ADIT (IT) 2(2), MUMBAI V. TTI TEAM TELCOM INTERNATIONAL LTD, MUMBAI

ITA 3939/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54964 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 25-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Permanent establishment
• Section: 143(3); 90

Judgement Text

ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 1 OF 21 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) AND SHRI VIJAY PAL RAO (JUDICIAL MEMBER) ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006-07 ADDITIONAL DIRECTOR OF INCOME TAX (INTERNATIONAL TAX)- RANGE 2(2), MUMBAI .. APPELLANT VS. TII TEAM TELECOM INTERNATIONAL PVT. LTD. RESPONDENT C/O SUDIT PAREKH & CO. BALLARD ESTATE, 2 ND FLOOR, ADI MARZBAN PATH, BALLARD PIER, FORT, MUMBAI. [PAN : AACCT5300M] APPEARANCES: C G K NAIR, FOR THE APPELLANT JITENDRA JAIN, FOR THE RESPONDENT DATE OF HEARING : JULY 07, 2011 DATE OF PRONOUNCEMENT : AUGUST 26 , 2011 O R D E R PER PRAMOD KUMAR : 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFI CER HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 24 TH FEBRUARY 2010, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2006-07. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCE: ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 2 OF 21 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSING OFFICER WRONGLY HELD THAT THE AMOUNT OF RS 3,00,44,506 RECEIVED BY THE ASSESSEE FOR THE SUPPLY OF SOFTWARE IS IN THE NATURE OF ROYALTY WHICH IS LIABLE FOR TAXATION IN INDIA. 3. WHILE THERE IS NO DISPUTE THAT THE GRIEVANC E SO RAISED BY THE ASSESSING OFFICER IS FULLY COVERED BY DECISION OF A COORDINA TE BENCH IN ASSESSEES OWN CASE IN A PRECEDING ASSESSMENT YEAR, FOR THE REASON S WE WILL SET OUT IN A SHORT WHILE, IT IS PERHAPS APPROPRIATE AND DESIRABLE TO D EAL WITH THE ISSUE AT SOME LENGTH. 4. THE RELEVANT MATERIAL FACTS, AS CULLED OUT FR OM THE MATERIAL ON RECORD BEFORE US, ARE LIKE THIS. THE ASSESSEE IS A COMPANY INCORPORATED IN, AND TAX RESIDENT OF, THE STATE OF ISRAEL. THE ASSESSEE COM PANY HAS ITS REGISTERED OFFICE AT 12 AMAL STREET, AFEK PARK, ROSH HAAYAIN, ISRAE L 48092, AND IT DOES NOT HAVE ANY OFFICE, OR PERMANENT ESTABLISHMENT IN ANY OTHER MANNER, IN INDIA. AS EVIDENT FROM MATERIAL ON RECORD, THERE IS NO DISPUT E ALSO THAT THE ASSESSEE IS ELIGIBLE FOR BENEFITS OF INDIA ISRAEL DOUBLE TAXATI ON AVOIDANCE AGREEMENT (254 ITR STAT 245; INDO ISRAEL TAX TREATY, IN SHORT). ON 17 TH SEPTEMBER 2002, THE ASSESSEE ENTERED INTO AN AGREEMENT WITH RELIANCE I NFOCOMM LIMITED (RIL, IN SHORT), FOR SUPPLY AND LICENCE OF SOFTWARE FOR RIL S WIRELESS NETWORK IN INDIA. UNDER THE SAID AGREEMENT, RIL PLACED THE TWO PURCHA SE ORDERS, I.E. PO # 13009821 AND 13009823 BOTH DATED 17 TH SEPTEMBER 2002, FOR US $ 25,84,300 AND US $ 6,65,880 RESPECTIVELY. WHILE THE FIRST PURCHASE ORDER FOR US $ 25,84,300 WAS EXECUTED IN THE ACCOUNTING PERIOD R ELEVANT TO THE ASSESSMENT YEAR 2003-04, THE SECOND PURCHASE ORDER FOR US $ 6 ,65,880 WAS EXECUTED IN THE ACCOUNTING PERIOD RELEVANT TO THIS ASSESSMENT Y EAR. THIS IS ALSO NOT IN DISPUTE THAT BY THE VIRTUE OF THE AGREEMENT REFERR ED TO ABOVE THE ASSESSEE IS HAS GRANTED TO RIL, AND ITS AFFILIATES, A PERPETUAL , IRREVOCABLE, NON-EXCLUSIVE, ROYALTY FREE, WORLDWIDE LICENCE TO INSTALL, USE, OP ERATE OR COPY THE SOFTWARE AND THE DOCUMENTATION LICENSED UNDER THE AGREEMENT SOLE LY FOR IMPLEMENTATION, OPERATION, MANAGEMENT AND MAINTENANCE OF RILS NET WORK WITHIN INDIA. THE ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 3 OF 21 ASSESSEE FILED AN INCOME TAX RETURN FOR THE RELEVAN T ASSESSMENT YEAR, DISCLOSING NIL INCOME AND CONTENDING THAT NO PART O F ITS INCOME, IN THE ABSENCE OF A PERMANENT ESTABLISHMENT (PE) IN INDIA, IS TAXABLE IN INDIA. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS INVOICED A SUM OF US $ 6,65,880 IN THE RELEVANT ACCOUNTING PERIOD, WHICH IS TAXABLE IN THIS ASSESSMENT YEAR. T HE ASSESSING OFFICER NOTED THE CONTENTION OF THE ASSESSEE TO THE EFFECT THAT THE PAYMENT RECEIVED FOR SUPPLY OF SOFTWARE WAS IN THE NATURE OF BUSINESS PR OFITS WHICH COULD ONLY BE TAXED UNDER ARTICLE 7 OF INDIA ISRAEL DTAA AS BUSIN ESS INCOME, BUT SINCE ASSESSEE DOES NOT HAVE A PERMANENT ESTABLISHMENT, I N TERMS OF ARTICLE 5 OF INDIA ISRAEL DTAA, ITS BUSINESS PROFITS COULD NOT B E TAXED IN INDIA AT ALL. IT WAS ALSO CONTENDED THAT IN ANY EVENT THE ASSESSEE HAS M ERELY RAISED IN INVOICE BUT, TILL THE END OF THE RELEVANT ACCOUNTING PERIOD, THE ASSESSEE HAS NOT RECEIVED ANY PAYMENTS FOR THE SAID INVOICE. IT WAS ALSO CONT ENDED THAT, IN VIEW OF JURISDICTIONAL TRIBUNALS DECISION IN THE CASE OF D CIT VS UHDE GMBH ( 54 TTJ 355), THE AMOUNT SO INVOICED IS NOT TAXABLE IN THIS ASSESSMENT YEAR. THE ASSESSING OFFICER TOOK NOTE OF THESE SUBMISSIONS AS ALSO OF ASSESSEES RELIANCE ON A LARGE NUMBER OF JUDICIAL PRECEDENTS, INCLUDING IN THE CASES OF TATA CONSULTANCY SERVICES VS STATE OF ANDHRA PRADESH ( 2 71 ITR 401 SC), SONATA INFORMATION TECHNOLOGY LTD VS DCIT (7 SOT 465), SAM SUNG ELECTRONICS CO LTD VS ITO (93 TTJ 658), LUCENT TECHNOLOGIES HINDUSTAN LIMITED VS ITO (92 ITD 366), HAWLETT PACKARD INDIA PVT LTD VS ITO ( 5 SOT 660), LOTUS DEVELOPMENT (ASIA PACIFIC) PTE LTD (UNREPORTED ITAT DELHI BENCH DECISION; ITA NOS 564 TO 566/DEL/05), SONATA INFORMATION TECHNOLOGY LTD VS A CIT (103 ITD 324), ISBC CONSULTANCY SERVICES VS DCIT (88 ITD 134), AND THE ASSESSING OFFICER FURTHER NOTED THE FACT THAT IN THE ASSESSMENT YEAR 2003-04, THE SAME ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CIT(A). H OWEVER, AS THE ASSESSING OFFICER NOTED, SINCE THE ORDER OF THE CIT(A) IS CON TESTED IN APPEAL BEFORE THE HIGHER AUTHORITIES, THE AMOUNT IN RESPECT OF SUPPLY OF SOFTWARE WAS CONSIDERED TAXABLE IN THE HANDS OF THE ASSESSEE. AC CORDINGLY, THIS AMOUNT OF US $ 6,65,880, WHICH WORKED OUT TO RS 3,00,44,506, WAS BROUGHT TO TAX IN THE ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 4 OF 21 HANDS OF THE ASSESSEE. AGGRIEVED BY THE STAND SO TA KEN BY THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE THE CIT(A). LEARNED CIT(A) INTER ALIA NOTED THAT THE ASSESSEE, BEING A TAX RESIDENT OF ISRAEL, IS ENTITLED TO THE BENEFITS OF INDIA ISRAEL DTAA, WHIC H OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT TO THE EXTENT THE SAME ARE BENEF ICIAL TO THE ASSESSEE. THE PROVISIONS OF THE INDIA ISRAEL DTAA WERE, ACCORDING LY, APPLIED. IN AN ERUDITE AND DETAILED ORDER, FOLLOWING INTER ALIA THE SPECIAL BENCH DECISION IN THE CASE OF MOTOROLA INC VS DCIT (96 TTJ 1), LEARNED CIT(A) CONCLUDED THAT UNDER THE AGREEMENT , THE ASSESSEE ONLY PARTED WITH A COPY OF SOFTWARE PROGRAM AND NOT ANY COPYRIGHT OVER SUCH SOFTWARE AS ENVISAGED BY SECTION 14 OF THE COPYRIGHT ACT. UNDER THE CIRCUMSTANCES, ACCORDING TO THE LEARNED CIT(A), PAYMENT MADE BY RIL TO THE ASSESSEE COULD NOT BE SA ID TO BE A PAYMENT FOR THE USE OF, OR RIGHT TO USE OF, COPYRIGHT. THE CIT (A) THUS HELD THAT THE PAYMENT AMOUNTED TO PAYMENT FOR PURCHASE OF COPYRI GHT MATERIAL WHICH DOES NOT AMOUNT TO ROYALTY WITHIN THE MEANING OF AR TICLE 12 (3) OF THE INDIA ISRAEL DTAA. IT WAS ON THIS BASIS THAT THE CIT(A) D ELETE THE IMPUGNED ADDITION OF RS 3,00,44,506. THE ASSESSING OFFICER IS AGGRIEV ED OF THE RELIEF SO GIVEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 5. IN THE MEANTIME, THE ASSESSING OFFICERS APPEAL, IN ASSESSEES OWN CASE AND ON THE VERY SAME ISSUE FOR THE ASSESSMENT YEAR 2003-04, CAME UP BEFORE A COORDINATE BENCH OF THIS TRIBUNAL, AND, VIDE ORDER DATED 13 TH APRIL 2010, THE COORDINATE BENCH REJECTED THE GRIEVANCE OF THE ASSE SSING OFFICER. WHILE DOING SO, THE CO-ORDINATE BENCH EXTENSIVELY QUOTED FROM T HE ORDER OF THE CIT(A) AND RATHER SUCCINCTLY OBSERVED AS FOLLOWS: 9. AS CAN BE SEEN FROM THE ABOVE DISCUSSION OF THE CIT(A) THE FACTUAL POSITION AS PER THE AGREEMENTS AND THE LEGAL POSITI ON WITH REFERENCE TO THE SUPPLY OF SOFTWARE FOR USE WAS ANALYSED IN DETA IL. VARIOUS COORDINATE BENCHES HAVE ALREADY ANALYSED AND NOTED THE DIFFERE NCE BETWEEN THE PURCHASE OF COPYRIGHTED ARTICLE AND TRANSFER OF COP Y RIGHTS. WE ARE IN AGREEMENT WITH THE FINDINGS OF THE CIT(A), WHO HAS CORRECTLY COME TO THE CONCLUSION THAT THE SUPPLY OF SOFTWARE TO RELIANCE DOES NOT AMOUNT TO ANY ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 5 OF 21 TRANSFER OF COPYRIGHT AND PAYMENT CAN BE ONLY FOR P URCHASE OF COPYRIGHTED ARTICLE AND DOES NOT AMOUNT TO ROYALTY WITHIN THE MEANING OF ARTICLE 12(3) OF THE DTAA. CONSEQUENTLY THE ORDER O F THE CIT(A) IS UPHELD. REVENUE APPEAL IS DISMISSED. 6. WHEN THIS APPEAL WAS CALLED OUT FOR HEARING, LEA RNED DEPARTMENTAL REPRESENTATIVE FAIRLY ACCEPTED THAT THE ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE BY TRIBUNALS ORDER IN ASSESSEES OWN CASE , BUT HE NONETHELESS DUTIFULLY RELIED UPON THE ORDER OF THE ASSESSING OF FICER AND JUSTIFIED THE SAME. LEARNED COUNSEL FOR THE ASSESSE, ON THE OTHER HAND, TOOK US THOUGH THE ORDER OF THE COORDINATE BENCH IN ASSESSEES OWN CASE AND SUB MITTED THAT THE ISSUE IN APPEAL BEFORE US WAS SQUARELY COVERED BY THE SAME. IT WAS ALSO POINTED OUT THAT THE CONTRACT FOR SUPPLY OF SOFTWARE WAS THE SA ME, AS IN THE ASSESSMENT YEAR 2003-04, AND THE INCOME IN THE ASSESSMENT YEAR 2003-04 AND 2006-07, I.E. ASSESSMENT YEAR BEFORE US, WAS ON THE SAME SE T OF MATERIAL FACTS. IT WAS SUBMITTED THAT THERE WAS NOT EVEN SLIGHTEST CHANGE IN FACTS OF THE CASE OR IN THE APPLICABLE LEGAL POSITION, AND THAT IT CANNOT INDEE D BE OPEN TO THE TRIBUNAL TO TAKE DIFFERENT VIEWS ON THE INCOME ARISING TO THE ASSESSEE UNDER THE SAME CONTRACT IN DIFFERENT ASSESSMENT YEAR PARTICULARL Y AS THERE WAS NO CHANGE IN THE LEGAL POSITION OR THE MATERIAL FACTS. HOWEVER, WHEN LEARNED COUNSELS ATTENTION WAS INVITED TO A LATER DECISION OF THE CO ORDINATE BENCH IN THE CASE OF GRACEMAC CORPORATION VS ADIT (42 SOT 550), WHICH H OLDS THAT EVEN THE SALE OF COPYRIGHTED SOFTWARE, WITHOUT SALE OF OR RIGHT TO U SE OF COPYRIGHT, COULD BE TREATED AS ROYALTY IN TERMS OF MATERIALLY IDENTICAL TAX TREATY PROVISION, IT WAS SUBMITTED THAT THE SAID DECISION WAS CONTRARY TO TH E LAW LAID DOWN BY A LARGE NUMBER OF DECISIONS BY OTHER COORDINATE BENCHES AS ALSO BY THE SPECIAL BENCH DECISION IN THE CASE OF MOTORLA INC ( SUPRA ). IT WAS SUBMITTED THAT THE ISSUE IS DIRECTLY COVERED BY THE SAID SPECIAL BENCH DECISION WHICH OVERRIDES THE DECISIONS OF THE COORDINATE BENCHES, I.E. DIVISION BENCHES, UNDER THE RULE OF PRECEDENCE. LEARNED COUNSEL POLITELY SUBMITTED THA T ONCE THERE IS A LARGER BENCH DECISION, WHICH IS DIRECTLY ON THE ISSUE, AND THE SAME IS NOT OVERTURNED BY A HIGHER JUDICIAL FORUM, THE DIVISION BENCHES AR E DUTY BOUND TO FOLLOW THE ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 6 OF 21 SAME IN PREFERENCE OVER OTHER DECISIONS FROM OTHER DIVISION BENCHES. LEARNED COUNSEL TOOK US THROUGH THE COORDINATE DIVISION BEN CHS DECISION IN THE CASE OF GRACEMAC ( SUPRA ), READ OUT THE OPERATIVE PORTION WHERE MOTOROLA DE CISION ( SUPRA ) IS SOUGHT TO BE DISTINGUISHED, POINTED OUT, WHAT HE PERCEIVED AS, THE APPARENT FALLACIES IN THE PROCESS OF THIS DISTINCTI ON HAVING BEEN MADE OUT, AND LEFT IT TO US TO CONSIDER WHETHER WE WOULD FOLLOW T HE SPECIAL BENCH AND COORDINATE BENCH IN ASSESSEES OWN CASE, OR WHETHER WE WOULD FOLLOW A LATER DIVISION BENCH IN DECISION IN GRACEMACS CASE ( SUPRA ). TAKING A CLUE FROM THESE PROCEEDINGS, LEARNED DEPARTMENTAL REPRESENTATIVE UR GED US TO F OLLOW THE GRACEMAC DECISION ( SUPRA ) . HE SUBMITTED THAT GRACEMAC DECISION ( SUPRA ), BEING A LATER DECISION, SHOULD BE FOLLOWED IN PREFE RENCE OVER EARLIER DECISION IN ASSESSEES OWN CASE. WHEN IT WAS POINTED OUT TO HIM THAT GRACEMAC DECISION ( SUPRA ) WAS CONTRARY TO THE LAW LAID DOWN BY SPECIAL BENC H OF THIS TRIBUNAL IN THE CASE OF MOTOROLA INC ( SUPRA ), WHICH IS A BINDING