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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI. INTURI RAMA RAO
Per Sunil Kumar Yadav, Judicial Member These appeals are preferred by the assessee on common grounds. Therefore, these were heard together. For the sake of reference, we extract the grounds raised in IT(TP)A No.47/Bang/2017: The learned CIT(A) has erred in law and on facts in upholding the order of the 1) Deputy Commissioner of Income-tax (International Taxation) ("AO") and passing an order under section 250 of the Act The learned CIT(A) has erred in passing an order under section 250 of the Act which is 2) bad in law and on facts.
3) The learned CIT(A) and the AO have erred in law and on facts in holding the Appellant to be an 'assessee in default' under section 201(1) of the Act in respect of the payments made to IBM Singapore Pte Limited (hereinafter referred to as "IBM Singapore").
The learned CIT(A) and the AO have erred in law and on facts in holding that the 4) Appellant ought to have deducted tax at source under section 195 of the Act on the payments made to IBM Singapore for the purchase of shrink wrapped/ off the shelf software and consequently holding the Appellant to be an "assessee in default" under the provisions of section 201(1) of the Act. The learned CIT(A) and the AO have erred in law and on facts in holding that the 5)
IT(IT)A Nos.47 & 48/Bang/2017 Page 2 of 4 payments made by the Appellant are in the nature of 'royalty' under the provisions of the Act.
The learned CIT(A) and the AO have erred in treating the payment made to IBM 6) Singapore for the purchase of shrink wrapped software as 'royalty' as contemplated under the Double Taxation Avoidance Agreement ("DTAA") entered into between India and Singapore.
Without prejudice to the above, the learned CIT(A) and the AO have erred in law and on facts 7) in failing to appreciate the fact that the amendments made to section 9(1)(vi) of the Act vide Finance act 2012 would be rendered inapplicable considering the beneficial provisions under the India-Singapore DTAA which have not been amended.
The learned CIT(A) and the AO have erred in law and on facts in merely following the 8) decisions of the Honourable Karnataka High Court,("KHC") in the case of Samsung Electronics [2012] 345 ITR 494 (Kar) and CIT v Synopsys International Old Ltd [2011] 212 Taxmann 454 (Kar) without appreciating the facts that the same could be distinguished and therefore, the decision of the KHC does not lay down the ratio decidendi applicable to the facts of the Appellant.
The learned CIT(A) and the AO have erred in law and on facts in not appreciating the the 9) distinction between a 'copyright' and a 'copyrighted article' which has been recognised and appreciated by various courts.
The learned CIT(A) and the AO have failed to appreciate various case laws relied upon by the 10) Appellant wherein the courts, under similar circumstances have held that the consideration for mere transfer of copyrighted article, without transferring the right in the copyright shall not be held as payments towards royalty and consequently, there is no obligation to deduct tax at source on the part of the payer.
The learned CIT(A) has erred in law and on facts in upholding the order of the AO and levying 11) interest under section 201(1A) of the Act in respect of the payments made to IBM Singapore. Each of the above ground is independent and without prejudice to the other grounds of appeal preferred by the Appellant Further, the Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal.
During the course of hearing, the learned counsel for the assessee has invited our attention that identical issue was examined by the Tribunal in the assessee’s own case for the assessment year 2013-14 and 2014-15 in which it was held that payment made by the assessee is the payment of royalty, therefore, the assessee is in default for non deduction of TDS under section 201 of the Act, subject to the outcome of the SLP pending before the Hon’ble Supreme Court. Copy of the order of the Tribunal is placed on record.
IT(IT)A Nos.47 & 48/Bang/2017 Page 3 of 4 These facts were not disputed by the learned DR.
3. Having carefully examined the order of the Tribunal and the grounds raised before us, we find that identical issue is squarely covered by the order of the Tribunal in the assessee’s own case. The relevant portion of the order of the Tribunal is extracted hereunder for the sake of reference:
“2. During the course of hearing, the learned counsel for the assessee invited our attention that the impugned issues are squarely covered by judgment of jurisdictional High Court in the assessee’s own case vide order dated 20.10.2011 in which it was held that payment made by the assessee to the non-resident supplier of software is a royalty, following its earlier order in ITA No. 280/2005. The assessee filed the SLP before the Hon’ble Supreme Court of India and the issue is pending for adjudication. The assessee has filed a declaration under section 158A(1) of the IT Act claiming that identical question of law is pending before the Hon’ble Supreme Court and the findings in that SLP would be binding in the instant case also even if the Tribunal decides the appeals against the assessee following the judgment of the Hon’ble High Court. This declaration was sent to the Revenue for verification of the facts and now the Revenue has verified the facts stated in the declaration filed by the assessee in Form 8.
Now in the light of the declaration filed by the assessee, we have to adjudicate the issue following judgment of jurisdictional High Court in which it has been categorically held that the payment made by the assessee is a royalty. The relevant portion of the judgment of Hon’ble High Court is extracted hereunder for the sake of reference: “3. We have heard the learned counsel appearing for the appellants and the learned counsel appearing for the respondent.
The above substantial question of law in similar facts regarding payment made towards supply of shrink wrap cassettes/CDs purchased by the respondent i.e., payment made by the respondent to the non-resident supplier of software has been held to be a royalty by answering the substantial question of law in favour of the revenue and against the assessee in and connected cases, decided on 15.10.2011. Following the detailed reasons assigned therein, we hold that the order passed by the ITAT impugned in this appeal is liable to be set aside and we answer the substantial question of law in favour of the revenue and against the assessee.
5. Accordingly, we pass the following:
ORDER The appeal is allowed. The order passed by the ITAT dated 29.11.2007 in is set aside and the order passed by the appellate authority confirming the order passed by the assessing officer is restored.”
IT(IT)A Nos.47 & 48/Bang/2017 Page 4 of 4
4. We, therefore, following the judgment of the jurisdictional High Court in the case assessee’s own case, hold that the payment made by the assessee is a payment of royalty and therefore the assessee is in default for non-deduction of TDS under section 201 of the Act subject to the outcome of the SLP pending in the Supreme Court. Accordingly, we find no merit in the assessee’s appeal and we confirm the order of the CIT(A).”
4. Following the view taken by the Tribunal in the assessee’s own case, we hold that payment made by the assessee is the payment of royalty and therefore assessee is in default for non deduction of TDS under section 201 of the Act, subject to the outcome of the SLP pending before the Hon’ble Supreme Court. We find no merit in the assessee’s appeal. Accordingly, we confirm the order of the CIT(A).
In the result, appeals of the assessee are dismissed.
Pronounced in the open court on 19th January, 2018.