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Commissioner of Income-tax v/s Rational Software Corpn. India (P.) Ltd.


Company & Directors' Information:- R S SOFTWARE (INDIA) LTD. [Active] CIN = L72200WB1987PLC043375

Company & Directors' Information:- C K SOFTWARE PRIVATE LIMITED [Active] CIN = U72501DL2000PTC106184

Company & Directors' Information:- RATIONAL SOFTWARE CORPORATION (INDIA) PRIVATE LIMITED [Amalgamated] CIN = U72900KA1993PTC015068

Company & Directors' Information:- K K SOFTWARE PRIVATE LIMITED [Active] CIN = U72900DL2009PTC193030

Company & Directors' Information:- A K C SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC128462

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- P AND P SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL1994PTC057212

Company & Directors' Information:- SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72200GJ1995PTC025791

Company & Directors' Information:- N. D. SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TG1998PTC029778

Company & Directors' Information:- T AND H SOFTWARE PRIVATE LIMITED [Active] CIN = U72200UP2000PTC025638

Company & Directors' Information:- M S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC133997

Company & Directors' Information:- G A S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC127546

Company & Directors' Information:- B B SOFTWARE LTD [Strike Off] CIN = L30009WB1995PLC072361

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

Company & Directors' Information:- H K SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200WB2001PTC093967

Company & Directors' Information:- J SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TZ2000PTC009229

Company & Directors' Information:- K S M SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC128463

Company & Directors' Information:- R B SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC140322

Company & Directors' Information:- SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72200RJ1995PTC010577

Company & Directors' Information:- R J SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC133815

Company & Directors' Information:- I & I SOFTWARE INDIA PRIVATE LIMITED [Strike Off] CIN = U72200TN2005PTC056262

Company & Directors' Information:- D F SOFTWARE INDIA PRIVATE LIMITED [Strike Off] CIN = U72200TZ2003PTC010629

Company & Directors' Information:- E. C. SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72900TN2007PTC063486

Company & Directors' Information:- Q 3 INDIA SOFTWARE PRIVATE LIMITED [Active] CIN = U72900TN2007PTC065786

Company & Directors' Information:- K Y SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200DL2005PTC136072

Company & Directors' Information:- T M I SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200KA2005PTC036299

Company & Directors' Information:- B C L SOFTWARE (INDIA) PRIVATE LIMITED [Strike Off] CIN = U30007MH1999PTC117922

Company & Directors' Information:- RATIONAL (INDIA) PRIVATE LIMITED [Strike Off] CIN = U29299DL1995PTC074800

Company & Directors' Information:- M I S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200TN2008PTC068694

Company & Directors' Information:- A. T. SOFTWARE PRIVATE LIMITED [Active] CIN = U72200TG1996PTC023841

Company & Directors' Information:- J A K SOFTWARE PVT LTD [Active] CIN = U72200DL2001PTC111929

Company & Directors' Information:- R R SOFTWARE PVT LTD [Under Process of Striking Off] CIN = U72200KL1991PTC006051

Company & Directors' Information:- A M H SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200DL2005PTC132410

Company & Directors' Information:- P D A SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900DL2003PTC123465

Company & Directors' Information:- K C SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL1989PTC036923

Company & Directors' Information:- I SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72300MH2012PTC225903

Company & Directors' Information:- V M SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900PN2010PTC136847

Company & Directors' Information:- H M SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200HP2011PTC031756

Company & Directors' Information:- S N R SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900DL2012PTC243073

Company & Directors' Information:- C M S SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL2005PTC142352

Company & Directors' Information:- S M I T SOFTWARE COMPANY PRIVATE LIMITED [Strike Off] CIN = U74899DL2006PTC144816

Company & Directors' Information:- A D SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200KA2002PTC030722

Company & Directors' Information:- H. A. N. R. E. J SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TG2008PTC062044

    IT Appeal No. 648 of 2008

    Decided On, 05 January 2015

    At, High Court of Karnataka

    By, THE HONOURABLE MR. JUSTICE N. KUMAR & THE HONOURABLE MR. JUSTICE B. VEERAPPA

    For the Appellant: K.V. Arvind, Advocate. For the Respondent: T. Suryanarayana, Advocate.



Judgment Text

N. Kumar, J.

1. The revenue has preferred this appeal against the order passed by the Tribunal holding that the remittances towards the cost of the software products imported from foreign suppliers is not royalty and hence there was no liability for deduction of tax under Section 195 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') and accordingly the provisions of Section 40(a)(i) of the Act are not attracted.

2. This Court had an occasion to consider the assessee's case itself and the order passed by the Tribunal holding that the remittances towards costs of the software products purchased/imported from foreign suppliers is not royalty, was set aside by this Court in ITA No.261/2006 following the judgment of this Court in the case of CIT, International Taxation v. Samsung Electronics Co. Ltd. [2012] 345 ITR 494/[2011] 203 Taxman 477/16 taxmann.com 141 .

3. It is submitted by the learned counsel for the assessee that the assessee has preferred an appeal against the said order in ITA No.261/2006 before the Apex Court and it is pending consideration in Special Leave Petition (Civil) No. 19092/2012. In the event, the assessee succeeds before the Apex Court, then Section 40(a)(i) of the Act is not attracted and therefore, a consequent order is to be passed. Even if the assessee does not succeed before the Apex Court and Section 40(a)(i) of the Act is attracted, still its claim in terms of Article 24(4) of DTAA between India and the Netherlands that a similar disallowance was not provided under the Act under Section 40(a)(ia) if the payment was made to a resident, is to be considered and a proper order is to be passed.

4. Per contra, learned counsel for the revenue submits that the said question was not raised before any of the authorities and for the first time it is being raised before this Court.

5. In view of the judgment of this Court in 'Samsung Electronics Co. Ltd.' case (Supra), as already the earlier order of the Tribunal is set aside by this Court, the impugned order passed, which is running counter to the said judgment, requires to be set aside and therefore, the appeal is allowed and the substantial question of law is answered in favour of the revenue and against the assessee.

6. However, in the event, the assessee succeeds before the Apex Court, it is clear that this order also cannot come into effect. The assessing authority shall therefore pass an order under Section 260(1A) of the Act, based on the outcome of the assessee's appeal before the Apex Court. If the assessee loses his battle before the Apex Court, then before giving effect to this order, the assessing authority shall consider the application of Article 24(4) of the DTAA between India and the Netherlands. Though the said question is not raised by the assessee b

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efore the authorities, the same being purely a question of law and the said DTAA being a beneficial piece of delegated legislation, if the assessee is entitled to the benefit of the same, that cannot be denied to it. Accordingly, the appeal is allowed with the aforesaid observations. Ordered accordingly.
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