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The Income- Tax Act, 1995
Section 195 in The Income- Tax Act, 1995
Section 201 in The Income- Tax Act, 1995
The Gift-Tax Act, 1958
Section 248 in The Income- Tax Act, 1995

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View the actual judgment from court
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 249 day of September, 2009 __  O' O V

PRESENT

AND

THE I-ION'BLE MR JUsT1CE.A3AVIN'D, 

ITA Nos. 2808 of 2005, 2809._._0L_2GO5, 2810.,of,,7

2005, 2911 of 2005, 29867-of ;,20015,O"171*A .1V6,2989 of
2005 C/w 2991 of 2005, -11'f1"AO"1\}cs;' 12005
C/w 3076 of 2005.,' 3077:61'~:;2005?--_3078;6f 2005,
3079 of 2005,?'    3.15} 266 of 2006
C/w 265    of 2006, 269 of
2006, 270555192-006E1=1:606-of-2006;"611"0 of 2006, ITA
No. 611 of 2006"1';;<;51 60961? 2006, ITA No. 612 of
2006, 1TA._Nos.1055-l'ofV'290'6'"& 585-594 of 2009
C/w_lO56O01" 2006--- &,'.5,5"2}556 of 2009, 1066 of

 ,_ 2006-, 1067 of 2006.,_._6z.v557--575 of 2009, 1053 of
V 2006  1.613 of 2009, 1061 of 2006 & 65 76682
 672oo9,7811~,,s,,,11o,s. 1062 of 2006, 1258 of 2006,

1.266' of 2006,1265 of 2006, rm No. 1268 of 2006
0/151269 67 2006, ITA 515.1270 of 2006, ITA Nos.

 '  V'L";.W0m60 of'2006 & 5951604 of2009, 737 of 200 7, 738
_ 2007, 739 512007, 740 of 2007, 741 of 2007,
  7215 of 2007, 746 of 2007, 747 of 2007, 777 of
 "2007, 780 of 2007, 782 of 2007, 785 of 2007, 786

12
V,

THE HON'BLE MR JUSTICE D V   X , 1,'



[By Sri. M.V. Seshachala & Sri. K.V. Aravind, Advs.]

And :

M/ S. SAMSUNG ELECTRONICS CO. LTD.
INDIA SOFTVVARE OPERATIONS

LEVEL 61'" AND 71",

PRESTIGE MERIDIANWII,

NO.30, 1\/LG. ROAD.

BANGALORE -- 560 001.  " 

[By Sri. KP. Kumar, Sr. COuné$0::i"fQ;* UnAive;rsa'1V  

THIS APPEAL IS FILED UNDER__:SECTI_ON f260A_ OE'; THE
INCOME TAX ACT, 1961, PRAY1?'§{} TQ'0SE"T..ASI1':3E ORDER DATED
18.02.2005 PASSED IN IT:3;._ fNO;._  FOR THE
ASSESSMENT YEAR 2001-2002  f   A 2
In rm No. 2309 of 2(}G5_  " A 0 0

Between:

1 THE OOVMMISEIONERVOE.1N.cOME.JfAX,
INTERD1A'I'IOIV7AiL TAX;A'nOr€., '
RAsTROTHANA'Ei,IE,O'ING,_[ 
NRUPA'1'HUN_GA ROI  
BANGALORE. . '  '

2 THE INCOME-'rAX'OFE1OER TDS~I,

 _ RASTROTHANA B'UILD__I__1\IG,
_  ..NRU--PAT5HIJN'GA ROAD,
 .B'ANGALOEE.j-~.  APPELLANTS

0    Seshachala, Adv.)

" " M'/'s_. SAMSUNG. ELECTRONICS CO. LTD,
.: LNIJIA OPERATIONS
 "LEVEL .A6T¥:i_AE'sID 7T1--J,
» W..P}LF1S;'I'I'GE MERIDIAN-11.
  =NO..30,M.G.ROAD,
"  , BANGALORE - 560 001.  RESPONDENT

 



[By Sri. K.P. Kumar, Sr. Counsel for Universal Legal]

THIS APPEAL IS FILED UNDER SECTION 260A OF TI"IE

INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER 
18.02.2005 PASSED IN ITA NO. 264/B/2002 FOR   

ASSESSMENT YEAR 19992000 AND E'I'C., _

In ITA No. 2810 of 2005

Between:

I THE COMMISSIONER OF INCOME-TAX,» 
INTERNATIONAL TAXATION, ' ' 
RASTROTHANA BUILDING.

NRUPATHUNGA ROAD.
BANGALORE.

2 THE INCOMEWTAX OFFICER TDS  
RASTROTHANA BUILDING, " '
NRUPATHUNGAROAD.    -  *
BANGALORE   2:   " ;AppELLANTS

 .. my sgsham Actv.1
And: I  I I 'D I

M/S. SAMSUNG ELECTRONICS  LTD,

INDIA SOFTWARE OPERATIONS "

LEVEL em 1{'.ND_7TH, _  '

P1?I£*STTGE»»N:ERIDLAN»II,   _____ .. «

N-O.3"0, MQO. R0"AD;" 

BAI'=?_GALO--RE 58.0'OO'1.__  RESPONDENT

[ByI'S:i«.  Sr. Counsel for Universal Legal}

  IS FILED UNDER SECTION 260A OF THE

_:CCe~I.?;\ICOME TAX~.ACjT, 1961, PRAYING To SET ASIDE ORDER DATED
_ "*18,'02.'2005 PASSED IN ITA No. 265/BANG/2002 FOR THE
IOASSESSMENT YEAR 2000-2001 AND ETC,



In ITA No. 2911 of 2005
Between:

1 THE COMMISSIONER OF INCOIVIETAX,
CR. BUELDING,
QUEENS ROAD,
BANGALORE.

2 THE INCOME-TAX OFFICER {TDS]--I,
C.R. BUILDING.
QUEENS ROAD,

BANGALORE.  ,5 ..   z$Ap1P'EI§LAN'IS'  ' ~  

[By Sri. IVLV. SeShaChB121_, AdIf.}__ ' . 1

And :

M/ S. RAFFLES SOFTWARE  2;' I O'
7?" FLOOR, No.12},   I
DICKENSON ROAD,   '
BANGALORE ~ 560 04"2,.  

[By Sri. }:'<VV.'}3'.vO'KriS§hna',¥'§VSz*3 Kumar, AdVS.]

THIS APPEAL '1SVEI'LEDv._IjI:I,DI:R SECTION 260A OF THE
INCOME TAX ACT. 1I961V;xPRAY[NG_'TO SET ASIDE ORDER DATED
28.03.2005 PASSED 'IN QITA3 N0. 151/BANG/2002 FOR THE
ASSESSMENT YEAR 20904200 1' AND ETC.,
IIT f'I"A No, C2988 Of 2005" """ 

Betiiveénz. 2 V B' V

O  THEOCOMNIISSIONER OFINCOMETAX,

. INTERNATIONAL TAXATION,
I RASTROTHANA BUILDING,
_ V '?ERUPAT'fi'UNGA ROAD,
"BANGALORE,

«  TI:IEINCOME~TAX OFFICER.
.. INTERNATIONAL TAXATEON,
 '"wARDm19{2},

* RASTROTRANA BUILDING.

 



 I  my Sn". Miv. Seshachala & Sri. K.V_. Arvind, AdvS.]
. 'NI/.S."'SOIeATA INFORMATION

 0"' NO_. 103, 13?' FLOOR,

N RUPATHUNGA ROAD,
BANGALORE. . .. APPELLANTS

[Ey Sri. M.V. Seshachala & Sri. K.V. Arvind, AdVs.}   

And :

M/S. SONATA INFORMATION
TECHNOLOGY LIMITED,
NOI93, Isr FLOOR,
R.V.ROAD,BASAVANGUDI,      "  
BANGALORE -- 550 004.   RESPQNDBSNT. 

[By 811. G. Sarangan, Sr. COunsOl  

THIS APPEAL IS FILED __ UNDER..._s_EC'I'ION 26'0A._0E' THE
INCOME TAX ACT, 1961, PRAYINO TO" SET 'A.S],DE,ORDER DATED
28.04.2005 PASSED IN ITA N0; _3i335_/f3ANG';'.2OO4 FOR THE
ASSESSMENT YEAR 20022003 AND ETC;;    

In ITA No. 2989 of   "   

Between:

1 THE COMMISSIONER 'OF 'INCOME--TAX.
INTERNATIONAL TANATIAON;  
RASTROTHANA BUILDING, "  '
NRUPATHUNGAROAD,  '
BANGALORE.  '

  -TI»IEA--.INc%OME~.frAX OFFICER,
 .INTERI'J.ATiONAL TAXATION,
  "  
R.AS3_RO*FHA.NA.BUILDING.
NRUPA'i'HUNG_A'ROAD,
BANGALQRE.  APPELLANTS

TECHNOLOGY LIMITED,



RV. ROAD,
BASAVANGUDI .

BANGALORE -- 560 004.  REX3PONE)EN'I7_0""V,'

{By Sri. G. Sarangan, Sr. Counsel for Smt. Vani. H_,--;    ~

THIS APPEAL IS FILED UNDER SECTION 260A--.:0F00"T}HEV

INCOME TAX ACT, 1961, PRAYING TO SE'I:'ASI'D«.'i3  'DATED?  
28.04.2005 PASSED IN ETA NO. 864/2004; FOR  1 ~

ASSESSMENT YEAR 2001 2002 AND E'PC.,

In {TA No. 2991 of 2005

Between:

1 THE COMMISSIONER OF"I1\IcOME:TAx,"*«  I 'I 
INTERNATIONAL TAXATION,  ' *  
RASTROTHANA BIIILDINC};  _  '
NRUPATHUNGAROAD, I '

BANGALORE.   _.   

2 THE INcOME»TAX_.EOEF;IcER'}'ifA  I *
INTERNATIONAL '

wARI:)~V1'9(2},'=..;f.  _ 
RASTROTHANA 'E'I,IIV1,aDIN(';-,. _ '~~- ._
NRUPATHUNGA    
BANGALORE. , I  "  APPELLANTS

{By  2SeVShaOhaIIa  Sri. K.V. Arvind, AdVS.]

Aid' 

M/S SO'NATA :I'E_§'O RMATION
TECHNOLOGY LIMITED;

' 0' =.N.o.193, 1sT'ELOOR;i._ v

 RV. ROAD":

_ ' I EBASAVANGUDIV; 
"BAI'JGAI,ORE » -SS0 004.  RESPONDENT

0   Sarangan, Sr. Counsel for Smt. Vani. H., Adv.)



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 TR

ASSESSMENT YEAR 2002-2003 AND ETC, V. 

In ITA No. 3075 of 2005
Between:

1 THE COMMISSIONER OF INCOME~TAX».~~ 
INTERNATIONAL TAXATION, A ' '
RASTROTHANA BUILDING.

NRUPATHUNGA ROAD,
BANGALORE.

2 THE INCOMETAX OFFICER; _

INTERNATIONAL TAXATION,  '

WARD~l9{1}.   '
RAS'I'ROTHANAE$.U1LDINi3, ' 0   
NRURATIIUNGARAD,    " _ 

BANGALORE"    "    APRELLANTS
[By Sn; _Mv,vV:"SI§SI2I.;§,I3I'1al£i'  Arvind, AdvS.}

And:

M/S. SONATA SOFTWPIRE I_:I'D_.,  
APS TRUST..ELIILDINOA., ' ' '-
1/4, BULL 1TEM1~'LE ROAD

NQRQ COLONY.  I " -
BANGALORE +560. 4017.  RESPONDENT

{By  Sr. Counsel for Smt. Vani. H., Adv]

THI':-3.  IS FILED UNDER SEUHON 260A OF THE

"».INc'OME TAx.A<::T, 1961. PRAYING TO SET ASIDE ORDER DATED
" '*2.8;0_4l2005 PASSED IN ITA NO. 2989/BANG/2004 FOR THE
.: -ASSESSIVIE"-NT YEAR 2002-2003 AND E'£'C.,

 



In ITA No. 3076 of 2005
Between:

1 THE COMMISSIONER OF INCOMECFAX.
INTERNATIONAL TAXATETON.
RASTROTHANA BUILDING,   ._
NRUPATHUNGA ROAD, :
BANGALORE.

2 THE INCOME-TAX OFFICER,

INTERNATIONAL TAXATION,

WARDwl9(1),

RASTROTHANA BUILDING.

NRUPATHUNGA ROAD. 9  5 _   , 
BANGALORE.  ~ ._  1];   APPELLANTS

[By Sri. M.V. SeShacha}z--T& Sni.'E.._V,_ Adv-s.]

Ami :

M/S. SONATA SOFTWARE LTD;,._  T_  '

APS TRUST EU1r._.DING_.' *x,._ - 

1 /4, BULL TEMPLE ROAD, 

N.R.COLONY.¥_ _-- V     -

EANGALORE--'560._01~r..    RESPONDENT

[By Sri. G. Safangan,  for Smt. Vani. H., AdV.]

 . THIvS5gAPF5EAL 1S"I-'ILEDV UNDER SECTION 260A OF THE
1N.cO'ME TAX ACT,"1..9S1, PRAYING TO SET ASIDE ORDER DATED

28;o4.:2Q05_ PASSED"~--1N ITA NO. 2988/BANG/2004 FOR THE
ASSESSMENT _3_rEAR 20_0_1w2002 AND E"PC.,

 O'  ITA Nioy"3o77'  25005

T%OT§sm:em.en=

<_1-  V~:O:'THFfO'COMMISSIONER OF INCOMEWTAX,

_ iN'}fER1\TA'I'IONAL TAXATION,
~  RASTROTHANA BUILDING,
  HNRUPATHUNGA ROAD.
" BANGALORE.



10

2 THE INCOME~TAX OFFICER,
INTERNATIONAL TAXATION,
WARD- I 9{2).

RASTROTHANA BUILDING.
NRUPATHUNGA ROAD.

BANGALORE.   %

[By Sri. M.V. Seshachaia 8: Sri. K.V§.'AArvind'I.¢AdtIS}i   '  

And:

M/S. SONATA SOFTWARE I;rD..

APS TRUST BUILDING,

I /4. BULL TEMPLE ROAD.

N.R. COLONY, ,    *  

BANGALORE -- 560 017.   p  » " 'RESPONDENT

{By Sri. G. Sarangan, Sr. Collrisel {Gr  Adv.]

THIS APPEAL ;~IS*EI-LED:1'.UI«IDER'"SEC'rION: 260A OF THE
INCOME TAX ACT,_ .19»61.i'I.ER_A&TNC:  SET ASIDE ORDER DATED
28.04.2005 PASSED .19-I ITA. NO-.. SSS/BANG/2004 FOR THE

ASSESSMENT YEAR..;f00::.;;g003'_AND  
in ITA No. 3073 @2005' 
Between: A '

1 THE COMMISSIONER OF' INCOME/I'AX,
_ INTF}RNA'I'IONAL 1'A_KA_"§ION,
'  .RAsTRO2..IHAI».IA BUILDING,
 ,NRI,.}PATH{.INGA ROAD.
    

 " ' THE "INCOME;TAX OFFICER.

INTERNA__'FIONAL TAXATION.
3 WARD-..19I.1).
~ __ "RASTRO'IT_HANA BUILDING.
'V »NRUP_ATHUNGA ROAD.
"«E3;'%.I$§GIé1I,OI?{E.  APPELLANTS

'   Sn}. M.V. Seshachaia 8: Sri. K.V. Arvind, AdvS.]



 

11

And:

M/S. SONATA SOFTWARE LTD..
APS TRUST BUILDING.

1/ 4. BULL TEMPLE ROAD,

N.R. COLONY.

BANGALORE - 560 017.  RESpOI~IO'EI$IfI'-  "

{By Sri. G. Sarangan, Sr. Counsel for Smt. Vani..VI_fIL";-..I§dIf_;.]-  %

THIS APPEAL IS FILED UNDER SECTIO:\I '_2.S0A« OETIIE7' n .
INCOME TAX ACT. 1961, PRAYING TO SET=.AS1O.Ez OROER DA'i"P§I3_ :_~
28.04.2005 PASSED IN ITA NO. 2987/BANG-./2004 ':'?OR  '

ASSESSMENT YEAR 20002001 AND ERG' A 4_ ..  ._
In ITA No. 3079 of 2005 M "
Between:

1 THE COMMISSIONER OF INCOME}-TAX,.--~«._  'I
INTERNATIONAL'FAXA'I'ION';'»_:'= - A V
RASTROTHANA.,S~IIILDIN<:;, _    ~
NRUPATIIUNGA ROAD, _   _  ' 
BANGALORE" "      '

2 THE INCONIE-TAXOFFICER;._ " __
1N'rERNA*r1VO'I-IAL '"i1A_s){I'x'£'--fO§\.R,__  "
WARD-19{2"}..._' ' _ . . " 
RASTPOTHAN"A_BUILDIN'G,
_ NRUEPATHIJNGA I
'"~._BAIv~IG2\L_QRE:..,A  _____   APPELLANTS

 SajiIM§V'."I$SS-hachaia & Sri. K.V. Arvind, Advs.]

