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Section 195 in The Income- Tax Act, 1995
The Income- Tax Act, 1995
Section 9 in The Income- Tax Act, 1995
Section 248 in The Income- Tax Act, 1995
Section 4 in The Income- Tax Act, 1995

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Karnataka High Court
The Commr Of Income Tax vs M/S Samsung Electronics Co Ltd on 24 September, 2009
Author: D.V.Shylendra Kumar Kumar

~ ")

IN THE HIGH COURT OF KARNATAKA , ~

AT BANGALORE __ ».___

Dated this the 24**1 day cf September, 2009 '`'`` .A » V PRESENT , ,

THE HON'BLE MR JUSTICE D V SHRENDRA, ..._ , `'--.e& A AND _ O'--. 1 I * I

THE :--x0N·m,1·: MR JUSTICE I ·-- -- A ITA N0s. 2808 0[ 2005, 2809 ___, 0

2005, 291 1 0[ 2005, 293§· 1V0,2989 0[ 2005 Cgw 2991 0[ 2005, _1_§g. _`'_ Cgw 3076 0[ 3_Q__7_@0[ 2005,

3079 0f 0[ 2006

I

N0. 611gf 1TA N0. 612 0{ ·

2006, ITA@s.1 585-594 0[ 2009 ,

$@1056 0{ 2006 ,552556 0[ 2009, 1066 0[ _. 0[ 20*066:, 557-575 0[ 2009, 1053 0[ I ,,,1, 0[ 2009, 1061 0[ 2006 6:, 657682 , 2Ii·I2

-- , ,1265 0{ 2006, ITA N0.1268 0[ 2006 I _ j

,, ' `lgmgg of 2006 & 595604 0[ 2009, 737 0[ 2007, 738 A '·`` _ 720 65 2007, 740 65 2007, 741 O; 2007, 0[ 2007, 746 0[ 2007, 747 0[ 2007, 777 0[ 7 I " _ 2007, 780 0[ 2007, 782 0[ 2007, 785 0[ 2007, 786

B

10 »

2 THE INCOMELTAX OFFICER, ·'

INTERNATIONAL TAXATION, S ' ,

WARD-I9{2), w A _

RASTROTHANA BUILDING, . .V~w-- , _' --_ V ` v_ NRUPATHUNGA ROAD, A ` -- ` -- _ BANGALORE. A - . · V

[By Sri. M.V. Seshachala & Sri. K.VQ`Arxr*ir;d,._Ad1*$§,j _ A M/S. SONATA SOFTWARE LT1), P _ . ` .1 ' · V APS TRUST BUILDING, S S S I

' I/4, BULL TEMPLE ROAD, V___, _ W _ _: N.R. COLONY, " p ' . A D

BANGALORE - 560 017. j . ~ RESPONDENT {By Sri. G. Sarangan, Sr. C011f1se1 for .Va{h.i·. Adv.] ' THIS APPEAL UNDER 44`' SECSTiONi 260A OF THE INCOME TAX ACT. IBB} ,~P, PRAYING SET ASIDE ORDER DATED 28.04.2005 PASSED .-IN ITA NO; SSB/BANG/2004 FOR THE ASSESSMENT ;

In ITA N0. 3078_gfS29Q§ ¤ [ 1

Between: ' A S S ' ·~S_`

I THE COMMISSION`E'R 01% ' INCOMEJPAX, . 4 _ INTE§{NA'I'IONAL 'IEAXATION, _

V * RASTROe..FEUU~,IA BUILDING,

,NRUPATHI.IIQGA ROAD, `

BANGALORE ' ,_

V » V OFF ICER,

' BUILDING,

. V ` e._W ° APPELLANTS

» ' ` [By Sri. I\/LV. Seshachaia & Sri. KV. Arvind, Advs.]

a 100

the payment to the resident recipient prima--facie bears the character of an income recipient and therefore_."·thel ` obligation under subsection [ll of section 195 ·r_4 p

54. The Judgment of they 2

TRANSMISSION CORPORATION ArP. llLTb.l;:'sVWcase [supra] is a binding authority and there is absolutely no scopeforrtheq ,iOoii·irts even to examine an the premise

that the ruling `R 't rimivsimssroiv CORPORATiON` case [supra] is not a binding precedent as premise that the said Jiidgznentfis idiistinguisliable for any other reason for the E of_applyi1ig"t_he ruling in that Judgment to the fact situation prevail in the present appeals. -- ` site certain appeals wherein the very ._ , { raised by the respondents -- assessees before i ``p' V. appellate authority in their appeals filed under section H .l4p ppipiq

A E lOl

246 of the Act as against an order passed under section 201 of the Act which is a provision providing for the consequential action that can be taken by the assessing authority against an assessee who has failed to with the requirement of deduction of tax at sourced »d¤` yl pd ' the time of payment z--d not remittinglthe i* it it iwpq A revenue after such deduction etc.,A. A l"·. id ° A A

56. As we have already indicated V»qulestlion of the d nature involvi;ng,exercise`;`of deternfrininglthedliability of the non--resident assessee `Al'` in payment received by the nonresident assessee cannot be an exercise thatwcan to even for the purpose of determining extent ofobligation on the part of the residentjpayer;andito·ascertain as to whether there is any Vpvscope the resident payer totally from the ..l_ obligation of deduction or even partially, as an answer for ~ , lpg'-- { obtained only by going through the procedure under section lQ5[2] of the Act and on making .l·· _ --·¤` application in this regard and for the said purpose to

e 102

the assessing officer and in the absence of such application by the resident payer, assuming _ appeal is filed by the resident payer against 1._. 'V,4 consequential order passed by the assessing officverj f , ` A section 201 of the Act, for the `°~¤ indicated earlier that question bg 2 A the appeal filed under section 246"ofVtthe¤"'Act against; the order under section 201 of the and ibarxpas we have indicated earlier in;the_v»rakerof the of section 195[2] of the the wake of the `

binding supreme court in

TRANSMCISSIGAI it A OF A.P. LTD./s case [supra] even the appellate authority in the appeal of the section ofthe Act as against the order of th0e° l_of$'ce1· passed under section 201 of the is is precluded from going into such question and if so it 4 even to the appellate Tribunal to venture on A 2 p``' answer to the very question in the assessee's A _.A0 further appeal to the Tribunal and opinion rendered by A

er 103

the Tribunal on the question answering it in favour of they assessee is of no consequence in law, is not a exercise of its appellate powers; an answer of this _"`` q` qv ' is not binding in law and is necessarily to ` 0. '_QQ A aside and the question answered in favour thetiievenue. A V A

57. in this context, an incidentalj_gliarguinenttwasraised though feebly, to the effect that ofthe nature as attempted by the assessing"office1'a._purp'ortiiig to be for the reason of failurelnon of assessee to comply with the requirer7rigenltlt*`Lif i"Q5[l] of the Act and therefore under section 201 of the Act cannot sustain the reason that section I 201 ofthe notcover consequential action on the failuie assessee on non--co1npliance of the requirenients of 195 of the Act and the provision being iinked to section 200 of the Act and section V o:$lVthe_Act providing for consequential action only in a where any person who has actually deducted Itii .il¤ amount in accordance with the preceding statutory

se- 106

201. Consequences of failure to deduct or . " pay. --- (1] lf any such person referred to __ »..__ in Section 200 and I the cases referred to ,___ _ · , _ ' . _. · _ in Section 194, the principal officer and -- l , the company of which he is the principal A ° » officer does not deduct the whole or ';~myJ~ , ``·-- 4 . - » V part of the tax or after deductingfails to = Pay the tax as required by Or under _l V l Act, he or it shall, without prt-yudice told ° A ` any other consequences¤which» he. or,it·--, · may incur, be deemed to be an assessee in default in respect of thetax: l ' ~ . _ VV l Provided that no · penalty °shall_ be charged under Section 221 fro: such person, principal adopter i··,_' or corrwany unless me l i'Asses'sirig ` Officer is satisfied that such, personQ_or principal officer or cornoanygl the --cose·* be, has

withoutrgocd sufficient reasons

jztiled to deduct and pay the tax. _l (LA] Withprejudzlce .V_` to `theproulsions of sub- section __( i J, if any such person, princgoal officer or company as is referred to in --. VV j°thaVt subsection does not deduct the ` ' whole or any part of the tax or after ` V l ·· deducting fails to pay the tax as required i V by orunder this Act, he or it shall be -- V ` S liable to pay simple interest at twelve per » W V "··--. centper annum on the amount of such V V _ _'·,l V ,_ toxfrom the date on which such tax was , " 4 ,`'~ W VW it deductible to the date on which such tax ,. __ ` __ is actually paid. ` l ` (2}% Where the tax has not been paid as _ ' ` aforesaid after it is deducted, the -,VV _ amount of the tax together with the

E s 107

amount of simple interest thereon · J referred to in subsection (1 --A} shall be cz , »----._ charge upon all the assets of the persona I ._ P ~ _ ` OT UU-? Compciny, as the case may bg? Ag ` g` eg referred to in subsection [1)_" V g 4 A and a sequential reading of section 19.5 of `~s` i_ Vqtth is a provision obviousiy preceding section noo Act - ' because of which it does get into 206*Of the Ad and at the relevant time . llaisojicovering the case of the total failure ot not only a situation of deduction tiieryeatteir agfailure to remit the _ amount and in section 201 clearlY indicating that it_is springs into action .; as a consequential measureu situations of the assessee failingeither deduct or to pay, the order passed under section of the is bad and is a relevant order even Vcinusituations ot on the part of the assessee for not --lded_u`cting the amount at source at the time of remittance , to a non--resident and consequential non- however bona fide the assessee might have .i·i tlcg§;¤et§;`1ai¤€d the thought and the belief that in fact no part

i

a 108

of the payment to the non--resider1t was not chargeableto, tax under the Income Tax Act, 1961, either for the ' that it was income at all within the meaning A '"`¤ A expression and does not get into the .___ g ` 4*--_,A the reason that even when income g the; , provisions of the Act, it becomes not;Vtaxab1e»`. india view of the provisions of that such income of the non--resident_ Masseissee are all r virtually exercises the time of determination oi; _--'__ gliability of the non- resident assesseei --1V. of a return being iield by the non--jresidenti--W_as_sessee, examination of such questions vdoesnot ariselwhiie the assessing officer is in theexerciseiqwoitqtalring conseouential action on an assessee \ V who his obligation under section i95[1} _ the Act, "``'· anduvtiierefore goes against the assessees and accordingly.

·iWhi1e examining the scope and the extent of '--,_ W1 jrggpilrgabigity gf the provisions, of section 195 of the Act. W6

ei 109

cannot lose sight of the fact that this section in the tirst instance is not a charging section nor a section providiizigp W for determination of the tax liability of the ` WY10 iS in receipt of payments frgm E1 mS;_d€m_ V use Y T --l¤q it Vg

59. The section itself occurs in chapter eppjiiflllr eil ..._ g ` 4'--_gg providing for collection and recoveijy *i_Vg by of a; V deduction effected at source of ··¤-- ilvpaymentl the deduction is in advancef g beforewv the determination of the actual tax, ld the non~ resident foreign l

60. The ainount the resident who is responsible ford to the non--resident is oniya provisional or tentative amount which is kept as a l this amount against the possible tax I veliabilitvi thell".nWon~resident assessee. The amount ~ [deducted under section 195 of the Act is not the same as lgg'-- the liability of the nonpresident assessee for of tax under the Income Tax Act, 1961. A non-~ i iigé ggigig g ®/

And :

M/S. SONATA SOP IWARE LTD..

APS TRUST BUILDING, ·'

E 1/4, BULL TEMPLE ROAD, I ` V

N.R. COLONY, » I _

BANGALORE - 560 017. RESPONDENT ,_ {By Sri. G. Sarangan, Sr. Counsel for Smt. Vani.HH.,·.Ad¤f.]·-- 1 I · I _ V THIS APPEAL IS FILED UNDER SECTION _:2Q·;soA * I INCOME TAX ACT, 196},, PRAYING TO SETASIDE_ORDER DATED `·'~ , A `'A, 28.04.2005 PASSED IN ITA NO. 2987/BANG-/2004 FOR ASSESSMENT YEAR 200042.00}, AND Eiiéfo. ` V V VQ I . In ITA NG. 3079 of 2005 I I

Between: * I * IV I'--__

I THE COMMISSIONER OF INCOME-TAX, ·~,_P L` A P INTERNATIONAL 'RAX.ATION', * L_ `'»,V j __ I I RASTROTHANAV BUILDING, V V __·' __ f` NRUPATIMIUNGA V ` V ' V _ I I I "

BANGALORPQ --I_V_ _ V_'

2 U THE _ I

INTERNATIONAL TAXATION, I {

WARD-19{2)e,._ _ ' A

RASTPOTHANA BUILDING,

V NRUPATHUNGA ROAD,

V" ` ° APPELLANTS

T VV[ByIS--a*j. MQW ·SosIf1achaIa & Sri. K.V. Arvind, Advs,] T M/S. SONAIIA SOFTWARE LTD.,

~ BUILDING,

° 2 4, I/4,IB_ULL TEMPLE ROAD,

A _ ·· I,_-- 'e,V _)3AN0.A;,0R,=3; - 550 017, RESPONDENT I L · I G. Sarangan, Sr. Counsel for Smt. Vani. H., Adv.]

--¤ l l2

62. Even here, one should bear in mind that it jsp actuaily either an exercise for the assessmentiof g income of the non~--resident nor N the actualp up 4l4¤¤ determination of the non-resident; * _' r _·W' { qW`'e1 l

63. As we are of the opinion thgitigectiong 295 of V , is not at all a provision wherein oificer is required to indulge in an eX--erf;ise·iOf deterrriinationg of the income of a non-»re`sident only on g the basis of a the non-resident who can contentions as

have been urged 1n`i11`e¥'_p;§sei1t`appeai by the learned senior counsel appearing onglbehalf of the respondents, and even much more on the l

declared by the supreme court in

`QCORPORATION OF A.P. LTD.,'s case

_ 4 4 the only scope and the manner of reducing the V Z p`¤' ior deduction imposed on a resident payer in g _.g` gterrrlsdof section 195Il] of the Act is by the method of e/e

»~-- 113

invoking the procedure contemplated under sub~section__A {2] of section 195 of the Act i.e., only when the responsible for paying any such sum chargeablej_;iu1*1d1er11 .1`1 p` ·1'. this Act on a non~resident, considers"that·the if A such sum would not be income chargeablein the if the recipient, by making an application to the 11 officer to determine by g¢agra1,· `p`1 order] the appropriate proportion of isoacliargeabie and upon such determpination alone, the liberty of deducting the st1ifl*r'1soV°;chargeable to tax to fulfil the; sub--section [1] of section 195 of tl¢ie`Act. '·ll·1 f --1_`p 64; * ID so residentpayer who has riot admittedly taken ` had made any efforts to have the _ vpproportionate so deductible in terms of the .,deterinination,1i"_flgy the assessing officer i.e., the resident , not filed an application under sub--section section 195 of the Act cannot, later, after having .,., to deduct and remit the amount turn mound and

a 114

contend that no part of the payment had resulted in any taxable income in the hands of the non--resident recipients and therefore it Cannot be said that there was any on the part of the resident payer in fulfilling its ·h .l`l y` Vp under section 195il] of the Act and itllsifl it ___A if l` 4v__y A demand raised in terms of section _ the riotll sustainable as the demand proceedsion ll there was a failure on the partof l'i._ V

65. We further ile_gai*--pos_ition_ if it is to be put in other llsoldthat is not open to a resident payer to inyitef officer to embark E upon the exercise 1. of the tax liability of the namaasideyfrr recipient on a' mere filing of objections to a demand `ilp 1 section 201 of the Act by merely lfcontendingl that tliepayment did not result in any taxable -l.l1§ZOljl'i€ in thellaands of the non--resident and this can be ~. , pl"_ undertaken by the assessing officer only in an _ ``y' V. return of income filed by the non--resident recipient s

el 1 16

and means of recovering the tax in advance even before the actual crystallization of the tax liability of an assesseeh V in terms of the provisions contained in chapter-XVIi;.--e1l l Act and section 195 of the Act being one such A and an exercise of this nature and llll e before, ll}[l"1€lr ._.y p Q 4'--.gA determination of the actual tax

assessee at the time of the resident Vlihevgthe respondents in the presen'tl._lVa·p_pea1sit premature one for the purposelllofl of the tax liability of the A ll

66. If one otwgiving a rough and Z crude comparisori which the provisions of section of Actloperates on a resident payer who makes a non-resident recipient and if the , 1 character of a semblance of an income receipt in l```' of the non-resident recipient, then Vt pg ·ea_ 4 l_·· lon the part of the resident payer who A Il gil' a payment to the non-resident recipient is ilol

A l 17

like a guided missile which gets itself attached to the target, the moment the resident assessee makes payment: to the non--resident recipient and there is no way ' resident payer avoiding the guided missile zeroingi A A '¤¤` A _ resident payer whether by way of .___ ` 4i._gp amount does not necessarily result inldtheirece_ipt of amount taxable as income in the ·--¤. ofditlie Winon- resident recipient under the_°iActiior gponleildlng that the non--resident recipient it ,»'` possibly avoided any liability ,ll_` nnder the Act by the over all provisions of the Act or _ even by the tcornbined of the provisions of a double tazgation avoidance agreement and the Act as is soughttol lcnntended the respondents in the present _ »._l ·i A `iii

