The Commissioner Of Income Tax vs M/S Software And Silicon Systems ...
2021 Latest Caselaw 2038 Kant

Citation : 2021 Latest Caselaw 2038 Kant
Judgement Date : 31 May, 2021

Karnataka High Court

The Commissioner Of Income Tax vs M/S Software And Silicon Systems ... on 31 May, 2021

Author: Alok Aradhe Chandangoudar

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 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

       DATED THIS THE 31ST DAY OF MAY 2021

                     PRESENT

       THE HON'BLE MR. JUSTICE ALOK ARADHE

                        AND

THE HON'BLE MR.JUSTICE HEMANT CHANDANGOUDAR

               I.T.A. NO.164 OF 2007
BETWEEN:

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 ROAD
BANGALORE-17.
                                      ... RESPONDENT
(BY SRI. T. SURYANARAYANA, ADV.)
                         ---

      THIS I.T.A. IS FILED UNDER SECTION 260-A OF
I.T.ACT, 1961 ARISING OUT OF ORDER DATED 26.04.2006
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PASSED IN ITA NO.975/BANG/2004, FOR THE ASSESSMENT
YEAR 2001-2002, PRAYING TO:
     I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED THEREIN.
     II. 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 THE
APPELLATE COMMISSIONER CONFIRMING THE ORDER
PASSED BY THE INCOME TAX OFFICER, INTERNATIONAL
TAXATION, WARD-19(2), BANGALORE, IN THE INTEREST OF
JUSTICE 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 been

preferred by the revenue against the order dated 26.04.2006

passed by the Income Tax Appellate Tribunal, Bangalore.

The subject matter of the appeal pertains to the Assessment

year 2001-2002. The appeal was admitted by a bench of this

Court vide order dated 19.04.2007 on the following

substantial questions of law:

"a) Whether the Tribunal was correct in holding that the assessee is not liable to deduct

TDS in respect of payments made for purchase of software as the same cannot be treated as income liable to tax in India as Royalty or Scientific Work under section 9 of the Act read with Double Taxation Avoidance Agreements and treaties?

b) Whether the Tribunal was correct in holding that since the assessee had purchased only a right to use the copyright i.e., the software and not the entire copyright itself, the payment cannot be treated as Royalty as per the Double Taxation Avoidance Agreement and Treaties which is beneficial to the assessee and consequently section 9 of the Act should not take into consideration?

c) Whether the Tribunal should have recorded a finding that it is under section 195(2) and (3) and (4) of the Act, the chargeability to tax or not of the recipient is decided and having failed to obtain such a decision the assessee was bound to deduct tax at source as held by the Apex Court in 239 ITR 587?

d) Whether 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 sufficient reason, when section 195(2)(3)(4) of the Act certificate is not obtained?

e) Whether the Tribunal was correct in holding that the payment partakes the character of purchase and sale of goods and therefore cannot be treated as royalty payment liable to Income Tax?"

2. When the matter was taken up today, the learned

counsel 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 in Civil Appeal Nos.8733-8734/2018

viz., 'ENGINEERING ANALYSIS CENTRE OF

EXCELLENCE PRIVATE LIMITED Vs. THE

COMMISSIONER OF INCOME TAX'.

3. The aforesaid submission has not been disputed by

the learned counsel for the revenue.

4. In view of the decision of the Supreme Court in

ENGINEERING ANALYSIS CENTRE OF EXCELLENCE