SOLIZE PARTNERS INDIA PV LTD vs. THE INCOME TAX OFFICER

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ITA/181/2014HC KarnatakaKAHC01016207201406 August 2026Author: S.G.PANDIT,K.MANMADHA RAO6 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the substantial questions of law raised in the appeal were identical to those raised in another appeal (ITA No.698/2023) which was rejected by a co-ordinate bench of the Court. Furthermore, the Court noted that the substantial questions of law were answered by the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence Private Limited Vs. Commissioner of Income Tax and Another, reported in (2022) 3 SCC 321. Based on these precedents, the High Court allowed the appeal. The substantial questions of law were answered in favour of the assessee and against the revenue. The assessee would be entitled to all consequential benefits.

What were the facts?

The assessee, Solize Partners India Pvt Ltd, is engaged in the business of re-sale of computer software licenses, services, installation, training, and technical consultation. For Assessment Year 2010-2011, the assessee declared nil income. The Assessing Officer treated payments made by the assessee to non-resident software owners for software as royalty under the applicable Double Taxation Avoidance Agreement (DTAA) and Section 9(1)(vi) of the Income Tax Act, 1961. The assessee's appeal to the Commissioner of Income Tax (Appeals) was dismissed, and the subsequent appeal to the Income Tax Appellate Tribunal (ITAT) was also dismissed, upholding the orders of the lower authorities. The assessee filed an appeal before the High Court challenging the ITAT's order.

What were the issues?

1. Whether the Tribunal was correct in characterizing payments made by the Appellant to non-resident software owners for standardized software as royalty under Article 12 of the applicable DTAA and Section 9(1)(vi) of the Act, making them subject to withholding tax? (Question of law) 2. Whether the Tribunal erred in upholding the CIT(A)'s order by not appreciating that the transfer was of copyrighted material, not rights in a copyright, and that the Appellant did not have the right to make copies for commercial exploitation, thus not constituting royalty? (Question of mixed law and fact) 3. Whether payments for shrink-wrap/off-the-shelf/standardized software are akin to the purchase of goods, treated as business profits of the non-resident and not royalty, hence not taxable in India without a Permanent Establishment, and whether the Karnataka High Court's decision in Samsung Electronics Co., Ltd. is applicable? (Question of law) 4. Whether the retrospective amendment to Section 9(1)(vi) of the Act by the Finance Act, 2012, could impose a withholding tax obligation on the Appellant under the DTAA for past transactions? (Question of law) Assessee's contentions: The payments were for the purchase of goods (standardized software) and not royalty. The transfer did not involve rights in a copyright. The decision in Samsung Electronics Co., Ltd. was distinguishable. The retrospective amendment could not impose a withholding obligation for past transactions. Revenue's contentions: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 9(1)(vi)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF AUGUST, 2026 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE DR. JUSTICE K.MANMADHA RAO INCOME TAX APPEAL NO. 181 OF 2014 BETWEEN:

SOLIZE PARTNERS INDIA PV LTD HAVING ITS REGISTERED OFFICE AT 2ND FLOOR, UNIT NOS.201-B AND 202 BRIGADE OPUS, NO.70/401, KODIGEHALLI GATE, HEBBAL, BENGALURU-560 092. REPRESENTED BY ITS CEO AND DIRECTOR V S MAHADEVAN (AMENDMEND VIDE ORDER DATED 30.07.2026) …APPELLANT (BY MS. PREKSHA R LALWANI., ADVOCATE FOR SRI. KUMAR RAM RAGHURAM CADAMBI & ADITYA MATOLLI(VK FILED A/W IA).,ADVOCATE)

AND:

THE INCOME TAX OFFICER INTERNATIONAL TAXATION WARD 1(1), RASHTROTHANA BHAVAN, 14/3, 6TH FLOOR, NRUPATHUNGA ROAD, BANGALORE-560 001. …RESPONDENT (BY SRI.M DILIP.,ADVOCATE)

THIS ITA FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 05/12/2013 PASSED IN ITA NO.936/BANG/2012, FOR THE ASSESSMENT YEAR 2010- 2011, PRAYING TO 1. ADMIT THE INSTANT APPEAL TO

Digitally signed by G SHREERAKSHA Location: HIGH COURT OF KARNATAKA

ANSWER THE SUBSTANTIAL QUESTION OF LAW SET OUT IN PARA 29 ABOVE AND 2. SET ASIDE THE IMPUGNED ORDER DATED 05/12/2013 IN ITA NO. 936/B/2012 AT ANNEXURE-A AND QUASH ANY RECOVERY OR OTHER PROCEEDINGS INSTITUTED PURSUANT TO THE DIRECTIONS ISSUED THEREUNDER AND ETC.,

THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE DR. JUSTICE K.MANMADHA RAO

ORAL JUDGMENT

(PER: HON'BLE MR. JUSTICE S.G.PANDIT)

The above appeal by assessee under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') is directed against order dated 05.12.2023 in ITA No.936/B/2012 (Annexure - A) and also to quash any recovery or other proceedings instituted pursuant to the directions issued thereunder raising the following substantial questions of law: "a) Whether, Tribunal was right in characterising the payments made by the Appellant to non-resident software owners for purchase of standardized software as royalty both under Article 12 of the applicable DTAA's and section 9(1)(vi) of the Act and therefore subject to withholding of tax under the Act?

b) Whether the Tribunal has erred in upholding the order of the CIT(A) without appreciating that what was transferred to the Appellant was a copyrighted material which was distinct from rights in a copyright i.e. neither the copyright in the software nor the use of the copyright in the software was transferred and nor did the Appellant have the right to make copies of software for commercial exploitation and hence cannot be categorized as royalty?

c) Whether the payments for purchase of shrink wrap software / off the shelf /standardized software is akin to purchase of goods which is treated as business profits/income of the non- resident and not royalty and hence not taxable in India in absence of the non- resident seller having a Permanent Establishment in India? Whether the decision of the Hon'ble Karnataka High Court in case of Samsung Electronics Co., Ltd (supra) is applicable to the Appellants case in view of the fact that the Appellant's case differs from the facts in Samsung Electronics Co., Ltd. case on various grounds and therefore the ruling would not be applicable in the present case?

d) Whether the retrospective amendment to section 9(1)(vi) of the Act by the Finance Act, 2012 could impose an obligation on the Appellant to withhold taxes under applicable DTAA's, and without prejudice to the same, for transactions entered in the past?

d) Whether the retrospective amendment to section 9(1)(vi) of the Act by the Finance Act, 2012 could impose an obligation on the Appellant to withhold taxes under

applicable DTAA's, and without prejudice to the same, for transactions entered in the past?"

2.

Heard learned counsel Ms.Preksha R Lalwani for Sri.Kumar Ram Raghuram Cadambi and Sri.Aditya Matolli for the appellant - assessee and learned counsel Sri.M Dilip for the respondent - revenue. Perused the entire appeal papers.

3.

It is stated that the appellant - company is engaged in the business of re-sale of computer software licenses, services, installation, training and technical consultation. It is stated that the appellant - company filed return for the Assessment Year 2010-11 declaring nil income and, thereafter, appellant - company filed revised return of income on 19.07.2011 again declaring nil income. While assessing the return of the appellant, the payments made by the appellant to non-resident software owners was treated as royalty under the applicable DTAA as well as the provisions of the Act by the Assessing Officer. Aggrieved by the same, the appellant filed appeal before the Commissioner of Income Tax (Appeals)-IV, Bengaluru (hereinafter referred to as 'the CIT(Appeals)') and it is stated that, in the meanwhile, the Assessing Officer under

Section 154 of the Act after providing an opportunity to the appellant, suo moto rectified an alleged mistake and recomputed the tax payable by the appellant. The CIT(Appeals) passed order on 29.05.2012 upholding the order passed by the Assessing Officer. Against the order of the CIT(Appeals), it is stated that the appeal was filed before the Tribunal. The Tribunal under impugned order upheld the order of the CIT (Appeals) as well as the assessment order.

4.

During the course of hearing, learned counsel for the parties brought to our notice that the substantial questions of law raised herein are identical to substantial questions of law raised in ITA No.698/2023 preferred by revenue, which was rejected by judgment of Co-ordinate Bench of this Court dated 12.08.2025. Further, we are of the opinion that the substantial questions of law raised herein are answered by the Hon'ble Apex Court in Engineering Analysis Centre of Excellence Private Limited Vs. Commissioner of Income Tax and Another, reported in (2022) 3 SCC 321.

5.

In the light of the above, the appeal deserves to be allowed. Accordingly, substantial questions of law raised are

answered in favour of the assessee and against the revenue. In view of the above, the appellant - assessee would be entitled for all consequential benefits.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (DR.K.MANMADHA RAO) JUDGE

GSR List No.: 1 Sl No.: 30

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