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

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TCA/124/2016HC Madras16 August 2022Bench: Hon`ble Mr Justice R. MAHADEVAN4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law on their merits. Instead, the Court noted the submission by the Revenue regarding CBDT Circular No. 17/2019, which sets a monetary limit for pursuing appeals before the High Court. As the tax effect in the present appeal was stated to be less than the threshold limit stipulated in the circular, the High Court dismissed the appeal as withdrawn. The Court explicitly stated that the substantial questions of law were kept open for determination in an appropriate case. No costs were awarded.

What were the facts?

The Commissioner of Income Tax, Chennai (the Revenue) filed a Tax Case Appeal before the High Court of Judicature at Madras, challenging an order dated 16.09.2011 passed by the Income Tax Appellate Tribunal (ITAT), Madras “B” Bench. The appeal pertained to assessment year 2006-07 and concerned M/s. Abaqus Engineering India Pvt. Ltd. (the Assessee). The High Court admitted the appeal on substantial questions of law on 08.03.2016. During the hearing, the Revenue brought to the court's notice CBDT Circular No. 17/2019, which stipulates that appeals shall not be filed or pursued before the High Court if the tax effect does not exceed Rs. 1,00,00,000/-. The Revenue submitted that the tax effect in this appeal was below this threshold.

What were the issues?

The High Court had to decide two 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) of the Income Tax Act 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 and covered under section 9(1)(vi) of the Income Tax Act? The Revenue argued that the disallowance under Section 40(a)(i) should not have been allowed by the ITAT and that the payment for the software license should be treated as royalty under Section 9(1)(vi). The judgment does not record specific arguments from the Assessee regarding these questions.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

TCA.No.124 of 2016 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 16.08.2022 CORAM

THE HONOURABLE MR. JUSTICE R. MAHADEVAN and THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ T.C.A.No. 124 of 2016 The Commissioner of Income Tax, Chennai

.. Appellant Versus 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 Tax Case Appeal filed under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal Madras “B” Bench, dated 16.09.2011 passed in I.T.A.No.1702/Mds/2010 in respect of assessment year 2006-07. For Appellant : Mr. T. Ravikumar Standing Counsel For Respondent : Mr.Sandeep Bagmar 1/4 https://www.mhc.tn.gov.in/judis TCA.No.124 of 2016 JUDGMENT (Judgment of the Court was delivered by R. MAHADEVAN, J.) This Tax Case Appeal has been filed by the appellant / revenue, questioning the correctness of the order dated 16.09.2011 passed by the Income Tax Appellate Tribunal Madras “B” Bench, in ITA. No.1702/Mds/2010 for the assessment year 2006-07. 2. On 08.03.2016, this tax case appeal is admitted by this Court on 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) of the Income Tax Act on the amount paid to Abaqus Inc without deduction of tax at source is to be allowed? And 2. Whether the assessee, who sold the license version of software product developed by the parent company, is to be treated as royalty payment made to non resident and covered under section 9(1)(vi) of the Income Tax Act?”

2/4 https://www.mhc.tn.gov.in/judis TCA.No.124 of 2016 3. When the matter was taken up for consideration, the learned counsel for the appellant / Revenue brought to the notice of this court the Circular No.17/2019 dated 08.08.2019 issued by the Central Board Direct Taxes, wherein, it is stipulated that appeals shall not be filed/pursued by the Department before the High Court in cases where the tax effect does not exceed Rs.1,00,00,000/- (Rupees One Crore). It is also submitted that the tax effect in this appeal is less than the threshold limit. 4. In the light of the aforesaid submissions made by the learned counsel for the appellant / Revenue, the present appeal, wherein, the tax effect is said to be less than the monetary limit imposed, is dismissed as withdrawn, keeping open the substantial questions of law for determination in an appropriate case. No costs. [R.M.D,J.] [M.S.Q., J.] 16.08.2022 msr

Index : Yes / No To The Income Tax Appellate Tribunal Madras “B” Bench, Chennai. 3/4 https://www.mhc.tn.gov.in/judis TCA.No.124 of 2016 R. MAHADEVAN, J. and MOHAMMED SHAFFIQ, J. msr T.C.A.No. 124 of 2016 16.08.2022 4/4 https://www.mhc.tn.gov.in/judis

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