IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM &

MS PADMAVATHY S, AM I.T.A. No. 3747/Mum/2024 (Assessment Year: 2015-16) I.T.A. No. 3751/Mum/2024 (Assessment Year: 2016-17) I.T.A. No. 3753/Mum/2024 (Assessment Year: 2017-18) I.T.A. No. 3752/Mum/2024 (Assessment Year: 2018-19) I.T.A. No. 5677/Mum/2024 (Assessment Year: 2019-20)

Cornerstone Ondemand Limited, ACIT (IT)-2(1)(1), 14^th Floor, The Ruby, 17^th Floor, Air India Building, 29 Senapati Bapat Marg, Vs. Nariman Point, Dadar (West), Mumbai-400028. M umbai-400021.

PAN: AAGCC3428B Appellant) : Respondent Appellant /Assessee by : Shri Hiten Thakkar, AR Revenue / Respondent by : Shri Krishna Kumar, Sr. DR Date of Hearing : 20.03.2025 Date of Pronouncement : 28.03.2025 O R D E R Per Bench:

These appeals by the assessee are against the separate orders of the Commissioner of income tax (appeals)-56, Mumbai (in short "CIT(A)") dated 29.05.2024 for Assessment Year (AY) 2015-16, 2016-17, 2017-18 & 2018-19 and dated 03.09.2024 for AY 2019-20. The common issues contended by the assessee in all the appeals pertain to levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 (the Act) for AY 2015-16 & 2016-17 and levy of penalty under section 270A of the Act for AY 2017-18 to 2019-20.

2. The assessee is a company incorporated and registered in United Kingdom (UK) and is a cloud-based learning and talent management solutions provider. Cornerstone Ondemand Services India Pvt. Ltd. (CSOD India) is company incorporated in India and is the Authorized Distributor of the assessee's Cloud-

based Software Products in India through Intercompany Service Agreement. The assessee enters into a separate agreement for sale of software products to a customer in India (Page 73 of the Factual paper book) wherein different terms and conditions of sale like granting license, pricing, payment terms, various obligations of assessee in connection with the sale of software like software implementation, after sale technical support, retain and maintaining all proprietary and intellectual property are agreed by the parties. CSOD India is also a party to the sale agreement which defines the role of CSOD India to be restricted to receiving a Purchase Order from a customer in India, raising invoices and collecting payments on behalf of the assessee in India. The assessee earns income from distribution of Cloud-based Software to CSOD India.

ITA No.3747/Mum/2024 - AY 2015-16

3. For the purpose of adjudicating the levy of penalty under section 271(1)(c) of the Act we will consider the appeal filed by the assessee for AY 2015-16 as a lead case. For the AY 2015-16 the assessee filed the return of income on 31.03.2017 declaring Nil income and claiming a refund of Rs. 1,30,15,030/- out of the TDS deducted. The income was reported as Nil by the assessee as the income earned from distribution of its cloud-based software to CSOD India according to the assessee is not Royalty or fees for technical services or business profits to be taxed in India as per the DTAA between India and UK. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The AO during the course of assessment proceedings held that CSOD India is the Dependent Agency Permanent Establishment (DAPE) of the assessee and that the payments received by the assessee are in the nature of Royalty. Accordingly the AO attributed 80% of the total receipts from CSOD India as taxable in the hands of the assessee. The assessee being aggrieved by the draft assessment order filed its objections before the DRP. The DRP issued directions upholding that CSOD India is the DAPE of the assessee but reduced the attribution of income to 30% of the total receipts. The assessee did not file further appeal against the final order of assessment passed by the AO pursuant to the directions of the DRP considering the smallness of the amount.

4. The AO subsequently initiated penalty proceedings mentioning that the assesse