This "'·-- onlyllirnited vvay of either avoiding or warding -- guided; missile is by the resident payer invoking iii *lii·_ provisions of section 195[2] of the Act and even here

ia 118

to the very limited extent of correcting an incorrect identification, an incorrect computation or to call in the actuai determination pf the tax liability of resident which in fact had been determined as1_part{of L process of assessing the income of th·eAAnonaresiden·th, j ...A _ Q 4'-.pA by using that as the basis for claiming,a"proporitionate_i; reduction in the rate at which the required to be made on the payment te pp Except for this method, thereiisliiogotheri resident payer avoiding the the provisions of section i95[ill oflthe »lV_ aj consequence of such default when notice in terms of

section of _theli*\ct._|` it VW ·

_p`W "Thisi··positioii_is theclear legal position that emerges z V on iulleifect of the provisions of section 195 E; bb the Actin the light of the law declared by the supreme 4"'i ' --`,,`_ [supra}.

s. l l9

69. The assessing authority and the first appellate authority while are correct to the extent of holding that there was an obligation on the pmt of the resident llli il · in effecting a deduction from out of the A ·lll i Vp by them in favour of the non--residentirelcipients ll ___A if A` li__p A consideration for acquiring what

wrapped software or what as

'ready to sell, off the shelf' pacltaged_1`softw¤vrare,L`_pr#»duct and even assuming it hadfpartalren of goods for the purpose of itaxgliability under the provisions Andhra __·V 2 Sales Tax Act, 1957 as heldf gy ··i9 the _lsupreme court in TATA CONSULTANCY case [supra], all such

the background while examining the

quesltion'·of.Athe` of a resident payer in terms of T `iseciion lv9·5[1=]i·of Act and as arguments not relevant h 4 4 purpose of answering this question. A . 1·lv Tribunal has clearly committed an error in law A _.pl in embarking upon to answer the question of the actual

FA. 12 _

THIS APPEAL IS FILED UNDER SECTION 260A OF INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED I 28.04.2005 PASSED IN ITA NO. 867 / BANG/ 2004 FOR,. ASSESSMENT YEAR 2001-2002 AND ETC., _ _,.,, · I- V Q_ In ITA N0. 3080 of 2005 ° I · .I`¤ I Between: ·' 2``2` --.· · I I I THE COMMISSIONER OF INCOI\/IE--TAX.,_ I 1 I I .2 » ~, I I INTERNATIONAL TAXATION, ` _ j ` , RASTROTHANA BUILDING, ' _ _·_» _ I " NRUPATHUNGA ROAD, ` '

BANGADORE- __ ,...,

2 THE INCOIvIE--TAX OFFICER., _ I ' VF .I ' I _ INTERNATIONAL TAXATION, _ * -- z __ = A WARD--19(2), _ ., . VI ·

RASTROTHANA BUILDING, _ 2°·--, ° " NRUPATHUNGA ROAD, * ? ` . -- 1-·' {By Sri. 1\/I_.V.'--SésiI.;;¢I1e;I;i· Sri. Advs.] j NUS- SONATA SQFTWARE _""I Q

APS TRUST BUILDING, . h g

1 /4, BULL TEMPLE ROAD, * I

N.R. COLONY, > -- . _ ·

--:_E$60'I»017. ` " RESPONDENT

S;},i*;mg;111V, Sr. Ccunscl for Smti. Vzami. H., Adv.] - M THIS FILED UNDER SECTION 260A OF THE ._ INCOME TAX ACT,. 1901, PRAYING TO SET ASIDE ORDER DATED 28.04.2005 PASSED IN ITA NO. 866/BANG/2004 FOR THE ' ASSESSMENTYEAR 2000»~200] AND ETC.,

§ 122

character of a royalty payunent and therefore applying the I relevant provisions of the DTAA and even the exercise holding that the actual percentage of deduction at V was at 10% or 12% or 15% as the case rnay be · A L upon the country in which the I'lO1'1·I`€S_lCl€{Ilt_·VI'éC`li2l€l;1lé` '·'~ , ll'·r_ assessed and having regard to the of V V that country and even such deteyrrrinsrjgn ffhas bg declared to be incorrect, law and therefore illegal, we have toraccept dleterrrrination by the assessing authority; appellate authority 3.1'1Cl"W€'._lfilfli`Stjl¥';;'Y?1'1l}'l`Lllf)1" thereason that on this aspect of thelniatter, not joined issue at all and while the the very beginning had taken, this of the payment in the hands of the non- 2 Vrecipient··il4b'eing in the nature of a royalty vdpaymenti affirmed by the appellate authority, i g ~ thlatlwvvaas not njade an issue or question for determination {before.thellitribunal by the revenue and therefore we do '·"-- h éjprcggsc to disturb this factual e1nerg€nC€ of 1°3€tS·

particularly, in ascertaining the extent of deduction that was required to be rnade by the resident payer therefore we are not disturbing the orders of the ` authority as affirmed by the first appellate authority A j by second appellate authority on this aspect ofthe ll --.--_ _ Q 4`·.ip

72. One another reason __ for ~i;hé't`Avv;§th€ assessing officer, even in a situation application is made by the resident p_ayer, of the Act, for the determin--atien_of·;the'----pro_po_rtionHof the actual amount being the¤non+resldent recipient so that the resident only the reduced amount rernit. it to credit of the account of the revenue yvhile doingso i.e., while examining an application'und_er`sec`tjon l95[2] of the Act, the assessing vfoflicer on an exercise as though it is g to determine the actual tax liability of the non- 4" l1·esident-- assessee is that if such a situation is permitted ``g` h lplace and if the income of the ncn--resident is , .,,, ,_ to be assessed in advance, even in the hands of a

g 124

resident payer, there can arise conilicting decisions versions, in so far as the tax liability of the non-residentit is concerned as even after a determination under ip i95[2] of the Act, where under the tax liability of ip » 4l4¤q ,4 resident is determined in the hands of'the`re·5iden"t i__` it Wd"i-- l and that too prematurely, then the=.exerc`ise not be"; productive as it will be always openito't--he--.non#resi.de_rlt to contend that no partpof in India

and is able to malre this basis of a return of income _·`_ nongresident assessee, it will resultiin versions of the actual tax liability of the of a payment from

this country, one when the liability is determined and that too in the hands of the resident xpayeru version of the liability when the iigiieiiise VV liability of the non-resident recipient of a p ph M ·,,_ pq i ···~ Q this country is actually determined V It ° V`·p lV'.· a different determination of the tax liability of ..p`4 · ,the=non~resident recipient.

s 125

73. A situation of this nature should necessarily be avoided and it can be avoided if we should bear in that the exercise under section l95[2] of the Act for extending a limited concession in favour A resident payer when things are very °or"gdoes~ ·--·i _ Q 4`'--r_ involve any doubt or ambiguity.-such aspin a VV where the non-resident recipient of has filed a return of his income asldlonertp arising such a tI`H1'1S8.CtiOH Vifith ggggggjyig officer has actualiyx of payment and has indicated order passed on the return of incoinetfiled irronaresident that no part of the rreceiptfis taxable the provisions of the Act [for whatever up and if so based on this Xsettledé/und·ispu'te_d `tg~i Qfactual/legal position, the resident = payer the assessment order passed by the V. M ·gc_ 4_ { on the return of income filed by the non- A It ° Vl·q any earlier year seek for granting the ..r`4 coniniensurate relief from the obligation for deduction of we

e 127

recipient was getting out 0f the net of taxation under income Tax Act, 1961 due to one or the other reason. p ' Vg

75. in all these appeals, there being no dispute nor · there be any dispute regarding the payments made V i 'lll ~l _ resident payers, bearing the an V Z receipt in the hands of the mii--reg,i,a,§Xa;S as thepayments whether are in respect of allrnerchandislé 'l,V payment for buying/purchasing,{ i°·-- software product and is orleven be in the

1'1&tLH`€ of 11 opined by the assessing officers in appeals by the first - appellate authorities, neirertheiess, the payment definitely being, _ll'1'l.ll1€__·~i.1f1EllQlo1Y€` of a payment resulting in some V possilogiell the hands of the non--resident recipient,,the imposed on the resident payers in g ' taasqr section 195[1] of the Act springs into action, the 44 ` '· V all ,.·l g--V. { is to he a payment to the non--resident and V`g` vt admittedly in all these appeals, the payers who are the K .l'' ----l--respondents in all these appeals, having not taken any

N? I 3 1 .

In ITA N0. 266 of 2006

Between:

I THE COMMISSIONER OF INCOME~TAX, ` _ _ INTERNATIONAL TAXATION, » , '''·- ` RASTROTHANA BUILDING, _ .--~---- I , ' V ` NRUPATHUNGA ROAD, A

2 THE INCOIVIE--TAX OFFICER, ~ RRRR` , L_ V I · I ·,: A If A INTERNATIONAL TAXATION, ,_ Y I . `'--, -----, _ . I`--LA WARD~I9[1], ·_ A ` ' _ , .W I

RASTROTHANA BUILDING, _· _ *_ A, I; ` V NRUPATHUNGA ROAD, ` `~ 1 . R ' ·' · BANGALORE. ' ._ ` `

{By Sri. M.V. Seshachaia S1ii.TI{.."JI.IiIAI*irind, AcIvS.}° M/S. HEVVLETT PACKARD INDIAN I 6··, I SOI; IWARE OPERATION ITVI`. LTD.; *" D .. ..---- NO.29, CUNNINGHAIVIVROAD. ' -_ , BANGALORE ~ 560 052}; I · RESPONDENT [By Sri. G. S&TETi]_'&I'l,~ {01* Smt. Vani. H., Adv.} - TI·IIS_.APPEALI IS FILED UNDER SECTION 260A OF THE I INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED 19.08.2005 'PASSED IN ITA NO. 970/BANG/2004 FOR THE ASSESSI'v'EENT YEAR 2001-2002 AND EIC., V In ITA

e I3etWeeu:I "'·---- I ·

, IL COMMISSIONER OF INCOME-TAX, v_ _ ° 4 C » ._'· INTERNATIONAL TAXATION, , ` '·.,A v I'·-- RASTROTHANA BUILDING,

78. For the reasons stated above, while we refrain from answering the questions raised in these appeals relating, _ to the actual determination of the tax liability of _`'` ·',4 resident assessees in respect of the paymentsltiiail. f, ` had received fl-OD] the ]`@Sid€I'it `·_` respondents in all these appealsr llppn fe EllllS`lKii(tjl`,i';Il;l liotherll questions relating to the correctnessijor o'therviriseitoflthe orders passed by the tribunal _in--the_l favour of the revenue and the ailowflthe appeals, set aside the orders ,ll_l and restore the orders authorities and

affirming orders appellate authorities, so far as jrelatesulto the demand raised on all assessees in terms of the provisions , of for the failure of the respondents assessees Vtojcoruply with the requirement of section 4 4 the

, Accordingly, these appeals are allowed. M

a 131

IN ITA Nos. 919 2007 8: 921 2007: _ ~

80. VVhiie these two batches of appeals had aisopvwbeenlf heard along with the above appeals, it is noticed that V _l`` é` llil strike a slightly different note, in me j¤ if ll h '_Ql A ultimately the question may be one of lt`heleirtlentl if manner of obligation of a resident 4le_l_ payer toldeduct! an it amount at a percentage of the made a `non· resident recipient, these mattershayei._reach·ed·this court l under section 260jIi stage had

reached wherein ·`__ appellatellauthoiity or the Second appeiéaté ppjygled on merits about the correctness order passed by the original/assessinglauthoritylin respect of ll remittances Nos.931 to 94}/Bang/2006] and l

V [corresponding to ITA Nos.672 to /`,B,gng/`Q,Q()'?]` nqade during the accounting period 4 4 for the assessment year 2006~O'7 and wherein V ~ 1`l' iirstfapplellate authority had declined to examine the l _.Al `jjgmeritsof the orders passed by the assessing authority »@//

at 132

relating to these 42 remittances where under the originai, V authority had concluded that the remittances ` nature of a royalty payment, the amount to Y 2 `QQQ A tg while making the remittance is at such tpep¢t~¤t;geg§,£2`rheigi' .___ g ` 4*--_yA amount as had been indicated in,athel·`D_oub1e Avoidance Agreement between india and Pfllnited States of America, particularlypas the agreement. _ .,22 it .__V ,»t`

81. The first dismissed the

appeal which uy tiie; assessee under section 248 the éthentiireshold, only for the reason that __asSé_SSeef2¤r`e~s2ident rernitter had not availed thehpygocedureq of making an application under sectiong EQSIZ} Ant, seeking for determination of the A proportionate in the payment to the non--resident coriatituting titgv taxable part of the payment or to put in ~. , lgg'· ivvordséiincome part of the payment.

a- 133

82. The first appellate authority having dismissed such appeals filed under section 248/249 of the Act as_ tenable, the assessee had preferred further appealsito V p Income Tax Appellate Tribunal in appeals as" élpqq P4

83. The Income Tax Appe1iat€i le--A Tribunaia ll Bench 'A' passed the common 18lO;7.ll,OO7 allowing all the appeals thvexmatter to the Commissioner of lfortresh disposal of the appeals llgllg opining that the Commissioner of was wrong in A

disrnissingthe lthe threshold as being not ma1raa1na.j§ie.__irl.; _ -- ··

84,lT.1It;,lis»._against.·ilsnch common remand order dated E: ' _ the Income Tax Appellate Tribunal _ _Tin__these appeals? i.e., ITA No.Q3l--Q4I/Bang/2006 and ·._. I\los_.(:37"§>,--TO2/Bang/2007, the revenue has come up ``p' p p

s 134

with an appeal each i.e., ITA Nos.Q19 of 2007 & 921 2007 respectively. _ _,.,, Vpll

85. We notice that though the registrylhas lj r élpqq P4 revenue has only paid one set icourtl fee both`; 'ITA'; Nos.91Q of 2007 and 921 of}2007ri.le_}y_a"--st1mlof Rs,.l§2/-- on the memorandum of , · these two appeals are batch of appeals order of the Tribunal passeldvenl disposing of all the 43 appeals before tas registry should have c necessarily of appeals instead of

one appeal in and 31 numbers of

appeals ·I'l`Al 'No.'92i of 2007 and should have also commensurate court fee from the Vfappellantsgj l is also hereby directed to take such g ~co1·rective measures in all other appeals, wherein also '· V arise and act for correcting the number of V`p` land also for reoovering the deiicit court fees, VW '~l_ V1 was payable; by the apP€H€mtS·

a 135

86. insofar the question of law raised in these appeals are concerned it is one of maintainability of an app.ea1Il under Section 248 of the Act, by a _q payer/assessee who had in fact deducted th€·`£i1T1(dl¤uli'1tWiiH4QiQ 4l4¤¤ P t€Y1T1S of sub--section (1} of Section ]_95·gu;f[(1·._ __W` fp ¤V"'ei S amount to the account of R;evenue,W ' nevertheless disputing Such

87. This question has to in the

'afiirmative' holding _----._ their ._ correct in reversing ·the°;Commissioner of income rm iAppat¤iisi,lpa*hat aaaaraiaatad tha appaai aaaar S Section 243/24g)"'·atWW the/threshold as not maintainable. B The `assessee has `infact deducted and remitted the `·_sub~section [1} of Section 195 is vldefinitelv maintain an appeal before the First Autiiaity.

I Z .l`W ,jTh'SSStatutoYY Provisions in the Section is very clear S _.q` `fjon thisaspect and the Tribunal is correct in holding that

% 136

the appeals were maintainable and could not have been disposed of at the threshoid and the Commissioner" Income Tax (Appeals) could not have disposed;·oi`·l,ltheil--f appeals at the threshold, as not maintainabie. . it A L

89. However, insofar as the scope oilexa.niVination ll --.--_ _ S l'·»o_ appeal under Section 248 is concerned in 1 ll . the view, that we have expresseeie. appeals, that view equally avpplies tothe also and while the remand 'llribunal is left undisturbed appealsl the Revenue are dismissed, the the interpretation of law that we have provisions of Section 195 of thenct, a.s"·a?oove_necessa1ily"governs the examination of the i underil_Section 248 of the Act, when the l·W_ income Tax [Appeals), takes up the p ~ for `disposa} on the merits of the matter. For ·-- . { purposes, these appeals are dismissed. ..--, V p

90. To sum up, the substantial questions raised in all these appeals are answered as under: ' _ S1.No. Substantial uestions raised _` · ll _ 1 "Whether the Tribunal was correct As ·` answered A -- ` » , V in holding that an appeal wasIl'i`A'·_Nos.__ 9__19`°of|· 'i__ * maintainable u/$.248 of the Act, iU20O'7,*92lof 2007 I ' even though there was no ` `; ` acyudicalion by the Authorities ' _ -- Y " l · under the Act in accordancewith Q

Section 195(3), {4) &.[5) read withy Section 200 the

2 lrVhether the Tribunal scorrectla ' _ in holding that V payments ,Not correct, made by theQA.;-rsessee Company the negative, , for purchase 'c--` software _`fro`inl against the Aaymetrbc As.ia·»Pacif:k;,·Singapore; ' assessee and in Peritus Software Service Inc., USA favour of the and iAst:*al";Conipe1iters*e Put} Litt., revenue Singapore the qciniounts of

Rs.3,43,`095/~, ·,_Rs_,¢i?,`&9,419/-- and Rs;--8,89,6'i 1/T was not liable E, to incorne in °--india and

co_nseq_uently no TDS as held by

C t§*¤.e* ,--Assessing'· "Officer and Q , °cory'irrned S°·t by the Appellate cu I°CO1 nrnz1ss»ior•,er_ needs to have been A A eicgtgducecigg, M

`3 Whether the Tribunal was correct

{S v_ in ` rnerely following the judgment Definitely wrong, -- passed; by its in the case of answered in _ A 4 V. li A ._ Samsung Electronics Co. Ltd. the negative, f ` _g ' '·,, ] `'~» ' has not been accepted by against the V {the Revenue and appealed assessee and in ' .-- _` ` ` ·. against before this Hon'ble Court favour of the where the facts were not entirel revenue

<. 138

identical to one subsisting in the . " present case and therefore the _ r ».___ Tribunal was bound to have _ _b_,V ._ ' . V recorded an independent fndlng

and therefore the impugned order C » _ is erverse? e__e. _____·` V ``'· Y 4 Whether the Tribunal based on gte] R * `· ° fact that the Assessee has imported Elk; there V1·;_{¤ggé{§yé, jl software from Aaymetrix Asia! agamgg. ° {hg Pacific, Singapore; Perttus ·So,itivare`·VE1;_.'S,3SS€J.€·--.._ &ndV* in Service Inc., USA and ·Astral * l, _ v_ Computers Pvt. Ltd., Singa,pore._on._*£i:fg;1i;p rtf the payment of `Rs.3,43,095('--.q¥»_ `"

Rs.47,89,»·=119/-- and=V.Rs.8,39,a5l1;*e'V * _ was bound to have taken into}- S --_ consideration the Ruling of ·--._ the`, ' Advance Ruling Authority__`__{238°--.ljliRI 296); the Double'Taxaliorl,Agreemei:t " between »Ind¤.a and USA and India

and Singapore, _-`_ p rovisions of Section 9(1)(VB` Qfthe Income Actylndtan

Copyright Act, __1957,, the Revised

entryyon Article 12 of.gO}£`CD; the

Internal v_ Revenue Service Regulation of USA{»._the Views i` of the High

Powered Committee on VE--Comrnerce

_, ._ and other facts and circumstances of l` * the present case which could have V jclearlyeshown that the payments

itheflssessee was liable to .

