DELL SOFTWAR INTERNATIONAL LTD vs. INCOME-TAX OFFICER

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ITA/1002/2017HC KarnatakaKAHC01051110201730 March 2021Bench: ALOK ARADHE,M.G.S. KAMAL5 pages
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What did the High Court hold?

The High Court held that the issue regarding the taxability of software sale receipts as royalty has been settled by the Supreme Court. Consequently, the substantial questions of law were answered in favor of the assessee.

What were the facts?

The assessee received amounts for the sale of software, which the revenue contended was royalty income taxable in India. The Income Tax Appellate Tribunal had confirmed the assessment order.

What were the issues?

Whether the receipts from the sale of software constitute royalty income taxable in India, and if the Tribunal's reliance on a previous case was appropriate given the factual distinctions.

Which sections of the Income-tax Act were involved?

Section 9(1)(vi)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 30TH DAY OF MARCH, 2021

PRESENT

THE HON’BLE MR. JUSTICE ALOK ARADHE

AND

THE HON’BLE MR. JUSTICE M.G.S. KAMAL

I.T.A. NO.1002/2017

BETWEEN:

DELL SOFTWAR INTERNATIONAL LTD., (PRESENTLY QUEST SOFTWARE INTERNATIONAL LTD.,) CITY GATE PARK, MAHON, CORK IRELAND, REPRESENTED HEREIN BY ITS DIRECTOR MR. JAMES MCGOWAN ... APPELLANT

(BY SRI T.SURYANARAYANA, ADVOCATE)

AND:

1.

INCOME-TAX OFFICER (INTERNATIONAL TAXATION ) WARD-2(1) (ERSTWHILE INCOME TAX OFFICER (INTERNATIONAL TAXATION)- WARD-1(2) ROOM NO.403, 4TH FLOOR, BMTC BUILDING, 80 FEET ROAD KORAMANGALA BENGALURU – 560 095.

2.

ADDITIONAL COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION)-RANGE-1 (ERSTWHILE DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA BENGALURU – 560 095. ... RESPONDENTS

(BY SRI DILIP KUMAR, ADVOCATE FOR SRI K.V.ARAVIND, ADVOCATE) - - -

THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED07/07/2017 PASSED IN IT(TP)A NO.643/BANG/2016, FOR THE ASSESSMENT YEAR 2012-2013.

PRAYING THIS HON'BLE COURT TO

(a) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE.

(b) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 07/07/2017 IN IT(TP)A NO. 643/BANG/2016.

(c) PASS SUCH OTHER OR SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE INTERESTS OF JUSTICE AND EQUITY.

THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:

JUDGMENT

Sri T. Suryanarayana, learned counsel for the appellant.

Sri Dilip Kumar, learned counsel for Sri K.V.Aravind, learned counsel for the respondents.

This appeal is filed under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), by the Revenue, being aggrieved by the order dated 07.07.2017 passed by the Income Tax Appellate Tribunal, Bengaluru, in IT(TP)A No.643(Bang)2016.

2.

The appeal was admitted to consider the following substantial questions of law: “1. Whether the Tribunal was justified in confirming the final assessment order passed by the 1st Respondent in holding that the amount received by the Appellant for sale of software amounted to ‘royalty’ as defined under Explanation 2 to Section 9(1)(vi) of the Income Tax Act, 1961, and under Article 12 of the India- Ireland DTAA, thereby giving rise to an income chargeable to tax in India?

2.

Whether the Tribunal was right in holding that the receipts from sale of software amounted to ‘royalty’ by following the decision of this Hon’ble Court in the case of decision of this Hon’ble Court in the case of CIT v. Samsung Electronics Co. Ltd., without appreciating the fact that the factual matrix involved in the case under consideration is distinct from that of Samsung Electronics Co. Ltd.?

3.

When the matter was taken up today, learned counsel for the assessee submitted that the issue involved in this appeal has been put to rest in view of the decision rendered by the Supreme Court in Civil Appeal Nos.8733-8734/2018 between ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED VS. THE COMMISSIONER OF INCOME TAX & ANOTHER, vide order dated 02.03.2021 and the issue involved in this appeal has been answered against the Revenue and in favour of the assessee.

4.

Learned counsel for the Revenue was unable to dispute the aforesaid submission.

5.

For the reasons assigned in the aforesaid judgment rendered by the Supreme Court in Civil Appeal Nos.8733-8734/2018 vide order dated 02.03.2021, the substantial questions of law involved in this appeal are answered in favour of the assessee and against the Revenue.

6.

In the result, the order dated 07.07.2017 passed by the Income Tax Appellate Tribunal is hereby quashed. In the result, the appeal is allowed.

Sd/- JUDGE

Sd/- JUDGE nvj

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