THE DIRECTOR OF INCOME TAX vs. M/S.SUN MICROSYSTEMS INDIA PVT LTD

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF JULY, 2018 PRESENT THE HON’BLE Dr.JUSTICE VINEET KOTHARI AND

THE HON’BLE MRS.JUSTICE S.SUJATHA ITA No.36/2010 Between:

The Director of Income-tax, International Taxation, Rashtrothana Bhavan, Nrupathunga Road, Bangalore.

..Appellant

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

And:

M/s. Sun Microsystems India Pvt. Ltd., 6th Floor, Divyashree Chambers, Off. Langford Road, Bangalore-560 025. ..Respondent

(By Sri. A. Shankar & M. Lava, Advocates)

This ITA is filed under Section 260-A of Income Tax Act 1961, arising out of Order dated:21.08.2009 passed in ITA No.444/Bang/2006, for the Assessment Year 2006- 2007, praying to formulate the substantial questions of law stated therein and to allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA No.444/Bang/2006 dated:21/08/2009 and confirm the order passed by the Income Tax Officer (Intl. Taxn.,) Ward- 19(2), Bangalore.

This Appeal coming on for Hearing this day, Dr.Vineet Kothari, J., delivered the following:

Date of Judgment:24.07.2018 in ITA No.36/2010 The Director of Income-Tax Vs. M/s. Sun Microsystems India Pvt., Ltd.,

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JUDGMENT

Mr.K.V.Aravind, Adv. for Appellant-Revenue. Mr.A.Shankar & Mr.M.Lava, Advs. for Respondent- Assessee.

Both the learned counsel at the Bar submitted that the controversy in the present case is covered by a decision of a Co-ordinate Bench of this Court against the present Assessee – M/.Sun Microsystems India Pvt. Ltd., Bengaluru, in ITA.No.35/2010 (The Director of Income-Tax –vs- M/s.Sun Microsystems India Pvt. Ltd.,), decided on 2nd June 2014, in which the Co-ordinate Bench of this Court, relying upon previous decisions of this Court, held as under:

“ 3. This Court had an occasion to consider this agreement in the case of Commissioner of Income Tax and others Vs. De Beers India Minerals (P) Ltd., reported in (2012) 346 ITR 467, where, after referring to various provisions of law, it was held that the question, whether along with rendering technical services, whether the technical knowledge with which the services was rendered was also made available to the

Date of Judgment:24.07.2018 in ITA No.36/2010 The Director of Income-Tax Vs. M/s. Sun Microsystems India Pvt., Ltd.,

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assessee/customers is purely a question of fact which is to be gathered from the terms of the contract, the nature of services undertaken and what has transmitted in the end after rendering technical services. If along with technical services rendered, if the service provider also make available the technology which they used in rendering services, then it falls within the definition of “fees for technical services” as contained in DTAA. However, if technology is not made available along with technical services what is rendered is only technical services and the technical knowledge is withheld, then, such a technical service would not fall within the definition of “technical services” in DTAA and the same is not liable to tax.

Date of Judgment:24.07.2018 in ITA No.36/2010 The Director of Income-Tax Vs. M/s. Sun Microsystems India Pvt., Ltd.,

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the entire material on record. When once factually it is held the technical services has not been made available, then in view of the law declared in the aforesaid judgment, there is no liability to deduct tax at source and therefore, the finding recorded by the Appellate Authority cannot be found fault with. In that view of the matter, the substantial question of law is answered in favour of the assessee and against the revenue.

Accordingly, the present Appeal is also disposed of in same terms.

Sd/- JUDGE

Sd/- JUDGE

bk/ (List No.1 Sl.No.6)