V » in india, and consequently the A { V Assessee was bound to deduct tax f_____V at `syce?

~ Whether the Tribunal should have ` 4 V_ t recorded a finding that it is under In the affirmative, " ·._g I '--V. ° _[·VsecVtlon 195{2) and {3] and {4) of in favour of the __ the Act, the chargeability to tax or revenue and * V __ 1 ' _ M Ilnot of the recipient is decided and against the havi a failed to obtain such a assessee

" 14 --

2 THE INCOME--TAX OFFICER, ~ _

INTERNATIONAL TAXATION, I _ I _

WARD~I9(1), ' » , '''--- `

RASTROTHANA BUILDING, . .V·---- ' --, ` , I NRUPATHUNGA ROAD, A A

BANGALORE. APPEI " -- ,

[By Sri. I\/LV. Scshachala & Sri. K.V.`Ar»·ind,0__AdxI$.j· Z A M/S. HEWLETT PACKARD INDIA ' _ . ` , · -- I SOF IWARE OPERATION PVT. LTD., ` I ` NO.29, CUNNINGHAM ROAD, ____ _ A _ _; BANGALORE ~ 560 052. " y I ' , l RESPONDENT [By Sri. G. Sarangan, Sr. C0LI1;ScIf0»I~ Vani. Adv.] THIS APPEAL ISDFILED 000 260A OF THE INCOME TAX ACT, 1961,} PRAYING TO SET ASIDE-I ORDER DATED 19.08.2005 PASSED I ITA ,969/BANG/2004 FOR THE ASSESSMENT YEAR 2l}00~2GOI AND " In rm No. 2681:5 2;}.9_§°L*_ A I'P», , `I`I A I I Between: · ` 1

I THE COMNTISSIONER OF »INCOME~TAX,

- INTERNATIONAL TAXATION,

_A ._ RASTROTFIANA BUILDING.

r * NRUPATI*IUN'GA ROAD,

.BANGALO·RE._ °~ 2

I V 2 OFFICER, _

` . INTERNATIONAL TAXATION,

--_ WA¥<,D~I€`p{I),

,_ I, RASTROTHANA BUILDING,

` ' DNRUPATHUNGA ROAD, (

I 4 , I ' __ ABANGALORE. . APPEJLLANTS I 0V0'I M.V. Seshachala Ba Sri. K.V.A1·vi11d,Advs.]

* I5 .

And :

M/ S. APARA ENTERPRISES

SOLUTIONS PVT. LTD. _.

OXFORD TOVVERS, SUIT 801, · '

'?"`¥`H FLOOR, 139 AIRPORT ROAD, , '·--._ KODIHALLI, _ _,.,, _ ` · _ I -- ' __ BANGALORE - 560 088. RESPQINDENT_ ° , [By Sri. S. Parthasarathy, Adv.} I I · _ _ THIS APPEAL IS FILED UNDER SECTION 1260A} OFPPTPIEM ».», I R P'·., I INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER ._ A 29.07.2005 PASSED IN ITA NO. 3799/BA;\IG/-2004 FOR THE I ASSESSMENT YEAR 2001-2002 AND `» I . ` . ' · Between: _ I · A _` V I _

1 THE COMMISS1ONERfOF` INCO,I\/IE.i'lA§(, I INTERNATIONAL TAXATION, .,`` I ' ` RASTROTIIANA BU·I,LDII'»IG, _ " . _ _ NRUPATHUIG-GAROAIJ, `e._ _ "

BANGA;.0RE. ' __ Q I

2 THE mcdme»TAx--.;51~*:é~?1cEiR.._""· INTERNATIONAL TAXATION,

WARD-I9{1}, ` _ .

I RASTEROTHANA BUILDING.

, " ' ·. NRUPA'I}IUN(}A ROAD, °

VBANG.*\I1Of{EI 2'~_ APPELLANTS

, I Sri. S,ésh&chaja 81 Sri. K.V. A1·v:{1:1d, Advs.] E I e,.,,

~ APARA ENTERPRISES SOLUTIONS PVT. LTD. ° , 4. 'DOVVERS, SUIT 801,

» 139 AIRPORT ROAD,

I ,_ I »._· 'e., f _K0D11~w,L1,*

_ ` h PEANGALORE - 560 088. RESPONDENT ' {ByS1*i. S. Parthasarathy, Adv.}

v

16 .

THIS APPEAL IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED 29.07.2005 PASSED IN ITA NO. 3800/BANG/2004, FOR THE ASSESSMENT YEAR 2001~2002 AND ETC..

In ITA N0. 270 of 2006 _ `I

Between: ____ AIIF II .

I THE COMMISSIONER OF INCOME--TAX, ~ I I _III I I · _ INTERNATIONAL TAXATION, . ' .__I I I II .. RASTROTHANA BUILDING, - **`*' _ I _ II J I IQ I-- NRUPATHUNGA ROAD, , I I 'VI, II 0I I'--. I I 2 THE INCOME·TAX OFFICER, II _ ' -- I ` INTERNATIONAL TAXATION, I· O I0 WARD--19(1), _ " ._

RASTROTHANA BUILDING, . '`"`` » ,I`· I· .4 I NRUPATHUNGA ROAD, I 1

BANGALORE. I I ' I I, _I · _ APPELLANTS [By Sri. M.V. Sc$·haQhaJ.e1I&

M/ S. APARA PVT. LTD. "

OXFORD TOWERS,._4SUIT 801QAW I --_

7TH FLOOR, I 39 AIRPORTROAD, II

KODIHALLIQ r . _

.,560.088, ' - _. RESPONDENT

I I ¤ --II' · _ -- S. Parthasarathy, Adv.] · I V _A.PPEAL,I£SIIFILED UNDER SECTION 260A OF THE »__ INCOMETAX AC'T,I*I9I&31, PRAYING TO SET ASIDE ORDER DATED ._ IQ2907.2005 PASSED IN ITA NO. 3801/BANG/2004 FOR THE ASSESSMEIIIT 2002~2003 AN D E'IIC.. *I 4 I_ , j;¤3f:AIA1·¤¤.606 or 2006 I II ' -- , 1 II "' THE COMMISSIONER OF INCOME~TAX, _ I '~,& ·.V, 1 INTERNATIONAL TAXATION, 0

' I7 _

RASTROTHANA BUILDING.

NRUPATHUNGA ROAD, 4 ·'

BANGALORE- 4 '

2 THE INCOMEJFAX OFFICER, 4 -'''' A_·,I, ` ,_ I INTERNATIONAL TAXATION, _ ` I V4 WARD»I9{1], M , ¤ 4

RASTROTHANA BUILDING, 4 IIII. V I " ``·-- I. . NRUPATHUNGA ROAD, A `· _ -_ _` --, _ BANGALORE. = 4 _ '·'» _ A `·,A {By Sri. I\/LV. Scshachgla, , 4 I I , A¤......d= _

M/S. EDS TECHNOLOGIES I 4 ` , B''._ I NO.153, 2ND CROSS, - I .

PROIVIENADE ROAD, " _ I '·», I . FRAZER TOWN, * " ` ``»,V j __

BANGALORE -- 560 , , .,': ` RESPONDENT [Bis} `I<IOI1&_ HOIIAQ Arivs.}

THIS .ISB·FILED·.IjUND·ER SECTION 250A OF THE INCOME TAXACT, 1951,4 P·RA`{I4N'G TO SET ASIDE ORDER DATED 30.09.2005 PASSED IN"-ITA. NO.`--14»50/BANG/2004 FOR .. THE ASSESSMENT YEAR 2000¥200I ETC.,

In ITA N0, 610 dIi"2D0*3 Ii I

£Bétw¢cuW§,I° .·--» _ _ 1* ` '

I I I IH~IE'CO·I\!II\rI.IS»SIONER OF INCOME~TAX, , ` INTERNATIONAL TAXATION,

' 5· V RASTROTHANA BUILDING,

; NRUFATHUNGA ROAD,

4 4 BANGALORE.

4 4 I 4 v_ ,4 VV_4 TI-iEINCOME--TAX OFFICER, I ` ° '--_4 '·», " INTERNATIONAL TAXATION, WARD~19{1},

RASTROTHANA BUILDING,

_ ' -- . 4 ` ~ - NRUPATHUNGA ROAD, * BANGALORE. APPELLANTS

° 1.8 .

{By Sri. MV. Scshachala & Sri. KV. Arvimd, Advs.] . VV And: '·--..

M/S. HEWLET PACKARD INDIA PVT. LTD., "V·`` " » V NO. 24, SAIAIQPURLAARENA, V` ~ __ * . HOSURMAIN ROAD, . ' V__` . P I] ADUGODI, .- AAAA' _ I V ` J I P

BANGALORE ~ 560 030. V C yRESPONDENT ___A Q `V._ ' [By Sri. G. Sarangam, Sr. Counsel. for Sh1t.Vani. Adv,} g THIS APPEAL IS FILED UNDERQSECTEON 26UA OE INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED 23.09.2005 PASSED IN ITA NO. 3708%BANG/2004 FOR? THE ASSESSMENT YEAR 2001~2002·'AND " .V I V _ Q ' .

Between: , _'R`` I e··. Y

1 THE COMMISSIONIEROQF.II\IC'QME'4'1TA.'(, . I I INTERNATIONAL"1TA}(.ATION,,'Iv ' " RASTROTI~£ANAIVl6UIVLDINGV, _V Q

NRUPATHUNGA ROAD; V .V ` V

2 THE VINCOMEVFAX .0FFi`cER,

V INTERNATIONAL TAXATION,

_WP»R!?-19I1}~· ' " '

V RAS'FROT1#LA1\T,A BUILDING,

NRUPATHUNGA ROAD.

, BANGALORE. " APPELLANTS

' M.V`.-- Seshachaia 82: Sri. KV. Arvimd, Advs.} V. .. V °·._ {e._IVIIVI,fS;VII~IE$»\TI;ET PACKARD INDIA PVT. LTD., , A 'P.' _V NO.24, SALARPURIA ARENA, V ` ,"H_OSUR&\/IAIN ROAD,

I · . V ADQJGODI, 2

A - _ BANGALORE ~ 560 030. RESPONDENT

"` I9 ,

[By Sri. G. Sarangan, Sr. Counsel for Smi;. Vami. H., Adv.} " THIS APPEAL IS FILED UNDER SECTION 260A . INCOME TAX ACT, 1961, PRAYING 'IIO SET ASIDE ORDER"IJATED·· 23.09.2005 PASSED IN ITA NO. 3709/BANG/2004 'FOR,TH.E` ASSESSIVIENTYEAR 2002-2003 AND ETC., , -- ,_`` , ° __ Ix1ITAN0. 609 0f2006 V A` · _V _ Vvhv = I 4·»_ Between: I·'-- AV °

I THE COMMISSIONER OF`INCOME:TAX, " [I INTERNATIONAL TAXATION, `

RASTROTHANA BUILDING, _» I`"`` = , `· NRUPATHUNGA ROAD, _ --.

2 THE 1Nc01v1E-TAX 0FF1c·EiR. e·., ¥ I INTERNATIONAL [

WARD--I9(I)_.. A T 1* ._ V

RASTROTH}\NA_.EUILDING,Iie». ` - --_ = NRUPATI~IUN~GA'·--R{}AD, I · _ i

BANGA.I;;ORE,[1"jV .2 I __ A ~ * APPELLANTS [By Sri., SeSIIQ;u;I12>.lQ2i K.V. Arvind, Advs.] M/S. HEWIQET r>Ac1<.ARD_[iND1A. PVT. LTD., NO; 24, sA1;AR?umA · °

HOSUR MAIN ROAD;.

ADUGODI,j

, V BAAIGALORE --· 030" RESPONDENT ' [By SrI._G._5&ra`,r1gan, Sr. Counsel for Smt. Vani. H., Adv.} '· ._V[ THIS IS FILED UNDER SECTION 260A OF THE I 4 ._ 4. __INCOME TAX ACT, 1963, PRAYING TO SET ASIDE ORDER DATED ` V.__ 23.0f.~I.2--005°_· PASSED IN ITA NO. 3707/BANG/2004 FOR THE I Ie.I ASSESSMENT YEAR 2000~200I AND ETC..

" 20

In ITA N0. 612 of 2.006 *

Between:

1 THE COMMISSIONER OF INCOMETAX. '

INTERNATIONAL TAXATION, .. ,9 '·--._ RASTROTI-{ANA BUILDING, _ _V.WW · -- NRUPATHUNGA ROAD, f -- . .

BANGALORE. .4 ' I · .4

2 THEINCOME-TAX OFFICER, ~ '`''` ._ 04 I I {4 ` .. A .4 INTERNATIONAL TAXATION. ._ I Y ' _ '·.. I ._.4 I '--_4 ` WARD~19{I}, ·_ A ` " 40 _ 4_V' I .4 ` RASTROTHANA BUILDING, 4- 4 .4 ` y ` NRUPATHUNGA ROAD, ` `» . ` . { . I BANGALORE. ' ..44 ' "

{By Sri. M.V. SeshachaIz>..__& SriQMK.IZ.4.Afvi11d, Advs;]" M/s. HEWLET PACKARD INDIALPVT. ¥ I NO. 24, SALARPURIA`ARE§}A. f i 4 .. ..»w HOSUR MAIN `VW.

ADUGODI, " ·. Q

BANGALORE 560 030; 4 · 4` _4 " 4 RESPONDENT {By Sri. G. Séirgngah SI'.._C0_1Ii#:1SeI for Smt. Vzmi. H., Adv.] 4 APPEAL IEILED UNDER SECTION 260A OF THE INCOME IQGIQPRAYING TO SET ASIDE ORDER DATED 23.09.2005 PASSED IN ITA NO. 3710/BANG/2004 FOR THE ASSESSMENT YEAR 42003-2004 AN D ETC. . I --_ ITA`Ndé. 2006 & 585-594- of 2009 40,4Betwce11:2 _ I 4

44 I ,4 40B· 4 { VV._ IIHECOIIT/IB/IISSIONER OFINCOMETAX, l .0 ` ` '--., w ''--. ' .INTTERNATIONAI.TA}CATION, · RASTROTHANA BUILDING,

40 { NRUPATHUNGA ROAD.

4 "BANGALORE.

" 21 ,

2 THE INCOME~TAX OFFICER,

INTERNATIONAL TAXATION,

WARD~I9(2),

RASTROTI-IANA BUILDING, ~ __

NRUPATHUNGA ROAD, ` _ ° W

BANGALORE. '`'·-- `

{By Sri. M.V. Seshachaia & Sri. K.V. Arvmd, Advé.} ' ` I ~ _ And: Q AAAA_ I ''·. [

M/S. SONATA INFORMATION , , `'--, I ..._ » I O'--. A I TECHNOLOGY LIMITED, I _ . -- , ·, _ NO.193, IST FLOOR, ` _ 3 If R.V. ROAD, BASAVANGUDI, _ " _ _·_~ _ " * BANGALORE ~-- 560 004. -- RESPONDENT [By Sri. G. Sarangan, Sr. Counsel "J;1ni. THESE APPEALS ARE FILED.UNDER 260A OF TI-IE INCOME TAX ACT, 1961-. PRAYING TO SET, ASIDEVIORDER DATED 31.01.2006 PASSED_ IN ITA _I59.3¥1603/"BAI`wIG/2004, AND In rm Ncs.:1056 Icf'20(I51I&,6:"$2--556 $1* 2009 Between: D·_ " ' .__0'' ,AD'

1 TI-IE _c0MMiss;01=aER OF iNCOME»TAx, INTEZRIVAIYIONAI; TAXATION,

, " ° ~, A BUILDING,

V NRUPATIILINGA ROAD,

BAI\IGAI.OI?E.» A

' A 2 TF#II%3AII\ICOI'Q/IE~II*AX OF FICER, _ INTERNATIOIFJAI. TAXATION,

I _ A WARDJQIZ}.

