THE COMMISSIONER OF INCOME TAX vs. M/S SONATA INFORMATION TECHNOLOGY LIMITED,

1 IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 13TH DAY OF AUGUST, 2012 PRESENT THE HON'BLE MR. JUSTICE K.SREEDHAR RAO AND THE HON'BLE MR. JUSTICE B.MANOHAR I.T.A. No.78 OF 2007 C/W. I.T.A.Nos.119, 132, 135, 207, 208, 123, 209, 210, 211, 212, 213, 214, 552, 778/2007 I.T.A. No.78 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Additional Commissioner of Income Tax, International Taxation, Range – 19, Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind & Sri M.V. Seshachala, Advocates) AND:- M/s. Sonata Information Technology Limited, No.193, 1st Floor,

2 R.V. Road, Basavanagudi, Bangalore-560004. Respondent (By Smt. Vani H., Advocate) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 06.07.2006 passed in I.T.A.No.3432/Bang/2004 praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order of the ITAT, Bangalore in ITA No.3432/Bang/2004 dated 06.07.2006 and confirm the order of the Commissioner of Income Tax (Appeals)-IV, Bangalore, in the interest of justice and equity. I.T.A. No.119 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(1), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate) AND:- M/s. Ishoni Network India Pvt. Ltd., No.50, Brigade MLR Centre, Vani Vilas Road,

3 Basavanagudi, Bangalore-560004. Respondent (Notice to Resp. held sufficient vide Order dt.07.09.10) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 26.04.2006 passed in I.T.A.No.1404/Bang/2004 for the Assessment Year 2000-01, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.1404/Bang/2004 dated 26.04.2006 confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, International Taxation, Ward-19(1), Bangalore, in the interest of justice and equity. I.T.A. No.132 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(1), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate) AND:- M/s. Digital Globalsoft Ltd., (formerly Digital Equipment (India) Ltd.)

4 Digital Park-Plot No.30/40, Konappana Agrahara, Electronic City, Phase-2, Hosur Road, Bangalore-560100. Respondent (By Smt. Vani H., Advocate) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 02.06.2006 passed in I.T.A.No.1056/Bang/2004 for the Assessment Year 2001-02, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.1056/Bang/2004 dated 02.06.2006 and confirm the order of the Appellate Commissioner confirming the order passed by the Income Tax Officer, International Taxation, Ward-19(1), Bangalore, in the interest of justice and equity. I.T.A. No.135 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(1), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

5 AND:- M/s. Digital Globalsoft Ltd., (formerly Digital Equipment (India) Ltd.) Digital Park-Plot No.30/40, Konappana Agrahara, Electronic City, Phase-2, Hosur Road, Bangalore-560100. Respondent (By Smt. Vani H., Advocate) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 02.06.2006 passed in I.T.A.No.1055/Bang/2004 for the Assessment Year 2000-01, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.1055/Bang/2004 dated 02.06.2006 and confirm the order of the Appellate Commissioner confirming the order passed by the Income Tax Officer, International Taxation, Ward-19(1), Bangalore, in the interest of justice and equity. I.T.A. No.207 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(1), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

6 AND:- M/s. L.G. Soft India Private Ltd., 5th Floor, Golf View Homes, Murgesh Palya, Bangalore-560017. Respondent (By M/s. King & Patridge, Advocates) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 04.08.2006 passed in I.T.A.No.1190/Bang/2005 for the Assessment Year 2004-05, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.1190/Bang/2005 dated 04.08.2006 confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, International Taxation, Ward-19(1), Bangalore, in the interest of justice and equity. I.T.A. No.208 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(1), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

7 AND:- M/s. L.G. Soft India Private Ltd., 5th Floor, Golf View Homes, Murgesh Palya, Bangalore-560017. Respondent (By M/s. King & Patridge, Advocates) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 04.08.2006 passed in I.T.A.No.980/Bang/2005 for the Assessment Year 2000-01, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.980/Bang/2005 dated 04.08.2006 confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, International Taxation, Ward-19(1), Bangalore, in the interest of justice and equity. I.T.A. No.123 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(1), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

8 AND:- M/s. Flextronics Technologies (India) Pvt. Ltd., No.88A, Electronic City, Hosur Road, Bangalore. Respondent (Service held sufficient vide Order dated 27.05.10) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 23.06.2006 passed in I.T.A.No.345/Bang/2005 for the Assessment Year 2003-04, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.345/Bang/2005 dated 23.06.2006 and confirm the of the Appellate Commissioner confirming the order passed by the Income Tax Officer, International Taxation, Ward-19(1), Bangalore, in the interest of justice and equity. I.T.A. No.209 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(1), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

