M/S WIPRO LIMITED ,BANGALORE vs. THE ASSISSTANT COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE-2(1), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA Nos.1215 to 1220/Bang/2014 & 18 to 23/Bang/2017 Assessment years :2007-08 to 2012-13 M/s. Wipro Limited, The Additional Doddakannelli, Commissioner of Sarjapur Road, Vs. Income Tax, Bangalore – 560 025. Range 12, PAN: AAACW 0387R Bangalore. APPELLANT RESPONDENT ITA Nos. 2328/Bang/2016 & 2335 to 2339/Bang/2016 Assessment years : 2007-08 to 2012-13 The Deputy M/s. Wipro Limited, Commissioner of Doddakannelli, Income Tax (International Vs. Sarjapur Road, Taxation), Bangalore – 560 025. Circle 2(1), PAN: AAACW 0387R Bangalore. APPELLANT RESPONDENT Assessee by : Shri K.R. Pradeep, CA : Shri K.V. Aravind, Standing Counsel & Respondent by Shri Dilip, Advocate. Date of hearing : 24.04.2019 Date of Pronouncement : 21.06.2019 O R D E R Per Bench ITA Nos.1215 to 1220/ Bang/2014 These are appeals arising out of the common order passed by the CIT(Appeals) on the following grounds:-

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“1. That the order of the learned Commissioner of Income-tax (Appeals) [hereinafter referred to as "the CIT(A)"] in so far as it is against the appellant is against law, facts and circumstances in the case of the appellant. 2. The notice, proceedings and order are all bad in law, without jurisdiction and invalid. 3. That the appellant denies the liabilities u/s 201(1) and 201(1A) of the Act. 4. The CIT(A)/A0 erred in declaring the assessee as in default u/s 201(1) of the Act. 5. That the order passed u/s 201(1) and 201(1A) of the IT Act is without jurisdiction, not as per law and barred by limitation, hence requires to be cancelled. 6. The CIT(A) erred in confirming the order passed u/s 201(1) & 201(1A) even after noticing that a single order was passed for multiple assessment years which is not as per law, hence requires to be cancelled. 7. That the orders of the CIT(A) /AO are liable to be cancelled as they are passed in gross violation of judicial discipline inasmuch as even the judgment of the jurisdictional High Court in appellant's own case, which upheld the appellate orders for the earlier years involving similar facts, has been disregarded. 8. That the CIT(A) merely carried out an academic exercise of analyzing various Explanations, clauses under section 9(1)(vi) of the Act, provisions of Double Taxation Avoidance Agreements and judicial decisions without actually specifying the charge having regard to the facts and circumstances in the appellant's case. 9. That the Learned CIT(A) erred in confirming the liability against the appellant contrary to the provisions of the I T Act and also DTAA. 10. That the CIT(A) erred in sustaining the order passed by the AO by upholding that payments made for purchase of software licenses, are royalty payments both under section 9(1)(vi) the Income-tax Act, 1961 and as per relevant DTAA, exigible for deduction of tax at source. 11. That the learned CIT(A) / AO erred in fastening a liability on the appellant u/s 201(1) and 201(1A) based on Explanation 4 to section

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9(1)(vi) of the Act which has been inserted by the Finance Act, 2012 w.r.e.f. 1-6-1976. 12. That the learned CIT(A) / AO failed to appreciate that there cannot be retrospective default in the matter of tax deduction at source on the basis of retrospective amendment, hence on this ground alone the order requires to be cancelled. 13. For the above and other grounds and reasons which may be submitted during the course of hearing of this appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered.” A common order was passed by the CIT(Appeals) in ITA Nos.173 to 178/Intl. Taxn./CIT(A)-IV/2012-13. Feeling aggrieved by the common order passed by the CIT(A) u/s. 201(1) & 201(1A) dated 30.11.2014 for the assessment years 2007- 08 to 2012-13, these six appeals are filed by the assessee before the tribunal. The year wise details of the demand were as under:-

A.Y. Amount 2007-08 4,47,22,584 2008-09 5,82,68,394 2009-10 94,88,913 2010-11 3,19,95,710 2011-12 2,44,56,548 2012-13 54,55,010 2. The proceedings u/s. 201(1) of the Act was initiated by the Officer after issuing a notice on 09.12.2012, 26.2.2013, 23.5.2013 & 20.8.2013. In reply of various notices, the DDIT (Intl. Taxn.) in para 6 mentioned that the assessee is a Indian company and the payees are foreign companies based in US, Ireland, Singapore, Australia, Israel etc. with their residential status being that of resident and non-resident respectively. The DDIT further noticed that as the payments were made to various vendors such as Avaya Cisco Systems International Finance Corp (Netherlands), Appdna Inc (US), Actuate Pte Ltd (Singapore), Cisco Systems International Finance Corp (Netherlands), GE Commercial Distribution Finance Corp etc. towards purchase of licensed software, as per the provisions of section 9(1)(vi) of the Act the payments made by the assessee to

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these non-resident foreign entities were in the form of royalty and hence, it was held that it was the duty of assessee to deduct tax at source in accordance with the law. As there was a failure on the part of assessee to deduct tax at source, the AO had issued show cause notices by invoking the provisions of section 201(1) by treating the assessee as assessee in default in respect of tax.

“1. Since Assessing Officer has considered the rate of tax as per provisions of Income-tax Act, surcharge and educational cess should have been levied on the tax liability calculated by the Assessing Officer. However, Assessing Officer has failed to levy surcharge and educational cess in the order u/s. 201(1) & 201(1A). 2. As per the agreements entered by assessee with foreign vendors available on record, the payment had to be made to the Vendors net of taxes. Thus as per Sec.195A of the Income-tax Act, 1961 while passing order u/s. 201(1) and 201(1A) Assessing Officer should have considered grossing up of the payment. But Assessing Officer did not consider the grossing up of amount credited as required u/s. 195A, for determining the tax-deductible u/s. 195 in respect of payments made to Non-resident companies.” 6. The AO then issued notice to the assessee u/s 154 for rectifying these mistakes and to grant opportunity of hearing to the assessee before passing the

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order u/s 154 because this will increase the tax liability of the assessee and after hearing the assessee, he passed the rectification order for all the assessment years.

“”8. I have gone through the agreement between Microsoft Licensing, GP ("MS") and the appellant containing Master Licensing Agreement. The agreement clause cited by the assessing officer and that quoted by the appellant are the same as per the agreement produced before me. As per the plain reading, the clause only speaks of the agreement between the parties to the effect that Wipro may deduct taxes required to be paid on remittances and pay it to the authority. As per the Master Agreement with Microsoft, there is no indication of any definite amount to be paid to the vendor irrespective of taxes. There is no basis to infer that the appellant had to bear the cost of taxes payable on remittances. Moreover, the appellant is right in contending that the terms of one agreement could not be applied to payments pertaining to other vendors. Raising of additional demand based on facts relating to one payment and applied to other payments requires inference and extrapolation. It could not be called a mistake / apparent from record. Therefore, section 195A was not applicable on the facts and circumstances of the case. The additional 1iability due to grassing up of the tax with remittances as made by the assessing officer in order under section 154 is deleted. Ground nos. 6 and 7 are allowed.” 8A) In these appeals, the assessee raised these grounds also before CIT (A) that the orders passed by the AO u/s 154 are bad in law because the rectifications made by the AO are beyond the scope of section 154. This ground was also raised by the assessee before CIT (A) in 154 proceedings that interest u/s 201 (1A) is also disputed. Learned CIT (A) disposed of these appeals in the proceedings u/s 154 by way of a separate combined order dated 26.10.2016 in ITA No. 47 to 52/CIT (A)/2015 – 16. As per this order, he held that grossing up of tax by invoking the provisions of section 195A is not as per law but he held that the orders p [assed by the AO u/s 154 are not bad in law.

