The Commissioner of Income Tax - International Taxation v. ZTE Corporation

2. The application stands disposed of. ITA 763/2019.ITA 769/2019&ITA 771/2019

3. At the outset, Mr. Ruchir Bhatia learned counsel for the Appellant very fairly states that the issues/questions framed in the present appeals are covered by the decision of this Court in Commissioner ofIncome Tax, International Taxation v. ZTE Corporation (2017) 392 ITR 80 (Delhi). The questions oflaw framed in the said appeal were as follows: "(7) Are the ITAT's findings with respect to interpretation of Article 12 (3) of the Indo-China Double Taxation Avoidance Agreement(DTAA), in the light ofExplanations 5 &6to Section 9(1)(vi), erroneous in law. (ii)Is the impugned order correct in its interpretation ofSection 234B ofthe Income Tax Act, 1961, in thefacts andcircumstances ofthe case."

4. The findings returned by this Courtin the said decision read as follows: "22. In the present case, thefacts are closely similar to Ericson. The supplies made (of the software) enabled the use of the hardware sold. It was not disputed that without the software, hardware use was not possible. The mere fact that separate invoicing was donefor purchase and other transactions did not imply that it was royalty payment. In such cases, the nomenclature (oflicense or some otherfee) is indeterminate of the true nature. Nor is the circumstance that updates of the software are routinely given to the assessee's customers. These facts do notdetractfrom the nature ofthe transaction, which was supply ofsoftware, in the nature ofarticles or goods. This court is also not persuaded with the submission that the payments, if not royalty, amounted to paymentsfor the use ofmachinery or equipment. Such a submission was never advanced before any of the lower tax authorities; moreover, even in Ericson (supra), a similar provision existed in the DTAA between India and Sweden.

23. Asfar as the question ofinterestpayments andSection 234B is concerned, the court is ofthe opinion that the issue is covered by GE Packaging (supra). This question oflaw too is answered againstthe revenue,andinfavour ofthe assessee."

5. In the present case as well,the same DTAA is under consideration as was considered by this Court in ZTE Corporation (supra). Following the aforesaid decision,we dismiss the present appeals. sanje: AUGUST 26,2019 nk N A HI V NAR