  And :

-{M/S.' SONATA SQFTVVARE LTD,
~  TRUST BUILDING.
_ .1 /4." }3U'LLf1'EMPLE ROAD.
 ; w_N.R. "COLONY.
  BANGALORE§ - 560 017.  RESPONDENT

{ByvSI'i.aG. Sarangan, Sr. Counsel for Smt. Vani. H., Adm]

 



12

THIS APPEAL IS FILED UNDER SECTION 260A OP' 

INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED
28.04.2005 PASSED IN ITA NO. 867/BANG/2004  

ASSESSMENT YEAR 2001-2002 AND E'I'C.,

In ITA NO. 3080 of 2005

Between:

I THE COMMISSIONER OF INCOME-TAX,
INTERNATIONAL TAXATION,  _ 'I ._ 
RASTROTHANA BUILDING,  "
NRUPATHUNGA ROAD,

BANGALORE.

2 THE INCOME--TAX OFFICER.) _
INTERNATIONAL TAXATION,  '
WARD»19(2}, I   I
RASTROTHANA B_UiI.,.DIN?3, '
NRUPATHUNGA ROAD "

BANGALORE.   'I       APPELLANTS
{By Sri. __1\V/_I_IV;'~   Arvind, AdVs.]

And :  T I 22

M/S. SONATA  

APS TRUST BUILD£NG,. ._ V ' I. 

1/4. BULL TEMPLE  ~

N.R. COLONY, II ~ _

BANGALORE *iE60=.017.  """ "  RESPONDENT

my SA'.  "SgIv¢fig:a1a#, Sr. Counsel for Smt. Vani. H., Adv.]

T*IA:IS'IIAPREA1; IS FILED UNDER SECTION 260A OF' THE

0' v._r'IN'COME TAX AC'I',.V 1:961, PRAYING TO SET ASIDE ORDER DATED
V_28.C14.2005 PASSED IN ITA NO. 866/BANG/2004 FOR THE
~ -« ASSESSMENT  20002001 AND ETO,



13

In ITA No. 266 of 2006
Between:

1 THE COMMISSIONER OF INCOMEWTAX.
IN'TERNATIONAL TAXATION,
RASTROTHANA BUILDING,
NRUPATHUNGA ROAD.

BANGALORE.

2 THE INCOMETAX OFFICER, 
INTERNATIONAL TAXATION,
WARI)~19[1],
RASTROTHANA BUILDING.
NRUPATHUNGA ROAD, _  ~ . _    --
BANGALORE. V'    

{By Sri. M.V. SeshachaEa~..& SrI;"K.'*kj.':IA}SBnd, Advs.}" 

And:
M/S.IIEwLE"rTPACKARD1_NDIA"""  _  

SOFTWARE OPERATION'BVr.L'IfD.,§   _ 

No.29, CUNNINGrLAM».ROAp;. ' __    .

BANGALORE A 560' 052;**._ '  ,    RESPONDENT

[By Sri. G.  for Srnt. Vani. H., AdV.}

THIS , APPEAL IS EILED- UNDER SECTION 260A OF THE
INCOME TAX ACT, 1961;-PRAYING TO SET ASIDE ORDER DATED
l:§).O8v.200'5. "PASSED IN ITA NO. 970/BANG/2004 FOR THE
ASSESSMENT_YEAR 2001-2002 AND E'IC.,

 In ITA Né_._ 26Bi"'¢f\200*6

V  i3éi;ween:"=--

' " "  V'  COW'/IISSIONER OF INCOME-TAX.

..  INTERNATIONAL TAXATION.
- T 'RASTROTNANA BUILDING,
--  NRUPATHUNGA ROAD.

 V' BANGALORE.

 



 2 THEi__INCO§v;E--'rAI:"'OPFICER,

14

2 THE INCOME--TAX OFFICER.

INTERNATIONAL TAXATION.

WARD~19(1), '

RASTROTHANA BUILDING,

NRUPATHUNGA ROAD,    .. 
BANGALORE.  APPEI,LANTs

[By Sri. M.V. Seshachala 8: Sri. KAI.'Ar»vangI;'_,«Ac1x¥§,'3:v    
And: _  _   *

M/S. IIEWLETT PACKARD INDIA
SOFTWARE OPERATION PVT. LTD.,

No.29, CUNNINGHAM ROAD,      
BANGALORE ~ 560 052. V    *    RESPONDENT

[By Sri. G. Sarangan, Sr. CC'.I¢'E.1J1'1.S€]:' fa}  Adv.]

THIS APPEAL IS FILEDf UI\II)ER_ Sf2Cf["I(§N,«fi6OA OF THE
INCOME TAX ACT, 1961;i;PRAY§NG€ TO SET ASIDEORDER DATED
19.08.2005 PASSF.D'~IN5I_ _I_TA= ,NO."...96-9/"BANG/2004 FOR THE

ASSESSMENT YEAR 20"00~'200I AND  '
In ITA No. 268"o£2f0o6"¥:.3   '
Between: 1 ' V V %

1 THE COMMISSIONER OI? IN.f;'OME~TAX,
INTERNATIONAL TAXATION,
. _ RASTROTHANA B"UILI)_I_N.G.
_  -NRUPATHUNGA ROAD,
 .BAAIGALORE, 

IN'TERNATION_J\£ TAXATION.
WAR;D~ 19(1),. 
1 RASTROTHANA BUILDING.
-  '-'NRUPATI-IUNGA ROAD, E
;,BANGiALORE. .  APPELLANTS

_'   M.V. Seshachala 8: Sn'. K.V. Arvind, Advs.]



 

}5

And:

M/ S. APARA ENTERPRISES
SOLUTIONS PVT. LTD.

OXFORD TOWERS, SUIT 801.
7?" FLOOR, 139 AIRPORT ROAD,
KODIHALLI,

BANGALORE -- 560 088.  REsPc§_Nb£:N;T:  4- 

[By Sri. S. Parthasarathy, Adv.}

Tms APPEAL 1s FILED UNDER sE;c*r1QN j;2"60A_oF'T£v£01:i'}__j
INCOME TAX ACT, 1961, PRAYING TO SET As13:)E~ ORDER .DATE:I_:)=._. 

29.07.2005 PASSED IN ITA NO. 3799/BANG/2004T,.FoR' 'mi:
ASSESSMENT YEAR 2001-2002 AND   ,   

In ITA No. 269 of 2006

Between:

1 THE COMMIS-SlQN5E_RfOF 1_IJc0.ME.:1'A;<. .
INTERNATIONAL"rA><A'1'I0N;jy.  «  
RASTROTHANA E'>{j'«I;LDII'»I(}'; A * *
NRUPA'1'HUN-0A;:'RoA%J; " 
BANGALORE. '  

2 THE 1Nc0ME'TAXV.Q1r§fIcER.,_  "
INTERNATIONAL TAXA'1'E_Oi\I :_ 
WARI).--19{1], "   r

_ RASTéRO'FHANA BUILDING.
' *  _NRLI_PA'I';HUNGA R0A;u;""
'BANG.AL0£<E,  APPELLANIS

1  S.§:s5f1acha1a 8: Sn'. K.V. Arvind, Advs.]

~ ..1ws. APARA ENTERPRISES SOLUTIONS PVT. LTD.
_ .QXFORI3 mwERs, sun' 801.
«V '.7TH._F'L«(}OR, '139 AIRPORT ROAD.
  
' .B_AN'GALORE - 560 088.  RESPONDENT

{By Sri. S. Parthasarathy, Adm}



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 No. 270 of 2006

Between:

1 THE COMMISSIONER OF INCOME~'I'AX,
INTERNATIONAL TAXATION.
RASTROTHANA BUILDING,   -
NRUPATHUNGA ROAD, 1
BANGALORE.

2 THE INCOMETAX OFFICER.
IN'I'ERNATIONAL TAXATION.
WARD-19(1),
RASTROTHANA BUILDING,
NRUPATHUNGA ROAD, '   .   
BANGALORE. * 'I  '--  'iv   APRELLANIS

[By Sri. M.V. Se$'ha.chaJ.a"'&' 

And:

M/S. APARA EN':jE12pRI'sEs---sOLU:1ONs PVT. LTD.

OXFORD TOWERS,._SU_IT 801;, " A 

7TH FLOOR,' 3 39 AIRPQRTROAD, 

KQDKHALLI}  ' - V

 -560.088.  ~~~~~   RESPONDENT

 ~ _   S. Parthasarathy, Adv.]
"'TI-IES FILED UNDER SECTION 260A OF THE

  1VNcOME.TAX ACT; j19%31, PRAYING TO SET ASIDE ORDER DATED
 ";2'907.20o:5__ PASSED IN ITA NO. 3801/BANG/2004 FOR THE
*._AssEssMENjr  20022003 AND Eve,

4: .:SI:InIff£'A"NOe.._.6(I)6 of 2006

*.'=_Betwmmm 

I1  I "THE COMMISSIONER OF INCOME~TAX,

INTERNATIONAL TAXATION,



'17

RASTROTHANA BUILDING.
NRUPATHUNGA ROAD.
BANGALORE-

2 THE INCOME--TAX OFFICER,
INTERNATIONAL TAXATION,
WARD» 19(1),
RASTROTHANA BUILDING, _,  S
NRUPATHUNGA ROAD, ' '

BANGALORE.   , .. 3AFI>EI,.I;AI\II*Sj-A ; A I

{By Sri. M.V. Seshatihala, Aim"

And :

M/S. EDS TECHNOLOGIES   f _ V 
NO.153,2ND CROSS, I' ' -  "
PROMENADE ROAD, - _ .
FRAZER TOWN,  V  *
BANGALORE -- 560 O(}5.W_ 1* »

(::B"y'iyI/is-."  IIqII,?;;AcIvs.;

THIS APPfEAL"j.IS FI3LED--_UNDER*»SECTION 260A OF THE
INCOME TAX ACT, 105.1,' FRA1eINO TO SET ASIDE ORDER DATED
30.09.2005 PASSED IIsT"'-ETA, 14550/BANG/2004 FOR .. THE
ASSESSMENT YEAR 20002200 I AND 

In ITA No, .610 «£2005 

  , . . . . . . ..
1  _ 'IZ'HE'CO'MM.IS«S_IONER OF INCOME~TAX,
" IN'-FEIRNI'x'1'I.QI\IAL TAXATION,
RASTROTHANA' BUILDING,
NRUPATHUNGA ROAD.
1 BANC;ALOR3'£.

.: f2' .,  INCOMETAX OFFICER,

" _ INTERNATIONAL TAXATION.
I VVARI} 1 9{1},
RASTROTHANA BUILDING,

 '' ~~NRORATHUNGA ROAD,

BANGALORE.  APPELLANTS



18

{By Sri. M.V. Seshachala 8: Sn'. K.V. Arvind, Advs.}

And:

M/S. HEWLET PACKARD INDIA PVT. LTD.,
NO. 24, SALARPURIA ARENA,

HOSUR MAIN ROAD.

ADUGODI.

BANGALORE ~ 560 030.   ' fRF,S?ONjDEb-Iff" 'V: 

[By Sri. G. Sarangan, Sr. Counsel. for Smt. Vani.  Advi}
THIS APPEAL IS FILED UNDER"-.SECT§A0N 260.3 
INCOME TAX ACT, 1961, PRAYTNG TO '3ET,ASIDE'-  DATED
23.09.2005 PASSED IN ITA NO. 3708xI3ANG/20040 FOR} THE
ASSESSMENT YEAR 2001~2002:--AND     

in ITA No. 611 of 2006

Between:

1 THE cOMMIs'SIQNRR'.01~':I:\IC'QMI:.rI5A}<, . 
INTERNATIONA_:L"'IfA}(ATIQN,.':-.   

RASIRVOTRANAI ';RUI_LDIN ' - ___
NRUPATHUNCEA ROAD,  *
BANOAL'oRE._ ' '  

2 THE INVCOMEVCAX OFFICER.
 INTE%RNAiHONAL'-TAXA'I'ION,
'   ..... 
' RAs*rRO17I=LANA BUILDING.
 NRUPATHUNGA ROAD.
 BANGALORE.    APPELLAN'I'S

 Sktshachaia <32: Sri. K.V. Arvinci, Advs.}

 v._M/s~.. }~IEWI;ET PACKARD INDIA PVT. LTD..
 NO.-_2'4.._ SALARRURIA ARENA,
--i=H_OsUR;MAIN ROAD.
V AD{JG.ODI,
 BANGALORE A 560 030.  RESPONDENT

 



19

[By Sri. G. Sarangan, Sr. Counsel for Smt. Vani. PL, Adv.};'"--.»

THIS APPEAL IS FILED UNDER SECTION 260A 
INCOME TAX ACT, 1961, PRAYINO TO SET ASIDE ORDER"DAI'ED" ;_. 
23.09.2005 PASSED IN ITA NO. 3709/BANG/2004 .EORV..T'R.E'*I  '

ASSESSMENT YEAR 2002-2003 AND E)'I'C.,

In ITA No. 609 of 2006

Between:

1 THE COMMISSIONER OF' INCQME:'I1~\.X.
INTERNATIONAL TAXATION,  --
RASTROTHANA BUILDING,'
NRUPATHUNGA ROAD, '  
BANGALORE. ' '

2 THE INCOME~TAX'Q_FFIC'ER{ ' - 
INTERNATIONAL 'I§A}«:ATION,g ~ 
WARD--19(1)_.,.  __  ~  _  
RASTROTHANA..EI}ILDING;~.D'j*--.0  I E.
NRUPATHUNGA'---R{)AD,    
     APPELLANTS

[By Sri';._M'.V.  K.V. Arvind, Advs.]
And: 0'  

M/S. HEWLET PACKARD INDIA PVT. LTD,

NO; 24, SAEARRURIA  "

HQSUR MAIN 'ROAD«,.__

ADUGOD1,»_  '  

BANG-ANQRE  500 0:30:  RESPONDENT

 [fly Sri,__ O.V'Saré';ngan, Sr. Counsel for Smt. Vani. H., Adm}

  THIS APPEAL IS FILED UNDER SECTION 260A OF THE
_ ._INCOM'BTAX ACT, 1961, RRAYING TO SET ASIDE ORDER DATED

 '~._f23.0SI2V005"_«PASSED IN ITA NO. 3707/BANG/2004 FOR THE
 ASSESSMENT YEAR 20002001 AND ETC,



In ITA No. 612 of 2006
Between:

1 THE COMMISSIONER OF INCOME--TAX.
INTIERNATTONAL TAXATION.
RASTROTI-{ANA BUILDING.
NRUPATHUNGA ROAD.

BANGALORE.

2 THE INCOME--TAX OFFICER,   *-

IN°'I'ERNATIONAL TAXATION. I

WARD~19(1},

RASTROTHANA BUILDING.

NRUPATHUNGAROAD,   .   
BANGALORE.   *._APPE=LLAN'1'S

{By Sri. M.V. Seshachai'a_&  A[r"%ri_nd, 
And:  _.. .

M /S. HEWLET PACKARD' I.I_\ID1A'--_ 
NO. 24, SALARPURIA'ARE.?1NA.  =:   _ 

I-IOSUR '1;
ADUGODL 3 _*g._~D«A-,__;
BANGALORE  560 030.'     .  RESPONDENT

{By Sri. G. Séirahgafi', .S'I"..'.CG;D}:1seI for Smt. Vani. H., Adv.]

 THIS APPEAL 1B...VEILEI:» UNDER SECTION 260A OF THE
11\ICOME;AC'E"», I96I,'PRAYING TO SET ASIDE ORDER DATED
23.09.2005 p'AssED._ IN ITA NO. 3710/BANG/2004 FOR THE
ASSESSB/1EAN'1'v.YI:1Af~l2003-20041 AND E3'I'C..

  ITANOS. 10.455 552005 & 535-594 of 2009

_   _Be1:ween: N' .. 

4: ~-:1' .. *I*Hi=;.cOi\rIIx/IISSIONER OF INcOME--TAx.

*  1NT1_'ERNA'i'1ONAL TAXATION.
RASTROTHANA BUILDING,
 NRUPATHUNGA ROAD.
"  'BANGALORE.



21

2 THE INCOMEMTAX OFFICER,
INTERNATIONAL TAXATION.
VVARD~ 19(2),
RASTROTHANA BUILDING.
NRUPATHUNGA ROAD,

BANGALORE.   

{By Sri. M.V. Seshachaia & Sri. K.V. Amnd, AciyE..}" if 5?.'  "' 

!_L1£_= 

M/S. SONATA INFORMATION

TECHNOLOGY LIMITED.

NOJ93, 18'1" FLOOR.

