Ita/164/2007 Of The Commissioner Of Income Tax v. M/S Software And Silicon Systems (I) Pvt Ltd

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 31ST DAY OF MAY 27071 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR.JUSTICE HEMANT CHANDANGOUDAR. BETWEEN: 1T.A. NO.164 OF 2007 1. THE COMMISSIONER OF INCOME-TAX INTERNATIONAL TAXATION RASTROTHANA BUILDING NRUPATHUNGA ROAD| BANGALORE. 2. THE INCOME-TAX OFFICER. INTERNATIONAL TAXATION WARD-19(2), RASTROTHANA BUILDING| NRUPATHUNGA ROAD, BANGALORE. | .., APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,) AND M/S. SOFTWARE AND SILICON SYSTEMS(I) PVT. LTD.,.NO.136, AIRPORT ROADBANGALORE-1 7. .., RESPONDENT| (BY SRI. T. SURYANARAYANA, ADV.) THIS I.T.A. IS. FILED UNDER SECTION 260-A OFI.T.ACT, 1961 ARISING OUT OF ORDER DATED 26.04.2006 PASSED IN ITA NO.975/BANG/2004, FOR THE ASSESSMENTYEAR 2001-2002, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW|STATED THEREIN.. I]. ALLOW THE APPEAL AND SET ASIDE THE ORDERS|PASSED BY THE ITAT, BANGALORE IN’ ITA NO.975/BANG/2004 DATED 26.04.2006 AND CONFIRM THE ORDER OF THEAPPELLATECOMMISSIONERCONFIRMING)THE|ORDER|PASSED BY THE INCOME TAX OFFICER, INTERNATIONALTAXATION, WARD-19(2), BANGALORE, IN THE INTEREST OFJUSTICE AND EQUITY. THIS I.T.A. COMING ON FOR FINAL HEARING, THIS|DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT Mr.K.V.Aravind, learned counsel for the revenue. Mr.T.Suryanarayana, learned counsel for the assessee. This appeal under Section 260A of the Income Tax Act,1961 (hereinafter referred to as the Act for short) has beenpreferred by the revenue against the order dated 26.04.2006passed by the Income Tax Appellate Tribunal, Bangalore.The subject matter of the appeal pertains to the Assessmentyear 2001-2002. The appeal was admitted by a bench of thisCourt vide order dated 19.04.2007 on _ the _ followsubstantial questions of law: Whether the Tribunal was correct /[nnoiding tnat the assessee is not liable to deduct TDS in respect of payments made for purchase ofsoftware as the same cannot be treated asincome liable to tax in India as Royalty orScientific Work under section 9 of the Act readwith Double Taxation Avoidance Agreements and|treaties? D)Whether the Tribunal was correct in|noiding tnat since the assessee had purchasedonly a right to use tne copyrignt i.e., the softwareand not the entire copyright itself, the payment|cannot be treated as Royalty as per the DoubleTaxation Avoidance Agreement and Treaties wnicnis beneficial to the assessee and consequentlysection 9 of the Act should not take Intoconsideration 2 C)Whether the Tribunal should have|recorded a finding tnat it is under section 195(2)and (3) and (4) of tne Act, the cnargeability to taxor not of the recipient is decided and naving failedto obtain such a decision the assessee was poundto deduct tax at source as neld by the Apex CourtIn 739 ITR 58/2? ad)Whetner the assessee can question|the taxability of the recipient in section 201(1) of the Act proceeding when the assessee has to.show only “without good and sufficient reasons|failed to deduct and pay tax", which has not. been shown in the facts of the present case and.non taxability cannot be taken as a_ sufficientreason, when section 195(2)(3)(4) of the Actcertificate is not obtained? e)Whether the Tribunal was correct [n°noiding that the payment partakes tne characterof purchase and sale of goods and tnereforecannot be treated as royalty payment liable to[Income Tax? 2. When the matter was taken up today, the learnedcounsel for the assessee submitted that the aforesaid|substantial questions of law have already been answered in|favour of the assessee by the Supreme Court vide judgment|dated 02.03.2021 iInCivil Appeal Nos.8/733-8734/2018 VIZ.,"ENGINEERINGANALYSIS|CENTREOFEXCELLENCE|PRIVATELIMITEDYs.THECOMMISSIONER OF INCOME TAX: 3. The aforesaid submission has not been disputed bythe learned counsel! for the revenue. 4. In view of the decision of the Supreme Court inENGINEERING ANALYSIS CENTRE OF EXCELLENCE e)Whether the Tribunal was correct [n°noiding that the payment partakes tne characterof purchase and sale of goods and tnereforecannot be treated as royalty payment liable to[Income Tax? 2. When the matter was taken up today, the learnedcounsel for the assessee submitted that the aforesaid|substantial questions of law have already been answered in|favour of the assessee by the Supreme Court vide judgment|dated 02.03.2021 iInCivil Appeal Nos.8/733-8734/2018 VIZ.,"ENGINEERINGANALYSIS|CENTREOFEXCELLENCE|PRIVATELIMITEDYs.THECOMMISSIONER OF INCOME TAX: 3. The aforesaid submission has not been disputed bythe learned counsel! for the revenue. 4. In view of the decision of the Supreme Court inENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED(supra), the substantial questions of lawframed in this appeal are answered in favour of the assesseeand against the revenue. — In the result, appeal is dismissed. Sd/-JUDGE Sd/-JUDGE RV