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He also held that the AO is directed to levy surcharge and cess in respect of royalty payments made to vendors who are resident of such countries with which the DTAA with India allows withholding of more than 11.33% and deleted the surcharge and cess ion respect of other payments. 9. Feeling aggrieved by the order passed by the CIT(Appeals) in respect of grossing up of taxes, the revenue is in appeal before us as per ITA Nos. 2335 to 2339/Bang/2016 on the following identical grounds:-

“1. Ld. CIT(A) has erred in partly allowing the appeal of the assessee which is opposed to law, facts and circumstances of the case. 2. Ld.CIT(A) failed to appreciate the fact that as per the terms of the Agreement entered by assessee with non-resident vendors the onus of deduction of taxes on the payments made solely vests on assessee. Accordingly, the Assessing Officer (AO) has rightly passed the order u/s 154 rws 201 on a grossing-up basis. 3. As per the Agreements with vendors which is part of the record, it is very clear that it was the sole responsibility of the assessee to pay the taxes as applicable in India on payments made to the vendors. Accordingly, the AO has grossed up the amounts u/s 195A and passed an order u/s 154 of the Income Tax Act. However, the Ld.CIT(A) erred in holding that the order was beyond the scope of the provisions of Sec.154 of the Act. 4. Ld.CIT(A) failed to appreciate the fact that beneficial provisions of DTAA are applicable only to the residents of respective countries and to avail the benefits one must submit the proof of the residency. 5. Ld CIT(A) has not appreciated the fact that in the absence of beneficial provisions of DTAA, provisions of Income Tax Act will prevail. 6. Ld. CIT(A) failed to appreciate that in the absence of any proof of residency of the parties, the cut off of 11.33% of TDS was not relevant. Accordingly, the Ld.CIT(A) erred in allowing part relief on levy of surcharge and education cess stating that surcharge and education cess should be levied only in the cases where the non-resident vendors are residents of countries with which the DTAA allows withholding rate of more than 11.33%.

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“1. That the order of the learned Commissioner of Income-tax (Appeals) [hereinafter referred to as "the CIT(A)"] is against law, facts and circumstances in the case of the appellant. 2. That the orders of the learned authorities below are liable to be cancelled as they are passed in gross violation of judicial discipline in as much rate as per Income Tax are applied overlooking the rate as per DTAA. 3. 3. That the learned CIT(A) has erred in considering the rate of tax as 15% in USA, UK, Austria and Canada and 20% for Spain whereas the rate of tax as per the relevant clause of the respective DTAA is 10%. 4. That the learned CIT(A) has erred in not considering that the order under section 154 of the Income Tax Act, 1961 (Act) is bad in law and is thereby disputed. 5. That the learned CIT(A) has erred in not considering that the rectification u/s 154 was made on an issue that is clearly outside the scope of section 154 of the Act. 6. That the learned CIT(A) has erred in not considering that the findings, reasons given by the AO for carrying out rectification are contrary to facts emerging from records and is unsustainable and untenable in law. 7. That the learned CIT (A) has erred in fastening a liability on the appellant u/s 201(1A) of the Act. 8. That the above grounds are without prejudice to each other. The appellant craves leave to add, alter, amend or vary from the above grounds of appeal before or at the time of hearing.” 11. We will first deal with the appeals filed by the assessee in the proceedings u/s 01 and 201 (1A). The first effective ground raised by the assessee before us and also before the CIT(Appeals) is that the DDIT was bound to grant relief in

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favour of the assessee in terms of the binding decision of the Hon’ble Karnataka High Court in assessee’s own case [ground No.2 before the CIT(A) and ground No.7 before us].

“37. The last substantial question of law framed. is as under:- ‘Whether the Tribunal is correct in allowing expenditure on imported software when the expenditure per se is capital in nature and is non-allowable?’ 38. The assessee company claims import of software for the purpose of retail trading, pre loading into the Hardware sold and also for in house use. The software. is a commodity having copyrights. Each software product is a licence to the use for the specified purpose only. The assessee made it very clear that the software which they have imported are used as a tool by end users to facilitate certain functions or operate their computers. . It is not a copyright which meant for commercial exploitation of the copyright under a licence. The copy right which is imported are goods sold in the market place as goods or as an integral part of the computers manufactured and sold by the company and therefore, they are entitled to deductions of the entire consideration paid for acquiring this copyrighted article. Though the assessing officer accepted the case of the assessee in so far as the software in house to the tune of Rs.4,29,99,061/- the consideration paid is treated as a royalty and as the assessee had not deducted tax at source he disallowed deduction of the aforesaid amount under Section 195 read with Section 40(a)(i) of the Act. Aggrieved by the same, the assessee preferred an appeal. The Commissioner of Appeals held the expenditure on import of software is of revenue nature. If it is pertaining to business the profit from which is not exempt under Section 10A and, therefore, it is to be allowed as deduction. He held the expenditure cannot be disallowed under Section. 40(a)(i). In appeal by the revenue, the Tribunal held they cannot go into the question whether the expenditure in nature as that is not what was urged before the lower authorities. Once it is held to be not representing the royalty and it is a revenue expenditure, the deduction allowed by the

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Appellate Authority is legal and valid and do not call for any interference.” 13. The ld. DR had also drawn our attention to the order of Tribunal passed in ITA No.426, 427, 468 & 469/Bang/2006 dated 30.05.2008 wherein the Tribunal in paragraphs 18.5 & 18.6 held as under:-

“18.5 We have heard both the parties. It is true that the issue under reference stands covered by the decision of the Tribunal in the case of the assessee for the asst. year 2000-01. The Tribunal while disposing off the appeal for the asst.year 2000-01, followed he earlier order for the asst.years 1998-99 and 1999-2000, which is reported in 96 TTJ 211., Thus, the issue is covered in favour of the assessee. 18.6 The Special Bench in the case of Amway India Enterprise v DCIT 111 ITC, 112 had an occasion to consider as to whether the expenditure incurred on.software is revenue or capital. If the life of the computer software is shorter, say less than two years, then it is to be treated as revenue expenditure. The Special Bench further observed that if there are associated capital expenditure like purchase of new computer equipment for running the software developed under the project, then it can be considered as capital expenditure. If the software is used as part of the profit-making apparatus of the assessee, then expenditure on software is capital. If it is used to facilitate the running of the business, then it is revenue in nature. Since in the instant case, the Assessing Officer has simply relied on the order of his predecessor by holding the expenditure as capital, therefore, we have to record a finding on the basis of the finding recorded in earlier year. Since in earlier years, the issue stands deckled in favour of the assessee, therefore, we are not inclined to interfere with the finding of the learned CIT(A). Moreover, the Tribunal is holding that the payment made for purchase of branded and shrink wrap software are not in the nature of royalty and therefore, disallowance cannot be made on the ground that no tax at source has been deducted. Hence we confirm the order of the learned CIT(A) on this issue.” 14. Further our attention was also drawn to the order dated 18.07.2002 wherein in para 24 & 25 it was held as under:-