~ RASTROTHANA BUILDING,

' _ 4, A ~ ` , NRUPATI~IUNGA ROAD, ~ '·__ ` A.__O° I APPELLANTS » {I3)! Sri. I\/LV. Seshachala & Sri. KV. Amrind, Advs.]

V 22 .

And :

M/S. SONATA INFORMATION

TECHNOLOGY LIMITED, _ "

NO.193, 1ST FLOOR, . A

RV. ROAD, BASAVANGUDI, " `` _

BANGALORE -- 560 004. RESPONDEIGTA ·· [By Sri. G. Sarangan, Sr. Counsel for Smt. Vzm.i,,H.,4 A, F " _ THESE APPEALS ARE FILED UNDER 260A ° INCOME TAX ACT, 1961, PRAYING TO SETZASIDE. ORDER DATED ``"' » A 31.01.2006 PASSED IN ITA NO. 3495-3500/BANG/2004,V AND V In ITA N0. 1066 of 2006 A _ A

Between: 1 .6 A4`~,

I THE COMMISSIONER OF `°'-- A _ I INTERNATIONAL HAXATEON, A e·.V _ Y RASTROTI{ANP;B?;?I_1.DING, 5 -- -''0 A NRUPATHUNGA ROAD, A · ,_ V

BANGALOR2. , .''·-- ._ " ''·e. Y I, A - 2 THE INCOME--TAX 1* "

INTERNATIONAL TMATEON , ` ¤ °

WARD-I9{2},_ _ ' ._

RAS'i`ROTHANAV BUILDING, `

NRU§T'A'1`HUNGA ROAD,

ABA3\§(}ALQR,¥§;, " ~ ·' APPELLANTS 0 V[ByS--=;i. §\1IQ'J.¤SeshachaIa1 & Sri. K.V. Aravinci, Advs.} E ;:·V AX1dI S ji: ,

0 _ M/S. SONATA

'· 1*}ZZCHNOLOG`{ LIMITED,

In P 4, __NO.`1Q3e, I5? FLOOR,

* ` ,,__ R,V.`·ROAD,'VBASAVANGUDI, . . ...F Ve·. BANGALORE W 560 004. RESPONDENT A 6 · A [By Sri. G. Sarang-an, Sr. Counsel for Smt. Vani. H., Adv.]

I 23 _

THIS APPEAL IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED 31.01.2006 PASSED IN ITA NO. 1770/BANG/2004, AND ETC., _, In ITA Nos. 1067 of 2006 8: 557~5'75 of 2009 , »--»._A Between: I .

1 THE COMMISSIONER OF INCOME--'I`AX,_ ' _ ' , I -- INTERNATIONAL TAXATION, "` w _ ._ ` , _ f RASTROTHANA BUILDING, V. AF V, A `'*» ~ ·--·0 _ . '`--IA NRUPATHUNGA ROAD, I I ` _ , .V '

BANGALORE. _ » j `Q

2 THEINCOME--TAX OFFICER, __0_WW I O` INTERNATIONAL TAXATION, V____ _ WARD~1Q[2), ` L ` . I `I

RASTRO1'I·IANABUILDING,_° _ I ° _ NRUPATIIUNGA ROAD, _ * · z __ I = I --_ BANGALORE. I I .., APPELLANTS [By Sri. M.V. S駧E1zIeh;1I:¢; 61 Advs.] M/ S. SONATA INFORMATION · N O" I

TECHNOLOGY I

NO.193, IST FLOOR, _ I " ._

R.V. ROAD, BASAVA\?Gl.1DI--, I . `

BANGALORE -- 560 004.. _ O RESPONDENT I Sgtremgan, Sr. Counsel for Smt. Vani. H., Adv.] , , I ARE FILED UNDER SECTION 260A OF THE I ._ INCOME 'IAX ACT} 1961, PRAYING TO SET ASIDE ORDER DATED ._ `"31.01.200»6_ PASSED IN IIA NO. 1561-1580/BANG/2004, AND I A ,1 1053 of 2006 & 61}-613 of 2009 i I WOAV ·._;B8tW0@_1};;

I `O ' » , 1 ` A THE COMMISSIONER OF INCO1VIE--TAX, . ' ·.V» INTERNATIONAL TAXATION,

E 24 .

RASTROTHANA BUILDING,

NRUPATHUNGA ROAD,

BANGALORE.

2 THE INCOME-TAX OFFICER. -- I

INTERNATIONAL TAXATION, _ '--»__ WARD-19{2), _,.,, -- A j

RASTROTHANA BUILDING, _. Q4 ' '·__ ` ' _ NRUPATHUNGA ROAD, , I ~ ° » _ I

[By Sri. M.V. Seshachala & Sri. KY. AryI1dd,*Ac;I€zs.l, I ._., `·»_, M/S. SONATA INFORMATION * I TECHNOLOGY LIMITED, , ` ~ _ _

NO.193, 151 FLOOR, ·' 4. V`"`` » " .4 R.V. ROAD, BASAVANGUDI, _ , ,

BANGALORE ~» 560 004. I I 4 ` A. _` Z , RESPONDENT [By Sri. G. Sa1·ang.;j, Sr. Cdiins-éjl f61=,ISnf1t. H., Adv.] THESE, FILED UNDER VBECTION 260A OF THE INCOME TAX ACT, 01961, F'·RA'{"ING TO SET ASIDE ORDER DATED 31.01.2006 BASSED. IN YITA. NO. "-3428-3431/BANG/2004, AND In ITA N0$. 106I` 2006 657-6§L0f 2009 B'ctw¢cn§_4`W·= _... ·-- ~·

1 I COMMISSIONER OF INCOME~TAX,

, INTERNAIEFONAL TAXA'I`IO1\E.

I .44 RASTROTFLKNAQIBUILDING,

,4 I NRUPATHUNGA ROAD,

I 4. ·I_` ` THE INCOME»TAX OFFICER, 1* '·__ ` ,,__ ° VINTERNATIONALTAPLAIION, I ,_ ` LA.' VL~, ,4 _4 4 1 `WARD»19[2], _4 ` Y ` RgASTRO'FHANA BUILDING, A *0 · . 4 4 -- .. NRUPATHUNGA ROAD, Q4 -- BANGALORE. APPELLANTS

" 25 .

{By Sri. M.V. Scshachala 8: Sri. K.V. Arvind, Advsl _ " And: ____ »1q ,1 .

M/S. SONATA INFORMATION - ` I TECHNOLOGY LIMITED, V -- V_`` , ° _ NO.193, 1ST FLOOR, , ---------- _ ` I" ° ' _ ° , ` V RV. ROAD, BASAVANGUDI, ' .V ¤ ~ ¥ BANGALORE ~ 660 004. ·. RESPONDEi`5T,_ THESE APPEALS ARE FILED UNDER SECTION 260A0_OP` I INCOME TAX ACT, 1961, PRAYING TO ASIDE ORDER DATED I 31.01.2006 PASSED IN ITA NO. 168291708/BANG/2004,;, AND _ In ITA N0. 1062 cf 2006 N - ' S . 1 Between: » " 1,1` I ` e.__ _ I I 1 THE c0MM1$$10N`Ifi}2;01¤`1_mQQME»~T;.X, WIIW INTERNATIONAI;"TA}(A;TION,'e. I - - = RASTROTHANA'B`(EIVLDING. I · _

NRUPATHIUNGA ROAD, I `·._ ` `

2 mE 1NC0;v;E·TA.*;WO1¤fF1cHR,

INTERNATIONAL TAQXATI

WARD~19(2],4" _ » 1. `

BUILDING,

, " ° ~, A NRLIPATHUNGA ROAD;

V APPELLANTS

, I 5;~1Q;»1,v. Seéhachala 81 Sri. K.V. Arvind, Advs.} ~ .@.1,/s.»..MPms1s_0BFL L11v11T12:1t>. ° S 4, __NO.139,·'} ,4HOSUR ROAD,

* ` e,__ KORAMANGALA, Q

, . ,,,A V6·. BANGALORE » 660 095. RESPONDENT 10 ~ I .. I [By M/S. King & Partridge, Advs.]

we

26 .

THIS APPEAL IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED 20.01.2006 PASSED IN ITA NO. 980/BANG/2004 FOR THE ASSESSMENT YEARS 2001-2002 AND ETC., _, In ITA N0. 1258 of 2006 __ ·».__I Between: T .

1 THE COMMISSIONER OF INCOME--TAX,M ` , ' _ I INTERNATIONAL TAXATION, ' --_ _ P. · __ j RASTROTI-IANA BUILDING, I. I A `''~ ···, . - `'-,_ NRUPATHUNGA ROAD, A ' I I _ , ._ ` --_ 2 THE INCOME-TAX OFFICER, °

INTERNATIONAL TAXATION, V____ _ · . V V 5 RASTROTHANA BUILDING,,` _ . " »

NRUPAT§·IUNGA ROAD, _ > » , _ I » I . BANGALORE. A_ H ._ APPELLANTS [By Sri. M.V. Seshachaia Sr Advs.} And: .4FI° I

ENGINEERING ANALYsIsF CENTRE ' -- .

OF EXCELLENCE [P] LTD., 3 ' __

PHASE~3, SITE NOQII 52, -- _ 4 I . ` HOODI I . _ ,_

EXPORT INDUSTRIAL AREA,

PHASE. XVHITE FIELD ROAD,

BANGALORE ·_560 RESPONDENT

' __ sQ.Ic.g;:1.-ES;]. Sr. Counsel, Sri. V. Ganga Bai, ._ ' Sn. Pavan. Sharma, & Sri. Kuber Devan, Advs. _· j _ for L}nive1'salLegal] -

I 4 , '.{`I~lIS APPEAL IS FILED UNDER SECTION 260A OF THE . , _A ` --.__ INCOMETAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED Ie.I 25.11.2005 PASSED IN ITA NO, 954/BANG/2004 FOR THE ` IASSESSMENT YEAR 2001-2002 AND ETC.,

I 27 ,,

In ITA N0. 1264 of 2006

Between:

1 THE COMMISSIONER OF INCOIVIE--TAX, , INTERNATIONAL TAXATION, ·

RASTROTI·IANA BUILDING, - , '---._ NRUPATHUNGA ROAD, 4 _,_,, _ ` , I - _A · __ 2 THE INCOME--TAX OFFICER, I ~ 'i`DS·1· · A```` . _ , 3 »,

RASTROTHANA BUILDING, ,_ I Y ` _ `V», I ,.., I '--. I NRUPATHUNGA ROAD, ·_ ¤ ` ° I , _ ' I . I BANGALORE. 4- 4 ;--,, APPEL&'I`S I I I [By Sri. M.V. Scshachala & Sri; ER'. Arvi1;d, AdFvs.0]'4 I I INFINEON TECHNOLOGIES INDIA P"\/`T. ` _ IOTH FLOOR, DISCOVERY BUILDING, __ _ _ V » ` 4 INTERNATIONAL, 'I`ECI·I_NOLOGY 4 0·.,_DIA __ » VVHITE FIELD ROAD; { 4 ·-.` __ __., BANGALORE -- ' ._ RESPONDENT [By Sri. 0K._PQ' Kut1'1&If.·,AdV';--_fOV1'< M/s. King & Partmdgc] THIS _IS- FI-LED SECTION 260A OF THE INCOME ACT, 1961, PRAYING TO SET ASIDE ORDER DATED 2`5.`I·] ,2005* PASSED IN' ITA NO. 468/ BANG/ 2002, FOR THE ASSESSMENT 2001-2002 AND ETC.,

, 4 m xm,__x;ge. '1:,é§;_$,_;;mg_·2,¤06 .4I°"&;twee11:--._ . I

4 ` COMMISSIONER OF INCOME~TAX, 4 , * p ; I _ INI`ERNATIONALTA){A"1`ION, 00 ° '-_4 'V--, I _RAS'IYRO'I`I·IANA BUILDING, NRUPATHUNGA ROAD,

,4 I I ` -- THE INCOME--TAX OFFICER,

S

3 .

[By Sri. M.V. Seshachala & Sri. K.V. Aravind, Advs.] .» _ And: »___q

M/S. SAMSUNG ELECTRONICS CO. LTD. · 14 ' . INDIA SOP IWARE OPERATIONS ° -- . LEVEL 6'VIIAND Tm, ' -- '·-. Q _

PRESTIGE MERIDIANWII, " AAOA` --, _ V. · ._ I . NO.30,1\/LG. ROAD, . T 1. `'--V --.--I _ . V'-LA BANGALORE - 560 001. ` RESPONDENT`¤_ [By Sri. KP. Kumar, Sr. CO1,1X`kS€14`fQI`UI11V€§fS31 · I I THIS APPEAL IS FILED UNDERMASECTION $260A THE INCOME TAX ACT, 1951, PRAY1`i`=€G TOR SETASIDE ORDER DATED 18.02.2005 PASSED IN ITAA jI\I0.. 266/B1/2002 FOR THE ASSESSMENT YEAR 2001·2002 . _ A » A ,4 IH ITA N0. 2809 of »1O1W I 0'·. I Between: , * ' '1A-- I _ I 1 THE COMMISSIONER A

INTERNATIONAL TAXATI ON, .

RASTROTHANA Bi,IH,D'ING, ` --_ · i

NRUPATHUNGA

2 THE INCOME;TTA){`OFF`ICER TDS~I,

J ._ RASTROTHANA BUILDING,

r * NR0U--PATIHIJN'GA ROAD,

* 1 APPELLANTS

V A ' 0`[By Scshachala, Adv.} I '·--.. -

` `M/`S,,1S.'\MSUNG» ELECTRONICS 00. 1:1*0., 4 I I * p ; INDIASOFTWARE OPERATIONS *~ . _ A ° '»_ 'II2EVEL.61`¥:€_AI`~ID 7TH, ' ~ -._PRESTIGE MERIDIANJI,

_ " · . V BANGALORE · 560 OO1. RESPONDENT

A

30 -

25.11.2005 PASSED IN ITA NO. 372/BANG/2002 FOR TI-IE ASSESSMENT YEAR 2000-2001 AND ETC.,

In ITA N0. 127*0 of 2006 , 4

Between: '·~..

1 THE COMMISSIONER OF INCOME-TAX, ·' I ` I A 4 INTERNATIONAL TAXATION, 4 ' -- , RASTROTHANA BUILDING, ,,,,_ I '· '`·- I, L, NRUPATHUNGA ROAD, " w 4 .4 ` ._ 4 f BANGALORE. » _A A `''~ * ···» , A I'·,_ 2 THE INCOMEWTAX OFFICER, 4 I Dj I INTERNATIONAL TAXATION 4 " _ _·W» 4 " * WARD-19{1], ` ' ,

RASTROTHANA BUILDING, ,___, " - ° · I _ _ I NRUPATI-IUNGA ROAD, I ` A, 4 I I BANGALORE. I _ I * APPELLANTS {By Sri. M.V. Seshachale Sri. Advs.} ENGIN SIS 4 j

OF EXCELLENCE (Pj·LTD,.4`,' 4 · ` I _ PI·IASE~3, SITENO; 152,4

HOODIVILLAGEQ4 _ 1 ' ,4

EXPORT PROMOTION 1E`~EDUS'IRIAL AREA. PHASE, FIELD ROAD.

BANGALORE 066. ° · ·' RESPONDENT I Sli. Ganfésh, S1". Counsel, Sri. Pavan Sharma, , 4 _ *6: S11. jisuam Bevan, Advs. for Universal Legal] IS FILED UNDER SECTION 260A OF THE

V INCOME TAX ACT, 1961, PRAYING 'IU SET ASIDE ORDER DATED ' ·.'j25,_l`I,.2005 PASSED IN ITA NO. 955/BANG/2004 FOR THE A 4 ,4 4, __ASS%SMENTYEAR 2002-2003 AND ETC.,

7 31 ,

mud

In ITA Nos. 1060 of 2006 &595-604 of 2009, 737 of 2007, 738 of 2007, 739 of 2007, 740 of 2007, 741 of 2007, 745 of 2007, 746 of 2007, 747 of 2007, 777 of 2007, 780__gf 2007, 782 of 2007, 785 of 2007, 786 cf 2007, 787 of and 953 of 2007 __,, " I I .

Between: ~ I .l`` I

1 THE COMMISSIONER OF INCOME--TAX'," ._ II I- "_ ` ., I I _· II , INTERNATIONAL 'IAXATION, ,_ I Y [ 'e», I ..., LI `--_, I RAS'I`I20'II--IANA BUILDING, --_ I ` * I _ _ I . ` NRUPATHUNGA ROAD, A. A ` y ` 2 THE INCOME--TAX OFFICER _ I

INTERNATIONAL TAXATION, _» I```` -- I' ._ WARD~19{2}, _ ,-,

RASTROTHANA BUILDING, T A. _I , II , " _ NRUPATHUNGA ROAD. __ __ I --_ _ _ ``'· . ` BANGALORE. W ' I 3~.,_Iev _ COMMON I I''-- , APPELLANTS

{By Sri. M S1;éQ12_di--rig Counsel] M/S. SONATA ,_II

TECHNOLOGY LIMITED, - 3

NO. 193, ISTFIJOOR, . * I

RV? ROADL. " _ .

