Trimble Solutions Corporation Vs DCIT (ITAT Mumbai)
1. This appeal, filed by the assessee, calls into question the correctness of the order dated 19th June 2019 passed by the Assessing Officer under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, for the assessment year 20 16-17.
2. Grievances raised by the appellant are as follows:
Ground no. 1: Income from cloud hosting services is erroneously held as royalty within the meaning of explanation 2 to section 9(l)(vi) of the Income Tax Act, 1961 (the Act) as well as Article 12(3)(b) of the India – US tax treaty
1.1. On the facts and circumstances of the case and in law, the learned AO, pursuant to the directions of the Hon’ble DRP erred in holding that cloud hosting system is combination of hardware, software and networking elements that constitutes industrial / commercial / scientific equipment and the income of INR 6,23,14,703 earned by the Appellant from cloud hosting services is for use of or right to use industrial / commercial / scientific equipment which would constitute royalty under section 9(1)(vi) of the Act.
1.2. On the facts and circumstances of the case and in law, the learned AO, pursuant to the directions of the Hon’ble DRP, erred in holding that the income earned by the Appellant is for use of or right to use industrial / commercial / scientific equipment and constitutes royalty under Article 12(3)(b) of the India – US tax treaty.
1.3. On the facts and circumstances of the case and in law, the learned AO, pursuant to the direction of the Hon’ble DRP, erred in holding that the definition of royalty under the Act (as retrospectively amended by Finance Act, 2012) can be applied even for the purposes of determination of royalty income under Article 12 of the India – US tax treaty in the absence of any corresponding amendment in the India – US tax treaty.
1.4. On the facts and circumstances of the case and in law, the learned AO, pursuant to the directions of the Hon’ble DRP, erred in holding that the Appellant is providing license to clients for use of third party software and the income earned there from is also royalty under the Act as well as the India – US tax treaty.
Ground no. 2: Income from cloud hosting services is also erroneously held as fees for technical services within the meaning of section 9(1)(vii) of the Act as well as fees for included services under Article 12(4)(a) of the India – US tax treaty
2.1 On the facts and circumstances of the case, the learned AO further erred in holding that the income from cloud hosting services is in the nature of Fees for Technical Services within the meaning of explanation (2) to clause (vii) of subsection (1) of section 9 of the Act.
2.2 On the facts and circumstances of the case, the learned AO erred in holding that the income from cloud hosting services also qualifies as fees for included services within the meaning of Article 12(4)(a) of the India-US tax treaty.
Ground no. 3: Erroneous levy of interest under section 234B of the Act
3.1 On the facts and circumstances of the case and in law, the learned AO erred in levying interest of INR 24,29,388 under section 234B of the Act.
3. The issues raised in this appeal are admittedly covered by the decision of coordinate bench dated 07th October 2020, in assessee own case for the assessment year 2012-13. We however see no reasons to take any view of the matter then the view taken by the coordinate bench in the aforesaid decision wherein the coordinate bench has inter alia observed as follows:-
3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2012-13 on 30.11.2012 declaring total income of Rs. Nil. The assessee is a tax resident of Finland. It has its registered office at Metsanpojankuja 1, FI-02131 Espoo, Finland. It is engaged in the business of development and marketing of specialized software products which are used in industries like building and construction, energy distribution and infrastructure management. In India, the assessee markets and distributes the specialized software products to the end-user Customers through a distribution channel consisting of subsidiary and a third party distributor. In order to distribute its software in India, the assessee appointed Trimble Solutions India Private Limited (earlier known as Tekla India Private Limited) (hereinafter referred to as ‘Trimble Solutions India’), its wholly owned subsidiary, vide agreement dated 28 January 2008 and DowCoMax Services India Limited (‘DCMIPL’) vide agreement dated, 23 June 2008 (collectively referred to as ‘Distributors’), as its non-exclusive resellers / distributors for the Indian territory. During the impugned assessment year, the assessee received the following payments from the Distributors:
