PR. COMMISSIONER OF INCOME TAX vs. M/S SYNAMEDIA LIMITED

PR. COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), KORAMANGALA, BANGALORE.

THE DY. COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION, CIRCLE 1(2), KORAMANGALA, BANGALORE. …APPELLANTS (BY SRI. SANMATHI E. I., ADV.)

This appeal under Section 260-A of the Income Tax Act, 1961 is filed by the Revenue, challenging the order dated 14.02.2022 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru, in ITA No.3350/Bang/2018, relating to the assessment year 2014-15.

The Revenue has formulated the following substantial questions of law for consideration:

The facts in brief are that the respondent-Assessee, being a foreign company, was in receipt of income from the sale of software. The Assessing Officer treated such income as ‘Royalty’. The draft assessment order passed by the Assessing Officer was challenged before the Dispute Resolution Panel (for short, ‘DRP’). The DRP held that the said receipt was taxable

The Tribunal, on appeal by the Assessee, upon analyzing the terms of the agreement and applying the principles of law laid down by the Hon’ble Apex Court in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income-Tax and another1, held that the receipts from sale of software are not taxable as ‘Royalty’. Aggrieved thereby, the Revenue is in appeal challenging the order of the Tribunal.

Learned Senior Standing Counsel Sri. E.I. Sanmathi, appearing for the appellants-Revenue, submits that the facts in Engineering Analysis Centre of Excellence Private Limited (supra) and the present case are not identical, and therefore, the law laid down by the Hon’ble Apex Court in the said decision is not applicable to the facts of the present appeal. It is further submitted that the Revenue has preferred a review petition in Engineering Analysis Centre of Excellence Private Limited (supra).

Learned Senior Standing Counsel further submits that the supply of Tata Sky viewing cards involves embedded software and entails a licence to use such software. It is contended that, under the agreement between Tata Sky and the Assessee, Tata Sky was required to pay licence fee for the use of the viewing cards, and the Assessee had permitted such use on payment of licence fee. Hence, it is submitted that the grant of licence would fall within the definition of ‘Royalty’ under Section 9(1)(vi) of the Act.

On the other hand, Sri. T. Suryanarayana, learned Senior Counsel appearing on behalf of Smt. Tanmayee Rajkumar, learned counsel for the Assessee, submits that the Tribunal, after analyzing the terms of the agreement in light of the law laid down by the Hon’ble Apex Court in Engineering Analysis Centre of Excellence Private Limited (supra), has held that the receipts from transfer of licence are not taxable as ‘Royalty’. It is further submitted that the substantial questions of law raised for consideration stand covered by the judgment of the Hon’ble Apex Court in Engineering Analysis Centre of Excellence Private Limited (supra).

Heard learned counsel for the parties and perused the substantial questions of law framed as well as the findings recorded by the Tribunal.

A careful perusal of the order of the Tribunal makes it clear that the Tribunal, after analyzing the terms of the agreement, has held that, in view of the judgment of the Hon’ble Apex Court in Engineering Analysis Centre of Excellence Private Limited (supra), the amount in question relating to sale of software is not taxable as ‘Royalty’.

This Court is of the considered view that the issue raised in the present appeal stands squarely covered by the judgment

Learned Senior Counsel for the respondent-Assessee submitted that the Review Petition filed by the Revenue in some of the cases which were part of common order in Engineering Analysis Centre of Excellence Private Limited (supra), are dismissed by the Hon'ble Supreme Court. The said submission could not be disputed by learned Senior Standing Counsel.

Insofar as the contention that the consideration paid by Tata Sky to the Assessee constitutes ‘Royalty’ under Section 9 of the Act, we find that no substantial question of law has been raised by the Revenue on this issue. Furthermore, no grounds in that regard have been urged.

A careful perusal of the order of the Tribunal indicates that a similar issue had been answered against the Assessee in its own case by the Tribunal. In the absence of any substantial question of law having been raised or made out by the