THE COMMISSIONER OF INCOME TAX vs. M/S SPICE TELECOM

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 8TH DAY OF JANUARY 2013

PRESENT

THE HON'BLE MR.JUSTICE D.V.SHYLENDRA KUMAR

AND

THE HON'BLE MR. JUSTICE B.MANOHAR

ITA NO.1273/2006

Between:

Central Circle,

C.R.Building,

Queens Road,

Bangalore.

TDS – 1,

C.R.Building,

Queens Road,

Bangalore.

…Appellants

(By Sri.K.V.Aravind, Advocate)

AND:

M/S.Spice Telecom, Embassy Square, NO.148, Infantry Road,

Bangalore.

…. Respondent

(By Sri.Chythanya.K.K., Advocate)

ITA FILED U/S.260A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 03-02-2006 PASSED IN ITA.NO.932/BANG/2002 FOR THE ASSESSMENT YEARS 2001-02, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA.NO.932/BANG/2002 DATED 03-02-2006 & CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, TDS – 1, BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY.

THIS APPEAL COMING ON FOR ORDERS THIS DAY, D.V.SHYLENDRA KUMAR J., DELIVERED THE FOLLOWING:

J U D G M E N T

This appeal under Section 260A of the Income Tax Act, 1961 by the Revenue has been admitted to examine the following substantial question of law:

“Whether the Tribunal was correct in holding that the order passed under Section 201(1) and under Section 201(1A) of the Act is not liable in respect of payments made by the assessee towards liaison services provided as the same would not fall under royalty and since the double taxation avoidance

agreement between India and Mauritius is silent on this issue and consequently the same is not taxable as per the provisions of Indian Income Tax Act.”

submits that this Court in the case of RANKA AND RANKA reported in 2012(73) Kar.L.J. 30 took a view that the Board Circular is applicable to the pending cases also and this has been followed by this court in several subsequent decisions including the judgment dated 03-08-2012 rendered in ITA No.750/2006 and ITA Nos.739-740/2006 in the case of CIT AND ANOTHER v/s GLOWTRONICS LTD. The Division Bench of this court sitting at Dharwad Circuit Bench in a judgment rendered on 03-10-2012 in ITA No.5049/2010 has taken a different view about the applicability of the Board Circular to the pending cases and by distinguishing the judgment of the Hon’ble Supreme Court in the case of COMMISSIONER OF COMMERCIAL TAXES, BANGALORE v/s MYSORE ELECTRICAL INDUSTRIES LIMITED reported in (2006)12 SCC 448 holding that the decision of the Hon’ble Supreme Court interpreting the Board Circular issued in the context of Central Excise Tariff’s Act, 1985

and the Rules 1944 regarding classification of goods has no application to the present circular and the applicability of that circular to the classification of goods in pending disputes is not so applicable to the facts and circumstances of the case on hand. Mr.Aravind submits that the present case is also distinguishable. Further, it is also submitted that the judgment rendered in RANKA AND RANKA case by the Division Bench of this court has been made the subject matter of the appeal before the Hon’ble Supreme Court in SLP No.27468/2012 and in many appeals coming up before this court involving like questions, this court has disposed of the appeals. However reserving liberty to the revenue to revive the appeal in the event of success in their appeal against the judgment of this court rendered in RANKA AND RANKA case, this appeal may also be disposed of with like liberty reserved to the revenue to revive the appeal in the event of success of

revenue in the appeal preferred by them against the judgment in RANKA AND RANKA case.

Sd/-

JUDGE

Sd/-

JUDGE

mpk/-*