TMI Blog2009 (9) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Appellate Tribunal, Bangalore Bench, where under the Tribunal had allowed the appeals filed by different resident assessecs in respect of different assessment years by holding that the resident - assessees were not liable for deduction of any part of the payments made by them to non-resident suppliers as price (for consideration) for the software which the resident - assessees had acquired/purchased from the non-residents for the purposes of the activities/business of the resident - assessees in the background of the nature of their liability/obligation under the provisions of section 195 of the Income Tax Act, 1961 [for short 'the Act'] by holding that the subject payments were not in the nature of royalty payments within the meaning of section 9[1] [vi] of the Act and if it is not royalty it is not income and if it was not income in the hands of the non-resident assessees it is not chargeable to tax even as per section 4 of the Act and if so there is no obligation on the part of the respondents - resident -assessees to deduct any amount in terms of section 195 of the Act and therefore the orders passed under section 201 of the Act calling upon the respondents - asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the provision of Sec.9[1][vi] read with Double Taxation Avoidance Agreements [DTAA for short] between India and USA, India and France respectively. The contention of the assessee was not accepted by the ITO [TDS]. It was held by the Assessing Officer that the assessee was a defaulter by not deducting tax from the remittance made by the assessee for purchase of these softwares. The reply of the assessee was not accepted by the Assessing Officer and it was held that as per the provision of Sec.9 [1][vi] of the Act, the payment made by the assessee is Royalty. Hence, the assessee was bound to deduct the tax. The ITO also placed reliance on the definition of the term "Royalty', as mentioned in DTAA [supra]. Accordingly, it was held by the ITO that the assessee was a defaulter within the meaning of Sec.201 [1] of the Act, for non-deduction of tax. Further, the interest u/s.201 [1A] was also levied for the three years, as follows: ASSESSMENT YEARS 201[1] 201[1A] 1999-00 Rs.25,440 Rs.12,211 2000-01 Rs.1,202 Rs.216 2001-02 Rs.16,87,270 Rs.58,447 TOTAL Rs.17,13,912 Rs.70,874 Agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and again the relevant articles of the DTAA are to be looked into and they providing for assessment of income attributable to such a receipt being taxable only in the country of the non-resident, unless the non-resident, has a business establishment in the country of the payer and on facts it is contended that the non-resident receivers in none of the cases having any permanent business establishment in India, the entire income of the non-resident assessee attributable to the payment being not at all taxable in India for the very reason of the provisions of the agreement prevailing over the provisions of the Act, non-resident has no income assessable to tax in India and therefore no obligation on the part of the resident payer to deduct any amount. 8. The Tribunal now has applied its ruling and conclusion in the above referred SAMSUNG'S case [supra] to all other subsequent cases and on such premise has allowed the appeals of other assessees also. 9. There are certain variations in the purpose for which the resident-assessees have purchased/acquired the software, also known as 'shrink wrapped ready to sell, off the shelf software' having regard to the purpose for which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pporting the orders passed by the tribunal holding that on the examination of the merits of the contentions put forth by the resident payers in their appeals before the tribunal, the tribunal was fully satisfied to conclude that such receipts in the hands of the non resident recipients did not result in the non-residents earning some income, from the transaction in question, which income was taxable in India under the Act, as an income chargeable to tax either because of the fiction created by the legislation under section 9 of the Act, providing for an artificial manner of attributing a taxable income in the hands of a non-resident in India even though in reality no income had either actually accrued or arisen in India in favour of a non-resident or even otherwise i.e. to say even when there was some income which had accrued or arisen to the non-resident in India as a consequence of the payment/remittance by the resident payer, and it was in the normal course and in the absence of any DTAA would have been taxable under the Act. 12. In the background of such vacations, the questions of law representative/illustrative of each category that have been raised in these appeals and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Apex Court in 239 ITR 587. 6. Whether the assessee can question the taxability of the recipient in section 201(1) i2nd 201(1A) of the Act proceeding when the assessee has to show only "without good and sufficient reasons failed to deduct and pay tax", which has not been shown in the facts of the present case and non taxability cannot be take as a sufficient reason, when section 195(2)(3)(4) of the Act certificate is not obtained. 7. Whether the Tribunal was correct in holding that the assessee is not liable to deduct. TDS in respect of payments made for purchase of software as the same cannot be treated as income liable to tax in India as Royalty or Scientific Work under section 9 of the Act read with Double Taxation Avoidance Agreements and treaties. 