BASP.VANGUDIe,. _ I I

BANGALORE ~ 560004. COMMON

. RESPONDENT

I ' , V [By G. Sarangam, Sr. Counsel for n V °··.. I - Smt. H. Vzmi, Adv.} , ` ITA NOSFI 1060 OF 2006 81 596-604 OF 2009 ARE FILED v_ _ " 4 { JJNDER SECTION 260A OF THE INCOME TAX ACT, 1961, PRAYING . ` '-., w `'·, 'PO ASIDE ORDER DATED 31.01.2006 PASSED IN ITA NO. ° _ ·..__3084--3'094/BANG/2004 AND ETC., _

3* I 32 ,

ITA NOS, 737 OF 2007, 738 OF 2007, 739 OF 2007, 740 OF 2007, 741 OF 2007, 745 OF 2007, 746 OF 2007, 747 OF 2007, 777 OF 2007, 780 OF 2007, 782 OF 2007, 785 OF 2007, 786 OF 2007,8; 787 OF 2007 ARE FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED 13.04.2007 PASSED IN ITA NOS. 307 /BANG_/ 2007--, ' _ 305/BANG/2007, 302/BANG/2007, 301/BANG/200,7-,, 298/BANG/2007, 325/BANG/2007, 296/BAi\?G/20.07, · .4 295/BANG/2007, 297/BANG/2007, 300_,»'B,XNG,_/20,07. 4 _ 304/BANG/2007, 303/BANG/2007, »306,'BANG/2007'_ 8:,, 4· , 308/BANG/2007 AND ETC., ,_ I Y Q '·1, I ._., I '--_ S ITA NO. 953 OF 2007 IS FILED- UNDER SEC'1`IO1\I-0.260A OF V THE INCOME TAX ACT, 1961, FRAYINGTIO SET ASIDE'·OR)ER . I DATED 10.08.2007 PASSED IN ITA NO. `2`1V1,/BANG/2UGG.'FOR THE ASSESSMENT YEAR 2006-2007 AND ` · . 4 In ITA Nos. 1203 of 2006,·.._1:'304, of _,_?.__{]»;~§__),(,5,_,,_1_205 of 2006, 1206 of 2006, 1207 0f 2006, 1208 cf, 20,0_§`)_;,,,_1__,2_Q9 of 2006, 1210 of 2006, 1211 qf 2006,,_,,]._212 of. 2006, `1213 of 2006, 1214 of 2006, 1215.9j_2_QQB, 121.;6.0f.2006,",·1217 of 2006, 1218 0f 2006, 1219 0f·2Q__06, 1220 {@2006, ··'` 1221 of 2006, 1222 of 2006, 1225 of 2006,

1236 of 2006, 12§__'§;_qf__2LQ€)_§_L,1_2_;58 bf 2006, 1239 of 2006, · 1240 of 2006,1241 0f¥t2,___0m(_,@,,,,,1242· nf`12006, 1243 of 2006 and 1244 0f2006`·". _ ,4 --

Between: _ ·_ P ·

1, THE·VCOM§.4ISSIONER OFINCOMETAX. ' _ ' TINTERNATIONAL TAXATION,

' 4 I RASTROTTDAINA BUILDING.

' NRUPATITUNGA ROAD.

I BANGALORE.

V 2 , THE ADDITIONAL COMMISSIONER

, _ _ OF INCOME--TAX {ASSESSMENT] . " S ° IN'E`ERNATIO1\IAL TAXATION. 4_ ,4 ' 4 { . ,_'-- I RANGEJ9, I I PTT, '- V''-- RASTROTHANA BUILDING, 1`IRUPATI-IUNGA ROAD,

` » _` ' 4 BANGALORE. COMMON

F 33 .

[By Sri. IVLV. Scshachala, Sr. Standing Counscll J And: ,_3VV I »___qA

M/S. SONATA INFORMATION `V'`` ' » V TECHNOLOGY LIMITED, 4 ` 2. _ V

- NO. 193, IST FLOOR, . - ,_q` , ' `_ R.V.ROAD, , ~··~-- _ ' ` Q 2

BASAVANGUDI, V V »,WV " · 'V__ ° BANGALORE ~ 560 004. [ ~ COMMON . ¤ _ R,ESI?_ON'DEN'§A *

[By Sri. G. Sarangan, Sr. __COU.1').S0l`f01' 23 11 Smt. H. Vani, Adv,] " ,_

THESE APPEALS ARE FILE? UNDERVCSECTION 260A OF TI-IE INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED 07.04.2006 PASSED 1 IN __ `°*-- V 7.63/BANG/2005, 769/BANG/2005, '"·.7?`--I/BANG,f200·5,·"1Qf T70/BANG/2005, 772/BANG/2005, __ V ,*774./'BANG/200,5.6 1144/BANG/2005, 145/BANG/2005,* _ _''--- _ 7*76./BANG/2005,°. ._ I 778/BANG/2005, 1016/BANG/2005,, _·`_ 453,¤'BANG/.2005, } 452/BANG/2005, ' 1015/BANG/2005. Cii?3/BAI€G/200.5., 206/BANG/2005, 777/BANG/2005, 205/BANG/2005, 146/BANG/2005, _ 450/BANG/2005, . *4.¥511;'BAI'\IG`y*2005, 775/BANG/2005, 1026/BANG/2005, · _IOI9./BANG/2005, 1025/BANG/2005, 1021/BANG/20054, 110213/BANG/2005, 1024/BANG/2005, 1018/BANG/2005} I0}?./BANGY2005, 1022/BANG/2005 8: 1020 / BAN G! 2005 AND ETC.,

E ITA 2006 & 543-548 or 2000, 1247 or 2000 82; __gfj§);Q_9?,_§.248 of 2006 & 580-584 of 2009, 1250 ` , of 2G06~.& _576··¤5'}'9*0f 2009 and 1251 cf 2006 ._°Betwccn:.__ _ M . I

` THE CO_]?¢E[1\/EISSIONER OF INCOME--TAX, 4 I p { ' _ INi`ERNATIONALTA)(.A'iTON. `·-- . __ A '·--. ' _i*€AS'I.T*20'I`I--IANA BUILDING. NRUPATHUNGA ROAD, »

BANGALORE.

F 34 ,

2 THE JOINT COMMISSIONER

OF INCOME--TAX

INTERNATIONAL TAXATION,

RAN'GE--19, _

RASTROTHANA BUILDING, --

NRUPATHUNGA ROAD, __ ».___

BANGALORE. COMMON ,_ ' . , 3

[By Sri. IVLV. Scshachala, Sr. Standing C0;1ns<=;I]j, I A And: , LI.G 0 Y '·VL 0` ·.._ "'-_S 00 M/S. SONATA INFORMATION A. A 0 TECHNOLOGY LIMITED, ' Y _ R ·

NO. 193, lg? FLOOR, ° * A v_

REV. ROAD, __ '

BASAVANGUDI, ·' _A '`'`` ·» " ,4 BANGALORE - 560 004. W , , COMMON 00 ,0 v .0 , 0T . RESPONDENT

[By Sri. GQ »Sara21gém,, ,»Sr.400C6-unsél Smt. I~IQ'.Vz:.ni;Aci·v.} '··0 M ,_·A 0 YS FILED UNDER SECTION 260A OF THE INCOME TAXVACT, 1.961,0"·PRAYI%?G SET ASIDE ORDER DATED 07.04.2006 PASSED IN `· ITA NOS, 135-141/BANG/2005, 236- 242/BANG/2005,4 262~2670,fBANG/2005, 88-92/BANG/2005 & 498/BANG/2005 AND L '_§_(1 F `0

Q;. ITA .2007 549-551 of 2009 and 94 of 2007 ...& 6@,@.,9;§"2;£J;Q..Q

0

` THE COMMISSIONER OF INCOME-TAX. 0 v_ { ' __ INi`F,RNATIONAIJTA}(A'I`1ON, '·»_ ` BUILDING,

07~0 NRUPATHUNGA ROAD,

6 35

2 THE ADDITIONAL COMMISSIONER

OF INCOME--TAX

INTERNATIONAL TAXATION,

RANGEJ9, _,

RASTROTHANA BUILDING, »

NRUPATHUNGA ROAD, _ ».___

BANGALORE. COMMON __ ' _ . -

{By Sri. I\/LV. Seshachala, Sr. Standing C0u:2s<=:I]'·, . And: ,__I I 1 · Vwhv T ._.A I'-_ M/S.: SONATA INFORMATION . I'·-- I ° y TECHNOLOGY LIMITED, ° _ 5 --

NO. 193, ISTFIIOOR,

R.V. ROAD, __ " ,

BASAVANGUDI, ·' _. V```` » I

BANGALORE -- 560 004. _ l A * ,,__ . .9 COMMON M ,3 v .3 . T . RESPONDENT

[By Sri. 1Sar2mgzém.3.Sr.`C§juqrIsci H.2Vami; Adv.] ·--.` __ ,_.,

ITA NOS. .V_I 549-5631 OF 2009 ARE FILED UNDER SECTION 260A OE THE INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATEDL07,04.2006 PASSED IN ITA NO. 436~439/BANG/`2005 _·`'

ITAQNOS. 94 OE320073 & 650w656 OF 2009 ARE FILED UNDER 260A OF INCOME TAX ACT, 1961, PRAYING TO SET ASIDE1 ORDER DATED 06.07.2006 PASSED IN ITA NO. 75¢I1_y7`6V1Y'BAI\IG/2005 D ETC.,

D ITAO1\I_6s. 2007 St 533-542 of 2009 and 921 of I _ _2_Q_07 Bt 503-532 of 2009

" Q ,

A 3`d- . 1_3` 1 "*d4I1¤.dD1R1@cT0R(c0MM1ss10NER; I CBFINCOMEWTAX.

_ ' --. V ._ ` ~ -- INTERNATIONAL TAXATiON, _ ' V, RASHTROTHANA BHAVAN,

E

36 _

NRUPATHUNGA ROAD.

BANGALORE ~-- 560 001. _ '

2 THE INCOEH/IE·'I`AX OFFICER 000 ` , INTERNATIONAL TAXATION, g ''°`` 0_'V , A ._ WARD 2{1}, 4 ' , .

RASHTROTHANA BHAVAN, 4 ° -, I

NO.14/3. OOOO. I `'~~ [ .,

6** FLOOR, ` ._ j »,

NRUPATHUNGA ROAD, A. V4 ,4 ''»V ._.A 4 N '._ ' BANGALORE. I COMMON, .4 ' ._ A

`APPELLANTS

{By Sri. M.V. Scshachala, Sr. Stmiding Cbcmseij T I M/S. SONATA INFORIVIATION M 0,0` _ ` 0`»AV V0 Q ,_ I A TECHNOLOGY LIMITED, ; . .w°` ` NO. 193, 15`¤'*`FLOOR4._. . ,F0& A · .4 , 4 R.V. ROAD, " _ .``'· .4 ` 00'-- , `'·A, _ I Q BASAVANAGUDI, ° . M I;

. BANGALORE -- .041} `g EF ''», COMMON U _ ,4 -- RESPONDENT

{By4S1i. G. .Sé11¢§;mg£=.;i,~ Counsel for ` Sm';. H. Vain, Adv.]

rx 00*ITA OF02007·°& 533-542 OF 2009 AND 921 OF Q 2007 & °503--532._OF`2009 ARE FILED UNDER SECTTON 250A OF THE INCOME TAX_AC'i',. 1961, PRAYING TO SET ASIDE ORDER 1 V DATED V18.07.200'7 PASSED IN ITA NOS. 931-941/BANG/2006 & --_072--702)'.B1§NG/ZGI}7 AND ETC., - Q HAVING BEEN HEARD AND RESERVED ` FUR JUDGMENT ON 14·08~2009, 17·08~»2009 & 2008-2009, 4 4 , v_ ,4 COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, f ` · . __ 4 " ·._4 KUMAR J., DELIVERED THE FOLLOVJING:

JUDGMENT

The above appeals are all by the revenue Vl`b iq against the orders passed by the Income Tax .``` é` Tribunal, Bangalore Bench, where if B. "V_q A had allowed the appeals filed gdifferentf resident QV A assessees in respect of different asfsessment,1 J if holding that the resident --- assessees liablelffor deduction of any part of the m.ad¤eA--iby"'therr1 to nonresident suppliersfaslprice for the software which if _--'_g it assessees had acquired/purtihased"'jl __2nonl~;residents for the i purposes of of the resident --

assessees in the utbaclrgvroundx of the nature of their liability}obligation;under the provisions of section 195 of g the ·A»f $1BGl [for short the Act'] by holding that the payments were not in the nature of V. gg ·i,_ 4 lglg ,lW_ ipayments within the meaning of section 9[l][vi] of V _, ,,.4 1--`, it is not royalty it is not income and if it was B _.g¤ `fjgnot income in the hands of the non-resident assessees it

%

, 4 ·

[By Sri. K.P. Kumar, S12 Counsel far Universal Legal] THIS APPEAL IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, IQGI, PRAYING TO SET ASIDE ORDER DATED 18.02.2005 PASSED IN ITA NO. 264/B/2002 FOR . ASSESSMENT YEAR 19932000 AND ETC., _; 'V°`` * . V '· 11:1 ITA N0. 2810 of 2005 , . .. Between: - VA_2 O 3 ··.V ° ._.A 2'--_ R I THE COMMISSIONER OF INCOME--TAX·,* A I , I I I Y T V INTERNATIONAL TAXATION, ° V , ` , · » RASTROTHANA BUILDING, ° " I 'V NRUPATHUNGA ROAD, _ ` · . V ?

2 THE INCOME~TAX OFFICER TDS<I._a DVC ` _ RASTROTHANA BUILDING, ° .V V VV `"'-- . ` NRUPATHUNGA ROAD, I I e·.VVTs, _ I BANGALORE g -- ·''2 V APPELLANTS V . SeshaeI;ala,.eAdv.l _

Mf S. SAMSUNGO V

INDIA SO ARE OPERATIONS '

LEVEL GTK AND TTU, * ` I I

V PI?ESTIGEI'lI·IERIDIAN~II, I ' ~ _ _. NO.30, ROAD,

- 580 RESPONDENT V

. min Sr. Ccunsel far Universal Legal} F V IS FILED UNDER SECTION 260A OF THE V _ __ TAXIACT, 1961, PRAYING TO SET ASIDE ORDER DATED V " _ ·1I$%.O2.V2005 PASSED IN ITA NO. 265/BANG/2002 FOR THE V_ ° V CVASSFISSMENT YEAR 2000-2001 AND ETC.,

§ 42

Av0ic.iamee Ag!`('CH]t'1`1{.S ['i`0t· sh<>1·t' `I)'.I`AA`} e11t.e1·ec1 iht;0 with severazl C()lll}U`i(`?S &·t]`I("i z'e1evamt" Ihr the purpose 0i` eauih pa:1yme1·'1t'. · _W__W V"¤ i

6. While the hattxure of pa1yr1aemt §gg; t;est;e`d 4"4¤q T.()l1Cl'lST.0].`1€ of at myatltiy [3215/H'l€l'l{. ats tif 4_V` j qV"` · 1 IJTAA amd the present. pa1yme1'1ta i`eih the het quztlih/ir1g for c1ee;e1*iptii0r1 `rc>tti;¤l_t.y}A a1.a1<t goes 0ut { of the purview of `1'<>ya1ltiy` at-ssec%_i*t11eqt};aVit1 A·W` tretjhtsé at aseetiicm 9[l}[vi] 0i` the there am imetms;ie;t;ehey am £ht.e1·hatti0ha1i Ag1·ee1"1a1e1*1t jathc! p.1;t>viSihi1*1':s at the Act, it is the i31`€Wi.$iO¥'\$ wi" tiéillatt hatfs I0 prevazil amd t;hetfef01'eV.tfhevleehe1ttsier1 _ofthe originati auttherity amd the 1`i1fet'_ a2t;Q];¤et1att1';:`A·»e1t¤ th<;t·ity than it royalty amd {.t'l€1'C?f()]T€ __t1·at<v<>1·rtete'·£'a;t.11a'1etV<'6t1ai>Patr1d 1'Tt0t" st1sst.a1i1·1at1i>le. I,,€}E'l.tLi]Q({`._C(éht`HS€i {01* the aztssesseesees have <;ertt;ehdec1 v_ ·.;_t;_>]§qea1ls thatt the I`l&kt'lll`Ci of patymertt is met; V Vexteyt within the meaming amd scope of section -`A`

A .

5 .

