M/s. IBM India Private Limited, Bangalore V. Deputy Commissioner of Income Tax, Bangalore

ITA 48/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5665 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 09-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VAIDEHI G
• Keywords: Double taxation relief; Question of law; TDS; Set aside
• Section: 201(1); 195; 250; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER IT(IT)A NOS.47 & 48/BANG/2017 ASSESSMENT YEAR : 2015-16 M/S. IBM INDIA PRIVATE LIMITED, 3RD FLOOR, SUBRAMANYA ARCADE, NO.12, BANNERGHATTA MAIN ROAD, BENGALURU-560029. PAN : AAACI4403L VS. DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), CIRCLE 1(1), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : MS. VAIDEHI G, CA REVENUE BY : SHRI. SANJAY KUMAR, CIT DATE OF HEARING : 11.01.2018 DATE OF PRONOUNCEMENT : 19.01.2018 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE APPEALS ARE PREFERRED BY THE ASSESSEE ON COM MON GROUNDS. THEREFORE, THESE WERE HEARD TOGETHER. FOR THE SAKE OF REFEREN CE, WE EXTRACT THE GROUNDS RAISED IN IT(TP)A NO.47/BANG/2017: 1) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF THE DEPUTY COMMISSIONER OF INCOME-TAX (INTERNATIONAL TA XATION) ('AO') AND PASSING AN ORDER UNDER SECTION 250 OF THE ACT 2) THE LEARNED CIT(A) HAS ERRED IN PASSING AN ORDER UN DER SECTION 250 OF THE ACT WHICH IS BAD IN LAW AND ON FACTS. 3) THE LEARNED CIT(A) AND THE AO HAVE ERRED IN LA W AND ON FACTS IN HOLDING THE APPELLANT TO BE AN 'ASSESSEE IN DEFAULT' UNDER SECT ION 201(1) OF THE ACT IN RESPECT OF THE PAYMENTS MADE TO IBM SINGAPORE PTE LIMITED ( HEREINAFTER REFERRED TO AS 'IBM SINGAPORE'). 4) THE LEARNED CIT(A) AND THE AO HAVE ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT OU G HT TO HAVE DEDUCTED TAX AT SOURCE UNDER SECTION 195 OF THE ACT ON THE PAYMENTS MADE TO IBM SINGAPORE FOR THE PURCHASE OF SHRINK WRAPPED/ OFF THE SHELF SOFTWARE AND CONSEQUENTLY HOLDING THE APPELLANT TO BE AN 'ASSESSEE IN DEFAULT' UNDER THE PROVISIONS OF SECTION 201(1) OF THE ACT. 5) THE LEARNED CIT(A) AND THE AO HAVE ERRED IN LAW AND ON FACTS IN HOLDING THAT THE IT(IT)A NOS.47 & 48/BANG/2017 PAGE 2 OF 4 PAYMENTS MADE BY THE APPELLANT ARE IN THE NATURE OF 'ROYALTY' UNDER THE PROVISIONS OF THE ACT. 6) THE LEARNED CIT(A) AND THE AO HAVE ERRED IN TREATIN G THE PAYMENT MADE TO IBM SINGAPORE FOR THE PURCHASE OF SHRINK WRAPPED SOFTWA RE AS 'ROYALTY' AS CONTEMPLATED UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT ('DTA A') ENTERED INTO BETWEEN INDIA AND SINGAPORE. 7) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) AND THE AO HAVE ERRED IN LAW AND ON FACTS IN FAILING TO APPRECIATE THE FACT THAT THE AMENDMEN TS MADE TO SECTION 9(1)(VI) OF THE ACT VIDE FINANCE ACT 2012 WOULD BE RENDERED INAPPLICABLE CONSIDERING THE BENEFICIAL PROVISIONS UNDER THE INDIA-SINGAPORE DTAA WHICH HAV E NOT BEEN AMENDED. 