RV. ROAD, BASAVANGUDI,   " . u   "
BANGALORE A 560 004.   " ~R_E's:>ONDENT

[By Sri. G. Sarangan, Sr. Ci0L1finse_i'OfOfASfr;t:""Jani. 

THESE APPEALS ARE FILE0.C.UNI)ER"sEC*1*§OAi' 260A OF THE
INCOME TAX ACT, 1961.. PRAY]-NG. To SET ASI'DE'€_)'I{DER DATED
31.01.2006 PASSED _ ma I-TA NO, 159341603/"B2'.i1'\§G/2004, AND

In rm Nos. 11056 0%." 20(§0'&. '$5éA5_5$}$f 2009
Between: O A O 2

1 THE VCQMMESSIONER OF INCOME/FAX,
_ INTE}_RNATIONA'L--TAXA'I'ION.
' *  __ RAS'fi2QT{'PLlkNA BUI':L;D}NG,
 NRUPAT1--.ILIN'G_A ROAD.
 ' BAi\EGALOREi'..A ' --.

  2 ":H.E--.AINCO'§k1E#1?AX OFFICER,

IN'PERNA'FIQNAL TAXA'1'iON,
« WA.RD~I'9(2}.
. ' RASTROTHANA BUILDING,
A '  I'-JRUPATHUNGA ROAD.
 BA§\IGALORE.  APPELLAIVFES

  [By Sri. M.V. Seshachala 81 Sri. K.V. Anrind, A<:1vs.]



22
And :

M/S. SONATA INFORMATION
TECHNOLOGY LIMITED.
NQ193, 1ST FLOOR.

RV. ROAD, BASAVANGUDI, T  = I ."j  ~ I
BANGALORE -- 560 004.  RESPONOEE. u _,_ 

[By Sri. G. Sarangan, Sr. Counsel for Smt. VaI1i,.,I:1b;' 

THESE APPEALS ARE FILED UNDERfSEOT1ON'*«2S0A«  
INCOME TAX ACT, 1961, PRAYING TO SETzASII3E.. ORDER DATE :3
31.01.2000 PASSED IN ITA NO. 3495-3500/BANG/2QgQ4,'v AND 

In ITA No. 1066 of 2006
Between:

1 THE COMMISSIONER OF' INCOME-TAX,--"'~~.  _ 
INTERNA1IONALfmxAIIO'I\I;"*..'A '  1 .. "
RASTROTHAN£;B?;?11'.DINi'}, :: »
NRUPATHUNGA ROAD, ~. 3 
BANGALORE.   

2 THE INCOME--TAX OF}P'ICVEI?~?.,_ 

INTERNATIONAL TAX.ATIO'N_, " v I"
WARDwI9{2}._ " _ j I 
RAS'§fRO*II-IANA EU.I.1;I:>II\IG, 

_ NRU}???A'IHUNGA" ROAD.

'   _____   APPELLANTS

 L'[I3%yf:yI;I.i;<vIVSeshachaIa & Sri. K.V.Arav1'nd, Advs.}

 M/S. SONAZ{'A"I}§IF'OI3{1\fIA'£'ION
~ .. .1'I?EcrINOLOG'Y, LIMITED.
_ ._NO;'I93*, .131' FLOOR,
;  Ry."«ROAO;'*~_r3ASAvANOUDI,
"  'I3AI<.rc.ALOI'*<E W 500 004.  RESPONDENT

    '[By-ffiri. G. Sarang-an, Sr. Counsel for Smt. Vani. H., Ac£v.]

 



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: 557675 of 2009
Between:

1 THE COMMISSIONER OF INCOME--TAX,m
INTERNATIONAL TAXATION,  "
RASTROTHANA BUILDING,
NRUPATHUNGA ROAD,

BANGALORE.

2 THE INCOME-TAX OFFICER,
INTERNATIONAL TAXATION,
WARD~19[2),  
RASTROTHANA BUILDING. _ ;
NRUPATHUNGA ROAD, _'     v
BANGALORE.      

[By Sri. M.V.     Advs.]

And:  1111  . 

M/S. SONATA'-IINFORl\/IATION   '

TECHNOLOGY 'LIM'ITED,._ ' ' 

NO.193, 1S1'FLOCR,OI _ ' _ .

RV. ROAD, 13ASAVAZ\?GUDI--.

BANGALORE -- 0560 004-.  RESPONDENT

   irgaréiizgan, Sr. Counsel for Smt. Vani. PL, Adv.]

A  FILED UNDER SECTION 260A OF THE

  INCOME ACT}; 1961, PRAYENG TO SET ASIDE ORDER DATED
""3v:.01.20G5__ PASSED IN DA NO. 1561-1580/BANG/2004, AND

{I .1' In' "IHTAB No.5. 1053 of 2006 & 611-613 of 2009

"~,_ B8t'Wé\B_1_i_: "A

I IE: " -THE COMMISSIONER OF INCOMETAX,

INTERNATIONAL TAXATION.



24
RASTROTHANA BUILDING,

NRUPATHUNGA ROAD,
BANGALORE.

2 THE INCOME-TAX OFFICER,
INTERNATIONAL TAXATTON,
WARD-- 19(2),

RASTROTHANA BUILDING.
NRUPATHUNGA ROAD.

BANGALORE.   .

[By Sri. M.V. Seshachaia & Sri.  A:§;:zI:njd,"~AcI&;s;I., "

And :

M/S. SONATA INFORMATION

TECHNOLOGY LIMITED,

NO193, 1s? FLOOR,

R.V. ROAD, EASAVANGUDI,  % --_ , ,   

BANGALORE A 560 004. ' '      RESPONDENT

[By Sri. G. Sarangaji, Sr.   H., Adv.]

THESE, F1LED,UND«ER :§3Ec'IION 260A OF THE
INCOME TAX, ACT, '106.1,4I-1RA*rI'NG TO SET ASIDE ORDER DATED
31.01.2000 FASSED. I1\IfITA --3428--3431/BANG/2004, AND

In ITA NOS. u106B1O'9fVV20O'3  65%'?-6810f 2009
   A   ..... .. W

1  THE1OOvMMISsI'ONER OFINCOMETAX,
*- INTERNAf1"1ONAL. --':I'AxATION,
RASTROTIiA.?\?A' BUILDING.
NR1I_PATRUNjGA ROAD,
--V BANGALORE.

   B  INOOMETAX OFFICER.

I « . " INTERNATIONAL TAXATION,
'wARD»19(21,
RASTROTNANA BUILDING,

  ....NRUPATHUNGA ROAD,

BANGALORE. . . . APPELLANTS



25

{By Sri. M.V. Seshachala 8: Sri. K.V. Anzind, Advs.}

And :

M/ S. SONATA INFORMATION

TECHNOLOGY LIMITED,

NO.193, 1ST FLOOR,   ._
R.V. ROAD, BASAVANGUDI, I

BANGALORE » 560 004.   .. :'REsPON'DEI§i*r..4 :3

THESE APPEALS ARE FILED UNDER SEOIION 200A'.VOI3j_frIIE
INCOME TAX ACT, 1961, PRAYINO TO'-SE':T_ASIDE-.. ORDER DATED
31.01.2006 PASSED IN ITA NO. 168221708/BANG_/2004,; AND

In ITA No. 1062 of 2006

Between:

1 THE COMMISSIONAEB'-;_OP"IN(3QME--~T;?.X, V
INTERNA1'IONAL"TA}(P:'HON;--   I. I 
RASTROTI~iAI*.?A"'I'3'éE_1.LDING.  ~
NRUPArrH'UNO'A ROAD, " '
I3ANOAI,ORE.'=1_--.   --

2 THE INc'OIvI'E--TAX_ OI3jE1CE.R;"<« 
INTERNATTO_NAL TA 'I'IO.N',;~
wARDgI9(2),'~' V'   
_ RAS_rROTHANAB1_JILDING,
' *  NRUPATfHUNGA ROA£.*;~"
'E..ANGALORE;«I__  APPELLANTS

I    Saéihachala & Sri. K.V. Anrind, Ac1vs.;

~ .0 QM/_s;-..MPHAsIs EFL LIMITED.
_ ._NOI1.39,':}, HOSUR ROAD.
;  KORAMANGALA.
"  'BAN_G'A_LO:*<E « 560 095.  RESPONDENT

[By M/S. King <3: Partridge, AdVs.]



26
THIS APPEAL IS FILED UNDER SECTION 260A OF THE

INCOME TAX ACT, 1961. PRAYENG 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 No. 1258 of 2006

Between:

1 THE COMMISSIONER OF INCOME--TAX,
INTERNATIONAL TAXATION,   "
RASTROTHANA BUILDING,
NRUPATHUNGA ROAD,

BANGALORE.

2 THE INCOME-TAX OFFICER,
INTERNATIONAL TAXA';{'ION,
WARD-19{1),  
RASTROTHANA BUILDING, _ ;
NRUPATHUNGA ROAD, __ '   _  
BANGALORE. ,     ;.".~. '~~,.APPELLANTS

[By Sri. M.V. s¢s;,;,,¢ha:g &;S{-1.'K.,§r;1A"A,w_d,rAid, Advs.}

ENGINEERING 'ANALYSIS CENTRE" ~ . 
OF EXCELLENCE IF)" LT'I)"., = "
PHASE~3. SITE NO."I52', . _ 

HOODI VILLAGE,  ._

EXPORT P_R'O1\,/£.O'I'I_C)N INDUSFRIAL AREA,
PHASE,  FIELD ROAD,

BAFIGALORE 560' 066, . .. RESPONDENT
{By"F3ri. S.~7CwaII1esh, Sr. Counsel, Sri. V. Ganga Bai,
Sn. P:,1var§..--Shar1na, 8: Sri. Kuber Devan, Advs.

 I for Universal Legal}

TRIS AI5PEAL IS FILED UNDER SECTION 260A OF THE

 {~.I_IVIINC0}\{iE_TAX ACT, 1961, FRAYING TO SET ASIDE ORDER DATED
 25_.1_1.'2005* PASSED IN ITA NO. 954/BANG/2004 FOR THE
ASSESSMENT YEAR 2001-2002 AND ETC,



27
In ITA No. 1264 of 2006

Between:

1 THE COMMISSIONER OF INCOME--TAX,
INTERNATIONAL TAXATION.
RASTROTI-IANA BUILDING.
NRUPATHUNGA ROAD,

BANGALORE.

2 THE INCOME--TAX OFFICER,
TDS--1,   ~
RASTROTHANA BUILDING, I
NRUPATHUNGA ROAD,

BANGALORE.  _ 5.,  ARPEI,fANTS 

[By Sri. M.V. Seshachaia & SriI;"'e«IV{:IQV. ArviI1c:I_,   
And : I I I I

INEINEON TECHNOLOGIES INDIA I?"v"r.' SIJILL, _  

IOTH FLOOR, DISCOVERY BUILDING,' = 

INTERNATIONAL TECHNOI,OGI:"'PAR:«s; _ _ _ - 
WHITEFIELD ROAD;    

BANGALORE - 560.086.  ~      RESPONDENT

[By Sri. 'I<,R- I§uIn.¢:¢;.IjAév~;..I§:'I~. M /s. King & Partridge]

THIS.APPEAL VISAFILED UNDER SECTION 260A OF' THE
INCOME TAX ACT, 196-1_, PRAYING TO SET ASIDE ORDER DATED
2l'5."I~]_.20(fi_5'* PASSED IN"I~TA' NO. 468/BANG/2002, FOR THE
ASSESSMENTYE.AR~ 2001-2002 AND ETC,

In I;I"A;_k_'3?_e.I '1'1i6M§;_g.;f'2fiO6

"Between":._

" A  LI ' ~ .   THE COMMISSIONER OF' INCOMETAX,

3  ., INTERNATIONAL TAXATION,
" _ RASTROTHANA BUILDING,
'NRUPATHUNGA ROAD,

 BANGALORE.

I "  THE INCOME-TAX OFFICER,



30
25.11.2005 PASSED IN ITA NO. 372/BANG/2002 FOR THE
ASSESSMENT YEAR 2000-2001 AND ETC.,

In ITA No. 12'?0 of 2006
Between:

1 THE COMMISSIONER OF INCOME-TAX,
INTERNATIONAL TAXATION,
RASTROTHANA BUILDING,
NRUPATHUNGA ROAD,

BANGALORE.

2 THE INCOMETAX OFFICER.

INTERNATIONAL TAPCATTON

WARD-19{1),

RASTROTHANA BUILDING.

NRUPATZI-IUNGA ROAD,"  .   " "
BANGALORE.   _    'APPELLANIS

{By Sri. M.V. Seshachala    Advs.}

ENGINEERING ANAI:;SISVCENEERE.V _ «

OF EXCELLENCE (p)LT'O..f,-~ I  ' ~

PHASEL3, SITENO. 152, ' '

HOODIvILLAOE';,_ " V '_ a = _ 

EXPORT PROMOTION 'INDUS*I'RIAL AREA.

PIIASE. FIELD" ROAD.

EAI-I.OALc)__RE;_..L5S0 066.  ----------   RESPONDENT

   Sr. Counsel, Sri. Pavan Sharma,
 .  S11. :'KIIbEIf.f3evan, Advs. for Universal Legal}

THIS AI?=PEAL0Is FILED UNDER SECTION 260A OF THE

 INCOME TAX "ACT, 1961, PRAYING '10 SET ASIDE ORDER DATED
'4.«.O'j2.'3-,_1'I..2005 'PASSED IN ITA NO. 955/BANG/2004 FOR THE
._ASSESSMENT YEAR 2002-2003 AND ErC..



31

Ci
In ITA Nos. 1060 of 2006c?&v§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--'O_f

2007 . 782 of 2007. 785 of 2007, 786 of 2007 , 787 of 

and 953 of 2007
Between:

1 THE COMMISSIONER OF INCOME~TAX;"'  A 
INTERNATIONAL TAXATION , I "
RASTROTHANA BUILDING.

NRUPATHUNGA ROAD.
BANGALORE.

2 THE INCOMETAX OFFICER
INTERNATIONAL TAXATION .
WARD~19{2}, '   1_
RASTROTHANA BUILDING,' _A 'I
NRUPATHUNGA ROAD, '
BANGALORE. 

 " I'  OOMMON
\: APPELLANTS

Ané:

M/S. SONATA IN.E'ORI\/IA.TIGN' _ 
TECHNOLOGY LIMITED, _ ' '
NO. 193, 151: EIOOR',   =
BASAVANOUDL: ..
BANGALOR1'J_~ I560 004.  COMMON
    I  RESPONDENT

 G. Sarangan, Sr. Counsel for
 I " Smt. H. Vani, Adv}

'   IjI'A NOS." 1060 OF 2006 81 595-604 OF 2009 ARE FILED

4: «UNDER SE.CTION 260A OF THE INCOME TAX ACT, 1951, PRAYING

 "7170 ASIDE ORDER DATED 31.01.2006 PASSED IN ITA NO.
1 _v3034--3094/BANG/2004 AND I;TC..



32

ITA N08. 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
O? 2007, 780 OF 2007, 782 OF' 2007, 785 OF' 2007, 786 OF' 2007_._&

787 OF 2007 ARE FILED UNDER SECTION 260A OF THE INCOME,
TAX ACT, 1961, PRAYIN0 TO SET ASIDE ORDER DATED"g
13.04.2007 PASSED IN ITA NOS. 307/BANG,/20,071-,  ,
305/BANG/2007, 302/BANG/2007, 301/BANE/2'007..,__' --'-- '

298/BANG/2007, 325/BANG/2007, 296/BAN__G/.20.07, 2
295 / BANG / 2 007, 297 / BAN G / 2007 , 300_,v"BAN_G.,/20,07.,A

304/BANG/2007, 303/BANG/2007, V-3'O6,"--BAN(}/20_()77',_ 8:} 

308/BANG/2007 AND ETC.

ITA NO. 953 OR 2007 IS FILED: UNDER SECTION--".I_260A OE 

THE INCOME TAX ACT, 1961, PRAYI_NG._'I0 SET .ASID_E«ORDER
DATED 10.08.2007 PASSED IN ITA No.21 I,/BANG-/2006'.=EOR THE
ASSESSMENT YEAR 2006-2007 AND  -- '  ii

In ITA Nos. 1203 of 2006,1204 o1:_2006, "1205 of 2006,
1206 of 2006, 1207 of 2006, 11206.o'r,~'2006;»..1209 of 2006,
1210 of 2006, 1211 of 2006,. .12-12' or..2006,*~1213 of 2006,
1214 of 2006, 1215,o1v200a6, 121:6.0f.,2006,'2«l217 of 2006.
1213 of 2006, 12139 0322000, 1220 62 2001251221 of 2006.
1222 of 2006, 1.g223~._0f»2006,-1224'"--0f«2006, 1225 of 2006.
1236 of 2006. 1232 Cif 2006, '71j;.;;3s-or 2006, 1239 of 2006.
1240 of 2006,-4.2411 ofiI:?,,=0G5_,_;;l242----vofv2006, 1243 of 2006

and 1244 o1':'_ 2006  

Between:

1.: v ,_ THE"COMM1SSIONER._QIt' INCOIVIETAX,
 . ' - INTERNATIONAL TAXATION,
 » RASTROT*IIANA.I3UILDIN0,
*  NRUP1{fii,UI'JGA ROAD.
BANGALORE.  

