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Income Tax Appellate Tribunal, BANGALORE BENCHES “B”, BANGALORE
Before: Shri George George K, JM & Shri B.R.Baskaran, AM
O R D E R
Per George George K, JM
This appeal at the instance of the assessee is directed against the CIT(A)’s order dated 24.11.2017. The relevant assessment year is 2013-2014.
The solitary issue raised is whether import of software attracted the provisions of section 195 of the I.T.Act and non- deduction of tax would amount to disallowance of expenditure u/s 40(a)(i) of the I.T.Act.
Brief facts of the case are as follow: The assessee is a company engaged in the business of trading of computer peripherals, accessories and software. For the assessment year 2013-2014, return of income was filed on 30.09.2013 declaring income of Rs.5,90,490. The assessment u/s 143(3) of the I.T.Act was passed vide order dated 29.02.2016, wherein the A.O. had made a disallowance of Rs.1,00,16,998 by invoking the provisions of section 40(a)(i) of the I.T.Act. The A.O. held that the payment of Rs.1,00,16,998 made to various foreign entities in foreign
. M/s.Login Infotech Private Limited. currency was to be disallowed as a business expenditure, since the assessee has not withheld tax on making such payment as prescribed u/s 195 of the I.T.Act.
Aggrieved, the assessee preferred an appeal to the first appellate authority. The CIT(A) confirmed the view of the Assessing Officer,
Aggrieved by the order of the CIT(A), the assessee has filed this appeal before the Tribunal. The learned AR submitted that the issue in question is squarely covered in favour of the assessee by the judgment of the Hon’ble Apex Court in the case of Engineering Analysis Centre of Excellence P.Ltd. v. CIT reported in [2021] 432 ITR 471 (SC), wherein it was categorically held that sale of software would not constitute royalty within the provisions of section 9(1)(vi) of the I.T.Act and Article 12 of the DTAA between India and USA.
The learned Departmental Representative supported the orders of the Income Tax Authorities.
We have heard rival submissions and perused the material on record. In the instant case, the CIT(A) has confirmed the disallowance made by the A.O. u/s 40(a)(i) of the I.T.Act for the reason that the assessee has not given party-wise details with regard to the payment made in foreign currency. It was further held by the CIT(A) that the field activities were not highlighted by the assessee so as to conclude that it was engaged in mere trading and that no software-licences (or certain extent of user) was involved in . M/s.Login Infotech Private Limited. the process. The Hon’ble Supreme Court has held that sale of software or purchase of software per se would not come within the term “royalty”. However, in the instant case it has not been conclusively established by the assessee that it merely purchased a copywrited article. Therefore, we are of the view that the matter needs to be examined by the A.O. in the light of the recent judgment of the Hon’ble Apex Court in the case of Engineering Analysis Centre of Excellence P.Ltd. v. CIT (supra), relied on by the assessee. Accordingly, the issue is restored to the files of the A.O. The A.O. is directed to examine the facts of this case and the dictum laid down by the Hon’ble Apex Court and take a decision in accordance with law. It is ordered accordingly.