9 AND:- M/s. L.G. Soft India Private Ltd., 5th Floor, Golf View Homes, Murgesh Palya, Bangalore-560017. Respondent (By M/s. King & Patridge, Advocates) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 04.08.2006 passed in I.T.A.No.1188/Bang/2005 for the Assessment Year 2002-03, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.1188/Bang/2005 dated 04.08.2006 confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, International Taxation, Ward-19(1), Bangalore, in the interest of justice and equity. I.T.A. No.210 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(1), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

10 AND:- M/s. L.G. Soft India Private Ltd., 5th Floor, Golf View Homes, Murgesh Palya, Bangalore-560017. Respondent (By M/s. King & Patridge, Advocates) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 04.08.2006 passed in I.T.A.No.1189/Bang/2005 & C.O.No.134/Bang/2005 for the Assessment Year 2003-04, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.1189/Bang/2005 & C.O.No.134/Bang/2005 dated 04.08.2006 confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, International Taxation, Ward-19(1), Bangalore, in the interest of justice and equity. I.T.A. No.211 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(1), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

11 AND:- M/s. L.G. Soft India Private Ltd., 5th Floor, Golf View Homes, Murgesh Palya, Bangalore-560017. Respondent (By M/s. King & Patridge, Advocates) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 04.08.2006 passed in I.T.A.No.981/Bang/2005 for the Assessment Year 2001-02, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.981/Bang/2005 dated 04.08.2006 confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, International Taxation, Ward-19(1), Bangalore, in the interest of justice and equity. I.T.A. No.212 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(1), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

12 AND:- M/s. Tata Elxsi Ltd., White Field Road, Hoody, Bangalore-48. Respondent (By Smt. Vani H., Advocate) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 04.08.2006 passed in I.T.A.No.1187/Bang/2005 for the Assessment Year 2002-03, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.1187/Bang/2005 dated 04.08.2006 confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, International Taxation, Ward-19(1), Bangalore, in the interest of justice and equity. I.T.A. No.213 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(2), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

13 AND:- M/s. Tata Elxsi Ltd., White Field Road, Hoody, Bangalore-48. Respondent (By Smt. Vani H., Advocate) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 04.08.2006 passed in I.T.A.No.1186/Bang/2005 for the Assessment Year 2001-02, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.1186/Bang/2005 dated 04.08.2006 confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, International Taxation, Ward-19(2), Bangalore, in the interest of justice and equity. I.T.A. No.214 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(2), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

14 AND:- M/s. Tata Elxsi Ltd., White Field Road, Hoody, Bangalore-48. Respondent (By Smt. Vani H., Advocate) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 04.08.2006 passed in I.T.A.No.979/Bang/2005 for the Assessment Year 2000-01, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.979/Bang/2005 dated 04.08.2006 confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, International Taxation, Ward-19(2), Bangalore, in the interest of justice and equity. I.T.A. No.778 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(2), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

15 AND:- M/s. Sonata Information Technology Limited, No.193, 1st Floor, R.V. Road, Basavanagudi, Bangalore – 560004. Respondent (By Smt. Vani H., Advocate) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 13.04.2007 passed in I.T.A.No.299/Bang/2007, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.299/Bang/2007 dated 13.04.2007 confirming the order of the Commissioner of Income Tax (Appeals)-IV, Bangalore, in the interest of justice and equity. I.T.A. No.552 OF 2007:- BETWEEN:- 1. The Commissioner of Income Tax, International Taxation, Rastrothana Building, Nrupathunga Road, Bangalore. 2. The Income Tax Officer, International Taxation, Ward – 19(2), Rastrothana Building, Nrupathunga Road, Bangalore. Appellants (By Sri K.V. Aravind, Advocate)

16 AND:- M/s. Sonata Information Technology Limited, No.193, 1st Floor, R.V. Road, Basavanagudi, Bangalore – 560004. Respondent (By Smt. Vani H., Advocate) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising out of order dated 31.01.2007 passed in I.T.A.No.100, 101, 127, 1006 to 1065/Bang/2006 for the Assessment Year 2006-07, praying that this Hon’ble Court may be pleased to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set-aside the order passed by the ITAT, Bangalore in ITA No.100, 101, 127, 1006 to 1065/Bang/2006 dated 31.07.2007 confirming the order of the Commissioner of Income Tax (Appeals)-IV, Bangalore and confirm the order passed by the Income Tax Officer (Intl. Taxation), in the interest of justice and equity. These appeals are coming on for final hearing this day, SREEDHAR RAO, J., delivered the following: J U D G M E N T The fee paid towards use of Software is held to be royalty in the case of Commissioner of Income Tax & Anr. Vs. Samsung Electronics Co. Ltd., & Ors., reported in

17 (2011) 64 DTR 178. In view of the above decision, the question of law is answered in favour of revenue. Accordingly, the appeals are allowed. Sd/- JUDGE Sd/- JUDGE NM*