M/S SELECT SOFTWARE (I) PVT LTD vs. THE INCOME TAX OFFICER

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ITA/319/2012HC KarnatakaKAHC01042586201209 November 2021Bench: S.SUJATHA,S RACHAIAH4 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the transactions were not outright sales but a transfer of rights to use software. Consequently, the second substantial question of law regarding deductions under Sections 28 and 37 did not arise for consideration.

What were the facts?

The assessee appealed against an ITAT order concerning the assessment year 2007-08. The core issue was whether transactions involving software suppliers were outright sales or transfers of rights to use software, impacting royalty payments.

What were the issues?

The primary issue was to determine the nature of software transactions: outright sale versus license to use. This determined the tax treatment and potential royalty implications.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 28,Section 37

AI-generated summary — verify with the full judgment below

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 09TH DAY OF NOVEMBER, 2021

PRESENT

THE HON’BLE MRS.JUSTICE S.SUJATHA

AND

THE HON’BLE MR. JUSTICE S.RACHAIAH

I.T.A.No.319/2012

BETWEEN :

M/s SELECT SOFTWARE (I) PVT. LTD., REP. BY ITS DIRECTOR SRI JOHN VERGHESE NO.2710, I DIAGONAL ROAD, 7TH MAIN, LIC COLONY, JEEVAN BHEEMANAGAR, BANGALORE-560075

...APPELLANT

(BY SRI A.SHANKAR, SENIOR ADV. A/W SRI S.V.RAVISHANKAR, ADV.)

AND :

THE INCOME TAX OFFICER WARD-12(2), 4TH FLOOR, NRUPATHUNGA ROAD, OPP: RBI BANK, BANGALORE-560001 …RESPONDENT

(BY SRI T.N.C.SRIDHAR, ADV. FOR SRI JEEVAN J. NEERALGI, ADV.)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 12.06.2012 PASSED IN ITA NO.1005/BANG/2011, FOR THE ASSESSMENT YEAR 2007-2008, PRAYING TO I. FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE

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FINDINGS TO THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY THE TRIBUNAL IN ITA NO.1005/BANG/2011 DATED 12.06.2012.

THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:

J U D G M E N T

This appeal is filed by the assessee under Section 260A of the Income Tax Act, 1961 assailing the order of the Income Tax Appellate Tribunal, Bangalore Bench “B” dated 12.06.2012 passed in ITA No.1005/Bang/2011 relating to the Assessment Year 2007-08.

2.

This appeal has been admitted by the Co- ordinate Bench of this Court to consider the following substantial questions of law:- 1. Whether on the facts and circumstances of the case, is it possible to hold that the transactions between the appellant- assessee and suppliers of the software, residents and non-residents of India, were the sale out and out or it was only a

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transfer of rights to use the software on payment of royalty? 2. If the answer to the first substantial question of law is in the affirmative, whether the appellant-assessee is entitled to seek deduction of the consideration paid for the software under Sections 28 and 37 of the Act?

3.

Learned Senior Counsel representing the assessee would submit that the substantial question of law No.2 would not arise for consideration in view of the substantial question of law No.1 being covered by the ruling of the Hon’ble Apex Court in favour of the assessee in Engineering Analysis Centre of Excellence Private Limited vs. The Commissioner of Income Tax and another reported in (2021) 432 ITR 471 (SC).

4.

Learned counsel for the Revenue could not dispute the same.

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5.

In view of the aforesaid submissions, the substantial question of law No.1 is answered in favour of the assessee. Substantial question of law No.2 does not arise for consideration.

The appeal stands disposed of accordingly.

SD/- JUDGE

SD/- JUDGE

PMR

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