Prl., Commissioner of Income Tax v. M/S Ibm India Pvt Ltd.,

NC:(2025:KHC:9113-DB( ITA(No.(632(of(2023( ( ( ( IN(THE(HIGH(COURT(OF(KARNATAKA(AT(BENGALURU(

THDATED(THIS(THE(4 (DAY(OF(MARCH,(2025(

PRESENT(

THE(HON'BLE(MR(JUSTICE(KRISHNA(S(DIXIT(

(AND((

(THE(HON'BLE(MR(JUSTICE(RAMACHANDRA(D.(HUDDAR(

INCOME(TAX(APPEAL(NO.(632(OF(2023((

BETWEEN:((

(

1., PRL.,,COMMISSIONER,OF,INCOME,TAX,, (INTERNATIONAL,TAXATION),,

KORMANGALA,,BANGALORE., ,

2., THE,DEPUTY,COMMISSIONER,OF,,

INCOME,TAX,,INTERNATIONAL,TAXATION,, CIRCLE1(2),,KORMANGALA,, BANGALORE.,

…APPELLANTS, (BY,SRI.,E.I.SANMATHI,,ADVOCATE), ,

AND:( ( M/S.,IBM,INDIA,PVT.,LTD.,,

NO.2,,SUBRAMANYA,ARCADE,, BANNERGHATTA,MAIN,ROAD,,Digitallytisigned by0SHAKAMBARI BANGALORE,-,560,029,,PAN:AACCI2917B., Location:0HIGH …RESPONDENT,COURT0OF KARNATAKA (BY,SMT.TANMAYEE,RAJKUMAR,,ADVOCATE), , , THIS,ITA/INCOME,TAX,APPEAL,IS,FILED,UNDER,SEC.260-A,OF,INCOME,TAX,ACT,1961,,ARISING,OUT,OF,ORDER,DATED, 08/06/2023, PASSED, IN, ITA, NO.318/BANG/2023,, FOR, THE, ASSESSMENT, YEAR, 2017-18, PRAYING, TO, 1.DECIDE, THE, FOREGOING, QUESTION, OF, LAW, AND/OR, SUCH, OTHER, QUESTIONS,OF,LAW,AS,MAY,BE,FORMULATED,BY,THE,HON'BLE, COURT, AS, DEEMED, FIT, AND, SET, ASIDE, THE, APPELLATE, ORDER, DATED, 08/06/2023, PASSED, BY, THE, INCOME, TAX, APPELLATE, TRIBUNAL,, 'C', BENCH,, BANGALORE,, AS, SOUGHT,

FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN ITA NO.318/BANG/2023 FOR A.Y. 2017-18 (ANNEXURE - A) AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.

THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE KRISHNA S DIXIT and HON'BLE MR JUSTICE RAMACHANDRA D. HUDDAR

ORAL JUDGMENT

(PER: HON'BLE MR JUSTICE KRISHNA S DIXIT)

This appeal by the Revenue calls in question the ITAT order dated 08.06.2023 whereby its appeals vide ITA Nos.317 & 318/Bang/2023 for the Assessment Years 2015-16 & 2017-18 have been negatived. The Revenue has framed the following as the substantial questions of law: "1. Whether on facts and in circumstances of the case, the Tribunal's order is perverse in nature in by holding that the payment made to non-resident entities in respect of purchase of software was not royalty and that the same did not give rise to income taxable in India and therefore, the petitioners were not liable to deduct tax at source under section 195 of the Act"?

¶2Whether on facts and in circumstances of the case, the Tribunal's order

is perverse in nature in holding that the payments made to non-resident entities were not in the nature of royalty as defined in Explanation 2 to Section 9(1)(vii) of the Act and the Double Taxation Avoidance Agreement as well?

¶3Whether on facts and in circumstances of the case, the Tribunal's order is perverse in nature in holding that the sale of software license did not include a right or interest in copyright, which thus did not give rise to payment of royalty and would be an income deeded to accrue in India under section 9(1)(vi) of the Act, requiring the deduction of tax at source?

¶4Whether on facts and in circumstances of the case, the Tribunal's order is perverse in nature in not considering the fact that the development of advanced cloud-based computer software by Section 14(a)/14(b) of the Copy Right Act?

¶5Whether on facts and in circumstances of the case, the Tribunal's order is perverse in nature in not appreciating that conditions for holding applying Explanation 2(v) to Section 9(1)(vi) of the Act were fully satisfied in present case as payments were made to a non-resident by way of royalty for use of or the right to use any copy right and Review Petition filed by Revenue is pending for adjudication before Supreme court in case Engineering Analysis Centre of Excellence (reported in 432 ITR page 471)?"

¶2Learned counsel representing the assessee submits that the fact matrix of this appeal is substantially similar to the one in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE

(P) LTD., VS. COMMISSIONER OF INCOME TAX1, wherein the questions raised by the Revenue are answered in favour of the assessee and that even the review petition in Diary No.35475/2023 in C.A.Nos.106/2013 & 1407/2013, vide order dated 23.04.2024 has been negatived. Despite vehement submissions learned Panel Counsel appearing for the Revenue is not in a position to demonstrate that this appeal is not covered by the said decision.

¶3Our system operates ordinarily on the principle of parity and equality, in the sense that like cases should be decided alike, unless there are demonstrable differences, which are absent in this case.

In the above circumstances, this appeal is liable to be and accordingly rejected, costs having been made easy.

1 [2021] 125 taxmann.com 42 (SC)

The request of learned panel counsel that liberty should be reserved to seek review of this judgment depending upon outcome of review in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE (P) LTD. (SUPRA), is liable to be rejected inasmuch as the assessee's review, as mentioned above, itself is rejected.

Sd/- (KRISHNA S DIXIT) JUDGE

Sd/- (RAMACHANDRA D. HUDDAR) JUDGE

RD/snb