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HC-KAR NC: 2025:KHC:37113-DB ITA No. 667 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF SEPTEMBER, 2025 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND INCOME TAX APPEAL NO. 667 OF 2023 BETWEEN:
PR. COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION, KORAMANGALA, BANGALORE.
THE DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION, CIRCLE 1(2), KORMANGALA, BANGALORE. …APPELLANTS (BY SRI. SUSHAL TIWARI, STANDING COUNSEL)
AND:
M/S. IBM SINGAPORE PVT. LTD. NO.12, SUBRAMANYA ARCADE, BANNERGATTA MAIN ROAD, BANGALORE -560029. PAN: AACCI2917B. …RESPONDENT (BY SMT. MANASA ANANTHAN, ADV.)
THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 03/05/2023 PASSED IN IT(IT)A NO. 178/BANG/2023, FOR THE ASSESSMENT YEAR 2016-17, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER
Digitally signed by NANJUNDACHARI Location: HIGH COURT OF KARNATAKA
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HC-KAR NC: 2025:KHC:37113-DB ITA No. 667 of 2023
DATED 03/05/2023 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE’S CASE, IN APPEAL PROCEEDINGS IN IT(IT)A NO.178/BANG/2023 FOR A.Y. 2016-17 (ANNEXURE-A) AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE S.G.PANDIT AND HON'BLE MR. JUSTICE K. V. ARAVIND
ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE K.V. ARAVIND)
Heard learned standing counsel Sri.Sushal Tiwari for appellants and learned counsel Smt.Manasa Ananthan for respondent. Perused the appeal papers.
This appeal by the Revenue against the order dated 03.05.2023 in IT(IT)A.No.178/Bang/2023 passed by the Income Tax Appellate Tribunal ‘C’ Bench, Bengaluru (for short, ‘the Tribunal’) for the assessment year 2016-17.
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HC-KAR NC: 2025:KHC:37113-DB ITA No. 667 of 2023
The following substantial questions of law are raised for consideration of this Court:
“1. Whether on the facts and in the circumstances of the case, the Tribunal’s order is perverse in nature in by holding that the payment made to non-resident entities in respect of purchase of software was not royalty and that the same did not give rise to income taxable in India and therefore, the petitioners were not liable to deduct tax at source under Section 195 of the Act?
Whether on the facts and in the circumstances of the case, the Tribunal’s order is perverse in nature in holding that the payments made to non-resident entities were not in the nature of royalty as defined in Explanation 2 to Section 9(1)(vii) of the Act and the Double Taxation Avoidance Agreement as well?
Whether on the facts and in the circumstances of the case, the Tribunal’s order is perverse in nature in holding that the sale of software license did not include a right or
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HC-KAR NC: 2025:KHC:37113-DB ITA No. 667 of 2023
interest in copyright, which thus did not give rise to payment of royalty and would be an income deeded to accrue in India under Section 9(1)(vi) of the Act, requiring the deduction of tax at source?
Whether on the facts and in the circumstances of the case, the Tribunal’s order is perverse in nature in not considering the fact that the development of advanced cloud-based computer software by the assessee would not come under copyright as envisaged in Section 14(a)/14(b) of the Copy Right Act?
Whether on the facts and in the circumstances of the case, the Tribunal’s order is perverse in nature in not appreciating that conditions for holding applying Explanation 2(v) to Section 9(1)(vi) of the Act were fully satisfied in present case as payments were made to a non–resident by way of royalty for use of or the right to use any copy right and Review Petition filed by Revenue is pending for adjudication before Supreme Court in case Engineering Analysis Centre of Excellence (reported in 432 ITR page 471)?”
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HC-KAR NC: 2025:KHC:37113-DB ITA No. 667 of 2023
At the outset, learned counsel Smt.Manasa Ananthan appearing for the respondent submits that the Tribunal under impugned order answered the controversy by following its earlier order in the case of the assessee in ITA.No.1311 to 1313/Bang/2018 dated 03.09.2021 which was appealed by Revenue in ITA.No.681/2023 and Connected Matters, wherein this Court following the judgment of the Hon'ble Apex Court in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED VS. COMMISSIONER OF INCOME-TAX AND ANOTHER1, dismissed the appeal of the Revenue. Hence, learned counsel submits that in view of the order passed in ITA.No.681/2023 and connected matters, the present appeal also liable to be dismissed.
Learned standing counsel Sri.Sushal Tiwari appearing for the appellants/Revenue is unable to dispute the above submission.
1 (2021) 432 ITR 471
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HC-KAR NC: 2025:KHC:37113-DB ITA No. 667 of 2023
Having considered the submissions of the learned counsel appearing for the parties, we are of the view that in the light of the judgment in ITA.No.681/2023 and connected matters, dated 12.08.2025, the present appeal fails. Accordingly stands dismissed.
Sd/- (S.G.PANDIT) JUDGE
Sd/- (K. V. ARAVIND) JUDGE
NC CT:bms List No.: 1 Sl No.: 17