Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 7209 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 7 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-11-2017
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
04-07-2017
Assessment Year
2010-2011
Appeal Filed On
24-03-2016
Judgement Text
ITA 595/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL, JUDICIAL MEMBER I.T.A NO.595/BANG/2016 (ASSESSMENT YEAR : 2010-11) GE INDIA INDUSTRIAL P. LTD, (AS SUCCESSOR IN INTEREST TO GE INDIA TECHNOLOGY CE NTRE P. LTD, NOW AMALGAMATED), 401, 402, 4 TH FLOOR, AGGARWAL MILLENIUM TOWER, E1, 2, 3, NETAJI SUBASH PLACE, WAZIRPUR, NEW DELHI 110 034 .. APPELLANT PAN : AAACG4901D V. ADDL. COMMISSIONER OF INCOME-TAX, RANGE-11, BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. ROHIT GARA, ADVOCATE REVENUE BY : SMT. VANDANA SAGAR, CIT HEARD ON : 01.11.2017 PRONOUNCED ON : 17.11.2017 O R D E R PER LALIT KUMAR, JUDICIAL MEMBER: THE PRESENT APPEAL IS FILED BY THE ASSESSEE, AGAIN ST THE ORDER OF THE CIT (A) 3, BENGALURU, DT.13.01.2016, FOR THE ASSESSMENT YEAR 2010-11,ON THE GROUNDS OF APPEAL EXTRACTED HEREUNDE R : ITA 595/BANG/2016 PAGE - 2 02. THE BRIEF FACTS ARE, THE ASSESSEE IS A CAPTIVE SERVICE PROVIDER AND IS ENGAGED IN THE BUSINESS OF PROVIDING ENGINEERING ANALYSIS AND ITA 595/BANG/2016 PAGE - 3 RELATED SOFTWARE DEVELOPMENT SERVICES / EXPORT OF C USTOMISED ELECTRONIC DATA. DURING THE RELEVANT ASSESSMENT YE AR THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.7 6.13.59,776/-. THE AO DISALLOWED RS.16,21,82,523/- U/S.40(A)(I) OF THE ACT, ON THE GROUND THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX A T SOURCE ON PAYMENTS MADE TO NON-RESIDENT VENDORS, FOR THE PURC HASE OF SOFTWARE. AGGRIEVED BY THE DISALLOWANCE BY THE AO, THE ASSESS EE FILED AN APPEAL BEFORE THE CIT (A). 03. THE CIT (A), IN HIS ORDER CONFIRMED THE DISALLO WANCE MADE BY THE AO, ON THE GROUND THAT THE ISSUE WAS CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CAS E REPORTED IN 320 ITR 209, WHEREIN THE HONBLE HIGH COURT HELD THAT T AX WAS REQUIRED TO BE WITHHELD ON PAYMENTS FOR PURCHASE OF SOFTWARE . FURTHER AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON TH E GROUNDS MENTIONED HEREIN ABOVE. 04. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT LEARNED CIT (A) HAS FOLLOWED THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD . AS REPORTED IN 245 CTR 481. HE SUBMITTED THAT BY A LAT ER JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE O F WIPRO LTD. VS. DCIT AS REPORTED IN 382 ITR 179, SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE EARLIER JUDGMENT O F THE SAME HIGH ITA 595/BANG/2016 PAGE - 4 COURT RENDERED IN THE CASE OF THE SAME ASSESSEE IN ITA 507 OF 2002 ITA NO. 1388/BANG/2013 ON 25.08.2010 AND IT WAS HEL D THAT NO DISALLOWANCE CAN BE MADE U/S 40 (A) (I) OF I. T. AC T IN RESPECT OF SOFTWARE IMPORTED WHICH IS IN THE NATURE OF ROYALTY U/S 9 (1) (VI) OF I. T. ACT. HE SUBMITTED A COPY OF BOTH THESE JUDGMENTS OF HON'BLE KARNATAKA HIGH COURT. AT THIS JUNCTURE, A QUERY WAS RAISED BY THE BENCH AS TO WHETHER THE JUDGMENT OF HON'BLE KARNATA KA HIGH COURT RENDERED IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD. (SUPRA ) WAS BROUGHT TO THE NOTICE OF HON'BLE KARNATAKA HIGH COURT IN THE LATER CASE DECIDED ON 25.03.2015 BECAUSE THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD. (SUPRA ) IS DATED 15.10.2011. IN REPLY, LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE EARLIER JUDGMENT IN THE CASE OF WIPRO LTD. (SUPRA) DATED 25.08.2010 WAS ALSO NOT BR OUGHT TO THE NOTICE OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD. (SUPRA ) DECIDED ON 15.10.2011 AND THEREFORE, THE FIRST JUDGMENT DATED 25.08.2010 SHOU LD BE FOLLOWED AND THIS JUDGMENT IS IN FAVOUR OF THE ASSESSEE. IN REPL Y, LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT (A) AND SUBMITTE D THAT BOTH THE JUDGMENTS IN THE CASE OF WIPRO LTD. (SUPRA) ARE IN THE CONTEXT OF SECTION 40 (A) (I) WHEREAS THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD. (SUPRA ) IS IN CONTEXT OF SECTION 195 AND IN THE PRESENT CASE ALSO, THE DISPUTE IS IN CONTEXT OF SECTION 195 AND THEREFORE, THIS JUDGMENT ITA ITA 595/BANG/2016 PAGE - 5 NO. 1388/BANG/2013 RENDERED IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD. (SUPRA ) SHOULD BE FOLLOWED. 05. THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AU THORITIES. 06. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE COORDINATE BENCH IN TH E MATTER OF INTERTEC SOFTWARE PVT. LTD., VS ITO, DT.13.10.2017, WHEREIN THE AUTHOR OF THIS ORDER WAS THE CO-AUTHOR, AFTER RELYING UPON THE JUD GMENT OF THE JURISDICTIONAL HIGH COURT IN THE MATTER OF CIT (INT L.TAXN) V. SAMSUNG ELECTRONICS CO. LTD [(2011) 203 TAXMAN 477] AND DIS TINGUISHING THE LATER JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN WIPRO LTD. VS. DCIT AS REPORTED IN 382 ITR 179, HAS HELD AS UNDER : 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST, WE EXAMINE THE APPLICABILITY OF THE FIRST JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF WIPRO LTD. VS. DCIT ( SUPRA) RENDERED ON 25.08.2010. IN THIS CASE, THE SUBSTANTI AL QUESTION OF LAW RAISED AS PER PARA 37 WAS AS UNDER:- 'WHETHER THE TRIBUNAL IS CORRECT IN ALLOWING EXPEND ITURE ON IMPORTED SOFTWARE WHEN THE EXPENDITURE PER SE IS CA PITAL IN NATURE AND IS NOT ALLOWABLE?' 5. FROM THIS SUBSTANTIAL QUESTION OF LAW, IT COMES OUT THAT IN THAT CASE, THIS WAS NOT A DISPUTE BEFORE HON'BLE KARNATA KA HIGH COURT AS TO WHETHER THE IMPORT OF SOFTWARE IS ROYAL TY OR NOT? THE DISPUTE IN THAT CASE WAS THIS THAT THE IMPORT OF SO FTWARE IS CAPITAL EXPENSE IN THAT CASE AND THEREFORE, HOW THE SAME CA N BE ALLOWED AS DEDUCTION. IN THAT CASE ALSO, THE A.O. HELD THAT THE PAYMENT FOR SOFTWARE IS ROYALTY AND SINCE TDS WAS NOT DEDUCTED, IT IS TO BE DISALLOWED U/S 40 (A) (I) BUT WHEN THE ASSESSEE CAR RIED THE MATTER ITA 595/BANG/2016 PAGE - 6 IN APPEAL BEFORE CIT (A), HE HELD THAT IT IS NOT RO YALTY AND THEREFORE, CANNOT BE DISALLOWED U/S 40 (A) (I). THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL BUT THE DISPUTE RAISED W AS NOT THIS THAT IT IS ROYALTY OR NOT? THE DISPUTE RAISED WAS THIS T HAT IT IS CAPITAL EXPENDITURE AND THEREFORE, CANNOT BE ALLOWED. THE T RIBUNAL HELD THAT THE TRIBUNAL CANNOT GO INTO THIS QUESTION AS T HIS IS NOT WHAT WAS URGED BEFORE THE LOWER AUTHORITIES. THE REVENUE FILED APPEAL BEFORE HON'BLE KARNATAKA HIGH ITA NO. 1388/BANG/201 3 COURT AND THE TRIBUNAL ORDER WAS CONFIRMED. HENCE, THIS I S SEEN THAT AS PER THIS JUDGMENT OF HON'BLE KARNATAKA HIGH COURT, THE DECISION IS NOT ON THIS ASPECT THAT IT IS ROYALTY OR NOT AND THEREFORE, THIS JUDGMENT IS NOT RELEVANT IN THE PRESENT CASE. 6. NOW, WE EXAMINE THE APPLICABILITY OF THE SECOND JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE O F WIPRO LTD. VS. DCIT (SUPRA) RENDERED ON 25.03.2015. AS PE R THIS JUDGMENT, IN PARA 171, IT WAS HELD THAT IN EARLIER JUDGMENT DATED 25.08.2010, SIMILAR QUESTION WAS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND THEREFORE, IN THOSE APPEALS ALSO, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESS EE. WE HAVE ALREADY SEEN THAT THE DECISION DATED 25.08.2010 IS NOT ON THIS ASPECT THAT IT IS ROYALTY OR NOT AND THEREFORE, THI S JUDGMENT IS NOT RELEVANT IN THE PRESENT CASE. ACCORDINGLY, THIS LAT ER JUDGMENT DATED 25.03.2015 IS ALSO NOT RELEVANT. 7. THERE IS NO DISPUTE THAT THE PRESENT ISSUE IS CO VERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD. (SUPRA ) AND LEARNED AR OF THE ASSESSEE HAS MERELY CITED T HESE TWO JUDGMENTS RENDERED IN THE CASE OF WIPRO LTD. (S UPRA) AND NO OTHER ARGUMENT WAS MADE TO THE EFFECT THAT THIS ISSUE IS NOT COVERED AGAINST THE ASSESSEE BY THIS JUDGMENT OF HO N'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD. (SUPRA ). SINCE, THESE TWO JUDGMENTS CITED BY HIM ARE NOT APPLICABLE AS PER ABOVE DISCUSSION; ITA 595/BANG/2016 PAGE - 7 ITA NO. 1388/BANG/2013 WE RESPECTFULLY FOLLOW THE J UDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE O F CIT VS. SAMSUNG ELECTRONICS CO. LTD. (SUPRA ) AND DECLINE TO INTERFERE IN THE ORDER OF CIT (A). RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) AND THAT OF THE ORDER OF THE COO RDINATE BENCH (SUPRA), ON IDENTICAL FACTS AND CIRCUMSTANCES, WE U PHOLD THE ORDERS OF THE LOWER AUTHORITIES. 07. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH DAY OF N OVEMBER, 2017. SD/- SD/- (INTURI RAMA RAO) (LALIT KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER BENGALURU DATED : 17.11.2017 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY
