THE PR. COMMISSIONER OF INCOME TAX vs. M/S SAMSUNG R AND D INSTITUTE INDIA BANGALORE PVT LTD

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ITA/24/2025HC KarnatakaKAHC01006326202528 July 2025Bench: CHIEF JUSTICE,C M JOSHI4 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal, referring to the Supreme Court decision in Engineering Analysis Centre of Excellence, held that payments for software where no copyright is acquired do not constitute royalty. This decision was also supported by a previous ruling in the assessee's own case.

What were the facts?

The assessee purchased software from an Associated Enterprise and claimed depreciation. The Assessing Officer disallowed this, stating tax was not deducted at source under Section 195, as the payment was considered royalty.

What were the issues?

Whether payments made for software, without acquiring copyright, are considered royalty for the purpose of tax deduction at source under Section 195 of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 195,Section 260A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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HC-KAR NC: 2025:KHC:28830-DB ITA No. 24 of 2025

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 28TH DAY OF JULY, 2025

PRESENT

THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE

AND

THE HON'BLE MR. JUSTICE C M JOSHI

INCOME TAX APPEAL NO. 24 OF 2025

BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU - 560 095

2.

THE JOINT/DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-6(1)(1) 2ND FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU - 560 095 …APPELLANTS (BY SRI Y.V. RAVIRAJ, ADVOCATE)

AND: 1. M/S SAMSUNG R AND D INSTITUTE INDIA BANGALORE PVT. LTD. 2870, PHOENIX BUILDING BAGMANE CONSTELLATION BUSINESS PARK OUTER RING ROAD DODDANEKUNDI CIRCLE MARATHAHALLI POST BENGALURU - 560 037 PAN: AAICS 6290F REP. BY ITS MANAGING DIRECTOR …RESPONDENT

Digitally signed by AMBIKA H B Location: High Court of Karnataka

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HC-KAR NC: 2025:KHC:28830-DB ITA No. 24 of 2025

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA/IT(TP)A NO.1166/ BANG/2019 DATED 30.05.2024 FOR A.Y 2013-2014 ANNEXURE-A AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE JOINT/DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 6(1)(1), BENGALURU.

THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE and HON'BLE MR. JUSTICE C M JOSHI

ORAL JUDGMENT (PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE) 1. For the reasons stated in the application-I.A No.2/2025, delay in filing the appeal is condoned.

2.

The Revenue has filed the present appeal under Section 260A of the Income Tax Act, 1961 [the Act] impugning an common order dated 30.05.2024 [impugned order] passed by the learned Income Tax Appellate Tribunal [ITAT] in ITA/IT(TP)A No.1166/Bang/2019 and a batch of connected matters included the appeals preferred by the Assessee as well as the Revenue. The present appeal is confined to the impugned order insofar as it relates ITA/IT(TP)A No.1166/Bang/2019, which was the Assessee's appeal in respect of Assessment Year [AY] 2013-14.

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HC-KAR NC: 2025:KHC:28830-DB ITA No. 24 of 2025

3.

During the previous year relevant to AY 2013-14, the Assessee had purchased software from an Associated Enterprise [AE]. It also claimed depreciation on the payments made for the same. The Assessing Officer [AO] disallowed the same on the ground that tax was not deducted at source under Section 195 of the Act. According to the AO, the payments made for the software was in the nature of royalty and, therefore, were taxable under the Act.

4.

There is no dispute that the Assessee did not acquire any copyright in the software. It also acquired no right to commercially exploit the intellectual property in the software.

5.

In view of the above, learned ITAT referred to the decision of the Supreme Court in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another: (2022) 3 SCC 321 and allowed the Assessee's appeal.

6.

Concededly, the question whether payments made for software for which the purchaser does not acquire any copyright

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HC-KAR NC: 2025:KHC:28830-DB ITA No. 24 of 2025

can be termed as royalties, is covered in favor of the Assessee by the decision in the case of Engineering Analysis (supra).

7.

The learned counsel appearing for the Revenue fairly points out that the said question is also covered in the Assessee’s favour by the decision of this court in Assessee's own case in respect of an earlier assessment year – order dated 25.06.2025 in ITA No.25/2025 captioned Principal Commissioner of Income Tax and another v. M/s. Samsung R and D Institute : NC:2025:KHC: 22126-DB.

8.

In view of the above, no substantial question of law arises for consideration in this Court. The appeal is, accordingly, dismissed.

Sd/- (VIBHU BAKHRU) CHIEF JUSTICE

Sd/- (C M JOSHI) JUDGE

AHB List No.: 1 Sl No.: 23

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