THE COMMISSIONER OF INCOME TAX vs. M/S. ABAQUS ENGINEERING INDIA

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TCA/123/2016HC Madras26 March 2025Bench: Honourable Mr Justice S. S. SUNDAR4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law on merits. The Revenue, through its learned Senior Standing Counsel, sought to withdraw the appeal on the grounds that the monetary limit for appeals, as stipulated by recent circulars (Circular No. 5/2024 and 09/2024), was not met. A memo was filed to this effect. Consequently, the High Court dismissed the Tax Case Appeal as withdrawn. The substantial questions of law were expressly left open, meaning no finding was rendered on whether the disallowance under Section 40(a)(i) was justified or whether the payment constituted royalty under Section 9(1)(vi). No costs were awarded.

What were the facts?

The appeal was filed by the Commissioner of Income Tax, Chennai (appellant) against M/s. Abaqus Engineering India Pvt. Ltd. (respondent), now known as Dassault Systems P Ltd. The appeal challenges an order of the Income Tax Appellate Tribunal, Chennai, dated September 16, 2011, pertaining to Assessment Year 2005-06. The appellant sought to raise substantial questions of law concerning a disallowance under Section 40(a)(i) and the classification of payments to a non-resident as royalty under Section 9(1)(vi) of the Income Tax Act, 1961. The amount in dispute is not explicitly stated but is implied to be below the monetary limit for appeals as per recent circulars.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the disallowance under Section 40(a)(i) on the amount paid to Abaqus Inc without deduction of tax at source is to be allowed? 2. Whether the assessee who sold the license version of a software product developed by the parent company is to be treated as royalty payment made to a non-resident covered under Section 9(1)(vi) of the Income Tax Act? Contentions: Assessee: Not recorded. Revenue: The learned Senior Standing Counsel for the appellant (Revenue) submitted that the amount involved in the appeal is below the monetary limit prescribed by Circular No. 5/2024 and 09/2024 dated 15.03.2024 and 17.09.2024, respectively. Therefore, the Revenue sought permission to withdraw the appeal.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 9(1)(vi),Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.No.123 of 2016 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26.03.2025 CORAM : THE HONOURABLE MR. JUSTICE S.S. SUNDAR AND THE HONOURABLE MR. JUSTICE C. SARAVANAN T.C.A.No.123 of 2016 The Commissioner of Income Tax, Chennai. ... Appellant Vs. M/s.Abaqus Engineering India Pvt. Ltd., (Now known as Dassault Systems P Ltd) 10th Floor, ASV N Ramanas Tower, 37 & 38, Venkatramana Road, T.Nagar, Chennai – 600 017. .. Respondent Prayer : Tax Case Appeal filed under Section 260A of Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal “B” Bench, Chennai, in I.T.A.No.1701/Mds/2010, dated 16.09.2011 for AY 2005-06. For Appellant : Mr.T.Ravi Kumar Senior Standing Counsel For Respondent : Mr.Sandeep Bagmar R. Page 1 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/04/2025 01:24:01 pm ) T.C.A.No.123 of 2016 J U D G M E N T (Judgment was delivered by S.S. SUNDAR, J.) The above Appeal is directed against the formal order of the Income Tax Appellate Tribunal, dated 16.09.2011, in ITA No.1701/Mds/2010. In this Appeal, the appellant has raised the following substantial questions of law to be answered : (i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the disallowance u/s.40(a)(i) on the amount paid to Abaqus Inc without deduction of tax at source is to be allowed ? (ii)Whether the assessee who sold the licence version of software product developed by the parent company is to be treated as royalty payment made to non resident covered u/s.9(1)(vi) of the I.T. Act ? 2.Learned Senior Standing Counsel appearing for the appellant submitted that the amount involved in the present Appeal is below the monetary limit as per the Circulars issued by the Government of India, Page 2 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/04/2025 01:24:01 pm ) T.C.A.No.123 of 2016 Ministry of Finance, Department of Revenue, Central Board of Direct Taxes in Circular No. 5/2024 and 09/2024 dated 15.03.2024 and 17.09.2024 respectively, and therefore, seeks permission of this Court to withdraw the Appeal. He has also filed a memo, dated 07.03.2025, to that effect. 3.In view of the aforesaid submission made by the learned Senior Standing Counsel appearing for the appellant, this Tax Case Appeal is dismissed as withdrawn. However, the substantial questions of law are left open. No costs. (S.S.S.R., J.) (C.S.N., J.) 26.03.2025 mkn Internet : Yes Index : Yes / No Neutral Citation : Yes / No To 1.The Income Tax Appellate Tribunal, “B” Bench, Chennai. 2.The Commissioner of Income Tax, Chennai. Page 3 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/04/2025 01:24:01 pm ) T.C.A.No.123 of 2016 S.S. SUNDAR

, J.

and C. SARAVANAN, J. mkn T.C.A.No.123 of 2016 26.03.2025 Page 4 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/04/2025 01:24:01 pm )

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