PRECEDENT FOR US, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE LA TER DIVISION BENCH IN GRACEMACS CASE HAS FOLLOWED HONBLE SUPREME COURT S JUDGMENTS (IN THE CASES OF GRAMOPHONE CO. OF INDIA LTD VS V B PANDE Y AIR 1984 SC 667 AND CIT VS PVAL KULANGADAN CHETTIAR 267 ITR 654) WHICH HAVE GREATER BINDING FORCE THAN THE DECISION OF A SPECIAL BENCH, WE MUST FOLLO W THE COORDINATE BENCHS ORDER IN GRACEMAC CORPORATIONS CASE ( SUPRA ) IN PREFERENCE OVER THE SPECIAL BENCH DECISION IN THE CASE OF MOTOROLA INC ( SUPRA ). HE SUBMITS THAT THE LAW LAID DOWN BY HONBLE SUPREME COURT IN THESE CASES, I.E. GRAMOPHONE CO OF INDIA LTD (SUPRA) AND PVAL KULANGADAN CHETIAR (SUPRA) , MUST PREVAIL OVER THE SPECIAL BENCH DECISION. LEARNED DEPARTMENTAL REPRESENTATIVE , WHO HAD ALMOST GIVEN UP HIS CASE IN HIS FIRST ROUND OF ARGUMENTS, WAS NO W VEHEMENT IN HIS RELIANCE ON THE STAND OF THE ASSESSING OFFICER AND SUPPORTIV E OF THE LINE OF REASONING ADOPTED BY THE COORDINATE BENCH IN GRACEMACS CASE ( SUPRA ). NONE OF THESE DECISIONS, LEARNED DEPARTMENTAL REPRESENTATIVE POIN TED OUT, WAS CONSIDERED BY THE CIT(A) OR EVEN THE COORDINATE BENCH IN THE PREC EDING YEAR. HE ALSO TOOK US THROUGH THE OBSERVATIONS MADE IN GRACEMAC DECISION, AND THE MANNER IN WHICH EARLIER DECISIONS ON THE SAME ISSUE, IN FAVOUR OF T HE ASSESSEE, WERE ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 7 OF 21 DISTINGUISHED IN DETAIL. A REFERENCE WAS ALSO MADE ABOUT PRESS REPORTS ON A RECENT SUPREME COURT JUDGMENT WHICH IS SAID TO HAVE HELD THAT DESPITE SECRECY CLAUSE IN INDO GERMAN TAX TREATY, THE INFORMATION O BTAINED FROM GERMAN TAX AUTHORITIES COULD NOT HAVE BEEN WITHHELD FROM PUBLI C. HE URGED US TO VACATE THE ORDER OF THE CIT(A) AND RESTORE THAT OF THE ASS ESSING OFFICER. 7. WE HAVE DULY CONSIDERED ALL THESE SUBMISSIONS, C AREFULLY PERUSED THE MATERIAL BEFORE US AND CONSCIENTIOUSLY DELIBERATED UPON THE APPLICABLE LEGAL POSITION AS ALSO FACTUAL MATRIX OF THE CASE. 8. WE FIND THAT THE ASSESSEE IS A TAX RESIDENT OF I SRAEL AND, IN TERMS OF THE INDO ISRAEL TAX TREATY, THE ASSESSEE IS COVERED BY THE PROVISIONS OF THE SAID TAX TREATY. AS TO THE EXTENT TO WHICH PROVISIONS OF TH E TAX TREATY WILL GOVERN THE TAXABILITY OF SUCH AN ASSESSEE, THE LAW IS UNAMBIGU OUS AS SECTION 90 (2) PROVIDES THAT WHERE THE CENTRAL GOVERNMENT HAS ENT ERED INTO AN AGREEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSIDE INDIA UN DER SUB-SECTION (1) FOR GRANTING RELIEF OF TAX, OR AS THE CASE MAY BE, AVOI DANCE OF DOUBLE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGRE EMENT APPLIES, THE PROVISIONS OF THIS ACT SHALL APPLY TO THE EXTENT TH EY ARE MORE BENEFICIAL TO THAT ASSESSEE. IN OTHER WORDS, IN SUCH A CASE, THE PROV ISIONS OF APPLICABLE TAX TREATY WILL OVERRIDE THE PROVISIONS OF THE INCOME T AX ACT, EXCEPT TO THE EXTENT THE LATTER ARE MORE BENEFICIAL TO THE ASSESSEE. IN THE CASE OF UNION OF INDIA VS AZADI BACHAO ANDOLAN (263 ITR 706), HONBLE SUPREME COURT HAD AN OCCASION TO SURVEY THE JUDICIAL PRECEDENTS ON THIS ISSUE AND THEN CONCLUDE AS FOLLOWS: A SURVEY OF THE AFORESAID CASES MAKES IT CLEAR THAT THE JUDICIAL CONSENSUS IN INDIA HAS BEEN THAT S. 90 IS SPECIFICA LLY INTENDED TO ENABLE AND EMPOWER THE CENTRAL GOVERNMENT TO ISSUE A NOTIF ICATION FOR IMPLEMENTATION OF THE TERMS OF A DOUBLE TAXATION AV OIDANCE AGREEMENT. WHEN THAT HAPPENS, THE PROVISIONS OF SUC H AN AGREEMENT, WITH RESPECT TO CASES TO WHICH WHERE THEY APPLY, WO ULD OPERATE EVEN IF INCONSISTENT WITH THE PROVISIONS OF THE IT ACT. WE APPROVE OF THE REASONING IN THE DECISIONS WHICH WE HAVE NOTICED. I F IT WAS NOT THE INTENTION OF THE LEGISLATURE TO MAKE A DEPARTURE FR OM THE GENERAL ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 8 OF 21 PRINCIPLE OF CHARGEABILITY TO TAX UNDER S. 4 AND TH E GENERAL PRINCIPLE OF ASCERTAINMENT OF TOTAL INCOME UNDER S. 5 OF THE ACT , THEN THERE WAS NO PURPOSE IN MAKING THOSE SECTIONS 'SUBJECT TO THE PR OVISIONS' OF THE ACT. THE VERY OBJECT OF GRAFTING THE SAID TWO SECTIONS W ITH THE SAID CLAUSE IS TO ENABLE THE CENTRAL GOVERNMENT TO ISSUE A NOTIFIC ATION UNDER S. 90 TOWARDS IMPLEMENTATION OF THE TERMS OF THE DTAS WHI CH WOULD AUTOMATICALLY OVERRIDE THE PROVISIONS OF THE IT ACT IN THE MATTER OF ASCERTAINMENT OF CHARGEABILITY TO INCOME-TAX AND AS CERTAINMENT OF TOTAL INCOME, TO THE EXTENT OF INCONSISTENCY WITH THE TER MS OF THE DTAC. 9. AS EVIDENT FROM A PLAIN READING OF SECTION 90, A S ALSO THE ESTEEMED VIEWS OF HONBLE SUPREME COURT, IT IS WHOLLY IMMATERIAL W HETHER THE PROVISIONS OF THE INCOME TAX ACT ARE LATER PROVISIONS OR WHETHER THESE PROVISIONS WERE LEGISLATED PRIOR TO THE TAX TREATY HAVING BEEN ENTE RED INTO. ONCE A TAX TREATY IS ENTERED INTO, AND IS NOTIFIED BY THE CENTRAL GOVERN MENT, THE PROVISIONS OF THE INCOME TAX ACT HAVE TO MAKE WAY FOR THE PROVISIONS OF THE TAX TREATY, WHEREVER THESE PROVISIONS ARE IN CONFLICT WITH THE PROVISION S OF THE TAX TREATY- UNLESS, OF COURSE, WHEN THE PROVISIONS OF THE INCOME TAX ACT A RE MORE FAVOURABLE TO THE ASSESSEE VIS--VIS THE CORRESPONDING PROVISIONS OF THE TAX TREATY. IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT THIS UNQUAL IFIED TREATY OVERRIDE IS NOT DUE TO OPERATION OF ANY PROVISIONS OF THE GENERAL L AW OR CONVENTION, BUT BY THE VIRTUE OF A SPECIFIC PROVISION TO THAT EFFECT IN TH E INCOME TAX ACT ITSELF. THE INDIAN INCOME TAX ACT ITSELF RESTRICTS ITS APPLICAT ION TO A SITUATION COVERED BY THE PROVISIONS OF A TAX TREATY ENTERED INTO, AND DU LY NOTIFIED, UNDER THE SCHEME OF SECTION 90 OF THE INCOME TAX ACT. WE MUST, AT T HIS STAGE, BRIEFLY DEAL WITH HONBLE SUPREME COURTS JUDGMENTS IN THE CASES OF G RAMOPHONE CO. OF INDIA LTD VS V B PANDEY AIR 1984 SC 667. IN GRAMOPHONE CO.S CASE (SUPRA), HONBLE SUPREME COURT HAD AN OCCASION TO DEAL WITH THE RIGHT OF TRANSIT OF GOODS THROUGH INDIA, OF OUR LANDLOCKED NEIGHBOR NE PAL, UNDER THE INTERNATIONAL CONVENTION AS