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2021 (9) TMI 462 - AT - Income TaxReopening of assessment u/s 147 - amount of consideration received by the assessee from sale of software licenses and support, maintenance services rendered in relation to such software licenses, as chargeable to tax as Royalty - reasons deciphers that the assessee sold software to Wipro Ltd., an Indian company as AO opined that the consideration received from sale of software license is in the nature of ‘Royalty’ - HELD THAT:- AO opined that the consideration received from sale of software license is in the nature of ‘Royalty’. For reaching this opinion, he relied solely on the judgment of Hon’ble Karnataka High Court in Samsung Electronics Co. Ltd [2009 (9) TMI 526 - KARNATAKA HIGH COURT] in which it has been held that the consideration received on sale of software license amounts to ‘Royalty’. This judgment of the Hon’ble Karnataka High Court, along with a batch of others, came up for consideration before the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT [2021 (3) TMI 138 - SUPREME COURT] After carrying out a detailed analysis, the view taken by the Hon’ble Karnataka High Court has been overturned by the Hon’ble Supreme Court. Thus, it becomes overt that the sole reason taken by the AO at the time of initiation of reassessment for holding the amount as chargeable to tax, based on Samsung Electronics Co. Ltd. [2009 (9) TMI 526 - KARNATAKA HIGH COURT], now ceases to exist. The reversal of Samsung (supra) by the Hon’ble Supreme Court has rendered the reasons for re-assessment as unfounded and invalid. There is no gainsaying that the Courts declare the law and do not legislate. With the advent of Engineering Analysis (SC) (supra), the law since inception has to be presumed as not treating the sale of software licenses as ‘Royalty’ in terms of section 9(1)(vi) read with Article 12 of the DTAA insofar as the year under consideration is concerned. Thus, the re-assessment pursuant to such reasons is hereby set-aside. Appeal of assessee is allowed.
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