Madras High Court
Principal Commissioner Of ... vs M/S. Saipem India Projects ... on 20 December, 2021
TCA Nos. 549, 554, 555 and 558 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 20.12.2021
CORAM :
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ
T.C.A. Nos. 549, 554, 555 and 558 of 2021
and
C.M.P. Nos. 19939, 19975, 19981 and 20008 of 2021
T.C.A. No. 549 of 2021:-
Principal Commissioner of Income-Tax
Company Circle-VI(I)
Chennai. ... Appellant
Versus
M/s. Saipem India Projects Private Limited
Yarlagadda Towers, 4, Fourth Lane
Off. Nungambakkam High Road
Chennai – 600 034.
PAN : AAA CI 7915 F ... Respondent
Tax Case Appeal filed under Section 260-A of the Income Tax Act,
1961 against the order dated 23.10.2017 passed by the Income Tax Appellate
Tribunal, Madras 'A' Bench, in I.T.A. No. 1863/Mds/2017 for the assessment
year 2010-11.
T.C.A. No. 554 of 2021 :-
Principal Commissioner of Income-Tax
Company Circle-VI(I)
Chennai. ... Appellant
Versus
https://www.mhc.tn.gov.in/judis
TCA Nos. 549, 554, 555 and 558 of 2021
M/s. Saipem India Projects Private Limited
Yarlagadda Towers, 4, Fourth Lane
Off. Nungambakkam High Road
Chennai – 600 034.
PAN : AAA CI 7915 F ... Respondent
Tax Case Appeal filed under Section 260-A of the Income Tax Act,
1961 against the order dated 23.10.2017 passed by the Income Tax Appellate
Tribunal, Madras 'A' Bench, in I.T.A. No. 1868/Mds/2017 for the assessment
year 2015-16.
T.C.A. No. 555 of 2021 :-
Principal Commissioner of Income-Tax
Company Circle-VI(I)
Chennai. ... Appellant
Versus
M/s. Saipem India Projects Private Limited
Yarlagadda Towers, 4, Fourth Lane
Off. Nungambakkam High Road
Chennai – 600 034.
PAN : AAA CI 7915 F ... Respondent
Tax Case Appeal filed under Section 260-A of the Income Tax Act,
1961 against the order dated 23.10.2017 passed by the Income Tax Appellate
Tribunal, Madras 'A' Bench, in I.T.A. No. 1866/Mds/2017 for the assessment
year 2013-14.
T.C.A. No. 558 of 2021 :-
Principal Commissioner of Income-Tax
Company Circle-VI(I), Chennai. ... Appellant
Versus
https://www.mhc.tn.gov.in/judis
TCA Nos. 549, 554, 555 and 558 of 2021
M/s. Saipem India Projects Private Limited
Yarlagadda Towers, 4, Fourth Lane
Off. Nungambakkam High Road
Chennai – 600 034.
PAN : AAA CI 7915 F ... Respondent
Tax Case Appeal filed under Section 260-A of the Income Tax Act,
1961 against the order dated 23.10.2017 passed by the Income Tax Appellate
Tribunal, Madras 'A' Bench, in I.T.A. No. 1865/Mds/2017 for the assessment
year 2012-13.
For Appellant : Mr. Karthik Ranganathan
in all the appeals
For Respondent : Mr. P.Chidambaram
in all the appeals
COMMON JUDGMENT
(Judgment of the Court was delivered by R. MAHADEVAN, J.)
These tax case appeals have been filed by the appellant / Revenue,
calling in question the correctness of the common order dated 23.10.2017
passed by the Income Tax Appellate Tribunal, 'A' Bench, Chennai, relating to
the assessment years 2010-11, 2012-13, 2013-14 and 2015-16, by raising the
following substantial questions of law:-
“1. Whether on the facts and circumstances of the case
and in law, the Tribunal was correct in holding that the amounts
paid by the assessee to the foreign company for the use of
copyright of 'computer software' was not 'royalty' and that the
same did not give rise to any 'income' taxable in India and,
therefore, the assessee was not liable to deduct any tax at
sources?
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TCA Nos. 549, 554, 555 and 558 of 2021
2. Whether on the facts and circumstances of the case and
in law, the Tribunal was right in holding that mere transfer of
right to use copyright software did not amount to royalty
particularly when there has been retrospective additions to
Explanations 4 to 6 to Sec. 9(1)(vi) of the Income Tax Act, 1961
even though there are no similar explanatory addition in the
DTAA and the DTAA provision clearly mention that the use of a
copyright amount to royalty?
3. Whether on the facts and circumstances of the case and
in law, the Tribunal was right in holding in favour of the
assessee by placing reliance inter alia on the decision of Hon'ble
High Court in the case of DIT vs. Infrasoft Ltd. (2013) 39
Taxmann.com 88 / 2014 220 Taxmann 273 (Delhi) when the
issues involved are clearly distinguishable to the present case on
hand?
4. Whether on the facts and circumstances of the case and
in law, the Tribunal was right in holding that its mere a transfer
of right to use copyrighted article, without appreciating the fact
that when a copyrighted article is permitted or licenses to be
used for a fee, the permission involves the use of or the right to
use the copyright embedded therein and hence, such 'right to
use' amount to 'royalty' even in the provisions of DTAA
concerned?”