8) THE LEARNED CIT(A) AND THE AO HAVE ERRED IN LAW AND ON FACTS IN MERELY FOLLOWING THE DECISIONS OF THE HONOURABLE KARNATAKA HIGH COURT,(' KHC') IN THE CASE OF SAMSUNG ELECTRONICS [2012] 345 ITR 494 (KAR) AND CIT V SYNO PSYS INTERNATIONAL OLD LTD [2011] 212 TAXMANN 454 (KAR) WITHOUT APPRECIATING THE FACTS TH AT THE SAME COULD BE DISTINGUISHED AND THEREFORE, THE DECISION OF THE KHC DOES NOT LAY DOW N THE RATIO DECIDENDI APPLICABLE TO THE FACTS OF THE APPELLANT. 9) THE LEARNED CIT(A) AND THE AO HAVE ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE THE DISTINCTION BETWEEN A 'COPYRIGHT' AND A 'COPYRIGHTE D ARTICLE' WHICH HAS BEEN RECOGNISED AND APPRECIATED BY VARIOUS COURTS. 10) THE LEARNED CIT(A) AND THE AO HAVE FAILED TO APPREC IATE VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT WHEREIN THE COURTS, UNDER SIMILAR CIRCUMS TANCES HAVE HELD THAT THE CONSIDERATION FOR MERE TRANSFER OF COPYRIGHTED ARTICLE, WITHOUT TRANS FERRING THE RIGHT IN THE COPYRIGHT SHALL NOT BE HELD AS PAYMENTS TOWARDS ROYALTY AND CONSEQUENTLY, THERE IS NO OBLIGATION TO DEDUCT TAX AT SOURCE ON THE PART OF THE PAYER. 11) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF THE AO AND LEVYING INTEREST UNDER SECTION 201(1A) OF THE ACT IN RESPEC T OF THE PAYMENTS MADE TO IBM SINGAPORE. EACH OF THE ABOVE GROUND IS INDEPENDENT AND W ITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE APPELLANT FURTHER, THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TI ME OF HEARING, OF THE APPEAL. 2. DURING THE COURSE OF HEARING, THE LEARNED COUN SEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION THAT IDENTICAL ISSUE WAS EXAMINED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2013-14 AND 2014-15 IN WHICH IT WAS HELD THAT PAYMENT MADE BY THE ASSESSEE IS THE PAYMENT OF ROYALTY, THEREFORE, THE ASSESSEE IS IN DEFAULT FOR NON DEDUCTION OF TDS UNDER SECTION 201 OF THE ACT, SUBJECT TO THE OUTCOME OF THE SLP PENDING BEFORE THE HONBLE SUPREME COURT. COPY OF THE ORDER OF THE TR IBUNAL IS PLACED ON RECORD. IT(IT)A NOS.47 & 48/BANG/2017 PAGE 3 OF 4 THESE FACTS WERE NOT DISPUTED BY THE LEARNED DR. 3. HAVING CAREFULLY EXAMINED THE ORDER OF THE TRIBU NAL AND THE GROUNDS RAISED BEFORE US, WE FIND THAT IDENTICAL ISSUE IS SQUARELY COVERE D BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE. THE RELEVANT PORTION OF THE O RDER OF THE TRIBUNAL IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: 2. DURING THE COURSE OF HEARING, THE LEARNED COUNS EL FOR THE ASSESSEE INVITED OUR ATTENTION THAT THE IMPUGNED ISSUES ARE SQUARELY COV ERED BY JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE VIDE ORDER DA TED 20.10.2011 IN WHICH IT WAS HELD THAT PAYMENT MADE BY THE ASSESSEE TO THE NON-RESIDE NT SUPPLIER OF SOFTWARE IS A ROYALTY, FOLLOWING ITS EARLIER ORDER IN ITA NO. 280/2005. T HE ASSESSEE FILED THE SLP BEFORE THE HONBLE SUPREME COURT OF INDIA AND THE ISSUE IS PEN DING FOR ADJUDICATION. THE ASSESSEE HAS FILED A DECLARATION UNDER SECTION 158A(1) OF TH E IT ACT CLAIMING THAT IDENTICAL QUESTION OF LAW IS PENDING BEFORE THE HONBLE SUPRE ME COURT AND THE FINDINGS IN THAT SLP WOULD BE BINDING IN THE INSTANT CASE ALSO EVEN IF THE TRIBUNAL DECIDES THE APPEALS AGAINST THE ASSESSEE FOLLOWING THE JUDGMENT OF THE HONBLE HIGH COURT. THIS DECLARATION WAS SENT TO THE REVENUE FOR VERIFICATIO N OF THE FACTS AND NOW THE REVENUE HAS VERIFIED THE FACTS STATED IN THE DECLARATION FI LED BY THE ASSESSEE IN FORM 8. 