 _ THE-ADbI*I':O°NAL COMMISSIONER

 OF INCOI*giE--TAX (ASSESSMENT)
 " INTERNA'I'IONAL TAXATION,
 RA2\3GE«19,
' .,RASf§fROTHANA BUILDING,
'NRUPATHUNGA ROAD,

 L' EANOALORE.  COMMON

APPELLANTS



33

[By Sri. IVLV. Seshachala, Sr. Stanciing Counsel}
And :

M/S. SONATA INFORMATION
TECHNOLOGY LIMITED.

NO. 193, 191" FLOOR.

RV. ROAD,   -
BASAVANGUDI, :

BANGALORE A 560 004.   f'cO»MMO':xr   
' * RESF_QN'DEN'£ 

[By Sri. G. Sarangan, Sr*;v2.6:C0uns6I'f01'   I
Smt. H. Vani, Adm} "

THESE APPEALS ARE  U1'-IDERVI'S'F,C'I"I'ON 260A OF THE
INCOME TAX ACT, 1961, PRAYING; TO 2.3061' ASIDEVV ORDER DATED
07.04.2006 PASSED V IN ...1..'V1'A.__ v__NQS.--"~.V 'A7266/--13ANG/2005,

769/BANG/2005,  /BANO,iiz00«5A§"'v #770/BANG/2005,

772/BANG/2005,  37741-/'BANG/2OO<5."--V ""'144/BANG/2005,
145/BANG/2005,  7'78.[BAl\1'G/"2Q05,V"v_V ' 778/BANG/2005,
1016/BANG/2005,,  ;j_453;'BANG,'.2005,  452/BANG/2005,
1015/BANG/t:006,_  ":r;;73/1:sA1'x1_c;/200.51.,~' 206/BANG/2005.
777/BANG/2005, '~ 205/BANG/2005, 146/BANG/2005.
450/BANG/2005:,' . "v%i'5A1V;'BA1'\IG;l2OO5, 775/BANG/2005, '
1026/BANG/2005; -- V101*'0./BANG/.2005, 1025/BANG/2005.
1021/BANG/2005, = '102'3/BANG/2005, 1024/BANG/2005,

1018/BANG_/2005}.V101?/BANGYZOOS, 1022/BANG/2005 8:
1020 /BANQ3/':2.005 AND. 

in ITA  i'246~n.f 20066: 543-543 of 2009, 1247 of 2006
8: '60:-3».-.610? of 2009'.' 11243 of 2006 & 580-584 of 2009. 1250
of 20061.&A5*z6»..-5?9~-of 2009 and 1251 of 2006

 VB-etweeAn*~:.__

"  :1 ' ~ .  '  THE COMMISSIONER OF INCOME--TAX,

  , IN1"--E5RNA'I'IONAL TAXATION.
" _ i°J§1S'I.T92O'FHANA BUILDING.
'NRUPATHUNGA ROAD,

 BANGALORE.



34
2 THE JOINT COMMISSIONER
OF INCOME-TAX
INTERNATIONAL TAXATION,
RANGE19,
RASTROTHANA BUILDING,
NRUPATHUNGA ROAD,  
BANGALORE.  COMMON .  =

[By Sri. 1VI.V. Seshachaia, Sr. Standing CO§I1'1SfC_:1]:'~VV V 
And : . '' M 'V

M/S. SONATA INFORMATION

TECHNOLOGY LIMITED,

NO. 193, 15'? FLOOR,

RV. ROAD.

BASAVANGUDI,   -   
BANGALORE -- 560 004, I   ._  _ ~ HCOMMON

" '- v  V  RESPONDENT

[By Sri.  ~Sara:r} géih.',V:Sr. COuI1S€1 
"  H'.i_V3.ni; Achy} 

THESE) APPEJXLS ARE FILED UNDER SECTION 260A OF THE
INCOME TAXACT.' l.961;:"'PARAYI:*EG"'TO SET ASIDE ORDER DATED
07.04.2006 PASSED IN =I_TA  135-141/BANG/2005, 236-
242/BANG/2005,' 2.624267'/BANG/2005, 88-92 /BANG/2005 .3:
498/BANG/2005 AND"m-.,  "

in ITA.   (£2007 }{549-551 of 2009 and 94 of 2007

  Betwe'en':"7

"  :1; ' ~ .   THE COMMISSIONER OF INCOME--TAX,

3  ,, INi'--ERNATTONAL TAXATION,
" _ :'?.ASTROTHANA BUILDING,
A' NRUPATHUNGA ROAD.

 BANGALORE.



35
2 THE ADDITIONAL COMMISSIONER

OF INCOME--'FAX
INTERNATIONAL TAXATION,
RANGE} 19,

RASTROTHANA BUILDING,
NRUPATHUNGA ROAD,

BANGALORE.  COMMON  .
AP    .

{By Sn'. M.V. Seshachala, Sr. Standing CO1_JI1--S(OI]".VV I 
And: _  . M .0

M/S. SONATA INFORMATION

TECHNOLOGY LIMITED,

NO. 193, 15'!' FLOOR.

RV. ROAD,

BASAVANGUDI,       
BANGALORE - 560 004. '     . V' ~  COMMON

 - 2   RESPONDENT

[By Sri. ' ~Sarangai1', :53". "C..(V:'J»'..'1Y1.E'I€fI 
  Adm] 

ITA NOS. 7'7'*{).F 2007..&~.._549--551 OF 2009 ARE FILED
UNDER SECTION 260A 'Q:'FTATI1E'VI--NCOIVIE TAX ACT, 1961, PRAYING
TO SET ASIDE ORDER DATED._07,64.2006 PASSED IN ITA NO.
436439/BANG/'2006 AND .0 

ITA;NOS, 94 OR 2007 & 650M656 OF 2009 ARE FILED
UNDER SECTION 260A  INCOME TAX ACT, 1961, PRAYING
TO SET ASIDE' ORDER DATED 06.07.2006 PASSED IN ITA NO.
75é»1,--7'6,1 '/BANG'/2005 AND ETC.

 ITAIINOS. 9.1"_9_'},o} 2667 3: 533-542 of 2009 and 921 of
 ggo7 & 503-532 'of 2009

_ vuBeijxe'e:1;_4

  1   "'*r'IHE'DIRECTOR {COMMISSIONER}

 OE INCOMEZWTAX.
*  INTERNATEONAL TAXATION,
RASHTROTHANA BI-IAVAN,



 " »,§372--702)'.BANG/20")? AND E'DC.,

"1~AFOR_"aUDOMEN'iI' ON 14-092009, 1'7~08-2009 3: 2008-2009,
 I COMING ON FOR FRONOUNCEMENT OF JUDGMENT THIS DAY.
 =,SflYi;EPJD  KUMAR J., DELIVERED THE F'OLLOW"I}\EG:

36

NRUPATHUNGA ROAD.
BANGALORE ~-- 560 001.

2 THE INCOMETAX OFFICER
INTERNATIONAL TAXATION,
WARD 2(1),
RASHTROTI-IANA BHAVAN,
NO. 14/3,  9
SR1 FLOOR,  '
NRUPATHUNGA ROAD,     
BANGALORE.   COIViMQN._ _ 

  _ 'VIAFFEIA.-ANTS

{By Sri. M.V. Se,-shachala, Sr. ST_éa1:éiing CODDSCIV1-I

And:

M/S. SONATA INFORMATION
TECHNOLOGY LIMITED,'  V ~
NO. 193, 151' FLC)OR.,.  

R.V. ROAD, 
BASAVANAGUDI, V ,   .. 
BANGALORE--~04'.'*      COMMON

   --  - RESPONDENT

{By 2811, G'. '~ Counsel for
 A Srrfli, PL Vaffi, AdV.]

f "-ITA19 OF 2007~& 533-542 OF 2009 AND 921 OF
2007 3: '5Q3--532,_OF"2009 ARE FILED UNDER SECTTON 260A OF
THE'*INCOME  1961, PRAYINO TO SET ASIDE ORDER
DATED .18'._07.20:07 P."'-SSED IN ITA NOS. 931-941/BANG/2006 &

  HAVING BEEN HEARD AND RESERVED



 

37

JUDGMENT

The above appeals are all by the revenue against the orders passed by the Income Tax Ap'pe11ajte Tribuna}. Bangalore Bench, where had aliowed the appeals fiied by _different resid'_ent "~n it assessees in respect of different assessmeIit._ flby hoiding that the resident -~ Iiahleffor deduction of any part of the to noI1--resideIit for the software which asfsessees had acquired/purchased' "n_on;residents for the purposes of of the resident --

assessees " the of the nature of their liah'ilit3f/ohiigatiorr:under the provisions of section 195 of jathe [for short 'the Act') by holding the "payments were not in the nature of within the meaning of section 9[1][Vi] of if " A Act it is not royaity it is not income and if it was VV._"I}.;Otui}'VlV(5V(a'I1'}T}(3 in the hands of the non--residerit assessees it V * i1f1(to1'nc" is"*£'é::_ll2'1t'*i.€'jL1$1= Ellfld 1101" s141s¥.ai1'1al;)lc:. 'V I,<:»'a_1'i1r;.ci'_c0unseI for t.1'1c7 assessees I'1ave (>oI1t.ended .1 in' !..Ij;..«r>.§sé*..ay1p1:>e'als 1.1m: thxa rzamlre of }")E1yIT1(".']'"l1 is not V" $u:;>y--«-;x1:-;y*: ex.-'e1'1 witiain H16 H1e2u'1i1'1g zmd scope of secti01'1 4'2 A\='oic.i:;.1.11C<:é A_.§_{:'(*c:11t'1'1£.s [for short" 'I)'.I'AA'E (=?111.er<>c1 irzto with sc=\='cra1 C(.>11m.ri('rs alui :'c:l<:v21.11t" for 1.119 purpose of ('EEC'}"J, ;)z:1yme1"11' .

6. While' U16', nat:1.:1'e of }')E.1yI1}C1'1i t:e*sI:é(i"' ~--d1_1 t:h(~:_ to11cl'1st.01.1e of 21 royalty paynmm. as (:i'<%:f]'.11_.'<.-'*;«Tj..~y'1'1'1 DTAA and the prese11t p21yme1'1t '<'::l_' tljxe zissc-jSsee}1_aot qu21li.1'yir1g for dE'.&5C'.1'i[JEZi(')l"1 'rc)y:i:l_t.y'?_ 21nd. u1';}'1C.y:fé'f?_)1'e g()es out of the purview of 'r0y211i:y' ass"d.e§i7i11cd}jr1 .t;r:1jf'11s'§ of S€CT,i.OI} 9[1}[\/1] of the AQtj_.L;.1} there 3111 in {x()y1.'-Sit-f.5'{:C? n cy_ ::':l:7}l\'/\\ V f' 2111 En t.ernation 211 Ag1'eet1"r1e1'11 :'e;_md ' 'of the Act, it is the pr0vi.s1'0ns oi ut'E'1_'_§' has to pmvail and 1;}1f:1fc2f()re..tf_he tonclL1s§io1.f3____Qf.the original authority and the 1'i1_i.s".:_V z3;pj3--e11a!.:§:"~2m1:I'1vQ1-ity that it royalty ancl 1.he1'c.=f01fe §/ 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 entire copyright itself, the payment . cannot be treated as Royalty as per the l Double Taxation Avoidance Agreement"-._V L" and Treaties which is beneficial to --the'*- . assessee and consequently sect£on._9<.of' i the Act should not 'take"rt.'i'iniio consideration. . l

9. Whether the Tribunal .=toa;s'r..'jco'rrect in" holding that the payr_ne=nt ._the character of purchase anfd"sale..Ofgoods and therefore carirzotf b'e._"»,trea;texd_ 615 royalty liable-to IncofiL8.T¢'x- "

13. It is in the b.a(ékgrour1d.. of developments and the questions haVing.V.arisei1_l"for examination in these appeals, argurnlents are ad\ran.c'ed'.l .,i_Seshaehala. learned senior standing appellant M revenue along with K V 'Aravir;d;e:'I}_earned junior standing counsel, in all

--4the«se'.cases,"rnany learned senior counsel instructed by thleirl"--ll(A:o1_1rit-3el on record have appeared and made $/ .AAI3V.'.-'i'.ji'i"I1(',',I'1i'Il -is t.0- ~h.é}t21xed at 10% as givirig the niaxinium " -«biE;i«1¢1'i~f. to t'i1C. is just and proper. 7'4]. '}?qéi*».c:E)1ii:.1'a Sri.K.P.Kuma1', 1€'c1I"1'1("d senior (touiisel

- é1.i}3(i°;l»ri--I'1g for the respo1'1c:i<;".*.i'"1£' would pose the foliowing 54 I'C"'fC:?1'l't'd if.1}(:T1"€?i1"l dc-rc=-r1'1'ic(i to £}.('('l'E,.1(' or arise in india squzxmly applies to 1,hc:~ fa(:1.s of the pm-:scm: Case. A(7c(>1'c1iiig;1y, SI'i.S(?Si'1E:1('h£11E1. brings to our iioiiioe t,1_1r;-22 EISSCSSIDETII1 o1'der w1'.1c-;r1'eir1 the Ass(3ss.ing Offic<~::t exami.i'1ed 'Lh€S(;'. issues which is at AI1I'1€X1.1f€--ij(::' suppcirts the \/i€VV of the Assessing effect that the ti'ar1sact.ion wlieii lifiad "

21g:reeme1ii_ i'ei'ic3ct,s that it is a 1ic(;fi::c and th.::"v_arhoiif1t.

paid thereu1'1dei' \v_ou'lgVi"_-be 1ic7eii(f£=. i'eé7;-ind. i:ifiL1s _is royalty within the C1E'.fi1'1i3'["iC)i_f."."'v(fi"V.$E3Cfii5:1'3s'!Vg[..i':},--{\*;i?,, 01': the i.'I".Ac1' anti hence Sc:('7l.ivi)ii"Vi'£95; "7'};iiii',r'é;i{::i'<?d. VIi:V is rioticed in the zissessiiicm oiidezf t_1i;~_1i Offi("t-:1' had hc.-'rid that though rate of te:1>"<*cw_19i i'(s)ya1i"y éifs per Section 1 15A is per D7I'AA., and" LC3{f.fftE'}f€l'11 pk{éi.*E:«e1'1is21get fixed for dif'f(-:i"erit (ie1.tQ.<;;'Q1'i<:fs. 'héisu (1-(51n&_i.. to t"hc'=r ('.()i"EC1L1Si()I] that the eiitire 5/ c:omp21Iay'i--ss' i1i"i'.he f2;=eit.:1re of royalty and not out right '7yo_s;.i11ce sofE;.\i»2;'1*éA. rom21i11s with the trarlsferor.

_A'Sfi;Séslmohala would fiirtiher come1'1c1 that the mling rcp<_)rE.ec.i in 238 ITR 296 which has been 5 'J1 (;_uesI'io:1 for }3e;.*.ia"1;-4' a1'1$\4-\-'e:'C('l 1'1am1c?iy w'}'1et.1'1c1" H19 NR1 c11e1rge21b1e to tax in Erldia and a1'te1*npI:s to amswer the que.si,£c)1'1 by c()11i.m'1cliI'1_g E:11e1t_ the '§"1"ibuna1 in pa1'agra;§n_ 5.1 at page 35 has held t:}1aI: the was not in law in crc)nte:nding that this case is not Section 9{I}[vi) of the Act.

18. Sri. Seshachala would co1}t.ehci"._ihe1t. ,V4L'1"v'1'L?' Appeliate Authority 21%, page,93,. _ha-S*-r3x2,11i1i'1j1<;Ei-,the effect of D'I'AA, the c1e1"in1'1.i--:)I1 f V. 1'gi'1«e('i:. _Vt1'1L:'§.1':%jz,t__oC1é'i*" and also the meau'1ing to be etsgigziggi to 'i1}1_}é;:11...___vHc}' cro_z'1i:ends that the 1*oy;-my as cié:j_fi1'u_:,d ;.aV1"id'é:ég"V's;«:;t%'i;vion._&}[ 1)[vi) of't:l1e Act' and the same defilied 'uhd§:1'V".Afi.iC§s{"'_.»~12 emci '13 of the DTAA 21grcc:111e13t_§.fi()i"USA é1'n-.d_Sw(:(ich xscrspectively are one and i.}'1C_sa11:1'e. fggtnd i1e';'1%ti'c: _t:.hc-2 payment. made by the .respo.ndem.

