THE COMMISSIONER OF INCOME TAX V. M/S IBM WORLD TRADE CORPORATION

ITA/245/2016

AI Insights

The case involves an appeal by the Commissioner of Income-Tax International Taxation and the Deputy Commissioner of Income-Tax International Taxation against M/s. IBM World Trade Corporation concerning the assessment year 2010-11. The primary legal issues pertained to the classification of royalty income from agreements entered into before and after June 1, 2005, and the applicability of section 234B regarding the mandatory payment of advance tax. The Tribunal had previously ruled in favor of the assessee, which the revenue challenged in this appeal.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 728431 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 01-10-2020
• Assessment Year: misc
• Other Referred Cases: ITA No.278/2012
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: T SURYANARAYANA; MAHIMA GOUD
• Assessee Lawyers: K V ARAVIND
• Keywords: Advance tax; DTAA; Mandatory Payment; Penalty; Royalty Income
• Section: 208; 234B; 260A; 155A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1ST DAY OF OCTOBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.245 OF 2016 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX INTERNATIONAL TAXATION 2ND FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BANGALORE-560095. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX INTERNATIONAL TAXATION CIRCLE-1(1), 2ND FLOOR BMTC BUILDING, 80 FEET ROAD KORMANGALA, BANGALORE-560095. ... APPELLANTS (BY Mr. K.V. ARAVIND, ADV.,) AND: M/S. IBM WORLD TRADE CORPORATION C/O. BMR & ASSOCIATES LEVEL 3, PRESTIGE NEBULLA-1 8-12, CUBBON ROAD BANGALORE-560001 PAN: AAACI 1209G. ... RESPONDENT (BY Mr. T. SURYANARAYANA, A/W 2 Ms. MAHIMA GOUD, ADVS.,) - - - THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961, ARISING OUT OF ORDER DATED 20-10-2015 PASSED IN ITA NO.728/BANG/2015, FOR THE ASSESSMENT YEAR 2010-11, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, BENGALURU IN ITA NO.728/BANG/2015 DATED 20.10.2015 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, CIRCLE-1(1), BENGALURU & ETC. THIS I.T.A. COMING ON FOR FINAL 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 revenue. The subject matter of the appeal pertains to the Assessment year 2010-11. The appeal was admitted by a bench of this Court vide order dated 17.01.2018 on the following substantial question of law: 3 (i) Whether on the facts and in the circumstances of the case the Tribunal is right in law in holding that royalty income in respect of agreement entered into before 1-6- 2005 are from one source and royalty income in respect of an agreement entered into on or after that date are from a different source and as such assessee can apply section 155A or DTAA separately for such different sources of income covered by different agreement by following its earlier decision which has not reached finality and without appreciating that it is not legally permissible for the assessee to have a mix of both DTAA and portion of the relevant section of the Act at a time? (ii) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside penalty levied under section 234B of the Act without appreciating that the payment of interest under section 234B is mandatory in nature and as per section 208, every assessee is required to pay advance tax on the income 4 earned, during a financial year it is Rs.10,000/- or more? 2. For the reasons assigned by us in the order passed today in ITA No.278/2012, the substantial questions of law are answered against the revenue and in favour of the assessee. In the result, the appeal fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE RV "