ALSO UNDER THE BILATERAL TREATY, AND THE PRECISE QUESTION WHICH CAME UP FOR CONSIDERATION BEFORE THEIR LORDSHIPS WA S WHETHER GOODS, WHICH CANNOT BE ALLOWED TO BE IMPORTED INTO INDIA DUE TO COPYRIGHT INFRINGEMENT LAW IN FORCE IN INDIA , COULD BE ALLOWED TO BE TRANSITE D THROUGH INDIA IN DEFERENCE TO ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 9 OF 21 THE RIGHT OF PASSAGE OF IMPORTS BY NEPAL. THESE BA SIC FACTS ARE EVIDENT FROM THE FOLLOWING OPENING OBSERVATIONS MADE BY THEIR LORDSH IPS IN THE JUDGMENT: NEPAL IS OUR NEIGHBOUR. UNFORTUNATELY NEPAL IS LAND -LOCKED. NEPAL'S ONLY ACCESS TO THE SEA IS ACROSS INDIA. SO, AS ONE GOOD NEIGHBOUR TO ANOTHER WITH A VIEW TO `MAINTAIN, DEVELOP AND STRENGTHEN TH E FRIENDLY RELATIONS BETWEEN OUR TWO COUNTRIES, BY TREATY AND BY INTERNA TIONAL CONVENTION, WE ALLOW A RIGHT OF INNOCENT PASSAGE IN ORDER TO FA CILITATE NEPAL'S INTERNATIONAL TRADE. ONE OF THE QUESTIONS BEFORE US IS THE EXTENT OF THIS RIGHT : DOES THE RIGHT COVER THE TRANSIT OF GOODS WHICH MAY NOT BE IMPORTED INTO INDIA? MAY GOODS WHICH MAY NOT BE BRO UGHT INTO INDIA BE TAKEN ACROSS INDIAN TERRITORY? WHAT DOES 'IMPORT' M EAN, MORE PARTICULARLY WHAT DOES 'IMPORT' MEAN IN SEC. 53 OF THE COPYRIGHT ACT? CAN AN UNAUTHORISED REPRODUCTION OF A LITERARY, DRA MATIC, MUSICAL OR ARTISTIC WORK OR A RECORD EMBODYING AN UNAUTHORISED RECORDING OF A RECORD (WHICH, FOR SHORT, ADOPTING TRADE PARLANCE, WE MAY CALL A PIRATED WORK), WHOSE IMPORTATION INTO INDIA MAY BE PROHIBIT ED, BUT WHOSE IMPORTATION INTO NEPAL IS NOT PROHIBITED, BE TAKEN ACROSS INDIAN TERRITORY TO NEPAL? THESE ARE SOME OF THE QUESTIONS WHICH ARISE FOR CONSIDERATION IN THIS APPEAL. (EMPHASIS BY UNDERLINING SUPPLIED BY US) 10. IT WAS IN THIS CONTEXT, AND PARTICULARLY IN A S ITUATION IN WHICH AN INTERNATIONAL CONVENTION AND A BILATERAL TREATY WAS BEING GIVEN EFFECT TO WITHOUT THERE BEING ANY ENABLING PROVISIONS FOR SUC H CONVENTION AND TREATY OVERRIDING THE DOMESTIC LEGISLATION, THAT JUSTICE O CHENAPPA REDDY, IN HIS INIMITABLE MANNER, OBSERVED AS FOLLOWS: THERE CAN BE NO QUESTION THAT NATIONS MUST MARCH WI TH THE INTERNATIONAL COMMUNITY AND THE MUNICIPAL LAW MUST RESPECT RULES OF INTERNATIONAL LAW EVEN AS NATIONS RESPECT INTERNATI ONAL OPINION. THE COMITY OF NATIONS REQUIRES THAT RULES OF INTERNATIO NAL LAW MAY BE ACCOMMODATED IN THE MUNICIPAL LAW EVEN WITHOUT EXPR ESS LEGISLATIVE SANCTION PROVIDED THEY DO NOT RUN INTO CONFLICT WITH ACTS O F PARLIAMENT. BUT WHEN THEY DO RUN INTO SUCH CONFLICT, THE SOVERE IGNTY AND THE INTEGRITY OF THE REPUBLIC AND THE SUPREMACY OF THE CONSTITUTED LEGISLATURES IN MAKING THE LAWS MAY NOT BE SUBJECTE D TO EXTERNAL RULES EXCEPT TO THE EXTENT LEGITIMATELY ACCEPTED BY THE C ONSTITUTED LEGISLATURES THEMSELVES. THE DOCTRINE OF INCORPORAT ION ALSO RECOGNISES THE POSITION THAT THE RULES OF INTERNATIONAL LAW AR E INCORPORATED INTO NATIONAL LAW AND CONSIDERED TO BE PART OF THE NATIO NAL LAW, UNLESS THEY ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 10 OF 21 ARE IN CONFLICT WITH ACT OF PARLIAMENT. COMITY OF N ATIONS OR NO, MUNICIPAL LAW MUST PREVAIL IN CASE OF CONFLICT. NAT IONAL COURTS CANNOT SAY YES IF PARLIAMENT HAS SAID NO TO A PRINCIPLE OF INTERNATIONAL LAW. NATIONAL COURTS WILL ENDORSE INTERNATIONAL LAW BUT NOT IF IT CONFLICTS WITH NATIONAL LAW. NATIONAL COURTS BEING ORGANS OF THE N ATIONAL STATE AND NOT ORGANS OF INTERNATIONAL LAW MUST PERFORCE APPLY NAT IONAL LAW IF INTERNATIONAL LAW CONFLICTS WITH IT. BUT THE COURTS ARE UNDER AN OBLIGATION WITHIN LEGITIMATE LIMITS, TO SO INTERPRE T THE MUNICIPAL STATUTE AS TO AVOID CONFORMATION WITH THE COMITY OF NATIONS OR THE WELL ESTABLISHED PRINCIPLES OF INTERNATIONAL LAW. BUT IF CONFLICT IS INEVITABLE, THE LATTER MUST YIELD. 11. THESE OBSERVATIONS ONLY LAY DOWN THE PRINCIPLE THAT THE RULES OF INTERNATIONAL LAW MAY BE ACCOMMODATED IN THE MUNICI PAL LAW EVEN WITHOUT EXPRESS LEGISLATIVE SANCTION PROVIDED THEY DO NOT RUN INTO CONFLICT WITH ACTS OF PARLIAMENT (EMPHASIS SUPPLIED BY US BY UNDERLINING) BUT SUCH AN ACCOMMODATION TO RULES OF INTERNATIONAL LAW, BY CONVENTION OR BY TREATIES, DOES NOT EXTEND TO THE SITUATIONS IN WHIC H THE PROVISIONS OF DOMESTIC LAW ARE CLEARLY CONTRARY TO THE RULES OF INTERNATIO NAL LAW . THESE OBSERVATIONS HAVE NO BEARING ON A SITUATION LIKE THE ONE BEFORE US, I.E. IN THE CASE OF THE INCOME TAX ACT, IN WHICH THE ACT ITSELF PROVIDES TH AT THE PROVISIONS OF A TAX TREATY, ENTERED INTO, AND DULY NOTIFIED UNDER THE S CHEME OF, SECTION 90 WILL OVERRIDE THE PROVISIONS OF THE ACT. THE OBSERVATIO NS MADE IN GRAMOPHONES CASE (SUPRA) COULD HAVE BEEN RELEVANT IF THE PROVIS IONS OF SECTION 90 WERE NOT ON THE STATUTE BOOK. EVEN IN THE ABSENCE OF THE PR OVISIONS OF SECTION 90, GOING BY THE RATIONALE OF GRAMOPHONE JUDGMENT, THE PROVIS IONS OF TAX TREATY WOULD HAVE HAD APPLICATION THOUGH ONLY TO THE EXTENT TH E SAME DOES NOT COME INTO CONFLICT WITH THE PROVISIONS OF THE INCOME TAX ACT. IN THE CASE BEFORE US, HOWEVER, IT IS BECAUSE OF THE PROVISIONS OF SECTION 90(2), AND NOT MERELY ON ACCOUNT OF THE GENERAL PRINCIPLES OF EXTENDING RESP ECT TO INTERNATIONAL CONVENTIONS AND TREATIES, THAT THE PROVISIONS OF TH E TAX TREATY OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT. THE OBSERVATIONS MADE BY HONBLE SUPREME COURT, IN THE CASE OF GRAMOPHONE COMPANY OF INDIA LTD (SUPRA) , ARE THUS ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 11 OF 21 WHOLLY IRRELEVANT IN THE PRESENT CONTEXT. AS WE SAY SO, WE ARE ALIVE TO THE FACT THAT A COORDINATE BENCH HAS INDEED OBSERVED THAT T HE LATER DOMESTIC TAX LEGISLATION MAY OVERRIDE TAX TREATY PROVISIONS WHER EVER THERE IS IRRECONCILABLE CONFLICT AND, IN SUPPORT OF THIS PROPOSITION, RELI ED UPON GRAMOPHONE JUDGMENT. HOWEVER, THESE OBSERVATIONS WERE IN THE NATURE OF OBITER DICTA , I.E. THINGS SAID BY THE WAY, INASMUCH AS THE COORDINATE BENCH WAS ONLY DEALING WITH A SITUATION, AS