8. Whether the Tribunal was correct in holding that since the assessee had purchased only a right to use the copyright i.e. the software and not the entire copyright itself, the payment cannot he treated as Royalty as per the Double Taxation Avoidance Agreement and Treaties which is beneficial to the assessee and consequently section 9 of the Act should not take into consideration. 9. Whether the Tribunal was correct in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are development had imported software from countries such as USA, France and Sweden and as such Section 9 of the Act which provides that the income referred therein is deemed to accrue or arise in India squarely applies to the facts of the present case. Accordingly, Sri. Seshachala brings to our notice the assessment order wherein the Assessing Officer has examined these issues which is at Annexure-'C' and supports the view of the Assessing Officer which is to the effect that the transaction when read with the clauses of agreement reflects that it is a licence and the amount paid thereunder would be licence fee and thus is royalty within the definition of Section 9(1) (vi) of the I.T.Act and hence Section 195 is attracted. It is noticed in the assessment order that the Assessing Officer had held that though rate of tax of royalty as per Section 115A is as per DTAA and different percentage is fixed for different categories, has come to the conclusion that the entire payment is to be taxed at 10% as giving the maximum benefit to the assessee is just and proper. 17. Per contra Sri. K. P. Kumar, learned senior counsel appearing for the respondent would pose the following question for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd royalty as occurring in Section 9(1) (vi) and to give full effect of it. 21. Sri. Seshachala would contend that the finding of the Tribunal paragraph 19 is erroneous wherein the Tribunal has held that there is no transfer of copy right and hence no right to utilise the copy right and the definition of royalty does not apply to the facts of the case and submit that the judgment relied upon by the revenue has not at all been examined by the Tribunal, Sri. Seshachala has formulated the following points for addressing the arguments. (i) The assessee was bound to deduct tax under Section 195 of the Act and he cannot contend that it is not the income of the recipient. (ii) The payment is covered by Section 9(1)(vi) of the Act. (iii) The Tribunal did not consider whether the assessee can question the taxability of recipient under Section 201(1) and 201(1A). (iv) Software is a scientific work and liable to tax under Section 9 read with DTAA and relies upon the decision in the case of Transmission Corporation Limited Vs. CIT (1999) 239 ITR 587 (SC) at paragraph 8. 22. Sri. K P Kumar, learned senior counsel appearing for the respondent would contend that the words used in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... geable to tax under section 4(1), there is no necessity to deduct any amount from the payment made to foreign suppliers. By relying on Tata Consultancy case Sri. Kumar contends that shrink-wrapped software is 'goods' and it is not "intellectual property" and does not by sale, transfer any right in the copy right itself but it is only the sale of a copy of copy righted material, that no intellectual property is embedded in the disc and thus it amounts to goods. 23.Elaborating the submission Sri. Kumar that by reading Article 366 (12) of the constitution with Section 2(7) of the Sale of Goods Act, software is to be held as goods and the ratio in TCS case is squarely applicable and thus software mark and seal becomes goods which aspect has been looked into and considered in the TCS case. Sri. Kumar contends that prior to amendment to Section 201 of the Act, and it contained a qualifying words 'no such person'; this means it refers to Sect ion 200 and thus the respondent does not come within the ambit of deemed defaulter, as the payment was not in the nature of a royalty payment. 24. It is contended by the learned counsel for the assessee that once they do not come under the charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Act. Under the Act, total income of previous year is chargeable under Section 4(2). Section 4 provides that in respect of income chargeable under sub-section (1), income tax shall be deducted at source where it is so deductible under any provision of the Act. If the sum that to be paid to the non-resident is chargeable to tax, tax is required to be deducted. Emphasises the word "if'; that if $ 5000 is carried from this country then obviously it is not income, there is no question of deducting the money at source; that if a gift is made there is no element, of income in the payment and draws attention to Board's Circular which says that if a commission is paid to the person who carries on a Commission business abroad and services are rendered in the other country that is not to be subject to tax; that if goods are bought in the foreign country and brought to this country then there is no liability of tax in this country. 26. Submission by learned counsel for the assessees is as under, the sum which is to be paid may be income out of different heads of income provided under Section 14 of the Act, that is to say income from salaries, income from house property; profits and gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is filed, income tax on such sum is to be deducted and it is the statutory obligation of the person responsible for paying such ''sum to deduct tax thereon before making payment. He has to discharge the obligation of tax deduction at source; that the intention of the legislature is gross sum with reference whatever then the provisions of the Act could have been omitted. 