“24. In Grounds No.20 to 23, the Assessee has projected its grievance against the order of the AO whereby the AO disallowed claim of the Assessee for depreciation of Rs.19,46,23,236/- on imported software

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products used by the Assessee in-house. The assessee claimed depreciation amounting to Rs.19,46,23,236/- on software purchased both locally and imported and used in its business and furnished the details thereof to the Assessing Officer in the course of assessment proceedings. The Assessing Officer was of the opinion that the provisions of section 40(a)(ia) of the Act are applicable and proposed to disallow the depreciation claimed on such purchases. The assessee submitted that the software purchased by it is in the nature of goods and the provisions of section 40(a)(ia) were not applicable to it and also that no order has been passed under section 201(1) of the Act treating it as an assessee in default in respect of payments for imported software. It was submitted by the learned Authorised Representative that the Assessing Officer did not accept the explanation put forth by the assessee and disallowed the entire depreciation claimed on the ground that there was an obligation on the part of the payers to effect deduction from out of payments made by them in favour of non-resident recipients for acquiring any software even assuming that it partakes the character of goods. It was submitted that the Assessing Officer was of the view that software is basically purchased by way of licence to use and he relied on the judgment of the Hon'ble High Court of Karnataka in the case of Synopsis Inc. and the decision of the Delhi Tribunal in the case of Microsoft Corporation Vs. ADIT. It was contended that the DRP agreed with the reasoning of the Assessing Officer in continuing the disallowance, even though it was submitted therein that the learned CIT(A) and the Tribunal had decided this issue in the assessee’s favour in the earlier assessment years, on the ground that the Department has taken the matter in further appeal under section 260A of the Act and that the matter had not attained finality. The learned Departmental Representative placed reliance on the findings of the Assessing Officer and the DRP on this issue and reiterated the arguments in the orders of the authorities below. 25. We have heard both parties and carefully perused and considered the material on record. We find from a perusal of the order of the co- ordinate bench of the Tribunal in the assessee’s own case for Assessment Year 2004-05 in ITA No.1072/Bang/2007 (supra) at para 8.2 thereof that this issue has been held in favour of the assessee following the earlier decision of the Tribunal in the assessee’s own case in ITA Nos.426, 427, 468 and 469/Bang/2006 for Assessment Years 2001¬02 and 2002-03. It is seen from this order that this issue has been decided in favour of the assessee company by the Tribunal from Assessment Year 1998-99 onwards. We, therefore, respectfully following the decision of the co- ordinate bench of the Tribunal for Assessment Year 2004-05 (supra),

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decide this issue in favour of the assessee. Grounds No.20 to 23 are allowed to the above extent.” 15. The ld. AR has further drawn our attention to the order passed in ITA No.1655/Bang/2012 wherein in ground No.15 at para 16, it was decided as under:-

“16. We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record. At the outset, we note that an identical issue has been considered in assessee's own case for the Assessment Year 2004-05 and again for the Assessment Year 2007-08. For the Assessment Year 2007- 08, the Tribunal has decided this issue in para 8.4 as under: " 8.4 We have heard both parties and have perused and carefully considered the material on record We find from a perusal of the order of the co-ordinate bench of the Tribunal in the assessee's own case for Assessment Year 2004-05 In ITA No.l072/Bang/2007 (supra) at para 82 thereof that this issue has been held in favour of the assessee following the earlier decision of the Tribunal In the assessee's own case in ITA Nos. 426, 427, 468 and 469/8al1g/2006 for Assessment Years 2001- 02 and 2002-03, It is seen from this order that this issue has been decided in favour of the assessee company by the Tribunal from Assessment Year 1998-99 onwards. We, therefore, respectfully following the decision of the co-ordinate bench of the Tribunal for Assessment Year 2004-05 (supra) decide this issue in favour of the assessee. Thus it is clear that the Tribunal has followed the earlier order for the Assessment Year 2004-05 which has been confirmed by the Hon'ble jurisdictional High Court. Following the earlier order of this Tribunal as well as Hon'ble jurisdictional High Court, we decide this issue in favour of the assessee.” 16. The ld. AR has further drawn our attention to para 170 to 172 of the order of the jurisdictional High Court in the matter of Wipro Ltd. v. DCIT for the AY 20101-02 to 2004-05 to the following effect:-

“170. The said questions arose for consideration before this Court in the assessee's case in ITA No.3198/2005 which was decided on 28.2.2012 where the substantial questions of law were answered in favour of the

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assessee and against the revenue. Following the said Judgment, said questions of law are answered in favour of assessee and against the revenue. Substantial Question No.18: "Whether the Appellate Authorities were correct in holding that the payments made by the assessee for import of software cannot be disallowed u/s 40(a)(i) of the Act for failing to deduct tax at source u/s 195 of the Act as such payments did not constitute royalty u/s 9(1)(vi) of the Act?" [Question of law No.26 in ITA Nos.907 & 909/2008, Question of law No.22 in ITA Nos.904 & 905/2008 and Question of law No.9 in ITA No.363/2009 - (Department's appeal)] "Whether the Appellate Authorities were correct in holding depreciation claimed on software imported for in house utilization and treated as part of block of assets should be allowed, despite the same being in the nature of royalty as per Explanation to section 9(1)(vi) of the Act and no TDS u/s 194 of the Act having been deducted, section 40(a)(i) of the Act?" [Question of law No.2 in ITA Nos.210 & 211/2009 - (Department's appeal)] 171. The said substantial questions of law arose for consideration in the assessee's case itself in ITA 507/02 which was decided on 25.8.2010 where the substantial question of law was answered in favour of assessee and against the revenue. Accordingly, the said question of law is answered in favour of the assessee and against the revenue. Substantial Question No.19: "Whether the Appellate Authorities were correct in holding that excise duty and sales tax should be included in the total turnover for the purpose of computation of deduction u/s 80 HHC of the Act?" [Question of law No.27 in ITA Nos.907 & 909/2008; Question of law No.23 in ITA Nos.904 & 905/2008; Question of law No.12 in ITA Nos.210 & 211/2009 and Question of law No.14 in ITA No.363/2009 - (Department's appeal)] 172. The said question also arose for consideration before this Court in the assessee's case in ITA No.507/2002 which was decided by Judgment

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dated 25.8.2010, the said question of law was answered in favour of assessee and against the revenue.” 17. On the basis of the above said orders, the ld. AR had submitted that the Officer who had passed the order and the CIT(Appeals) had totally ignored the binding precedent of the Tribunal as well as High Court passed in the case of assessee, whereby all the authorities have consistently held that the payment made by the assessee was not in the form of royalty and therefore, once the authority ( court / tribunal )created by law has declared that the payment made by the assessee to a non-resident entity was not in the nature of royalty, there was no liability on the part of assessee to withhold tax at the time of making payment to such non-resident entity. Having so decided in favour of assessee by the competent courts and Tribunal, it was inappropriate and the authorities were in contempt for initiating action u/s. 201(1) & (1A) of the Act.