THE BENCH PUT IT, THERE WAS NO CONFLICT BETWEEN THE PROVISIONS OF THE TREATY AND THE INCOME TAX ACT, BU T, ASSUMING THERE WAS INDEED A CONFLICT, WE WOULD LIKE TO DEAL WITH SUCH A HYPOTHETICAL SITUATION. IT IS WELL SETTLED IN LAW THAT OBITER DICTA OF COORDINATE BENCHES ARE NOT BINDING (UNLIKE THE RATIO), BUT THEY MAY BE REGARDED AS PER SUASIVE IN A FUTURE DECISION. IN OBSERVED BY HONBLE BOMBAY HIGH COURT, IN THE CA SE OF CIT VS. THANA ELECTRICITY SUPPLY CO LTD (206 ITR 727), AN OBITER DOES NOT HAVE A BINDING FORCE, THOUGH IT MAY HAVE SOME PERSUASIVE EFFICACY . EVEN AS WE HOLD THE OBSERVATIONS OF THE BENCH WITH HIGHEST RESPECT, THO UGH WITH RESPECTFUL DISAGREEMENT, WE DO NOT REGARD THE OBSERVATIONS MAD E BY THE BENCH AS OF BINDING FORCE, IN VIEW OF THE PECULIAR CIRCUMSTANCE S IN WHICH THESE OBSERVATIONS ARE MADE. THATS ONE REASON THAT DESPI TE A CONTRARY RULING ON THIS ISSUE BY A COORDINATE BENCH, WE SEE NO NEED T O REFER THE MATTER TO THE SPECIAL BENCH. SECONDLY, WE HAVE NOTED THAT GRACEMA C DECISION DID NOT HAVE THE BENEFIT OF GUIDANCE BY HONBLE SUPREME COURTS DIRECT JUDGMENT ON THE ISSUE OF TREATY OVERRIDE, IN THE CONTEXT OF THE PRO VISIONS OF THE INCOME TAX ACT. THERE CANNOT OBVIOUSLY BE ANY POINT IN REFERRING AN ISSUE TO THE SPECIAL BENCH WHICH IS CLEARLY COVERED BY A DIRECT DECISIONS ON T HAT ISSUE BY HONBLE SUPREME COURT. WITH RESPECT, BUT WITHOUT HESITATIO N, WE, THEREFORE, HOLD THAT GRAMOPHONE COMPANY OF INDIA LTDS DECISION, IN OUR HUMBLE UNDERSTANDING, DOES NOT DILUTE THE PRINCIPLE OF TREATY OVERRIDE IM PLICIT IN THE SCHEME OF THE INCOME TAX ACT AND WHICH HAS THE APPROVAL OF HONBL E SUPREME COURT IN AZADI BACHAO ANDOLANS CASE (SUPRA). ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 12 OF 21 12. WE MAY ALSO BRIEFLY DEAL WITH A RATHER RECENT D ECISION OF HONBLE SUPREME COURT IN THE CASE OF RAM JETHMALANI VS UNIO N OF INDIA (2011 TIOL SC 57 PIL) TO THE EXTENT THIS JUDGMENT DEALS WITH LIMI TATIONS ON UNIVERSAL APPLICABILITY OF THE PRINCIPLES OF TAX TREATY OVERR IDE. ONE OF THE ISSUES WHICH CAME UP FOR THE CONSIDERATION OF THEIR LORDSHIPS, I N THIS CASE, WAS WHETHER IN VIEW OF THE PROVISIONS OF ARTICLE 26 OF INDIA GERMA N DOUBLE TAXATION AVOIDANCE AGREEMENT (223 ITR STAT 130), GOVERNMENT OF INDIA W AS INDEED FORBIDDEN FROM DISCLOSING CERTAIN INFORMATION IT HAS RECEIVED FROM THE GERMAN GOVERNMENT, WITH REGARD TO INDIAN ACCOUNT HOLDERS IN BANKS BASE D IN LIECHTENSTEIN. THEIR LORDSHIPS REJECTED THE STAND OF THE GOVERNMENT AND HELD THAT ARTICLE 26 DOES NOT PREVENT GOVERNMENT OF INDIA FROM DISCLOSING THI S INFORMATION BECAUSE (A) THE 'INFORMATION' THAT IS REFERRED TO IN ARTICLE 26 IS THAT WHICH IS 'NECESSARY FOR CARRYING OUT THE PURPOSES OF THIS AGREEMENT', I .E. THE INDO-GERMAN DTAA, AND THIS DOES NOT EXTEND TO INFORMATION REGARDING INDIAN CITIZENS' BANK ACCOUNTS IN LIECHTENSTEIN THAT GERMANY SECURES AND SHARES THAT HAVE NO BEARING UPON THE MATTERS THAT ARE COVERED BY THE DO UBLE TAXATION AGREEMENT BETWEEN THE TWO COUNTRIES; (B) THERE IS NO ABSOL UTE BAR OF SECRECY. INSTEAD THE AGREEMENT SPECIFICALLY PROVIDES THAT THE INFORM ATION MAY BE DISCLOSED IN PUBLIC COURT PROCEEDINGS, WHICH THE INSTANT PROCEED INGS ARE, AND (C) THAT THE LAST SENTENCE IN ARTICLE 26(1) PERMITTING DISCLOSUR E OF SUCH SECRET INFORMATION IN PUBLIC COURT PROCEEDINGS OR IN JUDICIAL PROCEED INGS MUST BE SO CONSTRUED AS NOT LIMITING IT TO DISCLOSURE IN THE INCOME TAX PRO CEEDINGS ONLY BECAUSE SUCH AN APPROACH WILL COME IN CONFLICT WITH THE SCHEME O F THE CONSTITUTION OF INDIA, GRANTING EVERY PERSON A POWER TO SEEK REMEDY AGAINS T INFRINGEMENT OF FUNDAMENTAL RIGHT UNDER PART III OF THE CONSTITUTIO N, AS IN ORDER THAT THE RIGHT GUARANTEED BY CLAUSE (1) OF ARTICLE 32 BE MEANINGFU L, AND PARTICULARLY BECAUSE SUCH PETITIONS SEEK THE PROTECTION OF FUNDAMENTAL R IGHTS, IT IS IMPERATIVE THAT IN SUCH PROCEEDINGS THE PETITIONERS ARE NOT DENIED THE INFORMATION NECESSARY FOR THEM TO PROPERLY ARTICULATE THE CASE AND BE HEA RD, ESPECIALLY WHERE SUCH INFORMATION IS IN THE POSSESSION OF THE STATE. THE IR LORDSHIPS FURTHER OBSERVED THAT TO DENY ACCESS TO SUCH INFORMATION, WITHOUT CITING ANY ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 13 OF 21 CONSTITUTIONAL PRINCIPLE OR ENUMERATED GROUNDS OF C ONSTITUTIONAL PROHIBITION, WOULD BE TO THWART THE RIGHT GRANTED BY CLAUSE (1) OF ARTICLE 32. THE LAW SO LAID DOWN BY THEIR LORDSHIPS DOES NOT, IN ANY WAY, DILUTE THE PRINCIPLES OF TAX TREATY OVERRIDE, EVEN AS THEIR LORDSHIPS OBSERVE TH AT WHEN COURTS HAVE TO INTERPRET THE PROVISIONS OF TAX TREATY, THEY MUST N OT DO SO IN SUCH A MANNER AS TO COME IN CONFLICT WITH THE BASIC STRUCTURE OF THE CONSTITUTION OF INDIA. THIS OBSERVATION CANNOT, IN OUR HUMBLE UNDERSTANDING, BE CONSTRUED AS LIMITED THE PRINCIPLES OF TAX TREATY OVERRIDE EITHER. AS A MATT ER OF FACT, THEIR LORDSHIPS, LATER IN THE JUDGMENT, HAVE OBSERVED THAT WE HAVE PERUSED THE DOCUMENTS IN QUESTION, AND HEARD THE ARGUMENTS OF UNION OF INDIA WITH RESPECT TO THE DOUBLE TAXATION AGREEMENT WITH GERMANY AS AN OBSTAC LE TO DISCLOSURE AND REJECTED THESE ARGUMENTS, IN THE IMMEDIATELY FOLLOW ING SENTENCE, BY OBSERVING THAT WE DO NOT FIND MERIT IN ITS ARGUMENTS FLOWING FROM THE PROVISIONS OF DOUBLE TAXATION AGREEMENT WITH GERMANY. IT WAS ON INTERPRETATION OF THE TREATY PROVISIONS, RATHER THAN ON REJECTING THE APP LICABILITY OF TREATY PROVISIONS, THAT IN RAM JETHMALANIS CASE (SUPRA), THE GOVERNMENT OF INDIAS STAND FOR NON-DISCLOSURE OF NAMES OF PERSONS HOLDIN G ACCOUNTS IN LIECHTENSTEIN. THIS JUDGMENT CANNOT, THEREFORE, BE SEEN AS DILUTING THE PRINCIPLES OF TAX TREATY OVERRIDE. 13. IN VIEW OF THE ABOVE DISCUSSIONS, AS LONG AS TH E ASSESSEE CANNOT BE SUBJECTED TO TAX ON THE IMPUGNED RECEIPTS IN TERMS OF THE PROVISIONS OF INDO ISRAEL TAX TREATY, THE ASSESSEE WILL NOT HAVE TAX L IABILITY IN INDIA. THE PROVISIONS OF THE INCOME TAX ACT, 1961, CANNOT BE P UT INTO SERVICE IN SUCH A SITUATION, BECAUSE, AS WE HAVE NOTICED EARLIER, THE SE PROVISIONS CAN APPLY ONLY WHEN THEY ARE MORE BENEFICIAL TO THE ASSESSEE VIS- -VIS THE PROVISIONS OF THE APPLICABLE TAX TREATY. ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 14 OF 21 14. IT IS AN ADMITTED POSITION THAT THE ASSESSEE DI D NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA, IN TERMS OF THE PROVISIONS OF ARTICLE 5 OF THE TAX TREATY, AND, ACCORDINGLY, THE ASSESSEE CANNOT BE HELD LIABL E TO BE TAXED IN RESPECT OF BUSINESS PROFITS, UNDER ARTICLE 7, ON SUPPLY OF SOF TWARE IN QUESTION. THE CASE OF THE REVENUE REALLY RESTS ON TAXABILITY UNDER ART ICLE 12 WHICH PROVIDES AS FOLLOWS: ROYALTIES 1. ROYALTIES ARISING IN A CONTRACTING STATE AND PAI D TO A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TAXED IN THAT OTHER STATE. 2. HOWEVER, SUCH ROYALTIES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE, AND ACCORDING TO THE LAWS OF THAT STATE, BUT IF THE RECIPIENT IS THE BENEFICIAL OWNER OF THE ROYALTIES, THE TAX SO C HARGED SHALL NOT EXCEED 10 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES. 3. THE TERM ROYALTIES AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CIN EMATOGRAPH FILMS, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA O R PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE. 4. THE PROVISIONS OF PARAGRAPHS 1 AND 2 SHALL NOT A PPLY IF THE BENEFICIAL OWNER OF THE ROYALTIES, BEING A RESIDENT OF A CONTR ACTING STATE, CARRIES ON BUSINESS IN THE OTHER CONTRA CTING STATE IN WHICH THE ROYALTIES ARISE, THROUGH A PERMANENT ESTABLISHMENT SITUATED THEREIN, OR PERFOR M IN THAT OTHER STATE INDEPENDENT PERSONAL SERVICES FROM A FIXED BASE SIT UATED THEREIN, AND THE RIGHT OR PROPERTY IN RESPECT OF WHICH THE ROYALTIES ARE P AID IS EFFECTIVELY CONNECTED WITH SUCH PERMANENT ESTABLISHMENT OR FIXE D BASE. IN SUCH CASE, THE PROVISIONS OF ARTICLE 7 OR ARTICLE 15, AS THE CASE MAY BE, SHALL APPLY. 5. ROYALTIES SHALL BE DEEMED TO ARISE IN A CONTRACT ING STATE WHEN THE PAYER IS THAT STATE ITSELF, A POLITICAL SUB- DIVISION, A LOCAL AUTHORITY OR A RESIDENT OF THAT STATE. WHERE, HOWEVER, THE PERSON PAYING THE ROYALT IES, WHETHER HE IS A RESIDENT OF A CONTRACTING STATE OR NOT, HAS IN A CO NTRACTING STATE A PERMANENT ESTABLISHMENT OR A FIXED BA SE IN CONNECTION WITH WHICH THE LIABILITY TO PAY TH E ROYALTIES WAS INCURRED, AND SUCH ROYALTIES ARE BORN E BY SUCH PERMANENT ESTABLISHMENT OR FIXED BASE, THEN SUCH ROYALTIES SH ALL BE DEEMED TO ARISE IN THE STATE IN WHICH THE PERMANENT ESTABLISHMENT OR F IXED BASE IS SITUATED. 6. WHERE, BY REASON OF A SPECIAL RELATIONSHIP BETWE EN THE PAYER AND THE BENEFICIAL OWNER OR BETWEEN BOTH OF THEM AND SOME O THER PERSON, THE AMOUNT OF THE ROYALTIES, HAVING REGARD TO THE USE, RIGHT OR INFORMATION FOR ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 15 OF 21 WHICH THEY ARE PAID , EXCEEDS THE AMOUNT WHICH WOULD HAVE BEEN AGREED UPON BY THE PAYER AND THE BENEFICIAL OWNER IN THE A BSENCE OF SUCH RELATIONSHIP, THE PROVISIONS OF THIS ARTICLE SHALL APPLY ONLY TO THE LAST- MENTIONED AMOUNT. IN SUCH CASE, THE EXCESS PART OF THE PAYMENTS SH ALL REMAIN TAXABLE ACCORDING TO THE LAWS OF EACH CONTRA CTING STATE, DUE REGARD BEING HAD TO THE OTHER PROVISIONS OF THIS CONVENTIO N. 15. IN TERMS OF THE PROVISIONS OF ARTICLE 12 (3) OF THE INDO ISRAEL TAX TREATY, ROYALTY IS DEFINED, FOR THE PURPOSES OF THIS TAX TR EATY, AS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CIN EMATOGRAPH FILMS, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA O R PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE. THE QUESTION THEN ARISES WHETHER A PAYMENT FOR COMPUTER SOFTWARE CANNOT BE A PAYMENT FOR USE OF OR RIGHT TO USE OF A COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK, INCLUDING CINEMA PHOTOGRAPHIC FILM , AND, WHILE EXAMINING THIS QUESTION, IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT THERE IS A SPECIFIC MENTION ABOUT THE USE OF COPYRIGHT. THE ONLY OTHE R CLAUSE IN WHICH PAYMENT FOR SOFTWARE COULD POSSIBLY FALL IS CONSIDERATION FOR USE OF, OR RIGHT TO USE OF, A PROCESS. LET US EXAMINE THESE TWO ASPECTS OF THE DEFINITION OF ROYALTY UNDER THE INDIA ISRAEL TAX TREATY. 16. AS REGARDS THE QUESTION WHETHER THE PAYMENT FOR SOFTWARE COULD BE TREATED AS PAYMENT FOR USE OF, OR THE RIGHT TO USE , ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK, WE FIND THAT THIS ISS UE DIRECTLY CAME UP FOR CONSIDERATION OF A SPECIAL BENCH OF THIS TRIBUNAL I N THE CASE OF MOTOROLA INC. (SUPRA). THAT WAS A CASE IN WHICH THE SPECIAL BENCH HAD AN OCCASION TO DECIDE WHETHER PAYMENT FOR SOFTWARE AMOUNTS TO ROYALTY, FOR THE PURPOSES OF INDIA SWEDEN TAX TREATY (229 ITR STAT 11) WHICH INCIDENTA LLY IS THE SAME AS IN INDO ISRAEL TAX TREATY AND WHICH ALSO DEFINES ROYALTY AS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CIN EMATOGRAPH FILMS, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA O R PROCESS, OR FOR ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 16 OF 21 INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE. THE SPECIAL BENCH, AFTER A VERY ERUDITE DISCUSSION ON V ARIOUS FACETS OF THE ISSUE BEFORE THEM, CONCLUDED THAT WE HOLD THAT THE SOFTW ARE SUPPLIED WAS A COPYRIGHTED ARTICLE AND NOT A COPYRIGHT RIGHT, AND THE PAYMENT RECEIVED BY THE ASSESSEE IN RESPECT OF THE SOFTWARE CANNOT, THEREFO RE, BE CONSIDERED AS ROYALTY EITHER UNDER THE IT ACT OR THE DTAA. RIGHT NOW WE ARE ONLY CONCERNED WITH THE PROVISIONS OF THE TAX TREATY, AND WE HAVE NOTIC ED THAT THE PROVISIONS OF TAX TREATY AS BEFORE THE SPECIAL BENCH ARE EXACTLY THE SAME AS BEFORE US IN THIS CASE. THE ISSUE, THEREFORE, AS TO WHETHER PAYMENT FOR SUPPLY OF SOFTWARE CAN BE VIEWED AS A PAYMENT FOR COPYRIGHT OR NOT IS NO L ONGER RES INTEGRA . THE SPECIAL BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF T HE ASSESSEE, AND THE VIEWS SO