Appellantthrough: Mr. Ruchir Bhatia, Advocate v. Zte Corporation

<- $-3, 4 & 6 *IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 763/2019 THE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -2 AppellantThrough: Mr. Ruchir Bhatia, Advocate. versus ZTE CORPORATION Respondent Through: Mr. Rohan Khare, Advocate. +ITA 769/2019 THE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -2 Appellant Through: Mr. Ruehir Bhatia, Advocate. versus ZTE CORPORATION Respondent Through: Mr. Rohan Khare, Advocate. +ITA 771/2019 THE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -2 AppellantThrough: Mr. Ruchir Bhatia, Advocate. versus ZTE CORPORATION RespondentThrough: Mr. Rohan Khare, Advocate. CORAM: HON'BLE MR. JUSTICE VIPIN SANGHIHON'BLE MR. JUSTICE SANJEEV NARULAORDER %26.08.2019 CM. APPL. 37076/2019 in ITA 769/2019 & CM. APPL. 37077/2019 inITA 771/2019 1. Exemption allowed, subject to all just exceptions. 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 veryfairly states that the issues/questions framed in the present appeals arecovered by the decision of this Court in Commissioner of Income Tax,International Taxation v. ZTE Corporation (2017) 392 ITR 80 (Delhi). The questions of law framed in the said appeal were as follows: "(7) Are the ITAT's findings with respect to interpretation ofArticle 12 (3) of the Indo-China Double Taxation AvoidanceAgreement (DTAA), in the light of Explanations 5 & 6 to Section9 (1) (vi), erroneous in law. (ii) Is the impugned order correct in its interpretation of Section234B of the Income Tax Act, 1961, in the facts and circumstancesof the case." 4. The findings returned by this Court in the said decision read as follows: "22. In the present case, the facts are closely similar to Ericson.The supplies made (of the software) enabled the use of thehardware sold. It was not disputed that without the software,hardware use was not possible. The mere fact that separateinvoicing was done for purchase and other transactions did notimply that it was royalty payment. In such cases, thenomenclature (of license or some other fee) is indeterminate ofthe true nature. Nor is the circumstance that updates of thesoftware are routinely given to the assessee's customers. Thesefacts do not detract from the nature of the transaction, which wassupply of software, in the nature of articles or goods. This court L is also not persuaded with the submission that the payments, ifnot royalty, amounted to payments for the use of machinery orequipment. Such a submission was never advanced before any ofthe lower tax authorities; moreover, even in Ericson (supra), asimilar provision existed in the DTAA between India andSweden. 23. As far as the question of interest payments and Section 234Bis concerned, the court is of the opinion that the issue is coveredby GE Packaging (supra). This question of law too is answeredagainst the revenue, and in favour of the assessee. " 5. In the present case as well, the same DTAA is under consideration as wasconsidered by this Court in ZTE Corporation (supra). Following theaforesaid decision, we dismiss the present appeals. NAHIsanje:V NAR AUGUST 26, 2019nk