Case Law Details

Case Name : CIT, International taxation Vs Rational Software Corpn. (India) Ltd. (Karnataka High Court)
Appeal Number : IT APPEAL NO. 3082 OF 2005
Date of Judgement/Order : 01/03/2012
Related Assessment Year :
Courts : All High Courts (5992) Karnataka High Court (302)

HIGH COURT OF KARNATAKA

CIT, International taxation

v.

Rational Software Corpn. (India) Ltd.

IT APPEAL NO. 3082 OF 2005

March 1, 2012

JUDGMENT

1. The revenue has preferred this appeal against the order passed by the Tribunal which has granted relief to the assessee.

2. In fact, the substantial question of law which arises for consideration in this appeal arose for consideration before this court in two appeals, firstly, in the case of CIT v. Synopsis International Old Ltd. in IT Appeal No s.11 to 15/2008 decided on 3.8.2010 where the substantial question of law was as under:

“Whether the consideration paid by the Indian customers or end-users to the assessee – a foreign supplier, for transfer of the right to use the software/computer programme in respect of the copyrights falls within the mischief of ‘royalty’ as defined under sub-clause [v] to Explanation 2 to Clause [vi] of section 9{1] of the Act,’

3. Again in the case of CIT, (International Taxation) v. Samsung Electronics Co. Ltd. [2011] 203 Taxman 477 the substantial question of law framed was as under:

“The question which the High Court will answer is whether on facts and circumstances of the case, the ITAT was justified in holding that the amount[s] paid by the appellant [s] to the foreign software suppliers was not ‘royalty’ and that the same did not give rise to any ‘income’ taxable in India and, therefore, the appellant[s] was not liable to deduct any tax at source?”

4. In both the cases, it was held that consideration paid by the Indian customers or end-users to the assessee-a foreign supplier, for transfer of the right to use the software/computer programme in respect of the copyrights falls within the mischief of royalty as defined under sub-clause [v] to Explanation 2 to Clause [vi] of section 9[1] of the Income-tax Acts 1961.

5. In view of the aforesaid law declared by this court, the substantial questions of law framed in this case are also answered in favour of the revenue and against the assessee.

6. Appeal is allowed.

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