2. When these appeals are taken up for hearing today, the learned
counsel appearing for both sides jointly submitted that the substantial
questions of law raised herein have been decided in favour of the assessee, in
the decision of the Hon'ble Supreme Court in the case of Engineering
Analysis Centre of Excellence Private Limited v. Commissioner of Income
Tax and another reported in (2021) SCC Online SC 159 which was followed
by a Co-ordinate Bench of this Court in T.C.A. No. 150 of 2015 dated
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TCA Nos. 549, 554, 555 and 558 of 2021
03.09.2021, the relevant passage of which is profitably, extracted below:
2.The appeal has been admitted on 06.07.2015
on the following substantial questions of law :
“1.Whether on the facts and circumstances of this
case, the Tribunal was right in deleting the
disallowance made by the AO holding that the
amendment to Section 9(1)(vi) introduced by Finance
Act, 2012 with retrospective effect from 01.06.1976 is
not applicable and therefore no TDS needs to be
deducted?
2.Is not the finding of the Tribunal bad,
especially when a non resident companies, ACI of
Singapore and IRPL of Australia have permanent
establishment in India through the medium of assessee
company and as such liable to deduct tax at source on
the payment received?
3.Whether the Tribunal was right in holding that
the amounts paid by the assessee company to the non
resident company for use of the assessee customer in
India of operating net work payments, ATMs is not
Royalty as per the provisions of Section 9(1)(vi) of the
Income Tax Act?
4.Whether on the facts and in the circumstances
of the case, the Income Tax Appellate Tribunal was
right in holding that payments made to two companies
no TDS is required to be deducted under Section 195 of
the Income Tax Act?”
3.We have heard Mr.Karthik Ranganathan,
learned Senior Standing Counsel for the
appellant/Revenue and Mr.N.V.Balaji, learned counsel
for the respondent/assessee.
4.It is not disputed before us that the substantial
https://www.mhc.tn.gov.in/judis questions of law, which have been raised in this appeal,
TCA Nos. 549, 554, 555 and 558 of 2021
have been answered in favour of the assessee in the
decision of the Hon'ble Supreme Court in the case of
Engineering Analysis Centre of Excellence Private
Limited v. Commissioner of Income Tax and another
reported in (2021) SCC Online SC 159.
5.In the said decision, there were four categories
of cases as mentioned below :
“4.The appeals before us may be grouped into four
categories:
i) The first category deals with cases in which
computer software is purchased directly by an
end-user, resident in India, from a foreign, non-
resident supplier or manufacturer.
ii) The second category of cases deals with resident
Indian companies that act as distributors or
resellers, by purchasing computer software from
foreign, nonresident suppliers or manufacturers
and then reselling the same to resident Indian
end-users.
iii) The third category concerns cases wherein the
distributor happens to be a foreign, non-resident
vendor, who, after purchasing software from a
foreign, nonresident seller, resells the same to
resident Indian distributors or end-users.
iv) The fourth category includes cases wherein
computer software is affixed onto hardware and
is sold as an integrated unit/equipment by
foreign, non-resident suppliers to resident Indian
distributors or end-users.”
6.After elaborately considering the entire issues,
the Hon'ble Supreme Court held as follows :
“172. Given the definition of royalties contained
in Article 12 of the DTAAs mentioned in paragraph 41
of this judgment, it is clear that there is no obligation
https://www.mhc.tn.gov.in/judis
TCA Nos. 549, 554, 555 and 558 of 2021
on the persons mentioned in section 195 of the Income
Tax Act to deduct tax at source, as the distribution
agreements/EULAs in the facts of these cases do not
create any interest or right in such distributors/end-
users, which would amount to the use of or right to use
any copyright. The provisions contained in the Income
Tax Act (section 9 (1)(vi), along with explanations 2
and 4 thereof), which deal with royalty, not being more
beneficial to the assessees, have no application in the
facts of these cases.
173. Our answer to the question posed before us,
is that the amounts paid by resident Indian end-
users/distributors to non-resident computer software
manufacturers/suppliers, as consideration for the
resale/use of the computer software through
EULAs/distribution agreements, is not the payment of
royalty for the use of copyright in the computer
software, and that the same does not give rise to any
income taxable in India, as a result of which the
persons referred to in section 195 of the Income Tax
Act were not liable to deduct any TDS under section
195 of the Income Tax Act. The answer to this question
will apply to all four categories of cases enumerated by
us in paragraph 4 of this judgment.
174. The appeals from the impugned judgments
of the High Court of Karnataka are allowed, and the
aforesaid judgments are set aside. The ruling of the
AAR in Citrix Systems (AAR) (supra) is set aside. The
appeals from the impugned judgments of the High
Court of Delhi are dismissed.”
7.Following the above decision, this Tax Case
Appeal filed by the Revenue is dismissed and the
substantial questions of law are answered against the
Revenue. No costs.”
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TCA Nos. 549, 554, 555 and 558 of 2021
3. In the light of the above, the substantial questions of law raised in
these appeals, are answered against the Revenue. Accordingly, all the Tax
Case Appeals are dismissed. No costs. Consequently, connected miscellaneous
petitions are closed.
[R.M.D,J.] [M.S.Q, J.]
20.12.2021
maya/rsh
Internet : Yes
Index : Yes / No
To
1.The Principal Commissioner of Income-Tax
Company Circle-VI(I)
Chennai.
2. The Income Tax Appellate Tribunal,
Chennai 'A' Bench.
https://www.mhc.tn.gov.in/judis
TCA Nos. 549, 554, 555 and 558 of 2021
R. MAHADEVAN, J
and
MOHAMMED SHAFFIQ, J
Maya/rsh
TCA Nos. 549, 554, 555 and 558 of 2021
20.12.2021
(2/2)
https://www.mhc.tn.gov.in/judis
