Cornerstone Ondemand Limited Vs ACIT (ITAT Mumbai)
Making a bona fide claim under DTAA, even if rejected, does not attract penalty under either 271(1)(c) or 270A- Penalty provisions cannot be used as a revenue weapon in complex legal interpretation cases
Assessee, a company incorporated in the UK, provides cloud-based learning & talent management software. Its Indian subsidiary, CSOD India Pvt. Ltd., acts as an authorized distributor & collects payments on behalf of Assessee . Assessee entered into agreements directly with Indian customers for licensing the software, while CSOD India only facilitated the process & received separate remuneration. Assessee claimed that income earned from software distribution in India was not taxable in India, contending that it was neither royalty, nor fees for technical services, nor business income attributable to any PE, as per the India-UK DTAA. Accordingly, Assessee filed Nil returns for AYs 2015-16 to 2019-20.
During assessment, AO held that CSOD India constituted a Dependent Agent PE (DAPE) of Assessee , & attributed 80% of receipts to be taxable in India, which DRP reduced to 30%. For commercial reasons & to avoid prolonged litigation, Assessee did not challenge DRP directions further, but consistently maintained that the addition was purely a difference in legal interpretation.
