M/S ASTRAL SYSTEMS INDIA vs. THE COMMISSIONER

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ITA/413/2014HC KarnatakaKAHC01034341201426 May 2021Bench: ALOK ARADHE,HEMANT CHANDANGOUDAR4 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the substantial questions of law were already answered in favor of the assessee by the Supreme Court in a similar case. Consequently, the ITAT's order was quashed.

What were the facts?

The assessee appealed against an ITAT order that treated a simple sale as royalty under Section 9(1)(vi) of the Income Tax Act. The appeal raised several substantial questions of law regarding the classification of software payments and applicability of TDS provisions.

What were the issues?

Whether payments for software purchases constitute royalty and are subject to TDS provisions under the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 9(1)(vi),Section 154,Section 195(1),Section 40(a)(i),Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 26TH DAY OF MAY, 2021

PRESENT

THE HON’BLE MR. JUSTICE ALOK ARADHE

AND

THE HON’BLE MR. JUSTICE HEMANT CHANDANGOUDAR

I.T.A. NO.413 OF 2014

BETWEEN:

M/S ASTRAL SYSTEMS INDIA PVT LTD., NO.1348, 4TH MAIN, I STAGE PHASE II, CHANDRA LAYOUT BANGALORE REPRESENTED BY ITS DIRECTOR SMT.MRS. BHARATHI KUMAR

... APPELLANT

(BY SRI. ATUL K. ALLUR, ADVOCATE.)

AND:

1.

THE COMMISSIONER OF INCOME- TAX C.R. BUILDING, QUEENS ROAD BANGALORE-560 001

2.

THE INCOME –TAX OFFICER WARD 11(1) BANGALORE ... RESPONDENTS (BY SRI. K.V. ARAVIND, ADVOCATE.) - - - THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 09.05.2014 PASSED IN ITA NO.704/BANG/2013 FOR THE ASSESSMENT YEAR 2007-08, PRAYING TO:

(i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS STATED ABOVE.

(ii) TO ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN ITA No.704/BANG/2013 DATED 09.05.2014.

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

JUDGMENT

This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee against the order dated 9.5.2014 passed by the Income Tax Appellate Tribunal, Bangalore. The subject matter of the appeal pertains to the Assessment year 2007-2008. The appeal was admitted by a bench of this Court vide order dated 15.12.2014 on the following substantial questions of law: “a. Whether on the facts and circumstances on case the Tribunal was justified in treating the simple sale as Royalty under section 9(1)(vi) of the IT Act. b. Whether on the facts and circumstances on case the Tribunal was justified in confirming the order passed u/s. 1543(3) of the I.T.Act.

c. Whether on the facts and circumstances of the case the Tribunal was right in coming to

the conclusion that, Section 195(1) of the IT act, is applicable to the regular sale.

d. Whether on the facts and circumstances of the case the TGribu nal was right in treating the payment made for purchase of software would be termed as Royalty Payment and would, therefore constitute income chargeable under the IT Act.

e. Whegther on the facts and circumstances of the Tribunal was right over looking the Circular issued by the CBDT.

f. Whether on the facts and circumstances of the case the Tribunal was right in applyikng the judgment ofd the M/s.Samsung Electronics Co. Ltd, to the appellant case.

g. Whether on the facts and circumstances of the case the Tribunal was right in disallowing the purchases under section 40(a)(i) of the I T Act.”

2.

When the matter was takenup today, the learned counsel for the assessee submitted that aforesaid substantial questions of law have already been answered in favour of the assessee by the Supreme Court vide judgment dated 2.3.2021 in Civil Appeal Nos.8733-8734/2018 viz, ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED –VS-

THE COMMISSIONER OF INCOME TAX.

3.

The aforesaid submission has not been disputed by the learned counsel for the Revenue.

4.

In view of the decision of the Supreme Court in case of ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED (supra) the substantial questions framed in this appeal are answered in favour of the assessee and against the revenue. The order dated 9.5.2014 passed by the Income Tax Appellate Tribunal is quashed. In the result, appeal is allowed.

Sd/- JUDGE

Sd/- JUDGE

BKM

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