EXPRESSED BY THE SPECIAL BENCH, BEING FROM A HIG HER FORUM THAN THIS DIVISION BENCH, ARE BINDING ON US. IN ANY CASE, AS THE PROVISIONS OF ARTICLE 12(3) SPECIFICALLY PROVIDE, WHAT IS LIABLE TO BE TR EATED AS ROYALTY IS PAYMENT FOR USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK, AND THE CONNOTATIONS OF USE OF COPYRIGHT O F A WORK ARE DISTINCT FROM THE USE OF A COPYRIGHTED ARTICLE. THE MEANING OF U SE OF COPYRIGHT OF A WORK CANNOT BE TREATED AS EXTENDING TO USE OF A COPYRI GHTED WORK AS WELL, AS IT WOULD AMOUNT TO DOING CLEAR VIOLENCE TO THE WORDS E MPLOYED BY THE TREATY. COPYRIGHT IS ONE THING, AND COPYRIGHTED ARTICLE IS QUITE ANOTHER THING. TO GIVE A SIMPLE EXAMPLE, WHEN A PERSON IS USING A MUSIC CO MPACT DISC, THAT PERSON IS USING THE COPYRIGHTED ARTICLE, I.E. THE PRODUCT ITS ELF, AND NOT THE COPYRIGHT IN THAT PRODUCT. AS HELD BY THE SPECIAL BENCH, IN MOT OROLAS CASE (SUPRA), THE FOUR RIGHTS WHICH, IF ACQUIRED BY THE TRANSFEREE, C ONSTITUTE HIM THE OWNER OF A COPYRIGHT RIGHT, AND THESE RIGHTS ARE : (I) THE RIGHT TO MAKE COPIES OF THE COMPUTER PROGRA MME FOR PURPOSES OF DISTRIBUTION TO THE PUBLIC BY SALE OR OTHER TRANSFE R OF OWNERSHIP, OR BY RENTAL, LEASE, OR LENDING. (II) THE RIGHT TO PREPARE DERIVATIVE COMPUTER PROGR AMMES BASED UPON THE COPYRIGHTED COMPUTER PROGRAMME ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 17 OF 21 (III) THE RIGHT TO MAKE A PUBLIC PERFORMANCE OF THE COMPUTER PROGRAMME. (IV) THE RIGHT TO PUBLICLY DISPLAY THE COMPUTER PRO GRAMME. 17. IT IS NOT EVEN REVENUES CASE THAT ANY OF THESE RIGHTS HAVE BEEN TRANSFERRED BY THE ASSESSEE, ON THE FACTS OF THIS C ASE, AND, FOR THIS REASON, THE PAYMENT FOR SOFTWARE CANNOT BE TREATED AS PAYMENT F OR USE OF COPYRIGHT IN THE SOFTWARE. AS WE HOLD SO, WE MAY MENTION THAT IN TH E CASE OF GRACEMAC (SUPRA), A CONTRARY VIEW HAS BEEN TAKEN BUT THAT CO NCLUSION IS ARRIVED AT IN THE LIGHT OF THE PROVISIONS OF CLAUSE (V) IN EXPLANATIO N 2 TO SECTION 9(1)(VI) WHICH ALSO COVERS CONSIDERATION FOR TRANSFER OF ALL OR A NY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WORK A PROVISION WHICH IS CLEARLY LARGER IN SCOP E THAN THE PROVISION OF ARTICLE 12(3) OF THE INDO ISRAEL TAX TREATY. THE W ORD OF BETWEEN COPYRIGHT AND LITERARY, ARTISTIC OR SCIENTIFIC WORK IS ALSO MISSING IN THE STATUTORY PROVISION. THE TREATY PROVISION THAT WE ARE DEALING WITH ARE THUS CERTAINLY NOT IN PARI MATERIA WITH THIS STATUTORY PROVISION, AND, BY THE VIRTUE OF SECTION 90(2) OF THE ACT, THE PROVISIONS OF INDIA ISRAEL TA X TREATY CLEARLY OVERRIDE THIS STATUTORY PROVISION. IN GRACEMAC DECISION (SUPRA) , THE COORDINATE BENCH WAS OF THE VIEW THAT THE PROVISIONS OF THE APPLICABLE T AX TREATY AND THE INCOME TAX ACT ARE IDENTICAL A POSITION WHICH DOES NOT PRE VAIL IN THE SITUATION BEFORE US. WE, THEREFORE, SEE NO REASONS TO BE GUIDED BY G RACEMAC DECISION (SUPRA). THE NEXT ISSUE THAT WE NEED TO CONSIDER IS WHETHER A PAYMENT FOR SOFTWARE CAN BE SAID TO BE A PAYMENT FOR PROCESS AS A COMPUTER PROGRAM IS A NOTHING BUT A SET OF INSTRUCTION LYING IN THE PASSIVE STATE AND THIS EXECUTION OF INSTRUCTIONS IS A PROCESS OR A SERIES OF PROCESSES. NO DOU BT, IN TERMS OF THE PROVISIONS OF SECTION 2 (FFC) OF THE INDIAN COPYRIGHT ACT, 1957, A COMPUTER PROGRAM, I.E. SOFTWARE, HAS BEEN DEFINED AS A SET OF INSTRUCTION S EXPRESSED IN WORDS, CODES, SCHEMES OR IN ANY OTHER FORM, INCLUDING A MACHINE R EADABLE MEDIUM, CAPABLE OF CAUSING A COMPUTER TO PERFORM A PARTICULAR TASK OR ACHIEVE A PARTICULAR RESULT, BUT THE MOOT QUESTION IS AS TO WHAT IS THA T A CUSTOMER PAYS FOR WHEN HE BUYS, OR TO PUT IT IN TECHNICAL TERMS OBTAINS L ICENCE TO USE THE SOFTWARE ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 18 OF 21 FOR THE PROCESS OF EXECUTING THE INSTRUCTIONS IN TH E SOFTWARE, OR FOR THE RESULTS ACHIEVED ON ACCOUNT OF USE OF THE SOFTWARE. TO DRA W AN ANALOGY, IT IS AKIN TO A SITUATION IN WHICH A PERSON HIRES A VEHICLE, AND TH E QUESTION COULD BE AS TO WHAT DOES HE PAY FOR FOR THE USE OF THE TECHNICAL KNOWHOW ON THE BASIS OF WHICH VEHICLE OPERATES, OR FOR THE USE OF A PRODUCT WHICH CARRIES PASSENGERS OR GOODS FROM ONE PLACE TO ANOTHER. THE ANSWER IS O BVIOUS. WHEN YOU PAY FOR USE OF VEHICLE, YOU ACTUALLY PAY FOR A PRODUCT WHIC H CARRIES THE PASSENGERS OR GOODS FROM ONE PLACE TO ANOTHER AND NOT THE TECHNIC AL KNOWHOW ON THE BASIS OF WHICH SUCH A PRODUCT OPERATES. SAME IS THE CASE WITH THE SOFTWARE, WHEN SOMEONE PAYS FOR THE SOFTWARE, HE ACTUALLY PAYS FOR A PRODUCT WHICH GIVES CERTAIN RESULTS, AND NOT THE PROCESS OF EXECUTION O F INSTRUCTIONS EMBEDDED THEREIN. AS A MATTER OF FACT, UNDER STANDARD TERMS AND CONDITIONS FOR SALE OF SOFTWARE, THE BUYER OF SOFTWARE IS NOT EVEN ALLOWED TO TINKER WITH THE PROCESS ON THE BASIS OF WHICH SUCH SOFTWARE RUNS OR TO EVEN WORK AROUND THE TECHNICAL LIMITATIONS OF THE SOFTWARE. IN ASIA SATELLITE TEL ECOMMUNICATIONS LTD VS DCIT (78 TTJ 489), A COORDINATE BENCH OF THIS TRIBUNAL D ID TAKE THE VIEW THAT WHEN AN ASSESSEE PAYS FOR TRANSPONDER HIRE, HE ACTUALLY PAYS FOR THE A PROCESS INASMUCH AS TRANSPONDER AMPLIFIES AND SHIFTS THE FR EQUENCY OF EACH SIGNAL, AND, THEREFORE, PAYMENT FOR USE OF TRANSPONDER IS I NFACT A PAYMENT FOR PROCESS LIABLE TO BE TREATED AS ROYALTY WITHIN MEANINGS O F THAT EXPRESSION UNDER EXPLANATION 2 TO SECTION 9 (1)(VI) OF THE INCOME TA X ACT. HOWEVER, WHEN THIS DECISION CAME UP FOR SCRUTINY OF HONBLE DELHI HIGH COURT, IN THE CASE REPORTED AS ASIA SATELLITE TELECOMMUNICATIONS CO LTD VS DIT (332 ITR 340), THEIR LORDSHIPS, AFTER A VERY ERUDITE AND DETAILED DISCUS SION, CONCLUDED THAT WE ARE UNABLE TO SUBSCRIBE TO THE VIEW TAKEN BY THE TRIBU NAL IN THE IMPUGNED JUDGMENT ON THE INTERPRETATION OF SECTION 9(1)(VI) OF THE ACT. IT CANNOT, THEREFORE, BE OPEN TO US TO APPROVE THE STAND OF TH E REVENUE TO THE EFFECT THAT THE PAYMENT FOR SOFTWARE IS DE FACTO A PAYMENT FOR PROCESS. THAT IS A HYPER TECHNICAL APPROACH TOTALLY DIVORCED FROM THE GROUND BUSINESS REALITIES. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT THE EX PRESSION PROCESS APPEARS IMMEDIATELY AFTER, AND IN THE COMPANY OF, EXPRESSIO NS ANY PATENT, TRADE ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 19 OF 21 MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROC ESS. WE FIND THAT THESE EXPRESSIONS ARE USED TOGETHER IN THE TREATY AND AS IT IS WELL SETTLED, AS NOTED BY MAXWELL IN INTERPRETATION OF STATUTES AND WHILE ELABORATING ON THE PRINCIPLE OF NOSCITUR A SOCIIS , THAT WHEN TWO OR MORE WORDS WHICH ARE SUSCEPTIBLE TO ANALOGOUS MEANING ARE USED TOGETHER THEY ARE DEEMED TO BE USED IN THEIR COGNATE SENSE. THEY TAKE, AS IT WERE, THEIR COLOURS FROM EACH OTHER, THE MEANING OF MORE GENERAL BEING RESTRICTED TO A SENSE ANALOGOUS TO THAT OF LESS GENERAL. THIS PRINCIPLE OF INTERPRETAT ION OF STATUTES, IN OUR CONSIDERED VIEW, HOLDS EQUALLY GOOD FOR INTERPRETAT ION OF A TREATY PROVISION. EXPLAINING THIS PRINCIPLE IN MORE GENERAL TERMS, A VERY DISTINGUISHED FORMER COLLEAGUE OF OURS HONBLE SHRI M.K. CHATURVEDI, HAD , IN AN ARTICLE INTERPRETATION OF TAXING STATUTES (AIFTP JOURNAL: VOL. 4 NO. 7, JULY, 2002, AT P. 7), PUT IT IN HIS INIMITABLE WORDS AS FOLLOWS: 'LAW IS NOT A BROODING OMNIPOTENCE IN THE SKY. IT I S A PRAGMATIC TOOL OF THE SOCIAL ORDER. THE TENETS OF LAW BEING ENACTED O N THE BASIS OF PRAGMATISM. SIMILARLY, THE RULES RELATING TO INTERP RETATION ARE ALSO BASED ON COMMON-SENSE APPROACH. SUPPOSE A MAN TELLS HIS WIFE TO GO OUT AND BUY BREAD, MILK OR ANYTHING ELSE SHE NEEDS, HE WILL NOT NORMALLY BE UNDERSTOOD TO INCLUDE IN THE TERMS 'ANYTHING ELS E SHE NEEDS' A NEW CAR OR AN ITEM OF JEWELLERY. THE DICTUM OF EJUSDEM GENERIS REFERS TO SIMILAR SITUATION. IT MEANS OF THE SAME KIND, CLASS OR NATURE. THE RULE IS THAT WHEN GENERAL WORDS FOLLOW PARTICULAR AND SPECI FIC WORDS OF THE SAME NATURE, THE GENERAL WORDS MUST BE CONFINED TO THE THINGS OF SAME KIND AS SPECIFIED. NOSCITUR A SOCIIS IS A BROADER V ERSION OF THE MAXIM EJUSDEM GENERIS. A MAN MAY BE KNOWN BY THE COMPANY HE KEEPS AND A WORD MAY BE INTERPRETED WITH REFERENCE TO THE ACCOM PANYING WORDS. WORDS DERIVE COLOUR FROM THE SURROUNDING WORDS.' 18. VIEWED IN THIS PERSPECTIVE, AND TAKING NOTE OF LOWEST COMMON FACTORS IN ALL THE ITEMS COVERED BY DEFINITION OF THE EXPRESSI ON ROYALTY IN ARTICLE 12(3), THE PROCESS HAS TO BE IN THE NATURE OF KNOWHOW AN D NOT A PRODUCT.IN THIS VIEW OF THE MATTER, AND IN VIEW OF HONBLE DELHI HI GH COURTS DECLINING TO UPHOLD THE COORDINATE BENCHS DECISION IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO LTD (SUPRA), WE ARE OF THE CON SIDERED VIEW THAT THE ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 20 OF 21 PAYMENT FOR SOFTWARE, BY NO STRETCH OF LOGIC, CAN B E TREATED AS A PAYMENT FOR A PROCESS LIABLE TO BE TAXED AS ROYALTY. THIS IS PRECISELY WHAT WAS HELD BY A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SO NATA INFORMATION TECHNOLOGY (SUPRA) , THOUGH FOR DIFFERENT REASONS. 19. ON THIS ASPECT OF THE MATTER ALSO, GRACEMAC DEC ISION HAS COME TO A DIFFERENT CONCLUSION BY OPINING THAT PAYMENT FOR SO FTWARE IS INFACT A PAYMENT FOR A PROCESS, BUT THE VIEW SO EXPRESSED, BEING CON TRARY TO EARLIER DECISIONS OF THE OTHER COORDINATE BENCHES AND IN ACCORDANCE WITH THE LAW LAID DOWN BY HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CI T VS B R CONSTRUCTIONS (202 ITR 222) DOES NOT CONSTITUTE A BINDING JUDICIA L PRECEDENT. IN OUR CONSIDERED VIEW, EVEN A COORDINATE BENCH DECISION, WHICH IS ADMITTEDLY CONTRARY TO EARLIER PRECEDENTS ON THAT ISSUE FROM O THER COORDINATE BENCHES, DOES NOT BIND THE SUBSEQUENT COORDINATE BENCHES. W E HAVE ALL THE RESPECT AND ADMIRATION FOR THE COORDINATE BENCH DECISION, B UT, IN OUR CONSIDERED VIEW, THIS DECISION DOES NOT CONSTITUTE A BINDING JUDICIA L PRECEDENT, AND WE LEAVE IT AT THAT. THE OTHER ASPECT OF THE MATTER IS THAT TH E ISSUE OF TAXABILITY OF SOFTWARE, AS A COPYRIGHTED ARTICLE, IS DIRECTLY COV ERED BY A SPECIAL BENCH OF THIS TRIBUNAL AND THE SAID DECISION, COMING FROM A BENCH OF LARGER STRENGTH, PREVAILS OVER THE DIVISION BENCH DECISION. AS LAID DOWN BY THE APEX COURT IN THE CASE OF AMBIKA PRASAD MISHRA VS. STATE OF UP AI R 1980 SC 1762 (P. 1764 OF AIR 1980 SC) 'EVERY NEW DISCOVERY NOR ARGUMENTAT IVE NOVELTY CANNOT UNDO OR COMPEL RECONSIDERATION OF A BINDING PRECEDENT. A DECISION DOES NOT LOSE ITS AUTHORITY MERELY BECAUSE IT WAS BADLY ARGUED, INADE QUATELY CONSIDERED OR FALLACIOUSLY REASONED....'. THEREFORE, WHATEVER BE THE POINTS, RIGHT OR WRONG, WHICH CAN BE PUT AGAINST THE SPECIAL BENCH DECISION S, THE SPECIAL BENCH DECISION CONTINUES TO HAVE A BINDING FORCE ON THIS DIVISION BENCH. IN OUR HUMBLE UNDERSTANDING, THE SPECIAL BENCH DECISION IN MOTOROLAS CASE (SUPRA) BINDS US AND WE HAVE TO RESPECTFULLY FOLLOW THE SAM E. RESPECTFULLY FOLLOWING THIS SPECIAL BENCH DECISION, AS ALSO A SERIES OF OT HER DIVISION BENCH DECISIONS ON THE SAME LINES, WE MUST APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A). ITA NO. 3939/MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 21 OF 21 20. IN VIEW OF THE ABOVE DISCUSSIONS, RESPECTFULL Y FOLLOWING SPECIAL BENCH DECISION IN MOTOROLAS CASE AS ALSO A LARGE NUMBER OF DIVISION BENCH DECISIONS ON THE ISSUE, INCLUDING IN ASSESSEES OWN CASE FOR ONE OF THE PRECEDING ASSESSMENT YEARS, WE APPROVE THE CONCLUSIONS ARRIVE D AT BY THE COMMISSIONER (APPEALS) AND DECLINE TO INTERFERE IN THE MATTER. 21. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT TODAY ON 26 TH DAY OF AUGUST, 2011. SD/- SD/- (VIJAY PAL RAO ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 26 TH DAY OF AUGUST , 2011 . COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) , MUMBAI 4. COMMISSIONER (APPEALS) II , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, E BENCH, MUMBAI 6. GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI