Case Law Details
Brief facts of the case are that the assessee is an Indian Company who is engaged in developing telecommunication During the relevant asst. year, the assessee has purchased shrink-wrap Software from Cadence Designs Ireland amounting to Rs.5,946,245/- and Rs.4,015,887/- respectively. The AO noticed that the assessee has remitted the above amounts to Cadence Designs Systems Ireland without deducting tax at source u/s 195 of the Income-tax Act 1961. The AO initiated proceedings u/s 20 1(1) and issued show cause notice dated 25/12/2011 why the assessee should not be considered ‘assessee in default’ for not deducting tax at source u/s 195 in respect of payment in question. In response to notice, the assessee’s authorized representative Shri Puneeth, C.A appeared and submitted that the payment made to the non-resident Indian was made for the use of software under non exclusive and non transferable and licensed to use the software. Accordingly, the payments in question are not chargeable to tax in India and, therefore, no liability to deduct tax at source in respect of such payment. The AO however did not convinced with the explanation furnished by the assessee and was of the view that as per the provision of sec. 192 of the Income-tax Act 1961, the assessee was liable to deduct tax at source on the payment made to Cadence Designs Systems Ireland . During the purchase of shrink-wrap software as a payment made amounts to royalty under the Income-tax Act as well as the Indo-Ireland DTAA. The AO accordingly held that the assessee is default u/s 201 and 201(1A).
Aggrieved by the order u/s 201 and 201(1A) of the Act, the assessee preferred on appeal before the learned CIT(A) by declaring the assessment and contended before the learned CIT(A) that the payment made in question were not royalty with the meaning of sec. 9(1) of IndoIreland DTAA. The learned CIT(A) dismissed the assessee’s appeal vide order dated 5/11/20114 by following the decision of the Hon’ble High Court of Karnataka in the case of CIT Vs. Samsung Electronics Co. Ltd., . 245 ITR 181.
“Thereafter, it is very clear from the express terms of the agreement that the right to use copy righted software has been transferred to the assessee. Keeping in view the fact that the judgment of the Hon ’ble High Court of Karnataka takes the nature of binding precedent the amounts in question paid as consideration for the right to use copy-righted software amounts to Royalty within the meaning of the Act read with respective DTAA, the contentions of the assessee ’s representative are rejected.”
Aggrieved by the order of the CIT(A), the assessee preferred Appeal before ITAT.
The authorized representative of the assessee during the course of hearing before ITAT brought to ITAT notice that the appeals are already decided against the assessee in assessee’s own case in ITA No.31/Bang/2015 dated 5/6/2015. Assessee further submit that the Hon’ble High Court of Karnataka has also have judgment against the assessee in the case of Samsung Electronics Co. Ltd., (Supra), wherein the assessee is also one of the party.
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