“Pronouncements of law, which are not part of the ratio decidendi are classed as obiter dicta and are not authoritative. With all respect to the learned Judge who passed the order in Jamna Das' case and to the

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learned Judge who agreed with him, we cannot concede that this Court is bound to follow it. It was delivered without argument, without reference to the relevant provisions of the Act conferring express power on the Municipal Corporation to direct removal of encroachments from any public place like pavement or public streets, and without any citation of authority. Accordingly, we do not propose to uphold the decision of the High Court because, it seems to us that it is wrong in principle and cannot be justified by the terms of the relevant provisions. A decision should be treated as given per incuriam when it is given in ignorance of the terms of a statute or of a rule having the force of a statute. So far as the order shows, no argument was addressed to the Court on the question or not whether any direction could properly be made compelling the Municipal Corporation to construct a stall at the pitching site of a PG NO 939 pavement squatter. Professor P.J. Fitzgerald, editor of the Salmond on Jurisprudence, 12th edn. explains the concept of sub silentio at p. 153 in these words: "A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The Court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio.” In Gerard v. Worth of Paris Ltd. (k)., [1936] 2 All E.R. 905 (C.A.), the only point argued was on the question of priority of the claimant's debt, and, on this argument being heard, the Court granted the order. No consideration was given to the question whether a garnishee order could properly be made on an account standing in the name of the liquidator. When, therefore, this very point was argued in a subsequent case before the Court of Appeal in Lancaster Motor Co. (London) Ltd. v. Bremith, Ltd., [1941] 1 KB 675. the Court held itself not bound by its previous decision. Sir Wilfrid Greene, M.R., said that he could not help thinking that the point now raised had been deliberately passed sub silentio by counsel in order that the point of substance might be decided.”

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“Before adverting to and considering whither solatium and interest would be payable under the Act, at the outset, we will dispose of the objection raised by Shri Vaidyanathan that Hari Kishan Khosla's case is not a binding precedent nor does it operate as ratio decidendi to be followed as a precedent and per se per incuriam. It is not everything said by a Judge who giving judgment that constitutes a precedent. The only thing in a Judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well settled theory of precedents, every decision contain three basic postulates - [i] findings of material facts, is the inference which the Judge draws from the direct, or perceptible facts; [ii] statements of the principles of law applicable to the legal problems disclosed by the facts; and [iii] judgment based on the combined effect of the above. A decision is only an authority for what it actually decides. What is of the essence in decision is its ratio and not every observation found therein not what logically follows from the various observations made in the judgment. Every judgment must be read as applicable to the particular facts proved, since the generality of the expressions which may be found there is not intended to be exposition of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. It would, therefore, be not profitable to extract a sentence here and there from the judgment and to build upon it because the essence of the decision is its ratio and not every observation found therein. The enunciation of the reason or principle on which a question before a court has been decided is alone binding between the parties to it, but it, is the abstract ratio decidendi, ascertained on a consideration of the judgment in to the subject matter of the decision, which alone has the force of law and which, when it is clear what it was, is binding. It is only the principle laid down in the judgment that is binding law under Article 141 of the Constitution. A deliberate judicial decision arrived at after hearing an argument on a question which arises in the case or is put in issue may constitute a precedent, no matter for what reason, and the precedent by long recognition may mature into rule of stare decisis. It is the rule deductible from the application of law to the facts and circumstances of the case which constitutes its ratio decidendi.

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Therefore, in order to understand and appreciate the binding force of a decision is always necessary to see what were the facts in the case in which the decision was given and what was the point which had to be decided. No judgment can be read as if it is a statute. A word or a clause or a sentence in the judgment cannot be regarded as a full exposition of law. Law cannot afford to be static and therefore, Judges are to employ an intelligent in the use of precedents. It would, therefore, be necessary to see whether Hari Kishan Khosla's case would form a binding precedent. Therein, admittedly the question that had arisen and was decided by the Bench of three Judges was whether solatium and interest are payable to an owner whose land was acquired under the provisions of the Central Act? On consideration of the facts, the relevant provisions in the Central Act and the previous precedents bearing on the topic the Court had held that solatium and interest are not a part of compensation. It is a facet of the principle in the statute. The Central Act omitted to provide for payment of solatium and interest since preceding the acquisition the property was under was under requisition during which period compensation was under requisition during which period compensation was paid to the owner. The position obtained and enjoyed by the Government during the period of requisition continued after acquisition. The same principle was applied without further elaboration on entitlement to payment of interest of an owner. It is true that the decisions relied on by Shri Vaidyanathan on the principle of payment of interest as part of compensation in respect of land acquired were brought to the attention of this Court for discussion. What would be considered a little later. Suffice it to say for the present that the finding that solatium and interest are not payable for the lands acquired under the Central Act as part of compensation is a binding precedent. Obviously, therefore, this Court followed the ratio therein in District Judge, Udhampur case [supra]. The contention, therefore, that Hari Kishan Khosla's case cannot be treated as a binding precedent since therein there is no ratio but a conclusion without discussion, is not tenable and devoid of force. In that view, it is not necessary to discuss in extenso the effect of the decisions cited by Shri Vaidyanathan. Equally, the contention of Shri Vaidyanathan that the ratio in Hari Kishan Khosla's case is in conflict with the ratio in Satinder Singh's case which was neither distinguished nor overruled and that the decision of a co- ordinate Bench cannot have the effect of overruling decision of another co-ordinate Bench, cannot be given countenance. The effect of the ratio in Satinder Singh's case will be considered a little later; suffice it to state that there is no conflict in the ratio of these two cases if the facts in Satinder Singh's case are closely analysed and the principle laid

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down therein is understood in its proper perspective. Therefore, Hari Kishan Khosla's case cannot be held to be per incuriam not has it the effect of overruling the ratio decidendi of Satinder Singh`s case.” 20. The Hon’ble Supreme Court in the case of Bharagawan Pillai v. State of Kerala, AIR 2004 SC 2317 at para 24 had held to the following effect:-

“Coming to the plea relating to benefits under the Probation Act, it is to be noted that Section 18 of the said Act clearly rules out application of the Probation Act to a case covered under Section 5(2) of the Act. Therefore, there is no substance in the accused- appellant's plea relating to grant of benefit under the Probation Act. The decision in Bore Gowda's case (supra) does not even indicate that Section 18 of the Probation Act was taken note of. In view of the specific statutory bar the view, if any, expressed without analysing the statutory provision cannot in our view be treated as a binding precedent and at the most is to be considered as having been rendered per incuriam. Looked at from any angle, the appeal is sans merit and deserves dismissal which we direct.” 21. On the basis of the above, it was submitted that the principle of law expounded by the High Court in the case of Wipro (supra) [case of the assessee] was not the exposition of law as considered by the Hon’ble Supreme Court and was only with respect to facts before the jurisdictional High Court and therefore, will not come in the way of AO/CIT(A) for declaring the assessee as assessee in default u/s. 201(1) of the Act.