3. NOW IN THE LIGHT OF THE DECLARATION FILED BY THE ASSESSEE, WE HAVE TO ADJUDICATE THE ISSUE FOLLOWING JUDGMENT OF JURISDIC TIONAL HIGH COURT IN WHICH IT HAS BEEN CATEGORICALLY HELD THAT THE PAYMENT MADE BY TH E ASSESSEE IS A ROYALTY. THE RELEVANT PORTION OF THE JUDGMENT OF HONBLE HIGH COURT IS EX TRACTED HEREUNDER FOR THE SAKE OF REFERENCE: 3. WE HAVE HEARD THE LEARNED COUNSEL APPEARING FOR THE APPELLANTS AND THE LEARNED COUNSEL APPEARING FOR THE RESPONDENT. 4. THE ABOVE SUBSTANTIAL QUESTION OF LAW IN SIMILAR FACTS REGARDING PAYMENT MADE TOWARDS SUPPLY OF SHRINK WRAP CASSETTES/CDS PU RCHASED BY THE RESPONDENT I.E., PAYMENT MADE BY THE RESPONDENT TO THE NON-RESIDENT SUPPLIER OF SOFTWARE HAS BEEN HELD TO BE A ROYALTY BY ANSWERING THE SUBSTANTIAL QUESTI ON OF LAW IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE IN ITA NO. 2808/2005 AND CONNE CTED CASES, DECIDED ON 15.10.2011. FOLLOWING THE DETAILED REASONS ASSIGNED THEREIN, WE HOLD THAT THE ORDER PASSED BY THE ITAT IMPUGNED IN THIS APPEAL IS LIABLE TO BE SET AS IDE AND WE ANSWER THE SUBSTANTIAL QUESTION OF LAW IN FAVOUR OF THE REVENUE AND AGAINS T THE ASSESSEE. 5. ACCORDINGLY, WE PASS THE FOLLOWING: ORDER THE APPEAL IS ALLOWED. THE ORDER PASSED BY THE ITA T DATED 29.11.2007 IN ITA NO. 1000/BANG/2007 IS SET ASIDE AND THE ORDER PASSE D BY THE APPELLATE AUTHORITY CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICE R IS RESTORED. IT(IT)A NOS.47 & 48/BANG/2017 PAGE 4 OF 4 4. WE, THEREFORE, FOLLOWING THE JUDGMENT OF THE JUR ISDICTIONAL HIGH COURT IN THE CASE ASSESSEES OWN CASE, HOLD THAT THE PAYMENT MAD E BY THE ASSESSEE IS A PAYMENT OF ROYALTY AND THEREFORE THE ASSESSEE IS IN DEFAULT FO R NON-DEDUCTION OF TDS UNDER SECTION 201 OF THE ACT SUBJECT TO THE OUTCOME OF THE SLP P ENDING IN THE SUPREME COURT. ACCORDINGLY, WE FIND NO MERIT IN THE ASSESSEES APP EAL AND WE CONFIRM THE ORDER OF THE CIT(A). 4. FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE, WE HOLD THAT PAYMENT MADE BY THE ASSESSEE IS THE PAYMENT OF ROYA LTY AND THEREFORE ASSESSEE IS IN DEFAULT FOR NON DEDUCTION OF TDS UNDER SECTION 201 OF THE ACT, SUBJECT TO THE OUTCOME OF THE SLP PENDING BEFORE THE HONBLE SUPREME COURT. WE FIND NO MERIT IN THE ASSESSEES APPEAL. ACCORDINGLY, WE CONFIRM THE ORDER OF THE C IT(A). 5. IN THE RESULT, APPEALS OF THE ASSESSEE ARE DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY, 2018. SD/- SD/- ( INTURI RAMA RAO ) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BANGALORE DATED : 19/01/2018 /NS/* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE.