Sasken Communication Technologies Ltd. V. The Income Tax Officer (International Taxation) Ward-2(1), Bengaluru

ITA/267/2013

AI Insights

This case involves an appeal by M/s. Sasken Communication Technologies Ltd. against the order of the ITAT, Bengaluru, which upheld the Income Tax Officer's decision treating payments made to foreign companies for licensed software as 'royalty'. The primary legal question was whether these payments should be classified as 'royalty' under Section 9(1)(vi) of the Income Tax Act, 1961. The High Court of Karnataka, referencing a Supreme Court decision, ruled in favor of the Assessee, stating that such payments should not be classified as royalty.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 671273 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 02-09-2024
• Assessment Year: misc
• Other Referred Cases: ENGINEERING ANALYSIS CENTRE OF EXCELLENCE (P.) LTD. v. COMMISSIONER OF INCOME-TAX, COMMISSIONER OF INCOME-TAX v. GRACEMAC CORPORATION
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAVI RAJ
• Assessee Lawyers: S SHARATH
• Keywords: Income tax appeal; International Taxation; Royalty; Licensed Software
• Section: 9(1)(vi); 260-A

Judgement Text

" - 1 - NC: 2024:KHC:35622-DB ITA No. 267 of 2013 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2ND DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO.267 OF 2013 BETWEEN: M/S. SASKEN COMMUNICATION TECHNOLOGIES LTD., #139/25, DOMLUR RING ROAD BENGALURU-560071. …APPELLANT (BY SRI. S.SHARATH, ADVOCATE) AND: THE INCOME TAX OFFICER (INTERNATIONAL TAXATION) WARD-2(1), BENGALURU. …RESPONDENT (BY SRI. RAVI RAJ Y.V., ADV. A/W SRI. DILIP.M., ADV.) ITA IS FILED UNDER SEC.260-A OF I.T. ACT, 1961, ARISING OUT OF ORDER DATED 22/03/2013 PASSED IN ITA NO.899/BANG/2012, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE ITAT, BENGALURU, 'B' BENCH IN ITA NO.899/BANG/2012 DATED 22/03/2013 AND ETC. THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA - 2 - NC: 2024:KHC:35622-DB ITA No. 267 of 2013 ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT) This appeal is by the Assessee challenging the order dated 22.3.2013 in ITA.No.897/B/2012. 2. Though the appeal is filed raising three questions of law for consideration, it is submitted by the learned counsels that the question of law raised at Sl.No.1 would be sufficient. The said Substantial Question of Law reads as follows: \"1. Whether on the facts and in the circumstances of the case, the Honourable ITAT was right in law in upholding the action of the Learned Respondent in treating the payments made to the foreign Companies towards purchase of licensed software as 'royalty' under Section 9(1)(vi) of the Act?\" 3. Sri. S.Sharath, learned counsel appearing for the appellant would submit that the above stated question of law is answered by the Hon'ble Apex Court in the case of ENGINEERING ANALYSIS CENTRE OF EXCELLENCE - 3 - NC: 2024:KHC:35622-DB ITA No. 267 of 2013 (P.) LTD. v. COMMISSIONER OF INCOME-TAX reported in (2021) 432 ITR 471 (SC) and the said question is answered in favour of the Assessee. In view of the same, learned counsel prays for allowing the appeal. 4. Learned counsel Sri. Ravi Raj.Y.V., along with learned counsel Sri. Dilip.M., for the respondent-Revenue is not in a position to dispute the contention of learned counsel for the appellant. 5. Taking note of the above, in terms of the order passed by the Hon'ble Apex Court in the case of ENGINEERING ANALYSIS CENTRE OF EXCELLENCE (P.) LTD. (supra), we answer the above question of law in favour of the Assessee and against the Revenue. 6. Learned counsel for the Revenue would submit that the Revenue has preferred Review Petition before the Hon'ble Apex Court in R.P.Nos.1422-1497/2021 praying to review the order passed in the case of ENGINEERING ANALYSIS CENTRE OF EXCELLENCE (P.) LTD. (supra) - 4 - NC: 2024:KHC:35622-DB ITA No. 267 of 2013 and prays for liberty to file review in case the Revenue succeeds before the Hon'ble Apex Court. On the other hand, learned counsel appearing for the appellant would place reliance on the decision in the case of COMMISSIONER OF INCOME-TAX v. GRACEMAC CORPORATION reported in (2023) 456 ITR 135 (SC) to contend that the Hon'ble Apex Court has observed that there must be an end to litigation otherwise, the rights of persons would be in an endless confusion and fluidity and justice would suffer. 7. Learned counsel for the Revenue is seeking liberty to file review petition depending upon the outcome of the review pending before the Hon'ble Apex Court, apparently because of the observation made by the Hon'ble Apex Court at Paragraph Nos.6 and 7 in GRACEMAC CORPORATION case (supra). 8. We have gone through the above decision and deem it appropriate to grant liberty to the respondent- Revenue to file review petition based on the outcome of - 5 - NC: 2024:KHC:35622-DB ITA No. 267 of 2013 the review pending before the Hon'ble Apex Court and it is for the respondent-Revenue to make out a case for review. Accordingly, appeal is allowed; question of law is answered in favour of the Assessee and against the Revenue and the order dated 22.3.2013 in ITA.No.897/B/2012 is quashed to the above extent. Sd/- (S.G.PANDIT) JUDGE Sd/- (C.M. POONACHA) JUDGE SMJ List No.: 1 Sl No.: 40 "