“6. We have heard the rival submissions and perused the material on record. We find that the coordinate bench in the matter of Intertec Software Pvt. Ltd., vs ITO, dt.13.10.2017, wherein the author of this order was the co-author, after relying upon the judgment of the jurisdictional High Court in the matter of CIT (Intl.Taxn) v. Samsung Electronics Co. Ltd [(2011) 203 Taxman 477] and distinguishing the

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later judgment of the jurisdictional High Court in WIPRO Ltd. vs. DCIT as reported in 382 ITR 179, has held as under : 4. We have considered the rival submissions. First, we examine the applicability of the first judgment of Hon'ble Karnataka High Court rendered in the case of WIPRO Ltd. vs. DCIT (Supra) rendered on 25.08.2010. In this case, the substantial question of law raised as per Para 37 was as under:- "Whether the Tribunal is correct in allowing expenditure on imported software when the expenditure per se is capital in nature and is not allowable?" 5. From this substantial question of law, it comes out that in that case, this was not a dispute before Hon'ble Karnataka High Court as to whether the import of software is Royalty or not? The dispute in that case was this that the import of software is capital expense in that case and therefore, how the same can be allowed as deduction. In that case also, the A.O. held that the payment for software is Royalty and since TDS was not deducted, it is to be disallowed u/s 40 (a) (i) but when the assessee carried the mattering appeal before CIT (A), he held that it is not Royalty and therefore, cannot be disallowed u/s 40 (a) (i). The revenue filed appeal before the tribunal but the dispute raised was not this that it is Royalty or not? The dispute raised was this that it is capital expenditure and therefore, cannot be allowed. The tribunal held that the tribunal cannot go into this question as this is not what was urged before the lower authorities. The revenue filed appeal before Hon'ble Karnataka High ITA No. 1388/Bang/2013 Court and the tribunal order was confirmed. Hence, this is seen that as per this judgment of Hon'ble Karnataka High Court, the decision is not on this aspect that it is Royalty or not and therefore, this judgment is not relevant in the present case. 6. Now, we examine the applicability of the second judgment of Hon'ble Karnataka High Court rendered in the case of WIPRO Ltd. vs. DCIT (Supra) rendered on 25.03.2015. As per this judgment, in Para 171, it was held that in earlier judgment dated 25.08.2010, similar question was decided in favour of the assessee and against the revenue and therefore, in those appeals also, the issue was decided in favour of the assessee. We have already seen that the decision dated 25.08.2010 is not on this aspect that it is Royalty or not and therefore, this judgment is not relevant in the present case. Accordingly, this later judgment dated 25.03.2015 is also not relevant.

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“Pursuant to the hearing on 24.04.2019 and in addition to the written submissions filed during hearings on 20.03.2015, 19.11.2015 & 22.11.2017, the assessee submits that the issue in question is held in

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favour of the assessee in assessee's own case for AY 2007-08 by the Hon'ble FEAT in ITA 972/13/2011 dt.15.06.2012 (Paper book index II pages 89 to 93, relevant page 90 to 92, Para 8.1 to 8.4) wherein the Hon'ble ITAT even after considering the department's reliance on the decisions rendered by Hon'ble Karnataka High Court in Synopsis Inc and Delhi ITAT in the case of Microsoft Corporation has held the issue in favour of the assessee by relying on the decisions of the Hon'ble ITAT rendered in assessee's own case for AY's 2001-02, 2002-03 & 2004-05. Further the Hon'ble ITAT in assessee's own case for AY 2008-09 in IT(TP)A 1665/B/12 dt.04.01.2017 has decided the issue in favour of the assessee in Para 15 & 16, pages 17 & 18 of the order (copy of the order placed on record during hearing) wherein the Hon'ble ITAT has relied on the decision of the Tribunal in assessee's own case for AY 2007-08 mentioned supra and the decision of the jurisdictional high court in assessee's own case for AY 2004-05 in ITA 879/2008 dt.25.03.2015 (copy placed on record - relevant para 170 page 56 of the order). From the above it is seen that on identical set of facts having regard to the law even after the insertion of Explanation 4 to section 9(1)(vi) with retrospective amendment from 01.06.1976 carried out in Finance Act 2012, the decision of the Hon'ble TIM' and Hon'ble Karnataka High Court in assessee's own case have been rendered in favour of the assessee on the basis of its own facts and the applicable law. The argument of the department that the issue before the Hon'ble ITAT and the Hon'ble High Court did not involve the question of TDS on Royalty is factually incorrect as evident from the discussion and the decision both by the Hon'ble ITAT and the Hon'ble High Court extracted in our written submission dt.22.11.2017. It is to be seen that it is a decision between the litigant parties which has the binding effect. The reliance placed by the department in support of the order u/s 201(1) & 201(1A) on the decisions of the Karnataka High court in CIT vs Samsung Electronics Co Ltd & Ors (345 ITR 494 -- department paper book pages 1 to 25), CIT vs Synopsis International Old Ltd (212 Taxman 454 - department paper book pages 26 to 51), CIT vs CGI Information Systems & Management Consultants (P) Ltd (226 Taxman 319 ¬department paper book pages 126 to 138) and others cannot overturn the decision rendered in assessee's own case in a lis between the parties. A decision given in some other case cannot overturn the decision rendered in assessee's own case and the decision is also applicable even from the rule of consistency and predictability. The reliance placed by the Ld.DR on the following decisions submitted during hearing on 24.04.2019 being CIT vs Sun

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Engineering Works (P) Ltd — 198 ITR 297 (SC), Delhi Municipal Corporation vs Gurnam Kaur AIR - 1989 SC 38, Union of India vs Dhanwanthi Devi — 1996 (6) SCC 44, Bhargawan Pillai vs State of Kerala AIAR 2004 SC 2317, Ramacharan Atma Ram Sonkar vs Radhe Shyam Dhakuram pandey 1998 (2) MPLJ 173, Hanuman Datt vs State of MP 2002 (4) MPLJ 354, Jagabandhu Sahu vs State of Orissa AIR 1969 Ori 299 and Tata International Ltd vs Trisuns Chemicals Industry Ltd 2002 (2) Bom CR 88 are not applicable as the clearest of language read in proper context is that the Hon'ble Karnataka High Court in assessee's own case vide order dated 25.08.2010 in ITA.No. 507/2002 in Para 39 Page 34 of the order has held as follows: “………. The Commissioner rightly pointed out it is not royalty, it is a revenue expenditure and the entire amount is held to be deductible …………….. “ The same has been reaffirmed by the Hon'ble Karnataka High Court in assessee's own case in ITA 879/2008 dt.25.03.2015 (mentioned supra). The decisions relied on by the Ld.DR in Verizon Communications Singapore PTE Ltd vs ITO - 361 ITR 575 MAD FTC (department paper book pages 52 to 91), CIT vs CGI Information Systems & Management Consultants (P) Ltd (226 Taxman 319 - department paper book pages 126 to 138) and Citrix Systems Asia Pacific Pvt Ltd in Re 343 ITR 1 AAR are all cases of third parties and not applicable under the impugned case for the reasons mentioned supra. The decision of the Hon'ble Supreme Court in GVK Industries Ltd & Anr vs ITO & Anr Civil Appeal No.7796/1997 (department paper book pages 92 to 125) is not applicable as it is a decision on the constitutional validity of section 9(1)(vii)(b) of the Act whereas the impugned case is on the issue of applicability of section 9(1)(vi) of the Act. This decision is not applicable as the subject matter is different and the law involved is different. It has been held by the Hon'ble Supreme Court in CIT vs Sun Engineering Works (P) Ltd — 198 ITR 297 that a decision cannot be read out of context. Hence reliance placed on the decision in GVK Industries is not correct. The reliance placed by the Ld.DR on the decision of the Karnataka High Court in the case of CIT vs Wipro Ltd 203 Taxman 621 (department paper book pages 139 to 143) is also incorrect as evident from page 142, para 6 of the order extracted as hereunder wherein the Court has clearly said that the issue does not pertain to shrink wrapped software: "6 Mere fact that in the instant case, the issue do not pertain to shrink wrapped software or off-the-shelf software and access to

