bank Ltd. [2006] 100 ITD 215/[2006] 6 SOT 684 (Mumbai) distinguished; Mcorp Global (P) Ltd. v. CIT [2009] 309 ITR 434/178 Taxman 347 (SC) followed". Mumbai Special Bench of the Tribunal in Mahindra & Mahindra Ltd. v. Dy. CIT [2010] 122 ITD 216/30 SOT 374 (Mum.) (SB), held as follows:-"In our considered opinion the ld. D.R. has no jurisdiction to go beyond the order passed by the A.O. He cannot raise any point different from that considered by the AO or the CIT(A). His scope of arguments is confined to supporting or defending the impugned order. He cannot set up an altogether different case. If the ld. D.R. is allowed to take up a new contention de hors the view taken by the AO that would mean the ld. D.R. stepping into the shoes of the CIT exercising jurisdiction u/s 263. We, therefore, do not permit the ld. D.R. to transgress the boundaries of his arguments. Similar view has been taken by the Jodhpur Bench of the Tribunal in the case of Kwal Pro Exports v. Asstt. CIT [2008] 110 ITD 59 (Jodh.). This contention is therefore repelled as devoid of any merit. "The Hon'ble S.C. in MCorp Global (P.) Ltd. (supra) has held as follows:-"Held, that u/s 254(1) of the Act, the Appellate Tribunal had no power to take back the benefit conferred by the A.O. or enhance the assessment. Since the A.O. had granted depreciation in respect of 42,000 bottles that benefit could not be withdrawn."

In view of the discussion, we hold that the Ld. Departmental Representative cannot make out a fresh case for the first time during the course of arguments of the case.

27. As the facts and circumstances of these years are the same as in the previous years, we hold that the issues are squarely covered in favour of the assessee by the judgment of the Jurisdictional High Court in the assessee's own case for the earlier Assessment Years. We are bound by the same. The other case laws relied upon by the Ld. Departmental Representative are not relevant to the case on hand as all issues have been considered by the Jurisdictional High Court and the judgement binds us.

28. Thus we allow these grounds of assessee for all the impugned assessment orders and reverse the decision of the A.O. as confirmed by the CIT(A).

29. Coming to ground of allowing interest u/s 234B, the assessee being a Non-Resident Indian Company the issue is covered in its favour by the judgment of the Jurisdictional High Court in the case DIT v. Jacobs Civil Incorporated/Mitsubishi Corporation (supra). The Commissioner of Income Tax (Appeals) should have followed the same. Respectfully following the same this ground is allowed.

30. In the result all the appeals of the assessee are allowed.