In ITA N0. 2911 of 2005

Between:

I THE COMMISSIONER OF INCOMETAX, ` _ _ C.R. BUILDING, I I, V`''· "

QUEENS ROAD. . -'·VV `

BANGALORE. A

2 THE INCOME-TAX OFFICER {TDS]--I, AAAA_ ' I ' A C.R. BUILDING, ' ·. D _' ` , _

QUEENS ROAD, . _, A A ''eI -- '·'-- , I '·II BANGALORE. D VAPPELLANTS

[By spi. mv. s€Sha¢hiéIg, A¤iv.1__ » X I »_ A.p_·;1; J ,III,R `

M/S. RAFFLES SOP IWARE ' A .I_' I _ 'FTH FLOOR, NO.12I, _ * -- , __ -- --_ DICKENSON ROAD, I ., . ». VI · BANGALORE ~ 560 0·4V2_.._· ,_ , V I`'e, ' `E·R.ESPONDENT [By Sri. RQBWQ VKriI;}3ne,.,a_S1'i Kumar, Advs.] THIS SECTION 260A OF THE

INCOME TAX ACT, 1961} PRAYKNGTO SET ASIDE ORDER DATED 28.03.2005 PASSED IN ITA NO. 151 / BANG/ 2002 FOR THE ASSESSMENT 200042001 AND ETC.,

ITA Nb; (bf 2005 I It

Betweeix; - I I I

THE IC0MM1$5xbNER OF INCOME--TAX,

* , INTERNATIONAL TAXATION,

_ __ , _'·.V RASTROTHANA BUILDING, 5 I I E'ERUPATI·IUNGA ROAD,

,. K ,''· _ -- I.'· 'BANGALOR--E· AIDD ' INCOMETAX OFFICER,

H _ * ' _ MI1\}TER,NATIONAL TAXATION, _ WARD~I9{2},

'I._ > _ _·VT · RASTROTI~IANA BUILDING,

? 51 ,

8. Whether the Tribunal was correct in holding that since the assessee had

purchased only a right to use the

copyright i.e. the software and not the _ ~ ,___ A entire copyright itsey€ the payment qV_W_ . ._ cannot be treated as Royalty as per the · . Double Taxation Avoidance Agreement A and Treaties which is beneficial to the -- `'·~ Q . A assessee and consequently seciion.Q--._of' » the Act should not take Jinio * A i_V` i consideration. ° y ' _

9. manner me rneem1.»¤5iq;§..ij;§rr¢¤t in " holding that the payment the

character of purchase and saleof goods and therefore cannotjy be c__V ' '».V eared as ' royalty payrnent liable to Income "

13. It is in the eeelkgrelwie ·.WV such developments and the questions arisenllfor examination in these appeals, argurnents are J . I-

14; Seshachala, learned senior standing counselappears the appellant ~-- revenue along with K ..'e\ravind,Wl"`learned junior standing counsel, in all --~the·se·.cases,"nd21ny learned senior counsel instructed by '°ll counsel on record have appeared and made

§ 54

I`C"`i"C?1"1`('d t;hcéi·tvii·ii (1C?€'Tl`]`1(T(i to 21('('l`E,.l(' or twist? in india squztialy applies to ther ikicts 0i` the present came. Atvctiitiiiigly, Sri.Sc>sstia1t'1'1a11ai. hringts t0 our notititi thgj aisscssinciit ()I`(]f;Tl` Vx'l'1E·?l`€iI"1 the Asscssiiig Offictiit _ exgiminecl these issues which is Hit _l`` ·V·4 stippc>i·ts the view of ther Assessiiig Oi`fi·;i@r 2 i Qffbtft that the tl`&U1S21C[,i()I41 when fmt;} `'wq zigzmemiciit. i·eiic2cts that it. is at iiitrtgiistté paid th»a1·ctii·1d@1· \>VQL!`it1w bc iS myalty within thc dctiiniitiniiitit`,Qéétztrtéttih 2Q{iiii{t?i} ui; tha i.'I`.Act and hemw SCCl_i:{m~·iiniéigjvQig'¥2;im;t3Ci~€d_ `jifvzjs yityticctd in ihé g eisssccssiiiciit t.`.lia¤1ii_Vt·--higi·. Oi`f`ic'·t¢1· had held that though rate tif cin myzt}it'y pci Scction I 15A is par A E] {}t{`j`(;.;5€]-It 1`p€;,i~tg€1-tmge fixed ibr t1if`f`€1'@I'it. Z ·h;1stW t4?it.i>¤ii1·t§,i to ther cfonclusion that thc: ciitim rI)Ei._ffHl€)I'it]Z tn l`i· at iO% as giving tht: meixinium ' ·hjc;i·1g€t`iti to the is just and pmpcr. i"VV' Sri.K.P.Kt1nia1·, lszetitiwd st--ri'1it>i· crntiiistzl Wi_W V {01* the msptitidtzitit would post? the ihlivwing Viti _~"-- _,

5 55

Q_El(`Sl`lOl1 lot being answered iietmely whether the NRI ` eheirgezlble to tax in India amd zitteinpts to answer the quesiioiii by eonteiiclirig that the 'l"i~ibtinzil in pa=ii·agi·a;§n_ 5,1 at page 35 has held tiliait the was not ` in law in contending that this ease is not __ Section 9{l}[vi) of the Act. AAAAQ 3 · ,,hV ° ._.A y ` 4·»_ A 18, Sri. Sesliaicclwiln would Ql)Il}l.€I}`tj`._V'th€l{. it Appellate Authority ati the effect of IDTAA, the V``W and also the l

meaning to be__ <roz·ii;ends that the i--oyz-titty as clei`i1'u;dl 2t.alii<jG;Sseci%'i,lo1i.€r[ l)(vi) ol the Act and the same defined and 13 of the DTAA

aigreementf l_:V ol°'USA Vsymieii respectively are one and time the payment made by the respondent _&c:omplei1.iy'i--s; in of royalty and not out right since soi"t;.l$Q»zi·i·esiienieiiiis with the tmi·isi`ei·oi·. ``_` _`VV· { 1V`' TAl'":}i*i;5esl·1z=ieliei1zi would further contend that the Vl_` V railing reporteci in 238 l'l`R 296 which has been li i l V

$' S6

ccmsidercd by the Appellate Aut1}'1n1··it;y at psigc Q4 of the paper india wl·1ereir1 it cmrsidered by the Advance Rulirig Autliority with l`€`$t'I`€l}('C to the f;`uncti0nir1g etc and ctmclucied that such payment amounts ° ·l¤¤ AI I VQ {vide page 99 and 100}. it c<_>r1t;endIcdA` it l1_& I I· 4,_Q I deemed income under Sectirm Qnltl'1eIIAct;..irresqIp.£:ctive V I the tact whether it is 'shrir1k4'»lrratg>pedI"scr I shelf/ branded s0ftware` whIic--h cdnsidered and gone into. Sri.S1cshachala.rcIier:§ 12 and I3 of DTAA pertaihi_r'rgIItdItI~--€lSll'l._i re}$*I1*z2nt:cI.I~_§Wedeii and points out that thecani;eIriiii"c>iIiII*gjiI` __¤_ l*C'Sjti{51lt,ltTIl`ll in this regard is oftwrn fold: I V`»V I I

(1) &_s0ft;\trare_is» ?gctjdIsI`I`and it dues not find a place Y I` · rI 1»1;.·{Ql'"l agreemIc1'1t. I V iii] defi11it.i0r1 under Section E2 It I't. fdr royalty the word software is not I°I$ri,_II§§esl1achala. learned senior standing counsel for thc 1·ever·rae further ctmtends that in the

Sri.Seshachala has formulated the following points for addressing the arguments.

(1) the assessee was bound to deduct tax under __¤_ Section 195 of the Act and he cannot contendi ` that it is not the income of the recipient-; ll i i (ii) The payment is covered by·Section 9(_l]{¥¢i} off, ` the .7 ggv.

[iii] The Tribunal did not consider" whether theii assessee can questioned the taxability: of recipient under Section- 2`U1i{`l)l_and 20l['lA]. [iv} Software is a scientinc liable to tax under Seetion w~itiii_ and relies upon the decision in `the_`case`ofifransmission criorpgrsuqir 'u¤iite;1_nvs;. Noni (1999} 239 ITR ss? {sc) at ipqrggi;;pni--s.

22.* . gSri,`l_i`}§§ iiumarg learned senior counsel appearing l forTthe·*res·pon;den·twould contend that the words used in lhseetioni ,ll95 lltehargeable to tax`. Hence a person -- ` under Section 195 would have to ._ , _gl' first see whether the same is chargeable to tax then only if it is so he has to deduct and if it is not

deemed inrome within the scope of Senétion 9(l.)(vi} of the Act", then if it. is to be taken to be a trading receipt. it wlll V be clia.rgeable to t;2t.X as busiriess profil. and conditions of the D'I`AA are satisfied then it ean L income accruing in india. and tl ·.._ y Q 4'·. A SI"l.K.P.KLl1`l'1El1' relies; upon the vexfy deoisiim Vuiooni by Sr1.Seshaehala and lnriiigs to noltioe 8 wherein it. is held 'applicaLloLn mf ded}L.1r>1.·v.t.ax$»\yr>ulAd1A arise only in the event Sri Kumar

coniencls that sale and iii iS H iféldillg receipt t.l1u$ not India. Sri Kumar subrnit;s i.hat'i_l`V in India then only it is c:l1a1·gea.l:>E.e to iaz;»: and the payment is made outside E lifdqia as Qintlie instant ease, it. will not be I Z liaolev_4t`o_lloe as such the respondent company _ `woz.1ld beq·red`>r.1lirc2cl to deduct the Sri Kumar yy ` if is not liable to be charged to tax then .. . _'VV· being cronstruerd as a peraon in default. under Wl_W V S$eo4.·--i<.m§2OO does not arise. 'l`hiss position the resspondent; ' -.4é 1~--·tq

A .

6 .

N RUPATHUNGA ROAD,

BANGALORE. . .. APPELLANTS

[By Sri. M.V. Seshachala & Sri. K.V. Arvind, AdvS.} V I » ,__O¤A And: lg --'''' , I

M/S. SONATA INFORMATION v_ V _``* A A ` · __ A V_ TECHNOLOGY LIMITED, A_A__ V * » I . I -- I · 4 -- V NO.193, IST FLOOR, I * _ _V > .V * R.V. ROAD, BASAVANGUDI, r _ ' v ` · ` ```' » A BANGALORE -- 560 004. I V RESPONDENT P [By SFI. Gr. SEiI`E11'lg&I'1, SI`. COLIHSCI I F THIS APPEAL IS FILED VV UNDER ...I 260A ,OEi THE INCOME TAX ACT, 1961, PRAYING TOSETDIA.SI_DCE_ORDER DATED 28.04.2005 PASSED IN ITA NO. ,3133-_/BAI€G','_2004 FOR THE ASSESSMENT YEAR 2002~2003 AND ETC; ¢ ·._4 " Q In ITA N0. 2989 nf ' _ I. V . . I

1 THE cOM1vg1s$icjNERI TOF xmii-:J,1v1E»§TA><, INTERNATIONAL TAXATION_A».,_4 f

RASTROTIMNA BUILDING,

NRUPATHUNGA V " {

BANGALORE. -- ' ' '

2 I I ° OFFICER,

.INTERN.ATIONAL TAXATION, _ _

'

V ` RAS'I_'ROTHA.NA--BUILDING,

* -- V NRUPATHUNGA`ROAD,

, _ BANGALORE.-" APPELLANTS

V ` ' A {By Sd, MIQV. Scshachala & Sri. K.V. Afviild, ACIVS.] . ~ A .0F.»6

V " · . V TECHNOLOGY LIMITED,

§ 60

craui crummicil in i-ui zippczil t)()l`(>I'f;T ilic EZll.l1.l}(,)I"li'l€S or the 'l`rib1l1i'ml as 1·©sp01'1cl@i1ii would siicp imo that shoes of aisscesscc, siibmiis ilwii by 1·@e1cli1·'1g i;1m cmirc _j`l.l(igHl€1fI}._`l}Yl_} iirzi11s1nissi<_>1'i C()l"])()1`&1liO.i`l ceiisc ii docs riot. --_ right. of the 1·<2sp0i'1c1©i11' to clizillmigcv {lm.ligbilifjf/dééitijéiizid _ -- · bzisczd on ctlizirgcability. Sri Kuniar ·._¤ VqQ A ctlmygceiblity (K0 pay aidvzmctc tail iiS,,_rcl'émlpic 4(Q} mad with Scctlicms l90.~ l96 'c0n.1;dr1ds that adniiiicdly in is r10t madc

in india amd it iS urge that the

}`C(fTl_]`)lG1lll. lvlillw I`(;Yg3I`d Sracticms f ily 5{Zbl, 9(¥l(\'il·--2'11i<i imo sczrvicc. This decision iii tlaellélzisc m_F,--Cl"3`l Eli Lilly (2009) 312 FFR _ 221ES`{S~C·} pairzigi·ei.pl·i 29* peigc 247 is relied upon to I V (T()II`l.€`--l_j}G pmvisioii uriclcr Serciimi 4 will have be ld(>:ii;1c2 i1i riiiil1id while rczzidixig Sccttiori 195 amd ai ` liaibl¤é_ntc> dcaduciii cam look into as to whciihcr i` A`VV· mcrigiieifii; is (`Tl`IE`l1"g€&bl€ 1,0 tax in India amd ll_l V CX€1.lTlll'}&il'.l()l'}. if if is l¥(_)l.lI'lCl by ixlicr i`€S1JOl]C1€I'Ill that

§ 62

Seeticiiii 200 emc;1 thus the }`C`f:ri])(`)1`1(1('I`ll" does 1101. come \V11.1'11l`l the zimbiij 0i` cieemeci {1C1`E1ll.1€€l", as the pziymeiui weisiiciti in the 1ieiiii·e of ei. i·ey;i1l;y peiymeiil;. _ _V___ '»0¤ ·

24. IT is ccniiiieiiicied by the leeiriiecl ceurisevl eissessee lzlizii (mee they do imii eiiiiiieiiiiiqleii me ._._ y 9 4s--_0& p1·<;>visiei·is namely Seeiien 4, {1Q}`C_t'(}l_10·S{,1VQ`I'} 0i`_<;1`9ee19i_iQ1ing99 the tax docs 1101.. arise as rcvc;1.1i1¥<ir··e19V L1l`1C101`9'·SW0lT1.:1(J11Q 195 liiaismuclm as Seelioii 195 _' v »§1edii9ct1i0n 0f lax only in respeci of gueli ·V., ii·iee1tiie° becomes cilmrgezilnle l.111(1Q.I;1 9_q_ Act iizmxely Seee·ic>i··i 4. _<ieiiie2i#iclle:c1 thanx eiiee they are ouiisicle the piiiiy9ie*iyc$F there is absolutely no ligflgilily tri 9_:w deduct 11&L`*1.`;&1"1`]C19_1'lC1'l(YC 1110 ccmsequeiiiliail order 201 had in law. Iii C()1`}.J[.C.I}(1€(1 Llieii; 0i`1"1cm--pz1ymem' 1'i0li eiltxmeieel, if duty 110 ciecluet, urgeci.

0. ·._. 99·-- 91¤imi·igeii*i, Seiiiiigr eemisel by relying iipcm te 5 992399*9 {1999) 1'1`R 587 amd with l`€1`@1`(iTl)(IC 1.0 Paxrziggrapli 8 ef

Q 63

the Ji.1cigo1iic·1·it of tho rl\I`llZ)l.lQI'1&ll which rotors to Section l95(l.l(2){3) of the liicomo 'lkix Act, submits that other sum cliaugcailalo under the provisioiis of th_i;s" would ¤·ic2u11 that 'sum` is cliaiiigoaible to AAAA tux. W}`1l(?lé|.'_i`L'»Ot?ilCl'_ bs %1SS€SS€Cl to tax utidor the Aot; tliut this '·'» , 1W"·sA 41 would bo whether the paiymoiit ol`th@ to V tosidoiit is ohzirgoublo to tau; u1idot__iti`h¢¤ tho Act or hot, submits that if t21i<_;·ii·tl.h€itY is not at ull ctliaugcatblo, ql__. lllz is hot E1 question aiiisworstlx CORPORATION

crust; hoczuisté question that ztrosc: for (`}OI`lSlCl€l`ElKlOIl Sairzuigzm submitted thgit Soctioih 195 to pure iuoomo roooipts like _.ll_ feuid not to something iu which the I uhd that the Supreme Court was not

