ACIT COMPANY CIRCLE VI(1), CHENNAI vs. SAIPEM INDIA PROJECTS PRIVATE LIMITED, CHENNAI

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ITA 1210/CHNY/2019Status: DisposedITAT Chennai23 December 2019AY 2014-1542 pages

In favour of the Revenue: the Revenue's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that payments for software licenses, even if non-exclusive and non-transferable, constitute royalty under Section 9(1)(vi) of the Act and the India-Italy DTAA. Therefore, TDS was required.

What were the facts?

The assessee purchased software licenses from its foreign parent company. The Assessing Officer disallowed the expense under Section 40(a)(i) for non-deduction of TDS, treating the payment as royalty. The CIT(A) deleted the disallowance relying on a previous ITAT decision in the assessee's own case.

What were the issues?

Whether payments for software licenses constitute royalty and are subject to TDS under Section 195 of the Income Tax Act and the relevant DTAA.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 9(1)(vi),Section 195

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(7)Show list

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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI RAMIT KOCHAR

Hearing: 23.12.2019

(a) All the appeals are allowed. (b) Impugned orders passed by the Income Tax Appellate Tribunal, Bangalore Bench, is hereby set aside. (c) The order passed by the Commissioner of Income Tax (Appeals) affirming the order passed by the Assistant Commissioner of Income tax, Circle 19(1), Bangalore, with modification is restored. (d) No costs.” Thus, as could be seen from aforesaid decision of Hon’ble Karnataka High Court in the case of CiT v. Synopsis International Old Limited(supra) which decision was rendered in context of Royalty as defined in India-Ireland DTAA wherein definition of Royalty is paramateria to definition of Royalty as used in India-Italy DTAA(except exclusion to aircraft in case of India- Ireland DTAA as detailed above by us in this order by reproducing relevant Article of both the treaties) with which we are seized of and Hon’ble Karnataka High Court has held that grant of non-exclusive non transferable license in computer software with no right to sub-lease or transfer shall fall within Royalty both under DTAA as well u/s 9(1)(vi) of the 1961 Act read with explanations and shall be chargeable to income- tax under the provisions of the 1961 Act. Hon’ble jurisdictional High Court has affirmed the ratio of decision of Hon’ble Karnataka High Court in the case of Synopsis International Old Limited, in a recent judgment dated 23.04.2019 in the case of Zylog Systems Limited(supra). We are bound by aforesaid decision of Hon’ble Jurisdictional High Court decision and Respectfully following the decision of Hon’ble Madras High Court in the case of Zylog, we allow appeal of Revenue. We order accordingly.

7.

In the result, the appeal filed by Revenue in 2014-15 is allowed.

Order pronounced on the 23rd day of December, 2019 in Chennai.

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