@/ 720;. Sesliachaia. lc:e1rnc'-mi senior standing coimsei 'zip'}J.§r25i.1'iiig for the 1'€"'.\»'t':',l'1{1(,' f1i1'1'.hc1' (.'.(.)I"1i(:'11dS tl'12.1t' in 56 (.1<_)1isidei'C(i by Hit" Appclle-11.9 Al11'.}'1(')l"iE'.y at gasige 94 of the papei' book \V}'1t'l'€il'1 it ('.()l'}-SiCi("'I'€TCi by thli', AdV21I}:Cf--:T>7 R1.iIi1'1§_.?§ At,1t,l1<>i'ii.y \Vitl'} |'6t'f91'cr11(*L? 10 I;l'1(;' fL1m't1i()niI"1§.3; ~ etc and C(_)11cEu(ieci t.he1i: such payment (vide page 99 and 100}. It (T(_)I1tI(?f:i(>{(;,(i:"ihéii. 1'-its deeinccl income uricier SC()1.i0_11 9 iii" the 1'.'a(?i*. whether it is 'shrin}{¥"v§ifei;3psd*" ~.9(>:'i~' shelf/brzinded software' urfiiL:»}1 and gone into. Si"i.SV(1s1121c%lri,;1_1§i. 12 and 13 of DTAA zmci points 01.11: tliat thq in this regard is oftwo fold: 9 V H

(i) AVs§)fi,\iréi1*eV_:isw 7go<A$'tl9sV""'é:ii1d it does not find a place " V .. 'ii 1'15..A'i7;)"l 21g1'€1éfii{? 11 L s{.ii'V} 'i<5ts3i1'{_%.1'wise defiiiition urider Section I2

i)'I".A~,?3_i9'4j'..'i'(A)r royalty the word software. is not rfie.i'ii.i()11eci.

58

Sri.Seshacha1a has formulated the foliowing points for addressing the arguments.

(i) the assessee was bound to deduct tax Section 195 of the Act and he cannot that it is not the income of the recipient';-._:: v ' Vt" '

(ii) The payment is covered by~'S'ection the Act.

[iii] The Tribunal did not c_onsi'cie_r" assessee can questionzfihthe of recipient under Sectionsi2'U'iVc{'i]uVand 20 i'['1A}i

(iv) Software is a to tax under Sectiohn and relies upon in "the_4'cas'e"ofifransmission Ci;orpo_ration__ VS.'. won" (1999) 239 ITR 587V(scj at 'paragraph..--8.

K,umar;'»isai*ned senior counsel appearing forVthe"responidefitsiwouid contend that the Words used in i"'t-section ' .195 _is't"??ciiargeab1e to tax'. Hence a person ~ if.-e.du-cting 1235; under Section 195 would have to first see whether the same is chargeable to tax "then only if it is so he has to deduct and if it is not §/M.

5 9 (£ee1"nec.l inrome within the scope of S(i('i'_l()I'l 9(1_)[Vi} of the ACE". 1.l'1(--31'1 if it is to be E.al<en to be 21 1"I'2-idiiig rt-:c1eipE.. it be cha.rgca,ble to tax as busiiicss profit and if~~--oi_j§l°..e_{_1* . A' con.d.itions of 12116'. DTAA are satisfied l'h€il ii; c.a.,11_ income 'dCCI"L.ll1"lg in India. anti Diloltg. l'._c)i:}fiemrise_7 f Sri.K.P.Kumai' relies upon the wry cle(*I'ision I'C--Vl'i'€:'/"dv'.'i,'1_pC)l'lV'§ by Sri.Seshe1c11a]21 and lariilgs to ()l",i'I'_ ll(_)lii(_'.€'3 'p:;;ir21gr21i)h 8 wherein it; is held 'applicatioh fo de;di,1'c1'.'»t.éi2:%\7v()u1d arise only in the eveériig Sri KL11'1"18_l' cont.e11c'lss that El-"id ill i5 31 l1"€1diT1¥ :'€cc:iPt t.l11ii$i'iV'ii'o1j' India. Sri Kumar oubmits i,l1aix'i.i'itifaifili1l.g in India ELl"i€I1 only it is cl1a1'gea.l)E._e ttiiélltziizi afid paynient is made outside lr.i'§l1liav.,z1As insi,2u'1i Case, it will not be lieiblé... " as SL1('.h the respo.r1den'[ Company V'.jV\:'Ol.l1d nc:--.ij___ be§.~re:vt1i'i,1Aii'c2cl to deduct" the Sri Kumar ""éor1«ij.c%'r*..gls if 21'}}éfI'SOl'] is not liable to be C.h'c1l'gE'.d to tax then ._ iiilio' beiI'1g ('?()I}SFi1'L1'L"'d as .21 person in default under Se:§:i.vicoa:'1--i2OO does not arise. This _posii*ior; the respondent be b0~;i_'1(-?. iii1_iii:iiA11d W'11i](,' readiiig SC('.'(',i0I1 195 and 21 ii&1b10_.T,() dedimi: can look into as to whether '"g_.'iT1C'()iT1€:f ()§~ .t:=he 1*ec:ipiei"zi: is c'1iiz'1rgeabl<: to tax in India and Oz':1:'-.=::V~u..r_:li3: ex;-1.11':inai:i01'1_ if ii" is f(_)1.1:'1cl by !:l'1<;? i'€Sp()I1C1(".I'l1. that 60 02111 comc1'1(_'1 in e-1.11 z»1pp(*a1 b(:f'01'r3 1'.1"1e z:u.11.11(,)i'ii'ies or the 'i'rib1.u'1211 as responcieiiii would steep into the shoes of assessce, sL.1bmii.s H1211": {Dy 1"e21(iii"1g i:1'1e emire_j1.1(ign1eij:i_iixiii'-. !:ra11s1nissi(.)1'1 C'1"po1'aIi(:>.:'1 ('.€1.SC it does not :" I'I'gl1('. of the I'(:'.Sp()i'1Cl€111' to cliallenge based on c11argee1bi1ity. Sri KL1iTi'ai* (t11ai*geab1ii.y {to pay advance.

4(2) read with Secriiicms 190.5196 gpi'----€'uh'c.Aci'. a11é1"(?v0n1;t;r1ds ihai: adniiilieclly in _i.l«3'e_V i'_ii1si,éi1'1i_.cgise«,}52iy'm§;§11:ii is not madc in India and it Op_€I7)vfb"'thé"'f§3Sj3GV. déf1'{.Es to urge iihai. the E'(,'(f.'i_]')i(?i'11. )"ir"itm"<_:'}1aiifgézzaiifiitr Iii"i.1'1is 1*eg_gai'd Sr3ci..i0n.s 4, 5[2b], g(ij'('\7i}vE11}(.'1VI95.':2.Ii3Q§x"jD'17€¥SS€d into $€;ri'vi('.c. 'I"h<..* decision in _t1"1e E215? oft.'-CAI*§" I31} Lilly (2009) 312 PPR 2a2 5[SC} p'a,r21~g;'a.]')l'1«"29 ;:)a.g<:* 247 is relied upon 1.0 (rc)i11.€-izijiii_i.}'i&f._ provision uncic-tr S6-rciion 4 will have 33/ 62 Secti(:)1'1 200 e111(:l Elms the 1'c*:_s1)(')1'1(lc1'1t" cicms not c0r1'1c within trlle ambit of cle<?111ecl dcfau.lE<-:1". .215". the paym.r;=:'i1.1.

wasM11(:)tt in Elhcr. 11a!'111'e of 21 1"0y211t:y p21yn1e1.'1l:.

24. It is c:()11'::e:1'T1ded by 1.110 _lear1'1ed C()LiI1'S€_;?l:"il)I"v.:fl'lC assessee 1:112.-1t once they do 11:')! 0.01mi; 1;11d€1';. tlliqelgjhelfgizxg f p1'(1)Vi$i()1'1s namely Section 4. f;}1}'0__queS'l,i0'I"2 of ,€ftl:dI.llCtir1'g the tax does not 2-msc as I'C?C{l.11'1'lE?"Ci_'lL111dC1'.'SiTCl.i(Jli} 195 inaslfnucll as Section 195 ..4(_?EJ%«-81t'.e-t11p--laf<:~s_'{lie _declu()ti0r1 of tax only in re*spec,l__ of 51.1011'-.ir1<:mir1él'*.\2v§1i.p?i becomes (?l1a1"ge.21l3l@ 1.il1d('_3V.l;._ L" _ p.1V'L"27vi:i3.iL)1'1:'-_s..V llfiiéé Act namely Sec£'ic)1"1 4. i~"Ic;:1=;r.{c4."viii»"is_(it_>_{ite11'c.led 111211'. o1'1ce they are ouliside the p1tr.'v_iew of _cl'1'l211*'ggé;;bilitiy t.he1'e is abssolmiely no liability dt-YCl1l(".l t"e1'3--i. '&»iI1d .l'1C'.1'l(',C 1110 (I(')I'1.S€C_]L1@1"Il.lE;1l order pzmsetl'«1--.1miCr'«tbegii:-i.Q11 20'} bad in law. [11 ctmtended t.l'1et1!". tile.CONSétqV1j1«.ci:§=tfc?s:; of 1"1()n--payme1'1l' not 21lt'.r2»1ciCc1, if

7._l}1(:'Vpe1's(i)h 1710 duty 1:0 d€dLl(".lI. as Llrgeci.

Se'=11'211'1§,_;"e[11'1, Scniol' (::()ur1s<:1 by 1'elyi1'1g upon to F399) {TR 587 and with 1*efe1~c-zmre tic) Pezrzigrapll 8 of 63 the Jucigenieiu of the '1"1'ibu.;1'1al Whi('.h refe.1's to Section 195(l.){2){3) of £1119 Inconio Tax Act, submits that miher sum (',h'di"g€:'.Elb1€ under the provisions of m;§'A:5;.~%-.__jg ;.

would meal} that 'sum' is ehargeablt-=. to tax. w}'1i'c?vii:co£;1d=A be assessed to tax under the Act: 1111211,: 1116O(?ji">r1'sidAe:f21tioif1s..__ would be whether the payment. to I?:.QV1j1g..3 resident is Cha1'gCdb1€ to tax u11de_r___i"i1:;~ 'provisions ofitiihe Act or not, subrnits that if ifhis tE1'i+',€If|:Vi.h§£1';"iIh(%--.,SL111} is not ._.are'.i,l1<_3 (:Qn.:scC11iéi'£ces is not a at all (:l1argea1bI¢,_V question 2111s'\'7v__§fI:'e{j.V*:.ii1;_:O CORPORATION vase. 1T)(",(.'.'r'.11,E.':,§;'-Vfiifl.' qr-_ie.stiion that arose for consideration 'A1)'ei_'oro Sri Sarsingan subriiiiled t1'1:a1. Secéti,,c1§ii'V195 to pure income receipts like".

iI11'.VC*"['(',\',-31:,"~.1fCl11}V'€fi[I(7,';"".E1]}d not to something in which the 7'»__i11<:omes=is'--sa>11ibed'd.ed=imd 'mat' the Supreme Court: was not V:slj('.(1UVi1't?(ff to éo1'1sic1er a. Case of the p1'es€n1: nat:ur<~.*. in «:"i7z'a1'1sniissi.oz1 C()rporat:ion and th€I'€fOl'C the '_d(=:_(%'i's'i('Ji'.g is not: an aL1iiI*iori.t':y for the present. case. sL1bmit:s lj1a"1'.»(':()1'1sidc?ra1ion in UIQSE' a1ppL'*.als is as to whetilier the $/ 64 payrneiii of 21 's1,.1:m' to the r1on--1'eside1'1t. chargeable ,:."o, tax under the Act or i'1o1':? that. sum rnay be i1i1eor11e«...p_or_e-f income or income hidden or embedded I:herein,"'~--._If-:iSo, then tax required to be imposed;o1i_the Elab<)1"ai1;i1ig; Sri SaraI1ga1'1 s1.:b111ii:s' ljhaii wh_.a'ii \VO1}.1'd the';

income is to be computed on provisions of the Act': iI1(3iL£dii1:g'- of the business inconie. if receipt.

Trade receipt: proceeds of some properiiy or in the course oi' f1,.irther to be deducteci is income tax oéiyeble rate under the Act Under the of previous year is Se('ii.'ioI1___.4={2]. Section 4 provides that in respeci,:*oi;' i.nc.o11.1_eL'*--.chargeable under sub--section (1), ir1(to1ii'é.._i:'éicx. s}1.t3i_lJ__be'"dec1L1(:ied at source where it is so .Videduci.ib}e__L1rider provision of the Act. If the sum that bcxpaicl to the non-residem, is (?hE1Fg(?2ib]€ to tax, tax is 5re%q_Liir_er.i L')-,be (ied'1,ic:t,ed. Emphasises the word ''if': that /§// 65 If 3": 5000 is carried from this C()'{1I1I,I'_V then obviously it is not iiicome. there is no question of deductiilg the moixieyt at S()L11'(,'.€; that if a gift made tI:ie:re is no eler1§imeiii..'_'of ;_.

income iii the payment and draws attent.ior1_--to~-

Circuiar which says that if a con1i11issio.r_1~is paicl-. to person who carries on a c0miI1issio'r*:._Vbusi'nessVabtoaidvaodi services are renciered in the oth1er__eo11_r1tify tha--t;_is not to be subject. to tax; that if the foreign country and there is no liability of tag; iii 1

26. StlbI11i'£jSi()i}0fibjIV}«P_eii'I'}(?%iTE':~v!i)_Li*1]i€-561 for the assessees is as under, iimy be income out of _c1iffere1j17_'§ i'ieads of izricome provided under Section 1.4 of t.I'1e._Ar7t.xtI1'c:T, L-.o.'s,ay income from salaries, income from house~.propei*ty:--._ "pi"ofit:s aiici gains of business or :t{professiori"; céipitaxl gains and income from other sources.

.127'. ,fTi'he§i-scheme of tax cieductzioii at source applies not "_'c.,1niy9--'t:(5§ the amoi.mt. paid which wholly bears "ir1come"

66

ctliaraeier siieii as saiaries. diviciends. ir1te1'esi' securities. ete.._ but also to g_gi'oss suins, the w1iioIefV.o_f which may not be iricome or p1'ofit:s of the re(>ipie'ii1i_s':it:h as paymei'1i.s to eo11ii1'a(:t.o1's and sL1b4eoi1i._1jgio3:oi7s" e1'Iid7{.I1e f payment of iI'1SL11'a1"l('.€ (:()n1mi:+ssti'.()i'1. contended that the sum which ma3i"r3~ei1'equifed'.F[oV.:beivpaid to the no1i--1*esicIent. may and.

may co1:1tai1'} .21 fraction of the. :¢i1':1'.C0}"T1Ef. It is true that in eoritain a fraction of the in other cases such 21 ii'ite1'e,_s1' of 1'ig__§htos of patents, goodwill or niaehinery and such other f4l"c1I]S§~:':'.c:,1'CI'.'i~€)I1S. it: a large part as taxable ir1e'o_1'ii.-e"L1r1_cic-?i' 'iihe4piiov'isions of the Act. Whatever may be Z'ifiAi':h(§A'.::.ii!iCOET1(3 is from profits and gains of .\i?o;.11.Ci".V'be computed wider the Act as provided .1 .:i;i'i*rie,._.'(');fgular assessm en 1;.

ihirpose oi" s1.ib--see'i.ion (I) of section 195 is to "t:hai:' the sum which is ehaigeabie 1.II'id€I' Seeiiion 4 of $/

1) i'°1', ¢ 67 {.110 ACE. 1'c)r levy and colleciion of i1h1c()111.e--t,ax. the should dedum il1('(fi)I1']tFI.E1X tE'1e1'e()1'1 at 1'1'1e rates in t'<:»1"h(;%V,~..i'1;' , A' the amoum. is to be paid to a r1<m--reside.n1._....7Ifheu pmvisio1'1 for t,e1'1tative deduction ()f:jr}CQ[Iit?v~tt.'&1¢X1 '~.'h'er'er)I3A_ AA subje-Ct. to reg'L11a.:_' assess111e1'11" 21.r'1d_ by ded1;1C{iA0v1j of 1'nc0me--tax, the rights of the .41'ev".r1df?:':invvvf:any mamler. adversely affezrtheti :'t.hehA§A:"i'i_ghts hf the payee or 1"€(Tipi€l'1T. 2111: Sections 195(2), 195{3) Secttion 195 refers to paye<':j_f;111c*...ui':2;SVec.f1;i'oh"{3}. _1_i¢.f'6:13s 1:0 21 recipient.

29. It is c()1"1i-'e1'"1clco1 -byffie'1'e;iiaf1é::(i COLII1E:3C.1 appearilig for the assessces that .oi'11y"-th'i1'1g which requ1'.1'eci to be c1c:,ihcé"by t'h--ei"11?--.'i:--.; 1"'0._file e11i""éipplict21tic)11 for determinatioli. by the that such sum would not be T'v._{f'h'2:1'gea1ble__in flue <:::g1se of 1,110 rec:ipier1t, or for HC}f§t4€4-Efrfiinélt.i()l"1v4317 the e1pprop_1'ial'.e p1'0p011.ion of such sum "'._-$0 4(?hé1rg§e;1lj1er, or for g1'a1'1£'. of Ce.1't.ific:a1;e aL1':1horisi11g the rCci'pie»::1€L 1:0 1'eceiv@ the :;1.mo1.:111. wit,hoL1t deduCti(m of tax, "Ol"v'.d.G(iLl()fi()I'"1 of i1'1c0111e--'t:21x at any loxrver rates or no M ~€ 68 de<.iuc:tio1'"a. 011 such d(:'.lZC1TI1il'3&:lii()l1. tax at the e1pp1'()prie;-?'_e rate Could be deducted at £110 soume. if no app11'c211:icm filed. i11C()me--tax on such sum t'0T..be deducted and it; is the statutory 0b1ig2ii'i0iT<1. Q1?t.h€_Tp'eIjsV()Vn ' responsible for paying sucll "sum" to L'l¢d1.;_c:t: tz1X,_=_Vther'<3()1'=; "

before n1e1ki12g payment. He to dist:ha=rg£i the obligation of tax deduction é11.V_s0u1'L§é:' t hat.°'t.he ir;t.éhfion of the legislzlturc is gross sum with then the provisions of -- Cofiid ;;1:~2.i;\r€"%3:駥f1~w 0_r:iitt.€d.

30. Sri :f Z Q_L1:§I1st?1 appearing for the 'f:.1'£'er as:-sessee was able to dern0nst1'at:e t.'1i'a._1_ Vi:}f:cV>. ' inade to 21 ncm-reside1'"at wq.s to tax and therefore no 0bii'gVa*tiVQ11_Vo13.V_V V1iI'1'C'«._I""t'.'T>'_iC1E)l'1f payer to deduct on payment.

Vt H21t, 'Tr2m_sm1'ssi0n Co1'p01'ati0r; an'4"e11.1fits:_()fi'ty to hold that even wher1 there is 3-10 C H't.he.re is an (_>b1igg21t:i01'1 to deduct. under of the Act', Lmless one has ,g"c)ne through §/% 'i;1.1,§ }é»1-()c:£éss of Sec. 195(2) of'1ih£-: Act.

as 69

31. Sri Gamesh Sl,.lbI1')i.tS that the 'j1,1dggm.ent of tjsiis SLl])I'(.'.lTl.€ Court fully siipporiis the case of the tiiaii; the e1'11.ire payment is 1101 (:!1e11'g_;'ea1b1e to i of the (rharge iinder Sec:i:i()1"1 4 ofv' fIV"1'(>j'«_»é§t':«1"_. 2 obligation to C1€fd1.1C'[. at ail urider Se(rtiovi'1._ 1195 0ft1'].EjAx":X(i'1L:.

32. Leanied C()U.I1S€l for F116?

several conteiitions b21svt:&i--zT o.11'&*. =n_um.ber of authorities. both of 't11<é_.SL1;3"1'ér1*1V§%:: iseiverai High Courts, to drive { :if::_i1'a1_t:"tHiVie payment is not a payineiii.__i11 'i.l1:s ifciyzaiiiir paymt-:nt; {2} that it" is more a "of 21 payment made to acquire a Copysi'iiag{i1'LZ€Cir&Li;i.iijlé':i:}E11'1.e1ki1'1g the characizz-3r of a p2i:,.r1}ien1'. or some .n1erChandize: {3} t1'1cr'3V..1I..:€'\'/'f",':VIA1"' argu1nem."s sake. the payment is payment" imcier the hicome 'Auct. \7iiii,.hi);_11{Vxconcediiig. even then, in terms of the i:1V0idE111C€ £~}.§.:{I'€?(-3I31€I1tS, it does not retain A'.4'i?fiC.'_"V'E}1J;iJ§'£1(If.€1' of a royalty paynleiii; and it is an propositioii of law that the provisions of double $/is 'bt1sir1es«s I'fiE'?V';--'4"E:/iii;-§"i'-. and Consequently the income receipt "i'11:.'I:t'h(;"' !.12iI1ds*af the n0n«resident recipient. then also, it 47.1"«_(f21I1't1011Kb€' taxed under the Act, but C2111 be subjected to * . 1'.&'V1){..."()'1'1'}:g/'Zi.I1 the country of the n(m~resident recipient and 70 taxation an-'c)idam".e ag,.§ree1ne,i'1t.s prevail over the provision..s of the Imral IE1\»VS \»-'1':2:.. the income Tax Act and a definiti<)]-1 of 1'c3y.g11t.y in terms of the p1'o\risioI1"s_f:: Income Tzvt Act, part,ict,alarIy as in S:.§et:it)'1'1A Income Tax Act, are of no c:()11seqVL1c:>11ezVe'gindt. not at all an income receipt liainds resident; recipient: (4) if aceltiife the crharacter of a payment t'c)if:_ or a product, in the se1:vs'e:;i. is copy-righted article, which étpackaged form, aveiilable <)1;viV" then, even assuming nattire of business receipt m §«h.x3(:'t'.7'g1 An0ni1'esider1t,. the non--resident a«v}Se'1t1v1121nent. estabiishmerit or not carxjying regtti..>jii* >..A1te.t~i"\/it.y in India, the payment: even if it 5%// 73 CCE U. H P INDL/-1 SALES (P) LTD.

[(2007) 8 SCC 404)] SPRINT R P G INDIA LTD. v. COMMR;.."")"'«'[_": OF CUSTOMS [2000 (1 16) ELT 6 SC)'-._ I PUNJAB NATIONAL BANK "R L'.-I_/Alla!) _ "

[2004 (1 '72) ELT 24 SC] STATE OF KARNATAKA_u.

[(2006) 2 SCC 747] RAJENDRA SINGH v;"0S1:'piT2.?0'-OF UI5 [(2007) 7 SCC 378jT_A _ 1, _ CCE v. S.F-.!IKUMAR-- TAGEII:VC!1'ES«V:.0)'[2008 (232) SC]::

SAMSUNG 'ELECT'ROIvICS"; CO. LTD.

INOIA 'OPERATIONS v.

ITO (TDS)gI, BANGALOI'€E TATA~ CONSIILTANCY SERVICE v.

STATE)IQF"AP..[{2.(?04) 271 ITR 404 (SC)! ' _ '0TR:ANSMISSION0' CORPORATION OF ' _VINDLAvO;i'1'__AP LTD. v. CIT [(1999) 239 IT'? *I55'7f(3*571 2' ._tINION INDIA 1). AJADI BACI-mo ANDOLAN & ANOTHER [(2003) 263 ITR 706 (SC)] v. VIJAY SHIP BREAKING CORPORATION {(2003} 261 ITR 1 1 3] 74 r CIT v. INTERNATIONAL DATA MANAGEMENT LTD. [(2003) 314 ITR W 1 771 ~ "

r CIT v. ENGINEERING ANALYSIS *- "

CENTRE OF EXCELLENCE PVT. _L-'1'D:;~., [ITA 2158 AND 1270 014* $5006}.

r CIT v. ELI LILLY AND . «. "

LTD. [(2009) 312 ITR225 SC] I * , DIRECTOR OF INCOM1?i4T§{1X._Vv. PAEER PRODUCTS LT1).~..[[200'2]'2.57'I.'1fR 11 2 CIT, PANJAB v. R [(1965)56.ITR 20;». R.

, CIT 'ENCEINEER.

AP[(i!9$-5).152.IT.R.7'53]

34. These W.-{Ii'.v;1;§§§;:I§:v'»;§'pd¢§:_'hééemn 260--A of the Act. The EI1C'CsniIe-- of iegislation enacted by the P2,r3,i_2In1euf1t._:valzkaiillhk the purpose of raising (:e'm:.;~aI"gC¥§}eTr1mer11. and the aim and object:

is tci~..Ie"-.«f_y a11:"C1._{:D1ie;§~t' tax on an incomes which come 'v..__AAWi'iLhiH t.h'e__n1§>va;1.i D;g and scope of the pr0v1's1'_or1s of the Act ' " 'a5;'1i(l..<.";"uaI1t:ify11r1g the Eiabiiity (e:1'ez1t;ed on such income.

Q/ ii 76 which is not For the niziin purpose of levying tax c)r1.y'iCi*i,e income of the resident. Oi' I'1OI'1-I'(-'Sidt?I1t..' i.e_, whe1je._.ii;nc'ie:tT certaiii eire1,1msi:e:u'1ees eert,ai1'1 types of ii1(:O'1I1esifcire,3 exempted from the net of iiaxaiiiori, u though has i'eeeive_d_ otherwise definitely could have will not become income for of the Iiability to tax under the Ae't._iri:i__/Vieur -'ijfitiiievv-eixemption.

37. it is t:herei?:a:'eyy_c:iea'i' ;.ii3_()'f.1'~41' i:i_ieV_-::hai'ging section and the CX€ITI.pfyi(_)i"i..§5i'O:if§_Si()i1_$'Si1(){.1"Id~3i\Af£1yS be coristrued strictly a1'1d"'£::A1ie:--.re. ftzi' unduly expanding the scope of ievy, :».1_ procte-ssioi"ii:iiei'pi"et.aiioii1.

35??' to of the Income Tax Act, nanieiyl the previous year is brought, to tax i'()il'(>.x2iri.iiig'yeéir, kiiown assessment: year and for to finalize the assessment and to specific tax iiabiiity of the assessee, ii * . riei:.es's£x;i*£iy involves an exercise o_i'g21i,hering iiiforiilatioii, §/ §Oine par't...0l'V__*the liability is recovered in advance at W a1;1d rerriit.t.ed to the income Tax Departmerit which "«_e'a1'i i.e1'-2Vst1--re avoidance of the later lamenteltiori by the l"V('3'\f'..§VI"1U("i'V, due to the Ilorieavatilability of the assessee or 77 seeking for further explanation arlci tl'1ei1 passixig orders etc.. there is bound to be a time gap between the actugil earning of the irieome and the date of dete1'r11ine1tir>jr'1~V..bf_V"=V the tax liability and as it was the is revenue that realization of tax becomes' difficult when once the income the assessee. even before theifiii'a11izatio1j1.'0f liability for the assessment year" a demand notice is svewefl fo;},_l0win'g "the--:.asseVésment order. the assessee eit.i"iei'_:-4'rri».'ciy'"not,'*~be 'left W;§th much funds 01"

may not evehfl {i'1'"i«..:'l11die3_) for enforcing the tax liability and to ()xreyr":;@1V<:_l1'~si'tt2ati0I1s framers of the Act have erivisaged the of advance payment. of tax as irrdieatedV"i'iri Eihaiuters -~ and XVI of the Act providing for arliat:_tre1t~:aa_¢d fn.et,h0d of collecting tax. Where under.

aiso coming within the scope of oft1'1e total income of the n01'1~res1'dent

4._';:r1"i§i2~~tj}1e?fefQ1'cso far as non»»resident is concerned, there is iV.t:o_1j'iVs"id'e1"£11:ile significance to whcthei' any income had "aris.er1 or accrued to the nonwresident. in India or has even 78 even due to the nonwavai1291bi1it.y of the assets of the assessee agz1i1'1st_ which the I'G\»-'€I'11.l€' could have pro<.:eecie"CL_dv for recovery of the aniount.

39. Under the scheme ()ft}f1e Act ' 'A main charging section, i.e. section -$01' thc-:"A::t. the resident is co11cerned,'ai1 global income is taxable in India 'cir:idc1'&iV_Line:iAt:.i,fifV.':'S0,, far as non resident is co1ice1'nec_i;. linked to the total such income which is eéit.1i_er_1'e'ce'Ned or ._d'ceVI;ifled..,1j_Q.have been received in India ()1*'.,_a(rc:r1*u.r:s'vrjitA_'a1ji'ses'"'--or "deemed to have been accrued or aris"'e.n"to er_1'1o11"»1fe:<;ide11t. in India in the year dy1.ri1'1g w.h.iphii't11e S{1bj'S(vY_t'Ifi&1ttE¥1' arises and even here the i1'1conie_"wliieh'isdeemed to accrue or arise in India in 3/ e 79 been deemed to have a(.t(:rued or arisen in India. T his i{§;'.'t,o be found in see1'1'on 5 of the Act providing for the se(ipe'_'ef t()i',a.l_ income, while section 6 of the Act. prox-fl' K concept. of residence; se(tt,ion 9 of fiction, an arti1"ieia1 way of tixideirstieiiidliiigl'wiiether has accrued or arisen in India i;H3fiOI1 and the significance being assessee, even by the empioiyrnien section 9 of the Act, if accrued or deemed 1:0 have in India, such income, is ineoniei'wfhi(:h'Alis iizixeible in India.

40. In all the é;b.ove discussion proceeds on tine"'ps.yn'iei1ts have all been made to foreign are all non»res1'dents within the 5, 6 and 9 of the Act and by the teoi"1ji'i.r1.p(:ti"i.fe" of these provisions if it is to be held i;i:'<1ni_' 'i'}i':l"GflVpEi}>f.ID(?l11 in the hands of ricimresideiit is in the payment, which can be otherwise be called as fiiicorrae, the significance for present purpose is that the V e 80 resident: payers such as the appellants are definiteiy under an ob1ige1i.io1'1 to make deductions in terms of section 195 of the Act and to remit. the same wit.hi11:"th_eL'~».v stipulated period 1.0 the aecr01.1nt of the revenue. is may result: in the defaulting being iireaiied as a defaulter or against. for recovery of the a11noL1:rit.V_whi.eh__ payer shouicl have cIedue.ted.ar1d ren1.i:1_}te'Ci-»i,'.r.o i.he"e-reaiit of the Income Tax

41. E1 is in effort has been put appearing for the eissessees. us thai: in the first iiistagnce the rec.#e'ip_i:.s=ii'1 t..11evhands of the nonvresident stippEier/ reL:i':pie1i'f,..yis nc)t:mat. all in the nature of income in the h--;--1hC_3-S fei.1_o~i'i~r<;ésider]t Suppliers and therefore }'SAI'1.() lax .}ViAi.afA;i)iIit'y and that the Vi€W taken by the H 'i:'i5i14f5:1r'i':;2.i is the.- proper View and no need for i1'it;e:rferenee.

. T[i9991 239 1;*R 587[sc1.

V~.L_"€':~e(V:t"i'oI1 195 of the Act. for n(J1'_1--ct()mpIianc:e, with ' :whit':''h obligations as provided in this section. the I'€V&?I"1L1€ '*}1;7;ci:fpr0ceec.ied e1gaa.i1'1st: tile 1'es1:)011dem's - assessees for 84 resort,<'-2d to the above noticreci argL11m-ants and .21 googi number of .2u1t,h0rit'.ies .2111" Cited in support"

(:()nteI1t.io1'1s. A h

47. Hcwvever. on the part. of thg V' Sri. Seshachaia, learned straight and simple and of the obligatioxl on the part' and consequence of nQr1;fig.c,j-: (1uct:'=Ai0I*, :§»§~ percentage of the payrnelli; "Adhering to the reqL1i1'en1e11§jVé' is not a matter which is is fufiy and squarely covered by ..1:he Supreme Court in the of '»;1'.'}2z:3z'J§.'Sjl'$ilT1ffiSSIéOvJ?'§f"éb0RPORATION OF A.P. LT1)., vs. OF INCOME TAX' reported in 35/% 85 recovery in terms of section 201 of the Act. Section 1950-ff the Act reads as under:

195. Other sums. -~ (1) Any person _ .

responsible for paying to a non-resi;;ie'nt,:'_iv, not being a company, orfto "a«fo-yreign_'* company, any interest or any other sum " chargeable under the provisions of th.is" " Act [not being income'lc'h._argeable und,er£j«~v... ~ the head "Salaries" shallfat the'i1'_rr1'e.of credit of such income to__uthVe'Vaccount.iof the payee or at~..the Cfuvpaymennt in thereof in cash by the "issue of a cheque or draft or by any other.fV_'mode, whicheveris earlie"r,- .deciuc.t_ income tax thereon at' raises ginforce.' V.

Proviiiied-""tha't"-- in"'-tithe' of interest pay_able.tby*1:the G_ooei'nrn.ent' or a public sector"ba5n_lc u7iitliin"the meaning of clause [23~Dj'of Sec-t:i4or:ty1iOgyor a" public financial institution' .u)ithin"'-the "meaning of that claus'e,_4 deduction of tax shall be made only at the~time* of payment thereof in .. «cash or by" 'the_'_issue of a cheque or draft " oriby any other mode:

in 'VP:"oTvideti".fi.irther that no such deduction A "-shall---"tjbe1' made in respect of any '--.._div__iti'ends referred to in Section 1 15-0.

of T Explanation. --- For the purposes of this V 'section, where any interest or other sum aforesaid is credited to any account, whether called "interest payable account" or "Suspense account" or by any other name, in the books of account r/ 86 of the person liable to pay such income, such crediting shall be deemed to be _ ._ .V credit of such inco_me to the account of" _.__ the payee and the provisions of this section shall apply accordingly. V [2] Where the person responsible for paying ' ' any such sum chargeable under. this Act, = , . {other than salary} to a non%resi'den't*VV. considers that the wh.o_le.. or of such' .su"m '' would not be income chargeable in case of the recipient, an application to the"Assessing, 'Qfficer to determine, by general 'or'¥"special...order, the appropriate pr0_i90rti0_n .,of 's.uc'h[j'sum so chargjeableg rand such determinati';;ri,V [shall be deducted under, s'u.b¥--sectio«n----..__ ('£1 _on_ly_. ' on that proportion._ {of the which is so ch.a.*g€§lb,le: "1 if; "

{3} Subject to rules made" under sub-section {5),"anyr person entitied to receive any interest or othe1.'_si.:m on which income .tax has to bededucted under subsection JV may rnake__..an application in the A "prescribed form to the Assessing Officer for._the'~gra.nt of a certificate authorising himffto 'receive such interest or other sum "'witho'ut_ deduction of tax under that sub- "'««seC.tion.«-"'and where any such certificate is. granted, every person responsible for _ _ paying such interest or other sum to the V V "person to whom such certificate is ' granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under subsection (1).

;:.,,vobligatory".on the payer if the entire payment become income and that the present "appeals are not appeals involving such only appeals involving the question as to yggjwhetliéfl the payment or any part of the payment has a 89

50. In so far as the Judgment of the Supreme Court TRANSMISSION CORPORATION OF A.P. ~ {supra} is concerned, though Valiant attempts l made on the part of the learned :

assessee, particularly, Mr. K P Kurnar, Sarangan, Mr. R B Krishna, to either distinguish this z-1:uthorjity--:_ to contend that the Judgment can ivonly to the limited extent of Where a dispute may arise of section 195 of the entire payment to a foreign nonjresident""d'oels'*----not partake the character of income_bi1tg.only part of that payment partakes income and even then the deduction is K gr the in TRANSMISSION CORPORATION Dpjstcase [supra] cannot in any way be diluted was the Supreme Court being directly exercise of interpreting the provisions of ggctioni 95 of the Act in that case and having interpreted 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 resident can become income either under Atheflv Act or enjoys an exemption under 'if A then no part of such payment therefore in the absence of of section 195[1] of the Act, the with the requirements '{Vé/»ie}*,"':[t5] of section 195 of the Act examination, such argument the simple reason that in the first for determination of the taxggjliabiiity "(;f;_Vthe nonmresident recipient of the binding nature of the Judgment V 93 Act" would mean 'sum' on which income~tax is leuiable. In other words, the said sum is chargeable to tax and could be assessed to tax under the Act.

Consideration would be ---- whether A ' payment of sum to non«resident _ chargeable to tax under the provisions"-, of the Act or not? That sum .may' be"

income or income hidden or otherwise_"--._ A' ' embedded therein. if so, r_equired_V' -. _ _ to be deducted on thesaid sum 4» what _ would be the income is_.to:be °c--ornput'e--d.,.

on the basis of provisionsuof the Act including provisions'fo-'rgicomputation of the business income, if tl1e"pag1nent is trade receipt Howeuer, 'whai'is. to be deducted is:;1j.inconfae-tail: payable'-ti'1ereon at the rates' "inj_"orcef.--«.__ Und'e_r"the__Act, total incon'ie_ j'or;j_ the previous year would become:"chargeable"--to under s. 4. Sub--_s.. {2)'7Of.s;*.4 i«nt€-K alias. provides that in' respect of '=inco_me ' chargeable under sub--s. (1), incom~a--ta2c'shall be deducted at source _u:he.-e "it is so deductible _{under ang,vi__Vproui:3ion of the Act. {f the 'sum that be paid to the non-

resir,ierit«--._is chargeable to tax, tax is __ " 'reVq«uirie"d...to'..be deducted. The sum which ~. A' may be income out of different heads of income provided un"der'"s. 14 of the Act, that is to say, incoirrie from salaries, income from " property, profits and gains of business or profession, capital gains and income from other sources. The scheme of tax deduction at source applies not only to the amount paid which wholly bears "income" character 94 such as salaries, dividends, interest on securities, etc., but also to gross sums, the whole of which may not be income l' l ' or profit of the recipient, such as? _ payments to contractors and ' contractors and the payrnent.' of insurance commission. It} has been " ' contended that the sum whichgrriay be" _ required to be paid to, r the no'n_--reside_ntA A . f may only be a trading r'ecei_pt, arid, contain a fraction of sum' as taxablie income. It is true,» that in"so_me"'cases,' trading receipt may-cor-itain., afraciion of sum as taxable in_r,_-om..:2,f" })ut"in»...other cases such as 'interest, ..,ycom.misi.sion, transfer _Q,i', yrightsfiz of 'goodwill or drawings plant and _rnachinery and such gotrier. trarisasction-s, " contain large sum tcpcabie under the pi'ov'isioVn:s offiriiliefléct. Whatever may be the ,__I3'OSiiiQT'ES;", if~._the_ -income is from pro._fits_ and gVains«..olf. business, it would be computed the Act as provided at the' Q!" reguiar assessment. The _},purpose of.._sub--s. (1) of s. 195 is to see

- 'that the sumlivhich is chargeable under s._ 4.,ofVthe Act for levy and collection of V' V , it the payee should deduct . Q" -.,income_--tajc thereon at the rates in force, ij' thetifriount is to be paid to a non-

" resident. The said provision is for ten_tative deduction of incomewtax .. A' 'lgthereon subject to regular assessment and by the deduction of incorne-tax, rights of the parties are not, in any manner, adversely ajfected. Further, the rights of payee or recipient are fully safeguarded under ss. 195(2), 195(3) 95 and 197. Only thing which is required to be done by them is to file an appltbaiion for determination by the AO that such sum would not be chargeable to tax in the case of recipient, or for determination of appropriate proportion' of such so chargeable, or for grant. V certificate authorising recripient to i receive the amount without:ded1,iciion.of.' 4' ' tax, or deduction of incomeitaxjat any » _ , lower rates or no deduction.".On such"

determination, tax at appropriate 'rate would be deducted at theusource. '4'f._ no such application.:*'is file<i"'in.corne_--tax on such sum is to be..d.*3dacted.v the statutory .-ilobligation of "~{th.e ' person respons?ible}1i.'fo.*_paying _such " ''sum' to deduct l' * _ before. ' making paynient... ;;He toé""dis-charge the obligation oftttic deductionat source.

considered and». interpreted .sirn.ilar provision of s. 18 (33; qrthe I:-ff' Act, 1922, in the case V' _{ ofP.C. R"ay_V& Co. (India) {P} Ltd. vs. A.C. ~ lifl/.lfclkltEAlj€€, ITf)"(}l 959) 36 FIR 365 {Cal} : ' u _, 'V and rightly held:

'l;cl1.aig'eable under the provisions of this. Ajct' means actually liable to be assessed to tax, in other words, Q' the siirsi contemplated is taxable income, a it difficulty is undoubtedly created as to _,-complying with the provisions of the section".

The High Court further held that s.

18(3B) contemplated not merely even if the interpretation so placed nec.e__s}sari1y partake the character of the ratio of the sense, that the Judgment does not become an authority for a particular tit"-«.p:'oposition and therefore cannot be cited as a precedent.

97

under s. 195 is limited only to appropriate proportion of income chargeable under the Act, are correct. "

52. The interpretation by the Supreme Court respect of a statutory provision, namely.

the Act that interpretation becomes the law at the supreme court within the 'of of the Constitution of India 'have to be necessarily applied" ali wherein arises the questionxofy the Act and the "of~~the Act operates in any given case," fact that an answer given by p eourt in TRANSMISSION A'A;F;"--'LTD.,'s case {supra} was an answer' a question that had actually not V '."».%>'necessar:ily,' the cases on hand and the VVgiudgmentu"rendered in each case, on such application of .1 the lixawxcie-clared by the Supreme Court, to the facts of the "particular case.

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 case and decision of the case is not all such tests are irrelevant and 'd2oesd'n_ot in detract from the constitutional of wherein it is emphatically"iinade the law declared by the suprerne on all courts within the interpretation of the supreine the legal position of section 195 is the law declared bindingoon all courts in this country and assessees likes it or not it has to be é/i fact situation prevail in the present appeals. ~ 'There " .___3'e certain appeals wherein the very g "argurnent raised by the respondents -- assessees before 100 the payment to the resident recipient pri1na--facie bears the character of an income recipient and therefore;the_.'_t'~e._ obligation under sub--section {1} of section

54. The Judgment of they TRANSMISSION CORPORATION [supra] is a binding and there is absolutely no._scope,...fdI? even to examine an A the premise that the TRANSMISSION CORPORATlO_i\T' case [supra] is not a binding precedent premise that the said Judgmernifis distinguishable for any other reason for the purposely' "the ruling in that Judgment to the appellate authority in their appeals filed under section % 101 246 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 assessi.ng._ authority against an assessee who has failed to with the requirement of deduction of tax at source'.__i.eg,'-at'ad the time of payment and not remittingthe'arnount.Ato«thVe":"

revenue after such deduction etc.,,

56. As we have already of the nature involving€exercisi3\;'§;f of the non--resident, 'or payment received by the nonqresildglentTtirjiri assessee cannot be an exercise that to even for the purpose of .,p_eXteritvv-sf'obligation on the part of the resilde-n~t payer .to=ascertain as to whether there is any iinscope for_ll"re1ievingAi:; the resident payer totally from the

-. _l.oh1igation of deduction or even partially, as an answer for 'that obtained only by going through the procedure . under section 195[2] of the Act and on making application in this regard and for the said purpose to M2 the assessing officer and in the absence of such application by the resident payer, assuming appeal is filed by the resident payer ' consequential order passed by the assessing section 201 of the Act, for the indicated earlier that question be" in:

the appeal filed under section 246"'oi against; the order under section 201 of the we have indicated earlier in_the_V\a_vake of the reqiiirernent of section 195[2] of the the wake of the binding . supreme court. in TRANSMTSSIGN 4' J OF A.P. LTD.,'s case [supra] ey§n"the ;ppe_llate authority in the appeal of the section 246 of the Act as against the order of the" asseyssVi1igvV._offi'cer passed under section 201 of the is precluded from going into such question and if so it 'not:open eyen to the appellate Tribunal to Venture on 'answer to the very question in the assessee's LE"jgfurtherllappeal to the Tribunal and opinion rendered by lvrequirernents of 195 of the Act and the provision . being' to section 200 of the Act and section providing for consequential action only in a where any person who has actually deducted amount in accordance with the preceding statutory 103 the Tribunal on the question answering it in favour of tics assessee is of no consequence in law, is not a exercise of its appellate powers; an answer of is not binding in law and is necessai'iljfiiah1'e_ aside and the question answered in favoiirlof the A

57. In this context, an incidentaljvléarguinient.'\ai§§pféfised though feebiy, to the effect the nature as attempted by the to be for the reason of of to comply with the i'95{'l] of the Act and therefore under section 201 of the Act cannot the the reason that section of consequential action on the failure assessee on non--compliance of the $/'/ = A. deductible to the date on which such tax " _ "is actually paid.

Where the tax has not been paid as 106

201. Consequences of failure to deduct or pay. ---- {1} If' any such person referred to in Section 200 and I the cases referred to___ ' . " * ' in Section 194, the principal officer -- the company of which he is the principal S" officer does not deduct the whole or'any--.'_~. S' V . part of the tax or after deductingfaiis cto < . " V pay the tax as required by 'or under Act, he or it shall, without prejudice _to_ " b' any other consequenc;e_s'---._which- he or, may incur, be deemed tc>~.be.an as-sessee "

in default in respect of the"ta_x:'w. S Provided that penllliy be charged under Section V221 ~fro'm,fV such person, principal' cornpany unless the A Asseslsirtg " Officer is -- satisfied that such per:_=on4.:_or' ~pri'nc:;r_9'al_ officer or cornpar1y~;fi__ be, has without'~Vi_gobt7i.V_ suj}'ic--ient reasons failed to 'deduct and pay _the tax.

(1 --A} With__prejudice.'A'io»_ "the'provisions of sub- section _V( .3}, if__ar.t_y 'such person, principal gojficer or» company as is referred to in ,s_ub~section' does not deduct the _ wh.:)ie_ or any part of the 'tax or after " ~ deductingfails to pay the tax as required by'vo::,,_undér this Act, he or it shall be "ltable'to_ pay simple interest at twelve per V"-.cen't'per annum on the amount of such taxffrom the date on which such tax was aforesaid after it is deducted, the amount of the tax together with the of o.n the part of the assessee for not .:"dn¢d4u'c.ting th'e:_amount at source at the time of remittance to a non--resident and consequential non- . however bona fide the assessee might have 'jélfirterltained the thought and the belief that in fact no part 107 amount of simple interest thereon r _ referred to in subsection, (1 -A} shall be a ._ V charge upon all the assets of the person_,.... V " ' or the company, as the case may baa.

referred to in subsection (1). "

and a sequential reading of section is a Provision obviousiy Precedin§l,.5.,:V:S€:ction' Act'; because of which it does get intov-se;c'ti.oi1..gA.20tiloft-the Act and at the relevant time . ucovering the case of the total faiiu.re H ivnot only a situation of dedu.ctlt._n avfifajlure to remit the amount andginl 201 clearly indicating it springs into action as a consequential nieasure-S inilsituations of the assessee failiiagieither deduct 'orto pay, the order passed under section _of. _t}is4=,"A_.c't.. is bad and is a relevant order even 108 of the payment to the non~resiclent was not chargeableitc-.g tax under the Income Tax Act, 1961, either for the " that it was income at all within the 3 expression and does not get into the reason that even when ineonie it provisions of the Act, it becomes view of the provisions of that such income of the r1on--resident_ are all *~ virtually exercises the time of determination oi' liabililty of the non- resident asselssevei of a return being field by the examination of such questions ggioesgnot arifsexwhilel the assessing ofiicer is in the.eXe1'cise of'takin.g consequential action on an assessee ;_._vwho his obligation under section i95[1] the Act:"'*ancl:.ti1erefore goes against the assessees and iansvvered accordingly.

examining the scope and the extent of 'reivgipplicabiiity of the provisions of section 195 of the Act, We ' lVl"=li3.bi1it3.I'A it-.non~resident assessee. The amount

-4h.l.l'_dvcducted uiidér section 195 of the Act is not the same as the liability of the nomresident assessee for of tax llfldel' the Income Tax Act, 1961. A non~« 109 cannot lose sight of the fact that this section in the first instance is not a charging section nor a section providiigig-.p' for determination of the tax liability of the who is in receipt of payments from a resident. '_ it it

59. The section itself occurs in chapter' providing for collection and recovery._:'by A it deduction effected at source the deduction is in advan;o_e:'-- __beforelV the determination of the aCt1,1_EJ~.'_'C:E].XVV--.1plaitbllilyi".C)f the non» resident foreigin

60. The the resident who is responsible £015 to the non--resident is onlysiva or tentative amount which is kept as a butter this amount against the possible tax ©/ authottity-'___Q.f by the supreme court in VV'i*~?i'i2z3ii\TS1|¢!'fS$I{)i!VvA'EORPORATION or A.P. LTD.,'s case scope and the manner of reducing the for deduction imposed on a resident payer in section 19511] of the Act is by the method of 112

62. Even here, one should bear in mind that it is actuaily either an exercise for the assessrnent_.iof income of the non-resident nor _the _ it determination of the non-resident.

63. As we are of the opinion that-section_"'}95 of it is not at all a provision wherein is required to indulge in an effPfpdveterrrrintation of the income of a non»re'sid;e.tn't orgy on the basis of a the non«~resident who can contentions as have been in appeal by the learned senior cotynsel appearing on 'behalf of the respondents, 12;, thc.e_resident"«payers and even much more on the 3//,

1.lvl'"proportionate so deductible in terms of the

--.ldeterminatioi1_lby the assessing officer i.e., the resident jlias not filed an application under subsection to deduct and remit the amount turn around and 113 invoking the procedure contemplated under sub«~sectio.n__> {2} of section 195 of the Act i.e., only when the responsible for paying any such sum this Act on a non~resident, considerS'ltha"tethl-e such sum would not be income chargeable.in it the recipient, by making an to officer to determine by orderlllthe appropriate proportion of and upon such the liberty of deducting the to tax to fulfil the"lobligat.ion_.l_l'«castiiinderllllsub--section [1] of section 195 of t1'«1.p€l\Act.'~._lV it 64;" '~ ._In SQ .a resid "'nt'payer who has not admittedly taken " had made any efforts to have the section 195 of the Act cannot, later, after having V.

'contendingllthat ltlijeiioayment did not result in any taxable in thevwhands of the non-resident and this can be 'e>iexfcis_e:".:undertaken by the assessing officer only in an 1 14 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 under section 19511] of the Act and'; J demand raised in terms of section 20 the it°:vl'riot'3'; sustainable as the demand proceedsion there was a failure on the part"'~of

65. We further if it is to be put in other iVhile' is not open to a resident payer' officer to embark upon the exercise ..of the tax liability of the ncvn4'residvé_nt recipient"on--~a'rnere filing of objections to a deInVa=n_.d'' : 201 of the Act by merely act'ua1yV_return of income filed by the non--resident recipient paymei1tV"i)_¢.Q:i's:"t1j1¢ ij1i'aracter of a semblance of an income Vivireceipt of the non--resident recipient, then .1 on the part of the resident payer who a payment to the non--resident recipient is 116 and means of recovering the tax in advance even before the actual crystaliization of the tax liability of an assessee'-.y.

in terms of the provisions contained in chapter--XVIi.~c-i " Act and section 195 of the Act being one such. it and an exercise of this nature and determination of the actual tax " it assessee at the time of the piizlreiivfgthe respondents in the presen't:._._a'p_pe:alsgit prernature one for the ipactgzupai of the tax liability of the i

66. If one oinigiving a rough and crude comparison to in which the provisions of section' 9'5.of the Acitvioperates on a resident payer who rnakes non--resident recipient and if the éflz.

The""--oniy'iiniited way of either avoiding or warding ngnidedsmissiie is by the resident payer invoking of section 195[2] of the Act and even here 117 like a guided missile which gets itseif attached to the target, the moment the resident assessee makes paymenTt'~.g to the non~resident recipient and there is no way resident payer avoiding the guided missile zeroing: it resident payer Whether by way of amount does not necessarily resuit it amount taxable as income in resident recipient under contending that the non--resident reci.pi.ent possibly avoided any nnder the Act by the over all of the Act or even by the Acorpnbinedtt of the provisions of a double tazggation avoidancedagreement and the Act as is sought'tovtttbeficoiltended by the respondents in the present l on of the provisions of section 195 it Act"~in the of the law declared by the supreme M in _ TRANSMSSION CORPORATION or A.P.

' ' « _ {supra}.

118

to the very limited extent of correcting an incorrect identification, an incorrect computation or to call in the actual determination of the tax liability of resident which in fact had been determined as'_pa§t':::of 3 process of assessing the income of the by using that as the basis for reduction in the rate at which the to be made on the payment to Except for this method, therellthe-l-resident payer avoiding the the provisions of section 195[:.;1V]ll .a_' consequence of such default when isslerved. notice in terms of section 20}; of the V"

583 "'This.c..I§ositioi1iis the clear legal position that emerges W 119

69. The assessing authority and the first appellate authority while are correct to the extent of holding that there was an obligation on the part of the resident "

in effecting a deduction from out of the h by them in favour of the non--resident;recipi-Bnts g_ consideration for acquiring what i'su"imown'* ._as-_'.='shrinVk wrapped software' or what sou'ghV_t': as 'ready to sell, off the shelf and even assuming it of goods for the purpose of under the provisions Sales Tax Act, 1957 as held hy court in 'TATA CONSUL'1)f1NCY "case [supra], all such to the background While examining the question'-Tof.3the"'_o_h}igation of a resident payer in terms of Vvigsseciion 1'95[1=]: of "the Act and as arguments not relevant pur_pos'e of answering this question.

Tribunai has clearly committed an error in law ' ~.__in upon to answer the question of the actual «P 122 character of a royalty paynient and therefore applying the relevant provisions of the DTAA and even the exercisevyof holding that the actual percentage of deduction at was at 10% or 12% or 15% as the case rnay be upon the country in which the non--re'side'r1et.recipient assessed and having regard to the of" that country and even such be declared to be incorrect, V law and therefore illegal, wepvhfavgg by the assessing appeliate authority tfierefiason that on this aspect of not joined issue at all and while the» the very beginning had ta:_1§;ei1,_thisp_j of payrnent in the hands of the non-

resident' .:::being in the nature of a royalty 'payment affirmed by the appeliate authority, ~ .tIIi.at was not rriade an issue or question for determination 'Vi4lbeforelithelftribunal by the revenue and therefore we do nlo't.lp_rQpose to disturb this factual emergence of facts.

V V7_d"ofi»icer cannotv. enibark on an exercise as though it is to de"'te__rinine the actual tax liability of the non--

'~..yres'ident'~assessee is that if such a situation is permitted in to be assessed in advance, even in the hands of a 123 particularly, in ascertaining the extent of deduction that was required to be made by the resident payer therefore we are not disturbing the orders of the " authority as affirmed by the first appellate second appellate authority on this aspect ofthje A

72. One another reason for "that_d§the assessing officer, even in a application is made by the resident p_ayer,' of the Act, for the the actual amount being' t'he'--:vnon4res'ident recipient so that the resident only the reduced amount rernithit tocredit of the account of the re§Jen--ne while doiI'ig*"so i.e., While examining an applieationuridpeiré 195[2] of the Act, the assessing to':"taKe..Ep1ace and if the income of the non--resident is bayerl' Version of the liability when the pp of the' non-resident recipient of a this country is actually determined a different determination of the tax liability of V - ..the" inonwresident recipient.

124

resident payer, there can arise conflicting decisions versions, in so far as the tax liability of the non--residvent.:l_:l_*-..

is concerned as even after a determination 'V' i95[2] of the Act, where under the tax liabjilpity of it resident is determined in the hands oi"l=the'_'_'re:siden'tl and that too prematurely, then productive as it will be always open--to"t-he--~.nona1'esi.de.rlt to contend that no partpof in India and is able to rnalie basis of a return of income. nonlifresident assessee. it will resultiin of the actual tax liability of the of a payment from this country; one i/ersion when the liability is determined ex"/en an-4:1 that too in the hands of the resident Q/,r 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...

resident payer when things are veryiiclearrz A' involve any doubt or ainbiguityssuch as in a situation_V§ where the non--resident recipient of the arnountgflas filed a return of his income as. i7one--_ a.j_risi'ng« such a transaction with assessing officer has payment and has indicateffi 1 .order passed on the return of incorneglfilevd liriionilresident that no part of the Vreceiptgis taxable the provisions of the Act [for whatever_, reasonip and if so based on this itppsettled'/undiispdied'iffactual/legal position, the resident Ttggayer by the assessment order passed by the .1 on the return of income filed by the non-

.A"-dfresidentg for any earlier year seek for granting the VVcfp'-cornrnensurate relief from the obligation for deduction of ,9/.

:reCipient,...:the imposed on the resident payers in sec'tion 195[1] of the Act springs into action, the is to be a payment to the non-resident and . in all these appeals, the payers who are the ,.,,,..,,t4ll""t7t:5Spondents in all these appeals, having not taken any 127 recipient was getting out of the net of taxation under Income Tax Act, 1961 due to one or the other reason.

75. in all these appeals, there being no dispute nor. "

there be any dispute regarding the payments m_ade'-by the it " it resident payers, bearing the receipt in the hands of the the payments whether are in respect of payment for buying/purchasingfi software product and is or even be in the nature of opined by the assessing officers fin appeals by the first appellate at1thorit'i,es', nearerthefess, the payment definitely being,inv-":,_tt1e,.\---,.:naturexflofwav payment resulting in some possibie the hands of the non--resident fig/.

130

78. For the reasons stated above, while we refrain from answering the questions raised in these appeals to the actual determination of the tax liability of resident assessees in respect of the had received from the resident respondents in all these appeals',-~:,t:l:We questions relating to the correctn.eSs=.orlo'ther\vise'*of'lthe orders passed by the tribunal favour of the revenue and pas-slesslee;vlallowjlthe appeals, set aside the and restore the orders authorities and affirming orders,' appellate authorities, so far as relates to confirming the demand raised on all these re-sponclentslfiassessees in terms of the provisions of for the failure of the respondents assessees 'comply with the requirement of section irgagigpomle Act.

. llnccordingly, these appeals are allowed.

V 131 IN ITA Nos. 919/2007 & 921/2007:

80. Whiie these two batches of appeals had heard along with the above appeals, it is noticed that strike a slightly different note, in the ultimately the question may be one of manner of obligation of a residen't.e,.lpayer topdeducltp an amount at a percentage of the made tollla 'non- resident recipient, these '-this court under section 260f1#t stage had reached wherein or the second appeilate had...__opi.:1ed on merits about the correctness order passed by the original/assessinglauthorityl:in: respect of 11 remittances [can-pespo3~ldin;gtll:oul:an:A Nos.931 to 941/Bang/2006] and gyvanothei'. [corresponding to ITA Nos.672 to VV7tl)2v/'.Bangl/'2OO':7a] "made during the accounting period for the assessment year 2006-07 and wherein " fii--'st*appellate authority had declined to examine the the orders passed by the assessing authority 99/ 132 relating to these 42 remittances where under the origin~a3"*.y authority had concluded that the remittances "

nature of a royalty payment, the amount to it While making the remittance is at such amount as had been indicated inpthe A}D_ot:ble it Avoidance Agreement between States of America, particu1a'riy;;as [2] of the agreement. V '

81. The first dismissed the appeal Which="""ti1e§ assessee under section 248 the only for the reason that 'V ..assesseeftiriesident rernitter had not availed the}*~p;f.ocedure"'Vofwnaking an application under section: seeking for determination of the :?:pr.oportionate in the payment to the non--resident ~ --cofnstituting the? taxable part of the payment or to put in it otheriVaordsj'A"income part of the payment.

43/ ».l_8.07.20(:)7' the Income Tax Appellate Tribunal pllinp_4pth¢se appeals, i.e., ITA No.931-941/Bang/2006 and P§los,t$7~2--702/Bang/2007, the revenue has come up 133

82. The first appellate authority having dismissed such appeals filed under section 248/249 of the Act tenable, the assessee had preferred further appeals§V_:to Income Tax Appellate Tribunal in appeals _a.-3"

above .

83. The Income Tax Appellate"Tribunal;._ :Ba'ng.a§1ore Bench 'A' passed the comrnen 18.(V)l7.VfVl),OO7 allowing all the appeals 'matter to the Commissioner of; for fresh disposal of the appea;ls.*;:.Eits that the Commissioner' jigfilppeals] was wrong in dismissingpthe p_appealAs_l'at~*l"':the threshold as being not common remand order dated V 134 with an appeal each i.e., ITA Nos.919 of 2007 & 921 2007 respectively.

85. We notice that though the registryhas assi'gr1e'_cioi'1e'_' appeal number before this court and-v.pth'._'_'ei revenue has only paid one set ofeoyurt fee both i"i1_"iTA'° Nos.919 of 2007 and 92.1 of.2OO7y.i.;eA}",v-.a"--~su1no'i7Rs.,l§2/~ on the memorandum of these two appeals are batch of apvpeals; order of the Tribunal of all the 43 appeals before"it--.apr-,Vd should have necessarily assigned of appeals instead of one appeéilciun and 31 numbers of appeals N'o'."9'21 of 2007 and should have also c_re'coVer:ed.a.l ~ commensurate court fee from the lappellants; is also hereby directed to take such "'co;'rective m'easures in all other appeals, wherein also é 's--uch.situ.ati.ons arise and act for correcting the number of apiplealsfand also for recovering the deficit court fees, 0, was payable by the appellants.

35/ definiteljg' .erititl.e.di:Inaintain an appeal before the First

-iiX};p.eliate Authority.

-..l.'TI'hel>statutory provisions in the Section is very clear on thisaspect and the Tribunal is correct in holding that 135

86. Insofar the question of law raised in these appeals are concerned it is one of maintainability of an under Section 248 of the Act, by a f payer/assessee who had in fact deductedthe: terms of sub--section (1) of Section 19:54Aa1_jidl.. amount to the account of 1§evelnue',p nevertheless disputing such p_iiability,_fl'

87. This question has to in the 'affirrnative' was correct in reversing the" lth'e"lCommissioner of Income Tax rejected the appeal under Section 248_/24SS""at"th¢v._ threshold as not maintainable.

Thve"a.ssess_ee gyatho phasHi'r1"fa'ct deducted and remitted the "_:.sub~section (1) of Section 195 is V :fl'€ommissi_oner. Income Tax (Appeals), takes up the for "disposal on the merits of the matter. For 'statistical purposes, these appeals are dismissed.

136

the appeals were maintainable and could not have been disposed of at the threshoid and the Colnlnissioneifu Income Tax (Appeals) could not have disposed;0f-'4«'thei4y¥ appeals at the threshold, as not rnaintainabie. _. .. V in

89. However, insofar as the scope it appeal under Section 248 is concerned "in of:

the view, that we have appeals, that View equally apppliies also and while the remand Tltibunal is left undisturbedpi, it Revenue are dismissed, the' the interpretation of law that we have p1aced'\on;,t_he» Vpfovisions of Section 195 of t1?_.e'Act, Apnecessaiailygoverns the examination of ,. ,::S_ection 248 of the Act, when the who 137

90. To sum up, the substantial questions raised in all these appeals are answered as under:

S1.No.

Substantial questions raised "Whether the Tribunal was correct _ in holding that an appeal was maintainable u/5.248 of the Aet, even though there was no adjudication by the Authorities"

under the Act in accordance .._with Section 195(3), (4) &. {5} read Section 200 of the Act?

1[t2o07',' » 92 11 of zooff p A1:sw'eI''w. ' S' «i _ As ar1'sw'ere'd_' A. in _ V' 1'i'A 919 {of |« . 'c0FyP'Tln€d"'*-~--, by "C.o1m_'rt:'_.ss»ioner.. needs to have been .g7§§duCféd--? "

Whether the Tribunal' scorrectev.l_ , S Not--e'orrect, 'In ' the negative, "against in holding that payments' made by thejlssessee Companly for purchase jiof software 4_'_fro'rn" Aayn1eb"b6A's.ta'~Pa_,cy"zI::,-«-._S'i::1gapOre;_ Peritus SoftI;;~.a:fe S'erv.ice_'Inc'.",t USA and ~AtSt".'--'al'Y;COn?2p11terS*- PL'tl"';l;l'd., Singapore the'«..a"mo;Lnts of Rs.3,"4_3,'O_95/~«, Rs_,'4-7_,89,419/-- and Rs.=8,89,6'"1 1'/.-' was not liable to tncorne in Vlndta and conseq.uently. no TDS as held by ti-"i._e'~ 2/'r.cA.-;sAessing" '''' "Q[f'Lcer and the Appellate the in the assessee and favour of revenue lsamsung Electronics Co.

' has not been accepted by 'the AV£.r_'hether_S'the Tribunal was correct in "merely following the judgment passed' by its in the case of Ltd.

and Revenue appealed V. fiagainst before this Hon'ble Court where the facts were not entirely Definitely wrong, answered in the negative, against the assessee and in favour of the revenue V.

138

Identical to one subsisting in the present case and therefore the Tlribunai was bound to have recorded an independent funding and therefore the impugned order is perverse? s Whether the Tribunal based onthe fact that the Assessee has irrzpor;t.ed* software from Aaymetrix Asia Pacific, Singapore; Peritus 'S<j_fiu)are"

Service Inc., USA and Computers Pvt. Ltd, Singapor'e,on_ payment of and Singapore' ;"'prooision's_' of Section 9{1}(V3'Q,'r--.lfh€ Income Act: fndian Cop_u_right_ Act, _'V19V5'7,V Revised entTy*--.On Articief-»..1C}}§'CD; the I nternal V' Revenue' Service " Reg ulation of USA,'"u._4theV Views" the High Powered Committee on E-Commerce and other factsand circumstances of the ' p5r'ese'n.t case which could have 'c-learly =_sho'wn that the payments V' 'the_A3sessee was liable to in 'India;;Vand consequently the Assesseeiuras bound to deduct tax at 'sou--rce"?

y'Rs.3.43;'O95'/'-.' Teveflug Rs.47,89,419/~ and "4--.Rs.8,89,;_3} ' was bound to have taken' :into.>'--

consideration the Ruling'r. of gthefi ' Advance Ruling 'Authority_f_{238"~l1'1R ' i' 296}; the Dolublei'Taxaiion,Agreement " between ;'fndi_o.V and USA and 'India' _'_'In'V t11§.

against. . ' ' fthe " :-1vssVessvee"'.__"an~d"' in " V fav-oi11" the Whether the Tribunal should have .'*e.(_:Orded a finding that it is under 'vsection 195(2) and {3} and (4) of [the Act, the chargeability to tax or ?not of the recipient is decided and In the affirmative, in favour of the revenue and against the having failed to obtain such a assessee @/