· 1fQqti_i1'ocil __ zi. chaise? of tho prosout. 1'lEllfL11"(2 ih v_ C()]"})OI`E1lZl€)Il amd thoi·ofo1·o tho V O it `d('ftll'1%l(`)l>l isliriot am authority tot tho prosoztit caiso. submits OOl"lSl(lCI"&lll()ll iii those uppozils is as to whotilior the

s 64

pe1y111e11E 0i` E1 's1,.1111` t0 the l'1()1'1·l`€SiC1C1`1T. 0I1a1rgee1ble tax 1.1I"1dC1` the A01 01* 110ii? 1311011 sum may be 11100111e.w ` il'1C(')YH€ O1' il`]C()l'}`l€ l'IidC1€I'] 0r ernbeddecl V_ then tax required 110 be impesed V_.Vs .___ » ` 4·-_ A Ela1b0rz;11;111g Sri Sa1remga1'1 s1.zb111i1;_s· that 1x1}1Vz1`t \VOlI.l'd V 111001116: is t0 be mmputed 011 ":va1r10us pr0visi011s 0ft;11e Aeii i1](ZiU.di1ig· pr0xris1Aq111s_·r0re0mA01011e.ti011 0ft,i1e business i11e0111e. if receipt. TY&d€ Y€€*€iPY» m4€Y , Vétq proceeds 0i` SOUIS p'r0perty 01· lrflaey 111 the 00u1'se 01` f1,.1r¥,11er ex]>€11ri_1lf1;11'e;' _w11a1t;Wis 130 be dedueteci is iHC()H1€ tax payixble 1}1e1fe0;.;.__;1£i. £}1e rate under the Act. . 2 Under the xt0ij,;1l 0f previ0us year is Seetieu --%L{2). Seet.i011 4 prevides 1;E1z;11. 111 respergtncuf _0he1rgea1b1e 1111der SLlb·S€Ct4iOH {I}, iII(TO1`I1Cv(Q'2i}§·ASi};é1WH d€C1Ll(}'{1€C1 at seuree where it is s0 A V ideduet.1b }egmrler gmy pI`(}ViSi()H 0f the Act. If the sum that .4 begpaicl 110 11011-resiclem, is el1a1rgez1ble 10 tax, mx is V, ¥req1111*er1qtcdibe rieduczted. Emphazsises the w0rd "iI"; that

ti 65

lf $3 5000 is carried from this country then obviously it is not incorne. there is no question of deducting the at source; that if a gift made there is no income iri the payment; and draws attentionio 4¤400 Circular which says that if a contmission tiollt;l?ie__l·· ''`· i if 0W`'st ll person who carries on a cominissilori__businelss_abroadand; V i services are rendered in the otherV__c`ou_rit.ry to be subject to tax; that if gc)--0a]g,_ are qibonght;Ai`i1_ the foreign country and there is no

liability oftax in ».Wf · by Vivi i ll

26. SiibrnissioziislbyWIearried2t·:¤:>_tiiisel for the assessees is - as under, the which ``W» lbellpaicl inay be income out of4dVifi`eren.t·: heads of provided under Section 14 of i1'1COHl€ fwm Salaries, income from

phouse » `jprofits and gains of business or 0 professiori`; capital gains and income from other sources. v_ ll_y ·i%l`lT]€i·.$·(?l'if2Il"i€ of tax deduction at source applies not V *onpiyl ia ainoimt paid which wholly bears "incoine" Apvp

s 66

character such as salaries, dividends. interest V securities. etc., but also to gross sums, the Q which may not be income or profits of the j L as payments to contractors and st1b~contractors° lu ·.._ _ 1 4'·»6A payment of instirance conrmission. "lt has it , contended that the surn which may required_Vltol:beVpaid to the nonresident may a *receipt,¤ and. may contain a fraction of the income. It is true that in some a i64` contain a . fraction of the ``._ Vlvi ibtit in other cases such a interest is.s`i`ong.tra.Iisi`er of rights of patents, ' y goodwill or drawings Vavv machinery and such ` other transactions. lt contain a large part as taxable income of the Act. Whatever may be

prim lil;·_l;h(ér`A;;'lIlC()ET]C is from profits and g&i.¤S of g l"husi~ness.Vit wotlldlsbe computed under the Act as provided vt y_ ·li-- pp or regular assessment. , Thepirrpose of si.1b--scction (1) of section l9i'5 is to -.4A 1 lppll the sum which is chargeable under Section 4 of

e 67

the Act. for levy and collection of incom.e--i,zax. the should deduct il1(`()H']C4{.E1X thereon att the rates in 9 the &HI].(){.il"}{. is to be paid to at non--resideni.e,. The I provision for teiitzitive deduction of I --»--A _ "`'-- A subject. to regiiiziii etssessineiiit andy by·°iihe` deeductioni VW incomeftax, the rights of the gi1·e999r1ot? finxleiny manner. eidversely aiifeciieci,i__9_9]I?t1;cth;.rQ9 rights of the payee or recipient; are [`L1Hy_.----E}£if€igLl2i1j&€Ci·WA Sections `195(2), 195{3) 1¤._» Section 195 refers to payee eiid. to ai recipient.

29. It is contended l'e_·2iierieciPcounsel atppeziriieigg for the zissessces their i_he.o1e1lyVth`ii'1g which required to be done by to__i`ile eiiidaipplictziticiii for deterniinzition by Z the that such sum would not be

.9tT`i1VEll'g€ElB1C_i_W in the case of the recipient, or for ye `deterniinaitionof the aipproprizite proportiori of such sum y`VV· or for gmiit. of certiiiceite auithorising the Vl_d V r§r--i;miii to receive the amount. without deduction of tax, -949 ' V.99 dorVddedtiction of income-tzix at any lower rzites or no

E

'€ 68

deduction. On such delie1·n1inai.ion. lax at the applopriafe rate could be deducted at the source. if no application filed. incomedax on such sum .``` AW deducted and it; is the statutory obliggalion. olil Z '-- 4W A responsible for paying such "sunf1'" toldedygcti A before 1n.al<i12g payment. Hel to disc·har,ééei obligation of Lax deduction al.__sourceie stile infentlon of the legislature is gross sum then the provisions ol` the · conld ;l1--aXJe'--%aeVetl-- ongntted.

30. Sri éonnsel appearing for

the assesseezwouldl line assessee was able to n demonsnatie the 4 made to a non-resident wasm>lv.--.};;1. a11_V cl1af.ege_al1ie to tax and therefore no { O;Q)ji·g&{iV{;1;i_01q_ l;;q;.ijfCSld€¤t payer to deduct. on payment. that "l`ran.sn1ission Co1·po1·ati0n

» · an uuauljlts.éc>l·lt.y to hold thai. even when tlzelce is no v_ 2Venaegealailny lhere is an obligation to deduct. under V lSeet1lc>1·1¤$lQl`5[.l} of the Act, unless one has gone through --l4A I oi`Sec. l95[2} of`l1l1eAct;. 4 M

1é 69

31. Sri Ga111<1s11 s1..11>111i.1is 1;11a11. 1110 _jl.lC1g1"I`1.€f1'1}[1 01 the S1.1p1'c>111.c1 C01.111 fully s11pp01*1s 11110 case 01 131152 1.11:111; 1.110 0111.11*0 pa1ym<2111 is 1101 c:11e11·g<2a1bl€ 1.0 101*y ° ·l¤¤ 1 VQ 01 1.11cé 0111211gc: 111'1d<2r S€c.r1ii011 4 01" 1110 ». 2.11011 _q_A Z 4,__ 0b1igz11.1011 10 deduct. 611. z111 1.111d¤i11' $@1:1101*1. 01`111.i;1.A1t·1'. V V

32. L0a1r110c1 001111scl 101 111<;> p111__Li*Op1h sc;·vc1·z11 COI]1.€1l141()HS b2IS€d·W i· 011* _ »n_um.bcr 01 z1u1.1101·i11€s. 1:101111 01 "11'1<jS111g¢1ér1111;: 111101 WV.¤ ssvcrai High C0u1'1s, 10 drive 11) 11;.111111 pay111©1·11 is 1101 E1 p11y111@11_1. _111 `1.1lVé` 1;`L12?1.1L11'€ O1%VH *1*1%:1.11111 pa1y111c111; 12} that 11 is 1}]()l`€ E1 :p;1y111c111¤'1.11·1- 101 21 payment. 111e1d<: 1.0 acquire kl 00py¥1*i1g1111€c1ia1.111.i1;1&:·11'1111·1;z1ki1·1g thi} c11a1'z1c1.01' 0111 p21y111c:111;11111Qis .g00ds 01* s0111© .111s1·cthamdiz€; {3) 111211; 101* &iI"gL11T1€I]1Z'S sake. 1.110 pe1ymc111 is 1·0y2111iy pa1y111@111 1.lIl€1(21" {ht? 1IlCOi'I'1€ » · `A01;. v11i1..h01_11 "c011cc1<;1i11g. sven 1111211, 111 1;@r111s 01`1I1<2 v_ 1Q§1X£1~1Q1()1I :;1v01da1110c E1g1"€7'E}I)]€Il11S, 11. dscvs 1.101 rctz1i11 V °011e11rz.1c:1.c1· 01 21 myaltzy p&1y1"1l@I`11. amd 11; is em ·.4A I p10p0s11.i011 01`1a1w 1411211. the p1·0v1s1011s 01 dcublcz 1//1

7 .

RV. ROAD, ~ _

BASAVANGUDI, ` _ ° _

BANGALORE · 560 004. RESPONDENT `

{By Sri. G. Saramgan, Sr. Counsel for Smt. Vani. I-I., A THIS APPEAL IS FILED UNDER SECTION 26UA--.OF1THE INCOME TAX ACT, 1961, PRAYING TO SETASID-E DATED* 28.04.2005 PASSED IN ITA NO. 864/BANG./2004-A FOR ·-·T _ A `·._ ASSESSMENT YEAR 2001~2002 AND ETC., ' I I _ V. ·_ I _ In ITA No. 2991 of 2005 ' _ 2 · y Between: __ V.... I

I THE COMMISSIONER OF`INCOME#TAX,` --1.V ' _ . Q INTERNATIONAL TAXATION, » " ' Z --.__ " L RASTROTHANA BUILDING, ---- = _ ··.,V I 2 ` ` NRUPATHUNGA ROAD, .4 I _V~¢ _ BANGALORE. I V '_ Ir _ A ° I A ''`` 2 THE INCOMETAX.-OFF'ICER..VV' v_ I ` . INTERNATIONAL1'fP;XATION.._ ' ~

WARDj19(2}," _ I V'4_ I _

RAS'I`RO'1`HANA EIUILDING, ` --_ »

NRUPA'I`I~IU1`\IGARO1A.I}._ =

BANGALORE. _ A APPELLANTS

[By Sri. tSeshac*:haIr1 Sri. K.V. Arvind, Advs.] A · 1_ 1 A -. .· Q

M/ S .``e SONALIA INFORMATION

. TECHNOLOGY

" >NO.193, 1$'I`VF`LOOR,. A

~. RA;. ROAD:. ·

A -- 360 004. RESPONDENT

'· I A I `'·. A .511, Sarangan, Sr. Counsel for Smt. Vani. H., Adv.]

rt 70

tztxeition aivoidzince agreeinents prevail over the provisions ofthe local Ietws viz., the income 'lizix Act and at definition oi` royeilty in terms of the provisionsiioft »h _"`` j V1 income 'lkix Act, pairticularly E13 in S5?`Ctt<>t'i· it l' 4,__ A Income Taix Act, are of no consequenceYendl thereceipt V not at all an income receipt in lietnds 'oi;F it resident; recipient; [4} if aiconire the l cheirncter of ei payment torn or ei product, in the sensei; ~ A. is price copyrighted article, which in érpetckaged form, iivgiilgihle ont seller, then, even assuming theit nature of business receipt in the oi*.'e1lnonlresident, the non--resident; at perineinent establishment or not

Z eiiiqéiiig ei in India, the payment even if it it bnsiness receiptziiid consequently the income receipt _ hands the i'ion~resident recipient., then also, it ,`VV'. tlexed under the Act, but cam be subjected to Wl_l V 1t.é1.>il,_o`1ily gin the country of the nonresident, recipient and i.il ~,_l »

..; 73

» CCE v. H P INDL4 SALES (P} LTD.

E [{2007) 8 SCC 404}] __ ».___

I SPRINT R P G INDIA LTD. v. COMMR.] O4 I OF CUSTOMS [2000 {116] ELT 6 SC] A I ¤ _ _ » PUNJAB NATIONAL BANK R LIVAIII] I 4`·» [2004 (1'72)ELT 24 SC] * _] _ I ° i STATE OF KAR1vAT.¢<I{.4___v. » Y [(2006] 2 SCC 747] · ° °

2 RAJENDRA SINGH U

[(2007) 7SCC 378]. " I » 1

r CCE v. SIQBIKUMJL? ]].] [2008

(232) ELT'6[77 SC]; .. ..---- » sA1ws%t}AiG ICO. LTD.

INDIA `* -- OPERATIONS v.

I (TDS;I5I, IIANGALORE E

» SERVICE v.

STATE OF AP.W[1'2W004} 271 ITR 404

Y CORPORATION OF -.

, , INDL4 ·0F__AP LTD. v. CIT [(1999] 239 _ . I {TR 587 [SDC}! az

X Qjywzgjyi ]·.. op mmm U. AJA.01 BACHAO ° » ANDOLAN 82. ANOTHER [(2003) 263

~ ._V` ITRM706 {SC]]

,. "·__ `'V` v_ .~__CIT v. WJAY SHIP BREAKING .. _._-- ·_ CORPORATIONH2003} 261 ITR 113]

r CIT v. INTERNATIONAL DATA .» _

MANAGEMENT LTD. [(2003) 314 ITR " __ 177} _` * I .

r our v. Eivorivssmivo MALYSJS -- A EEIE j CENTRE OF EXCELLENCE PVT. _L'1"D.» p ' --.._ ·_ _ [ITA 2158AND 1270 OFEOOSJF _· _

r 01:1* v. ELI LILLY Aim co, (mom) » A A LTD. [(2009) 312 ITR 225 SC] A _ -- V . _ A r DIRECTOR OF INCOME}`TAX__v.

PRODUCTS LTD.,[[2002]`2,57 `ITR 1]

C » CIT, PANJAB v.

[(1965) 56 ITR 26} " .___ ` `»., _ Q ir on ;SUTPERINTEND.IIv'G lEQN*o1N1:ER. AP[(Ql98-5) 152 753] * A

34. 'l`hese.iarcV section 260-A of the Act. The Iricoine of legislation enacted by the Parli.anient. mainly lhoii the purpose of raising reyenue to·:ih·e'·<:e'oi;raI goyeicnment. and the aim and object __ Z is to».Ie¤.·iyllaiiclicolVleot' tax on all incomes which come A .. i>vii;hin th'o__mean.ing and scope of the provisions of the Act _ ll `aiililoiiantifyiifig the liability created on such income.

\Vl`i`lCh is NOK. li)? UIC Hléllll pl1I`pOS€ Of l€VyiI}g [HX (ll/1--ii'lc€ iI1C()H]€ of the i`€SiClE7l]i. Oi` I'lOI"l--1"Q'SiCI€Il[§ i.(?., \Vl'1€1if;"f. ` C€I`l£1ii`] Cli`CLliHSlZ&:ll'1(T€?S CCI"[,kll`[l lj}/'p(£<S of 3 C €XCI}lpIC(T1 {TOD] HIC? I'l(2{ of iC€1XE`lll()I'1, &\'V}]AiiTh.U`[T3V(;T`£1I'1E¤.`· ._._ y Q 4V`--_A EISSGSSCC [hOlJgil 1138 I`€C€i\*'QCi· J EULHOl.1i}iT by , n otherwise clefiiiitteiy coulci have treaieci iiicome will noi; become income lor of

the liability to tax under t,heyAci.iVri33 yiew exemption.

37. it is iihereibre botliv section and the exem_ptioi*i· ·sl1oi.1'lcl~--always be construed strictly aiiciziijlieire iiriduly expanding the S(}Op€' of levy, `élt `ii'ii€i`pi`€t.E1UO1"]. I 381; _A`` to scheme of the Income Tax Act, I- Z ¤ailié1;,»ri3`iii¤y3§1yi; iiici;.oi1ieq! the previous year is brought. to tau; I f()llV(>.X2k"l.I"lgW;y'CiE1l", k1'1()W'I] E;1SS€fSSi}]€I]iZ y€E3I` EUICI {OT _ ··'oii`icer io iiriaiize the assessment; and to c`VV'. specific tax liability of the assessee, ii V`.W V lI]VOlV€S EU] (2XCI`CiS@ of g€1i,i]€I'li'1g iIII`O1"Il]E1{QiOI1, M

t 77

seeking for further explanation and theii passing orders etc., there is bound to be a time gap between the actual earning of the income and the date of determination--l,o·f 1 the tax liability and as it was the ex.pei·iencei;~iof 1'·' ·',4 1 revenue that realization of tax becomes ` difficult when once the income earned been `·V` llll the assessee, even before the t`inalizationg the liability for the assessmeritg a demand notice is served order,

the assessee eit.}iei·limjay¤;not ,``* beliefi;* vvéjtiimiich funds or may not even ..¤, enforcing the tax i liability and to framers of the Act have envisaged advance payment of tax as chapters and XVI of the Act providing Z for an. of collecting tax, Where under, ll fsoine part._loi` ___' t he liability is recovered in advance at and remitted to the income Tax Department which 4"'a A i`VV'. avoidance of the later lamentation by the ·`¤~l due to the non--availabi1ity of the assessee or i ` A

é 78

even due to the non»z1ve1ilz21bil1t.y of the assets of essessee Eig2lll`1Sl. which the revenue could have proceeded _ for recovery ofthe amount;. _``` é` °V·4

39. Under the scheme of the Acts ini--ihe '·'· i qW`'hA main charging section, i.e. section éltof the lAci. V i the resident is concerned, gall qgilobeil income is teixeible in india eirider i'l*ierllAcri§r ferr as non~ resident is concerned; as the direlctly linked to the total inconievr such income whicli is eitheijreceived or been received in India `or deemed to have been

zqiccrued or iio in India in the year deririg snbject matter arises and even here the l1`1C('Q"l¥§jv"\Ff,l`ll()lfll"·l.$'--x_d€(§I"l'1(;"Ci to accrue or arise in India in nrjilidfeslideixi,. also coming within the scope of y · of the total income of the norvresident V. riwvgaiviiilci VV·-- ijhelreforesso ter ers iciowresidemc is concerned, there is dcocidsiderzible significzince to whether any income had .c4é Q `Y accrued to the nonwesidenti in Indie or has even Q

e 79

been deemed to have ziccrtied or arisen in india. This to be found in section 5 of the Act providing for the ` i totzi.1 income, while section 5 ofthe Act. provi_desiiorviithe L E concept of residence; section 9 of VAA` A ct;·.VproviVdes-is.: ._._ » 1 4`·» _ fiction, an artificial way of understanding; whether , has accrued or arisen in india by tiction and the significance beingiin_ non»i#esident sssessee, even by the empioy1fnentiio`t` section 9 of the Act, if some`inc€>ine-- `tdheive accrued er deemed to have in India, such

income, is inmiridiai. 1

40. In all the elbove discussion proceeds on the payments have all been rzmide to forei·gnA are all nonwcesidents within the ` qegmiiig 5, 6 and 9 of the Act and by the · iccynjuncztiveu uesicjiiiig of these provisions if it is to be held Wh tihtvitiq theepziyineiit in the hands of non»resident is in the V 5 payment which can be otherwise be celled ss the significance for present purpose is that the

-

8 .

