M/S ASTRAL SYSTEMS INDIA V. THE COMMISSIONER

ITA/413/2014

AI Insights

The case involves M/s Astral Systems India Pvt Ltd, the appellant, contesting an order from the Income Tax Appellate Tribunal which treated a simple sale as royalty under section 9(1)(vi) of the Income Tax Act, 1961. The appeal was filed under Section 260A of the Income Tax Act, challenging the tribunal's decision which was based on the interpretation of what constitutes royalty payments and the applicability of section 195(1) of the IT Act to regular sales. The High Court of Karnataka, referencing a Supreme Court decision, found in favor of the appellant, overturning the tribunal's decision.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 726757 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 26-05-2021
• Assessment Year: misc
• Other Referred Cases: ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED vs. THE COMMISSIONER OF INCOME TAX
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: ATUL ALLUR
• Keywords: Assessment Year 2007-08; CBDT Circular; Income Tax; Income tax appellate tribunal; Royalty
• Section: 260A; 9(1)(vi); 40(a)(i); 195(1); 1543(3)

Judgement Text

" 1 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. 2 (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 3 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- 4 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 "