The Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘D’, adjudicated on the appeal filed by Cognyte Technologies Israel Ltd., formerly known as Verint Systems Limited, against the order of ACIT Circle-3(1)(1), International Taxation, New Delhi. The appeal, registered as ITA No. 342/DEL/2021, pertains to the assessment year 2012-13.
Cognyte Technologies Israel Ltd., located at 2nd Floor, Tower A, Building No. 8, DLF Cyber City, Phase – 2, Gurgaon, Haryana, filed an appeal against the order dated 31.12.2020 framed under section 144C(1) read with sections 147/148 of the Income Tax Act, 1961. The case involved taxability of software/license charges received from Indian customers, which the Assessing Officer (AO) considered as royalty under Article 12(3) of the India-Israel Double Taxation Avoidance Agreement (DTAA) and section 9(1)(vi) of the Act.
The appellant raised the following grounds:
The case was heard on 29.09.2022. The appellant’s counsel drew attention to a decision by a co-ordinate bench for Assessment Year 2010-11 in ITA No. 7111/DEL/2019, where a similar issue was decided in favor of the appellant, following the Supreme Court’s decision in Engineering Analysis Centre of Excellence Pvt Ltd. The Department Representative could not provide a distinguishing decision in favor of the Revenue.
The ITAT, respecting the precedent set by the Supreme Court and the co-ordinate bench, decided in favor of the appellant. The grounds regarding the taxability of software/license charges as royalty were upheld in favor of the appellant. Consequently, issues regarding reconciliation and tax credit were rendered academic. The Tribunal directed the AO to consider the provisions of section 240 of the Act while giving appeal effect.
The appeal was allowed in favor of the appellant. The order was pronounced in the open court on 03.10.2022.
Order Pronounced in the Open Court on 03/10/2022.
Signed by:
(SAKTIJIT DEY) – Judicial Member
(N.K. BILLAIYA) – Accountant Member
Date: 03/10/2022
VL/
Copy forwarded to:
Assistant Registrar, ITAT: Delhi Benches-Delhi
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