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database maintained by M/s.Gartner is granted online, would not make any difference in the reasoning assigned by us to hold that such right to access would amount to transfer of right to use the copyright held by M/s.Gartner and the payment made by the respondent to M/s.Gartner in that behalf is for the licence to use the said database maintained by M/s.Gartner and such payment is to be treated as royalty …………….” Hence the above decision is not applicable to the impugned case. The decisions relied on by the Ld.DR of Hon'ble ITAT Bangalore in M/s.Kalki Communication Technologies ltd vs ITO - ITA 1401 to 1403/B/2013 dt.15.04.2015 and GE India Industrial I' Ltd vs Addl CIT in ITA 595/B/16 dt.17.11.2017 are not applicable as the Hon'ble ITAT Bangalore and Hon'ble Karnataka High Court in assessee's own case have held that the impugned payments are not covered u/s 9(1)(vi) of the Act. The argument of the ld.DR that the decision of the Hon'ble Karnataka High Court in assessee's own case in ITA 507/2002 dt.25.08.2010 & in ITA 879/2008 dt.25.03.2015 should not be relied on in view of the decision of Hon'ble Karnataka High Court decision in PCIT vs GMR Energy Limited ITA 358 to 360/2018 dt.08.01.2019 wherein the Court has held in page 10 para 7 of the order as extracted under (copy enclosed as Annexure 1): "7 A judgment of the court becomes binding only when a question arises for consideration, is contested by both sides and thereafter findings are recorded by the Court. None of these conditions have been fulfilled. There is no notice issued to the other side. No question of law has been determined. The appeal was dismissed, as bereft of any substantial question of law. Therefore, the judgment reported in Laney's case cannot be said to be applicable law or binding for any reason whatsoever. The reliance placed by the tribunal on the judgment in Lancy's case is misplaced. The judgment in Laney's case does not render the true position in law. It cannot be considered as a precedent." The above ruling is not applicable to the impugned case as the ruling of the Court is binding between the parties. Moreover in the High Court decisions in assessee's own case the substantial question of law was framed and decided after notice to the parties. The same is evident in from the decision in ITA 507/2002 dt.25.08.2010 in Para 37 to 39 pages 32 to 34 of the decision:-

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"37. The last substantial question of law framed is as under ………………………….. ” and in ITA 879/2008 (11.25.03.2015 in Para 171 page 56 Substantial question no.18 "171. The said substantial questions of law arose for consideration in the assessee's case itself in ITA 507/02 which was decided on 25.8.2010 where the substantial question of law was answered in favour of the assessee and against the revenue. Accordingly, the said question of law is answered in favour of the assessee and against the revenue." Since in the impugned case the substantial questions of law were framed and answered in favour of the assessee, the ruling in PCIT vs GMR Energy Limited ITA 358 to 360/2018 dt.08.01.2019 relied on by the Ld.DR is out of context and not applicable.” 26. We have heard the rival contentions of the parties and perused the record. If we look into the order passed by the Tribunal in the case of the assessee for the AY 2007-08, the Tribunal in para 8.4 had decided the issue by following the decision of the coordinate Bench in favour of assessee for the earlier AYs 2001- 02 and while doing so, had not distinguished the binding decision of the High Court rendered in the case of Synopsis International Old Ltd. (supra). Similarly for the AY 2008-09, the Tribunal while deciding this issue in para 15 & 16 had merely followed the decision for the AY 2007-08, which had merely followed the decision of the coordinate Bench for the AY 2001-02 & 2002-03. Thus this decision of the coordinate Bench was also passed ignoring the binding decision of the jurisdictional High Court in the matter of Synopsis International Old Ltd. (supra) and also in the matter of Samsung Electronics Co. Ltd. & Ors., (supra). Interestingly, the decision of Samsung Electronics Co. Ltd. & Ors., (supra) was passed by the jurisdictional High Court on 15.10.2011 [ 345 ITR 494]. The decision of Synopsis International Old Ltd. (supra) dated 03.08.2010 as well as of Samsung Electronics Co. Ltd. & Ors. dated15.10.2011 were available to both the coordinate Benches for the AY 2007-08 and also for AY 2008-09. However the coordinate Bench had followed the decision in the case of assessee for the earlier assessment years. The ld. AR in the written submissions had also

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submitted that the decision of Synopsis International Old Ltd. (supra) and Samsung Electronics Co. Ltd. & Ors. (supra) were considered by the Tribunal while deciding the issue in favour of assessee and therefore, the order of coordinate Benches are binding and are required to be enforced by the authorities below as well as by the Tribunal. In our view, respectfully following the coordinate benches decision which are in conflict of High court decision was not correct and further, there is no purpose of perpetuating the wrong and obsolete law by following the decision of the coordinate Bench when it was passed in negation of the law laid down by the jurisdictional High Court. The jurisdictional High Court in the case of Samsung Electronics Co. Ltd. & Ors. (supra) vide its order dated 15.10.2011 had categorically held that payment made for purchase of software were in the form of royalty u/s. 9(1)(vi) of the Act and therefore, in our view, the decision rendered by the coordinate Bench treating the expenditure incurred for the purchase of software cannot be held that it is not royalty. In fact, as pointed out by the ld. DR, the issue which was decided by the coordinate Benches were confined to narrow compass whether the assessee was entitled to depreciation on the expenditure incurred for purchase of software or not? There was no discussion before any of the forums including before the High Court with respect to applicability of provisions of section 9(1)(vi) of the Act or the Explanation introduced into the Act w.e.f. 1.4.2012. In our view, application of law is required to be decided by the coordinate Bench by discussing the provision of law and also of the judgment and thereafter discussing how the said provision of law and judgment are applicable or not applicable to the facts . In the absence of any discussion on the above two aspects as to the scope of provisions of the Act as well as judgment, it will be unfair to conclude that, the coordinate benches had correctly applied the law in the context of what was now argued before us by the assessee. In fact this Bench was having the occasion to consider the pith and substance of the decisions rendered by the High Court in the matter of Wipro and thereafter had

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come to conclusion ,which was rightly pointed out by the ld. DR, that the issue of royalty was not an issue before the High Court in the matter of Wipro.

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laid down by the Hon’ble Supreme Court. The Hon’ble Supreme Court in the case of Sun Engineering Works (P) Ltd. (supra) had held that there are many judgments including the judgment cited by the DR that judgment is not a statute and it is required to be applied on the given facts and further We are of the opinion , that Single change in facts will not only affect the colour and texture of decision, but would also affect outcome of the case .

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“91. For the purpose of above, it was submitted that the reasoning which was given by courts/Tribunal referred by the assessee are not available as all the judgments referred by the learned counsel for the assessee were for the period prior to introduction of amendment in section 201(1) of the Act. It was submitted that on the analogy and reasoning given by the Special Bench in the case of Mahindra & Mahindra (supra) in paras.14.2, 17.10 and 17.11 are no more available to the assessee as the said reasoning were given by the Special Bench in the case of Mahendra & Mahendra (supra) in the absence of limitation for initiation of proceedings or passing of order u/s 201 of the Act as applicable on said date and therefore, the Special Bench has applied the limitation as provided u/s 143(2), 149, 153, 154 and 263 to the proceedings under section 201 of the Act. The special bench after detailed examination in para.14.2, in the case Mahindra & Mahindra has came to the conclusion that, as there is no limitation provided under un-amended section 201, therefore, period of 4 years will be the reasonable period for initiation of proceedings. Further it was held that the period of completion of proceedings shall be one year form the end of the relevant financial year.