. THIS APPEAL IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED 28.04.2005 PASSED IN ITA NO. 865/BANG/2004 FOR THE ASSESSMENT YEAR 2002-2003 AND ETC., _ " X11 ITA N0. 3075 of 2005 E"` * _ Between: l''` ·

1 THE COMMISSIONER OF INCOME~TAX»,~---- _ I I I I · VII` L_ Q ` __ I , , INTERNATIONAL TAXATION, " A " ' `T__ I RASTROTI-IANA BUILDING, ~ » * I * NRUPATHUNGA ROAD, _ * A *

· BANGALORE. r 1 N _

2 THE INCOME~TAX OFFICER., _ I ` VI .T ' A _ INTERNATIONAL TAXATION, , ' · z * ·_ WARD~19{1}, __ M --. --., L ' RASTROTHANA BUILDING, F''--, I " NRUPATHUNGA * I "W ` E ---- ----'` BANGALORE; I _ ·. APPELLANTS {By Sri. Sés§I§;;,,e1m1d Siig ,I§,_V.TA1*vir1d, Advs.} M/ S. SONATA SOFTWARE

APS TRUST ABUILDINGW, ` · " '

1[A, BULL TEMPLE ROAD, _ _

N.R.COLONY, .'T-- _ _ ` I '

BANGALORE ~ 5530 ,017. RESPONDENT

V {By Sr. Counsel fer Smt. Vani. H., Adv.] THIS. IS FILED UNDER SECTION 260A OF THE INCOME TAXACT, 1961. PRAYING TO SET ASIDE ORDER DATED ` '28;04l2005 PASSED IN ITA NO. 2989/BANG/2004 FOR THE 4 I 4 --_ ; ASSESSMENT YEAR 200242003 AND ETC.,

e 80

resident; payers such as the appellants are definitely under an obligation to make deductions in terms of section 195 of the Aet and to remit the same wit.hin'theA 1 stipulated period to the account of the revenue. A 1··· '',4 p may result in the defanlting resident --·---- ` being treated as a defaulter or evennpbeing, '·V¤ qw A against, for recovery of the é1ITI6L1ifl7§~_ whieh the irelsident payer should have deduetedsand preinlitted- to the credit of the IHCOITIE Tax _

al. li is in this eoqnsioderable eiiert has been put appearing for in

the assessees Vite us that in the first instance the i~eee`ipts»in of the nonaresident sn4ppiier/ notlat all in the nature of income in I Z the l1anrl»sl~'oi;the_AVr»1oi'1~resiclerit suppliers and therefore ll isno taxllilahility and that the view taken by the _ ` is proper view and no need for ini;e;rfe1·enee. a//

I

2 e 84

resorted to the above noticed arguments and ei gooti number of zuithorities are cited in support (2()]]l`,€Ill[.i()I`1S. .l`¤ é`

47. However. on the part of the OA Sri. Seshaehaiia, learned senior 4"o_Aq ist.a111etir;xgpl Qu straight and simple and to».point 'V¤` of the obligation on the part payer and consequence of non¥:ie_duct'~Aion percentage of the payme1eit `etdhering to the requirements _lW_ ··¤» is HOT 3 maimr which is res is fufly and squarely covered by the O`udgme1e1t;iotV the Supreme Court in the of CORPORATION OF AMP. LTD.,

z V vs. OF INCOME TAX' reported in {A 999] me 1rR.5~87 [sc}.

V. VW·- ."i`:~eotion $195 of the Act. for no1i1--oompIiz1nee with AO llwlnqieh oibligaitions as provided in this section, the revenue ·iyé D Q·'· t proceeded sgetiust; the respondents --~ e-issessees for i iO`i

I

E

e 85

recovery in terms of section 201 of the Act. Section 195of the Act reads as under: W_WW A`_`' 5 . -- _

195. Other sums. --- (1) Any person " responsible for paying to a non--resi;;ie'nt,l"-- _ l '·--. ' , . » 4 not being a company, or'to a·foreign__` » _V company, any interest or any other sum ` ` ```A · A chargeable under the provisions of this " ' y ° Act [not being income chargeable under--f_ · · A the head "Salaries" shallfat rnetgmte of credit of such income toglthe account, of the payee or attthe ofpayment l

thereof in cash cr by the issue . of a cheque or draft or by any otherfjrnode, whicheveriis earlier, deduct income tax thereon greener rates ginforcej

Provided -```` that the case, of interest payable bywthe Gcoernmentl or a public , sectorbank uzitlunicthe meaning of clause [2*3~D} of Section IO or at public financial institution _within"¤the "`meaning of that clause, deduction of tax shall be made Only at the--time~ of payment thereof in 4 _ , {cash or by the of a cheque or draft ._ A _ orby any other rhode:

it ll 1¤m¤c1€¤z' further that no such deduction _ shall `beii made in respect of any _ ' i ».._ diuicicnds referred to in Section 1 15-0. ` _ Explanation. --» For the purposes of this _ A ,_ _li· 4 2 _A . ,_'· A _ section, where any interest or other sum Y " ''~., `· l`'' ` _ '_ as aforesaid is credited to any account, ~ *· t whether called "interest payable ° ._ 4 ·· account" or "Suspense account" or by Q ' -- r any other name, in the books of account

Q yyyy y yyyyyyy yy it __ __ __ ____=___=_ , ______________ , E____ _ =._ _ ._i__=_ _ ....__ , ___._:,_ _.=;::=_. ._..._=.;:... . _=.;..,.=::;..1%;ii..=_=£=.==.i___£=E.;_;_..=§=;;.=.=; ;= :;.;_ , ;;;;;_;=;;;;;:;;:5;€E;;:;;=;;; Eig gt-; igi iiigi -:;;; =Z.; z&-= :;·z ;¤E I

e 86

of the person liable to pay such income, . such crediting shall be deemed to be »`'·· _ credit of such income to the account of `_·, , ` the payee and the provisions of this , _``` V section shall apply accordingly. , , ' V` [2] Where the person responsible for paying '*--i V ·----i _ AV `'-y_ any such sum chargeable under this Act, -- , ~, V (other than salary) to a nonéresidentg _ _; Y considers that the wholeof such suVmV`e V VV would not be income chargeable in the case of the recipient, may"-makean application to theV"·Assessing__ VQ]j'icer to determine, by general or special. order, the appropriate proportion .._of Vsuch sum so chargeable, Wand l°'~» upon such determinatiL>n,_ tax shall be deducted under "su.b>sectio·n ll} 'V only, on that proportion_V;cy" the "sum" which is so Chargeaxble: `V¤V; ·rt, '

[3) Subject to rules »mqi+ie~ under sub-section _ (5), any person entitled to receive any interest or other sum on which income tax haste be deducted under subsection ` _, ._ till} may make .an application in the * _ _ prescribed form to the Assessing Officer `V __ V V for_the*grant of a certificate authorising ._ V him to receive such interest or other sum gg; __ without deduction of tax under that sub- ._ V *--sec.tion.--V' and where any such certificate ,_ is granted, every person responsible for y VV _ paying such interest or other sum to the v_ AV 4 _ -- t_'· A _ person to whom such certificate is V V -- V V'-t_ V` _ V_ granted shall, so long as the certificate is ~ ` 2 inforce, make payment of such interest ' ·· ._ 4 V~ or other sum without deducting tax thereon under subsection {1).

at 89

50. In so far as the Judgment of the Supreme Court in., TRANSMISSION CORPORATION OF A.P. LTD./$___ [supra} is concerned, though valiant attempts l ·O`¤ ll VQ made on the part of the learned counselttappearingitortthe i° __"A 2 S 4t__g A assessee, particularly, Mr. K P Kumar, Ganesh,lMr.° V Sarangan, Mr, R B Krishna, leamediseniorlcouiisellvetlcl,Q ll to either distinguish this authority; to lcéiitemi that the Judgment can onlyghe and only to the limited extent of ~applicable·:to` where a Q dispute may arise asl ,ll_` thetwprovisions of section 195 of the Act yvhenl the entire payment to a foreign partake the character _ of income hut only pmt of that payment partakes income even then the deduction is

, obligatorytton the payer if the entire payment `doesnot become income and that the present and appeals are not appeals involving such I .. ·l,,`_ only appeals involving the question as to S _.pl whether the payment or any part of the payment has a

N

9 .

In ITA N0. 3076 of 2005 _ ·'

Between: * Pl`_ I .

1 THE COMMISSIONER OF INCOMEYFAX, ~ I I _1"S I I · _ INTERNATIONAL TAXATION, . · V__` . I I . RASTROTHANA BUILDING, _ »··--- _ ` . ' I . I. II . I ~ I , NRUPATHUNGA ROAD, ° · " ° `V._ ` 2 THE INCOME--TAX OFFICER, II - . __ ,I ' INTERNATIONAL TAXATION, _ --. I Y WARD~19[1), _

RASTROTHANA BUILDING, A ,·.», '

NRUPATHUNGA ROAD. 1 · 1 " A 'V._ BANGALORE. I . ' I Q;. APPELLANTS I [By Sri. I\/I.V. Seshe1cha1I3.*& ILE?. AI'vi1jI§E,IAdvs.] I M/S. SONATA _ I II

APS TRUST BUILDING. `¥;y, --,_V

1/ 4, BULL TEMPLE . 4 --

NR. COLONY, V__-- . I` A V I A '

BANGALORE -- 560,0I':`. 4',_ RESPONDENT . [By Sri. G. Saxezmgan, Sr.IL"TeuI:1se1 for Smt. Vani. H., Adv.] _, ._ THIS IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1.961, PRAYING 'IU SET ASIDE ORDER DATED I 28.04.22005_ PASSED ITA NO. 2988/BANG/2004 FOR THE Z; ASSESSMENT 200I}.W2002 AND ETC.,

I -- rm 1<m.I"a0v;z` (If sims

_ __ _ _§_§!_}_H%;QV€11Z ~

v_ COMMISSIONER OF INCOMEWTAX, I `V._ ' ` I V iN'I`ERNATIONAL TAXATION, F ~. R,»;.sTROTI~mmA BUILDING,

e 90 `

character of income within the meaning of section 9 of the Act read with charging section and that the being that no part of the payment made to .¤`¤ by resident can become income either under thevlncotrie i·` A h '_Qg A Act or enjoys an exemption under gif A then no part of such payment being_é_jtaxab1e`*in A lu therefore in the absence of i`fuii`il1ment;`ctgreguirement of section 195[1] of the Act, the with the requirements of {4}, '·q' 15] of section A 195 of the Act QWVV examination, such argurnent cannotbev themsiniple reason that in the frst nortebrercise for determination of the ta1r_g;`1iab_iiity of Vnon--~»resident recipient of the the binding nature of the Judgment

i of the in TRANSMISSION CORPORATION ALP. Dniscase [supra] cannot in any way be diluted A 4 vias the Supreme Court being directly A Z l``' inyolived the exercise of interpreting the provisions of A _.g¤ jg section 195 of the Act in that case and having interpreted M

e 93

Act" would mean 'sum' on which

income~tax is leviable. In other words, _s the said sum is chargeable to tax and -- could be assessed to tax under the Act. . »----.. Consideration would be ---- whether . .--·v-- · payment of sum to non~resident Q chargeable to tax under the provisions'~._ , " _ of the Act or not? That sum may be° ` [ U income or income hidden or Oinenasel ·wll ° .___ f `·¤_ ` embedded therein. if so, taxis requiredr , _ ' ._ ' to be deducted on thesaid sum #» what Q; , would be the income is tobe epm.puiaz, on the basis of provisionsof the

Act including provisions fo--r_conapi1_tatibn of the business income, if thepayrrient is trade receipt However, to be

deducted income--taQv€ payable thereon at the rates 'inforce.· _ Under the Act, to tal income, jbr ·`__ the previous year would become `ehargeable ''·i to under s. 4. Sub-s. [2} o_f.s§·.4 inter alia, provides that invrespect gf inco_irie_`c.hargeable under sub-s. [1], incomeetaxlshall be deducted at source ,u;ne»--¢¤zi is so deductible A vjunder any provtsion of the Act. lf the that is be paid to the non-

, ,*eSu.;»;·ii. is chargeable to tax, tax is __ 'required_to·__be deducted. The sum which ` T torbe, paid may be income out of g A different heads of income provided T -- under s. 14 of the Act, that is to say, '· __V` income from salaries, income from ` , { ' ` ehouse property, profits and gains of " ·--, '~», business or profession, capital gains _,_r' '- and income from other sources. The . ` .. I scheme of tax deduction at source If applies not only to the amount paid ·._r " which wholly bears "income" character

s- 94

such as salaries, dividends, interest on -- ` securities, etc., but also to gross sums, _. s·--.. the whole of which may not be income. .V·V» 4- ~ , or profit of the recipient, such as"-- { payments to contractors and sub-*._ . _``' , " _ contractors and the payment of ' ` ._ U insurance commission. It has been ·V,, ° .___ f `·-_y ` contended that the sum which may be .4 __ ' ._ ' required to be paid toythe non_--resident· » l; may only be a trading receipt, and, l " " " contain a fraction of sum as taxable income. It is true that in··*so4me"cases,' trading receipt maycontain., ajracaon of sum as taxable incorney butlin-.._other cases such as interest, --·,_ commission, transfer of rights.4 of patents, goodwill or drawings for plant and machinery and such other transactions, `itmay contain large sum as tcncable income under the prov`isio_n;s of*ihe`Act. Whatever may be the positions} ifcthe income is from profits and gains--__oJ°.,b_iisiness, it would ` be computed underthe Act as provided at theame Qt reguiar assessment. The clpurpose ofsub-s. [1) of s. 195 is to see _ . " ° = , that the sum which is chargeable under . s. 4,of the Act for levy and collection of _4 , l` `incomeé the payee should deduct 4 = V income-tax thereon at the rates in force, if the amount is to be paid to a non- "_ ~4 " resident. The said provision is for " tentative deduction of income-tax 4 l 4 V. .3 A _ ` ~.__thereon sulyect to regular assessment '--., '*--. and by the deduction of income-tax, `, rights of the parties are not, in any " .-- _` ` --. l manner, adversely affected. Further, the Yf rights of payee or recipient are fully ' safeguarded under ss. 195(2), 195(3}

ii 95

and 197. Only thing which is required to be done by them is to jile an application _, for determination by the AO that such ·n sum would not be chargeable to tax in » "··--~ the cme of recipient, or for. --··~v ' determination of appropriate proportion} _` 1 of such so chargeable, or for grant. qfg , " _ certificate authorising recipient to" " `._ 7 receive the amount without deduciionnof '~», ` ..., n [ `'--,, ` tax, or deduction of incometax at any --. , ' A lower rates or no deduction.YO`n such n _; determination, tax at appropriate rate 9 ` would be deducted at thecsource. if no such application ·' is filed"`in.con*ie--tax on- such sum is to bededucted. ami. itfs the statutory..;_obligc,iiion of l°·~, the ' person responsible *,--` paying such ` "siim' to deduct l_tr1Q>c"?.thereonr _ before ' making payment}- He has to discharge the

obligation oftax deductionat source.

9. The High. Court ofCalcut"ta considered - and: interpreted .sirnilar provision of s. 18 (313} of the Fi"} Act, 1922, in the case `Q ofP.C. Ray_& Co. [India) [P) Ltd. vs. A.C. ? C ' ~. A {Mukfieyrjee, ITO (1959} 36 ITR 365 (Cal) : . TC'--5I*E.355, and rightly held: n » it chargeable under the provisions of _ this Act' means actually liable to be `W v_ ` assessed to tax. in other words, yr the ' sum contemplated is taxable income, a _A 9 4 --. ; i _ ` ·.__dy*Tculty is undoubtedly created as to Y ''--. `'*-- pcomplying with the provisions of the section".

if The High Court further held that s. " i8(3B} contemplated not merely

M 97

under s. 195 is limited only to

appropriate proportion of income J

_ chargeable under the Act, are correct. " » Vp V

52. The interpretation by the Supreme Court being respect of a statutory provision, namely, sectien I the Act that interpretation becomes the lawtldteclared ·~·i _ Q 4`'--i_ the supreme court within the ofgArticle of the Constitution of india have to be t necessarily applied all wherein

arises the question section _ the Act and the rnanner1lin"t*.rhiii•;h ofthe Act operates in any given the fact that an answer

given byu in TRANSMISSION

AQF; ·LTD.,'s case [supra} was an

V `'`_ a question that had actually not tjariisen or even if the interpretation so placed y ~ neeessarily partake the character of the ratio Of 44* l.·¤ y--W. ,V'i--i n the sense, that the Judgment dees not ,_"_ v· ecessarily become an authority for a particular it .t4' -- ·~W.t proposition and therefore cannot be cited as a precedent,

it 98

on appiying the tests as are relevant for determining the question as to whether a Judgment is an authority binding precedent for a particular proposition ratio if any has not even been appiied to the A ig case and decision of the case is not based-on ···i , lV'·g_ all such tests are irrelevant and edoesqnot in V detract from the constitutional of wherein it is emphaticallytminade rthat the law declared by the suprcine on ali

courts within the interpretation i of the supreine clarified the legai position of section 195 oti -4Yie ffiiiteipmtation is the law E declared and bindinggon ail courts in this country and lsiassessees likes it or not it has to be _necessariiy,·A to the cases on hand and the 1Qiudgn1ent""r·endere¤d in each case, on such application of Vt r; iavvl1de·clared by the Supreme Court, to the facts of the V if if Wl'q case.

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