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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF JUNE, 2020
PRESENT
THE HON’BLE Mr. JUSTICE ALOK ARADHE
AND
THE HON’BLE Mr. JUSTICE M. NAGAPRASANNA
I.T.A. No. 36/2012
BETWEEN : --------------
Commissioner of Income
Tax-III, C.R. Buildings
Queens Road
Bangalore – 560 001.
Deputy Commissioner of
Income Tax
Circle-12(4)
Bangalore.
… APPELLANTS
(By Sri. E.I. Sanmathi, Adv., )
AND : -------
M/s. Rational Software Corporation (India) Pvt. Ltd., Subramanya Arcade
2 No. 12, Bannerghatta Main Road. Bangalore – 560 029.
… RESPONDENT
(By Sri. H.Y. Harish, Adv., for Smt. Vani H., Adv.)
---
This I.T.A. is filed under Section 260-A of I.T. Act 1961 with a prayer to formulate the substantial questions of law and set aside the order passed by the ITAT, Bangalore in appeal proceedings No. 1536/Bang/2010 dated 10.10.2011 and etc.
This I.T.A. on for Final Hearing this day, ALOK ARADHE J, passed the following;
O R D E R
Mr. E.I. Sanmathi, learned counsel for appellants.
Mr. H.Y. Harsih, learned counsel for respondent.
This appeal has been filed by the revenue which was admitted by a Bench of this Court vide order dated 29.05.2012 on the following substantial question of law:
“Whether on the facts and in the circumstances of the case, the tribunal is justified in holding that the payments made by the assessee
3 cannot be treated as royalty and hence, there is no liability for deduction of tax u/s. 195 of the Act and consequently holding that the provisions of Section 40(a) of the Act are not applicable?”
When the matter was taken up today, learned counsel for the revenue submitted that the aforesaid substantial question of law has been answered in favour of the revenue by a Bench of this Court vide judgment dated 22.06.2015 passed in I.T.A. No. 205/2009.
The aforesaid submission could not be disputed by the learned counsel for the assessee.
In view of the aforesaid submissions, the substantial question of law framed by this Court is answered in favour of the revenue and against the assessee.
However, in the event the assessee succeeds before the Apex Court, it is clear that this order also cannot come into effect. The assessing authority shall therefore, pass an
4 order under Section 260(1A)of the Act, based on the outcome of the assessee’s appeal before the Apex Court. If the assessee loses his battle before the Apex Court, then before giving effect to this order, the assessing authority shall consider the application of Art. 24(4) of the DTAA between India and the Netherlands. Though the said question is not raised by the assessee before the authorities, the same being purely a question of law and the said DTAA being a beneficial piece of delegated legislation, if the assessee is entitled to the benefit of the same, that cannot be denied to it.
Accordingly, the appeal is allowed with the aforesaid observation.
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