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4 years, in view of the fact that same logic and reasoning is required to be followed by the Tribunal by laying down the reasonable period of limitation for initiation of proceedings against non-resident entity. In the written submissions it was submitted by the DR as under: “1. Section 201(3) of the Act has been amended by providing Limitation only in respect of payments made to the resident in India. In the Circular Explaining the Finance Act, it has been specifically referred that the payments made to the nonresidents, no limitation is applicable. In view of the specific provision providing Limitation only to the payments made to the resident in India and not providing any limitation to the payments made to the non-resident, no limitation can be prescribed or read into the section. 2) Without prejudice to the above contention if the contention of the assessee is to be accepted that in the absence of any limitation being provided under the Act, reasonable time limit has to be read into the section as held by various high courts in the case of NHK Japan, Bharath Hotels, the limitation provided for payments to residents has to be applied(six years). Otherwise it amount to discrimination between the payments made to the resident and the non-resident. 3)Insofar as the judgements relied on by the assessee, all the judgements were rendered in respect of the orders passed prior to amendment to section 201(3) of the Act and period of four years has been arrived at on the analogy of various other provisions under the Act. Even in the absence of any limitation being provided under section 201(3) of the Act for payments to the nonresident's, even certain limitation is to be provided, applying the same analogy as held by the various courts in the judgements relied on by the assessee,

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period of six years has to be read/considered in view of the legislative interference by introduction of section 201(3) of the Act. In the absence of such an analogy and any other Limitation other than period of six years would amount to discrimination in the limitation between the payment to resident and non-resident. 4) The assessee has relied on the judgement of the Delhi High Court in the case of Bharathi Hotels Ltd (2016) 76 taxman.com 256 (Delhi) to contend that even after introduction of section 201(3) of the Act and in the absence of any limitation provided by the Act in respect of payments to the nonresident's, the reasonable limitation has to be read into. With great respect, the Delhi High Court has not provided any limitation with respect to payments to non-residents. Without prejudice to the above contention even if the contention of the assessee that in the absence of any limitation, reasonable time limit has to be read into the section is to be accepted, applying the same analogy as held by the various courts relied upon by the assessee and considered by the Delhi High Court, the period of six years provided by the statute to the payments ma1e to resident in India under section 201(3) of the Act would be equally applicable to the payments made to the nonresident's. If any limitation other than six years is read into the section in respect of payments to non-resident, it would amount to discrimination among the payments to residents and the nonresident.

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it was only restricted to resident. It was submitted that principle of literal interpretation is required to be invoked for the purpose of interpreting this kind of provisions and this tribunal cannot supply the word which is not intended to be supplied by the legislature. Lastly, our attention was drawn to the judgment passed by the Hon’ble Delhi High Court in the case of Bharti Airtel vs. Union of India (76 taxman.com.256) and special attention was drawn to paras.11,12, 13, 14 & 17.

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artificially imported by the authorities. The ld. DR has contended that the Tribunal is not competent to lay down any time limit. If this contention is brought to the logical conclusion it will mean that the unlimited time will be available to the Departmental authorities at their sweet-will for taking action under this section. In our considered opinion this contention raised on behalf of the revenue is bereft of any force for the simple reason that certainty is the hallmark of any proceedings. It is beyond our comprehension that how, in the absence of any time limitation provided in the section, the action can be taken in indefinite period. It is wholly impermissible to argue that unlimited time limit be granted to the revenue for taking action under this section. The sword of taxing authorities cannot be allowed to hang, forever, over the head of the tax payers. If this proposition of the learned D.R. is accepted that will give license to the authorities to take action even after 30, 40 or 50 years. The canons of limitation are ordinarily provided expressly in the Act and in their absence, they are to be impliedly inferred by taking into consideration the scheme of the relevant provisions. The ld. DR has relied on some cases for suggesting that no time limit be laid down by the Tribunal for the purposes of passing order under section 201(1) or (1A). In our opinion before applying the ratio of any judgment, it is imperative to look into text and the context in which it is rendered. It is equally important to bear in mind the relevant provision in the background of which such judgment was rendered. It is not permissible to pick up a case from one enactment and insist for the application of the ratiodecidendi of that case to an altogether different legislation, which has no resemblance with the former. The Hon'ble Rajasthan High Court in Arihant Tiles & Marbles (P.) Ltd. v. ITO [2007] 295 ITR 148/166 Taxman 274 has held that the interpretation of any expression used in the context of one statute is not be automatically imported while interpreting

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similar expression in another statute. Similar view has been earlier expressed by the Hon'ble Supreme Court in CIT v. Venkateswara Hatcheries (P.) Ltd. [1999] 237 ITR 174/103 Taxman 503. 95. In para.14.2 (supra in Mahindra and Mahindra) it has been held by the Special Bench that in sub-section (1) and (1A) of section 201, no limit for initiation of proceeding or passing of the order is prescribed. Thereafter, the Special Bench noticed the period of limitation provided for issuance of notice u/s 143(2), 149, 153, 154, 263 and thereafter it was held that certainty in taxing provision is hall-mark of any proceeding and it was noticed that “it is beyond our apprehension that how in absence of time limit provided in the section, action can be taken in indefinite period. It is impermissible to argue that no time limit be granted to revenue.” 96. Thus it is clear from reading of the abovementioned paragraphs that the logic and reasoning given by the Special Bench for coming to reasonable period of 4 years was based on analysis of the provisions viz., 143, 147, 148, 149 and 153 and absence of time limit u/s 201(1) of the Act. In our view, there is a change in the position after passing of judgment by the Special Bench as the section 201 has been amended by the legislature and now specific provision is incorporated by the Legislature to dealing with limitation or initiation of proceedings u/s 201 of the Act in the case of resident , however no period of limitation is provided in the case of non-resident.

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If Court finds that delay in exercise of power is for valid and bonafide reasons, alleged delayed exercise of power cannot be held invalid.” 98. The contrary judgment of Hon’ble Delhi High Court in the matter of Bharti Airtel Ltd v. Union of India [(2016) 76 taxmann.com 256] was relied upon by the Ld. AR. The DR relied upon Bhura Exports Ltd [2011] 13 taxmann.com 162 (Calcutta) and Mass Awash (P.) Ltd. [2017] 83 taxmann.com 306 (Allahabad) In our view the decision of the Special Bench and other judgments apply with equal force in favour of both i.e. resident as well as non-resident providing period of limitation of four years from the end of the financial year for initiation of proceedings on the analogy and principle mentioned in section 147, 148, 153 etc. prior to amendment in law. However there are contrary judgments in favour of the revenue post amendment which does not provide any limitation for initiation of proceedings u/s.201 of the Act.

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and the non-resident at par after relying upon the decision of Special Bench in the matter of Mahindra and Mahindra (supra), in case relating to pre amendment assessment year. In our opinion, after the amendment of law same logic and limitation is required to be applied for non-resident well as resident thus treating non-resident at par with resident. In other words, period of imitation for initiation of proceedings for resident as well as non-resident u/s 201 should be 6 years from the end of the financial year. Further the payer is required to maintain books of account and deduct TDS for both resident as well as non-resident. No Separate treatment had been envisaged under the Act, for the payer paying to a non-resident.

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Subramanian Swamy v. Director, CBI [2014] 8 SCC 682 (SC) in para 22. 101. Keeping in mind the principles set out by the Hon'ble Supreme Court in Dr. Subramanyian Swamy (supra), if we examine the scheme of Section 201 Act, the resident of India cannot be discriminated vis-à- vis. The non-resident under Income Tax Act and similarly under DTAA non-resident cannot be discriminated viz-a-viz resident. If we accept the argument of the Ld. AR that the limitation of 4 years, as held provided by the Special Bench would continue to apply to non-resident even after post amendment to section 201, in that eventuality, hostile discrimination towards the resident-payee will creep in i.e., the limitation for initiation under section 201 against the resident payee would be six years and against the non-resident payee it would be four years. This is neither the intention of the legislature nor the mandate of the Special Bench or the judgment referred herein above. On the contrary, if we accept the argument of the Ld. DR that there is no limitation for initiation of proceedings under 201, in view of Hon’ble Calcutta and Allahabad High Court judgments (supra), if the payee is non-resident then, it will amount to discrimination against the non- resident as the proceedings may be initiated against the resident within four years and there is no limitation for initiation of proceedings against the non-resident. Therefore, the arguments of both the assessee as well as the Revenue cannot be accepted. If we accept the argument of one it

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would tantamount to discriminating either the resident or the non- resident, which is not permissible in the eyes of law.

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that if comparison is drawn between the two provisions, then the law does not prohibit any passing of the common order u/s. 201.

“Further it is the contention of the assessee that passing a single order for multiple assessment years is unsustainable and untenable under the circumstances. This contention is supported by perusal of the following sections: Section 2(9) of the Act defines "Assessment year" as under: (9) "assessment year" means the period of twelve months commencing on the 1st day of April every year Section 3 of the Act defines "Previous year" as "previous year" means the financial year immediately preceding the assessment year Section 139(1) of the Act reads as under: "139. (1) [very person,— (a) being a company or a firm: or (b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed ………………. Section 201(1) of the Act reads as under:

(1) Where any person, including the principal officer of a company, – (a) who is required to deduct ally sum in accordance with the provisions of this Act; or

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(b) referred to in sub-section (IA) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident – (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii)has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant ill such form as may be prescribed: ……………. Section 201(3) of the Act reads as under: "(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given. Thus bare perusal of the above sections implies that an order u/s 201(1) can be passed only in respect of a particular previous year/assessment year. It is a well settled principle by the judiciary that each assessment year is separate, distinct and independent. The assessee places reliance on the decision of Allahabad HC in Mohd. Ayub vs ITO - 346 ITR 30 - paper book index IV - pages 411 to 413 wherein the Court has held that each assessment year is an independent unit of assessment and the provisions of the Act applied separately. The limitation for passing the order as per section 201(3) has also to be tested for each previous year separately. Thus the impugned common order passed by the AO u/s 201(1) & 201(1A) dt.15.10.2013 for multiple

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assessment years being AY 2007-08 to 2012-13 are had in law and requires to be vacated. Further the entire tax liability has been fastened on the assessee based on retrospective amendment to Explanation 4 of section 9(1)(vi) inserted by Finance Act 2012 w.r.e.f 1.06.1976 for alleged non deduction of TDS u/s 195 of the Act. Section 195 of the Act reads as under: 195. (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC) or section 194LD or any other sum chargeable under the provisions of this Act not being income chargeable under the head "Salaries") shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :." As per the above section the obligation of deduction of TDS if any can be discharged in the light of law as it stands at that point of time. An assessee cannot be treated as an "assessee in default" relying on subsequent amendments made to the Act having retrospective effect. The assessee vide written submission dt.22.11.2017 in para 4 has relied on several decisions wherein it is held that retrospective effect cannot be imposed when it comes to deduction of TDS. The assessee also places reliance on the decision of the Hon'ble Allahabad High Court in the case of Jagran Prakashan Limited vs DCIT 345 ITR 288 (Index of Decisions--H pages 110 to 150) which has been affirmed by the Hon'ble Supreme Court in SLP Civil 9861/2013 dt.05.05.2014 (Index of Decisions — II page 151). While dealing on the issue on assessee-in- default, the High Court has held as under: " 74. From the above, it is clear that deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly. In the present case, the Income tax authorities had not adverted to the Explanation to Section 191 nor had applied their mind as to whether the assessee has also failed to pay such tax directly. Thus, to declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that assessee has also failed to pay tax directly. The fact that assessee has failed to pay tax directly is thus, foundational and jurisdictional fact and only after finding that assessee has failed to pay tax directly, deductor can be deemed to be an assessee in default in respect of such tax. It is relevant to notice here that

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Explanation to Section 191 is confined only to the amount of tax which was required to be deducted.” Thus on this count also, the tax liability fastened requires to be deleted.” 34. We have heard the rival submissions and perused the record. The grounds of appeal raised before the ld. CIT (A) were similar in all the assessment years under consideration before us and we are not reproducing hereinbelow the common grounds raised by the assessee in each of the assessment years for the sake of brevity.

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201 (1A) is payable by him till the payment of such tax by him or by the payee. Accordingly, we hold that there is no merit in Ground No. 7 and it is also rejected.

“8. I have gone through the agreement between Microsoft Licensing, GP ("MS") and the appellant containing Master Licensing Agreement. The agreement clause cited by the assessing officer and that quoted by the appellant are the same as per the agreement produced before me. As per the plain reading, the clause only speaks of the agreement between the parties to the effect that Wipro may deduct taxes required to be paid on remittances and pay it to the authority. As per the Master Agreement with. Microsoft, there is no indication of any definite amount to be paid to the vendor irrespective of taxes. There is no basis to infer that the appellant had to bear the cost of taxes payable on remittances. Moreover, the appellant is right in contending that the terms of one agreement could not be applied to payments pertaining to other vendors. Raising of additional demand based on facts relating to one payment and applied to other payments requires inference and extrapolation. It could not be called a mistake apparent from record. Therefore, section 195A was not applicable on the facts and circumstances of the case. The additional liability due to grossing up of the tax with remittances as made by the assessing officer in order under section 154 is deleted. Ground no.s 6 and 7 are allowed.” 44. We find that in this Para, a categorical finding is given by CIT (A) that as per the agreements between the assessee company and various parties to whom

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payments were made, the assessee company had to deduct TDS if required by law or by the income tax authorities and hence, there is no basis to infer that the assessee company had to bear the cost of taxes payable on remittances was to be borne by the assessee company. This finding of CIT (A) could not be controverted by the learned DR of the revenue and we find no infirmity in the ultimate finding of CIT (A) that there was no apparent mistake in the order passed by the AO which can be rectified u/s 154 On this aspect, we uphold the order of CIT (A). These grounds are rejected.

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withholding tax rate is in fact resident of some other country having higher withholding tax rate, we do not find any reason to interfere in the order of CIT (A). This Ground is also rejected.

Sd/- Sd/- ( A.K. GARODIA ) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore, Dated, the 21st June, 2019. /Desai Smurthy/ Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file By order

Assistant Registrar, ITAT, Bangalore.