30. Sri. Ganesh, learned senior Counsel appearing for the assessee would contend that the assessee was able to demonstrate that the payment made to a non-resident was not at all chargeable to tax and therefore no obligation on the resident payer to deduct on payment. Sri.Ganesh submits that 'Transmission Corporation Case' is not authority to hold that even when there is no chargeability there is an obligation to deduct under Section 195(1) of the Act, unless one has gone through the process of Section195(2) of the Act. 31. Sri Ganesh submits that the judgment of the Supreme Court fully supports the case of the assessee, that entire payment is not chargeable to levy in terms of the charge under Section 4 of the Act, then no obligation to deduct at all under Section 195 of the Act 32. Learned counsel for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal has ultimately allowed the appeals of the assessees to arrive at this result, there is absolutely no need for the High court to interfere in the appeals filed by the revenue under Section 260A of the Act. 33. Learned counsel for the assessees, in support of their contentions, have relied on the following judgments: * COMMISSIONER OF INCOME-TAX, AP-III v. SUPERINTENDING ENGINEER, UPPER SILERU (152 ITR 753) * COMMISSIONER OF INCOME-TAX v. VIJAY SHIP BREAKING CORPORATION (261 ITR 113) * VIJAY SHIP BREAKING CORPORATION AND OTHERS v. COMMISSIONER OF INCOME-TAX [(2009) 314 ITR 309] * CIT v. COOPER ENGINEERING LTD. (68 ITR 457 BOM) * CIT v. VASAVI PRATAP CHAND AND OTHERS (255 ITR 517 DEL) * CIT v. SUPERINTENDING ENGINEER, UPPER SILERU (152 ITR 753 AP) * ITO v. SHRIRAM BEARING LTD. (164 ITR 419 CAL) * CIT v. WESMAN ENGG. CO. LTD. (188 ITR 327 SC) * ITO v. SRIRAM BEARINGS LTD. (224 ITR 724 SC) * CIT v. TATA ENGG. LOCOMOTIVE CO. LTD. (245 ITR 823 BOM) * CIT v. P.V.A.L. KULANDAGAN CHETTIAR (267 ITR 654 SC) * DCIT v. TORQOUISE INVESTMENT FINANCE LTD. (300 ITR 1 SC) * ANJALEEM ENTERPRISES (P) LTD. V. CCE [(2006) 2 SCC 336)] * CCE v. H. P. INDIA SALES (P) LT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted as a deduction or by way of exemption should also be construed strictly i.e., a provision for exemption or exception which is a provision which is not for the main purpose of levying tax on the income of the resident or non-resident; i.e., where under certain circumstances certain types of incomes are exempted from the net of taxation, which means that the assessee though has received the amount which otherwise definitely could have been treated as income will not become income for the purpose of computation of the liability to tax under the Act in view of the exemption. 37. It is therefore clear that both the charging section and the exemption provisions should always be construed strictly and there is no scope for unduly expanding the scope of levy, by a process of interpretation. 38. Having regard to the scheme of the Income Tax Act, namely, that income of the previous year is brought to tax in the following year, known as assessment year and for the assessing officer to finalize the assessment and to determine the specific tax liability of the assessee, it necessarily involves an exercise of gathering information, seeking for further explanation and then passing orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and the significance being in the case of a non-resident assessee, even by the employment of fiction under section 9 of the Act, if some income is deemed to have accrued or deemed to have arisen to the non-resident in India, such income, is income which is taxable in India. 40. In all the above appeals, the discussion proceeds on the premise that the payments have all been made to foreign suppliers who are all non-residents within the meaning of sections 4, 5, 6 and 9 of the Act and by the conjunctive reading of these provisions if it is to he held that the payment in hands of non- resident is in the nature of payment which can be otherwise be called as income, the significance for present purpose is that the resident payers such as the appellants are definitely under an obligation to make deductions in terms of section 195 of the Act and to remit the same within the stipulated period to the revenue. A failure may result in the defaulting resident (assessee) payer being treated as a defaulter or even being, proceeded against, for recovery of the amount which the resident payer should have deducted and remitted to the credit of the Income Tax Department. 41. It is in this b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability of the non-resident recipient of the price/payment For the supply or sale of shrink wrapped software packages as though it is an exercise of passing an assessment order for determining the tax liability of the non-resident assessee receiving the payment; although the respondents in all these appeals are quite aware that it is not actually an exercise for determination of the tax liability of the non-resident but is only in the context of the obligation of a resident assessee making payments to the non resident as contemplated under section 195 of the Act. 46. It is precisely because the payers i.e., the resident assessees are aware that in terms of section 195 of the Act they are under an obligation to so deduct a percentage of the payment while making payment to the non resident and also to remit that amount to the revenue within the stipulated time and as this is an obligation which cannot be otherwise got rid of or can be wriggled out, learned counsel for the assessees have resorted to the above noticed arguments and a good number of authorities are cited in support of such contentions. 47. However, on part of the revenue, submission of Sri. Seshachala, learned se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing Officer to determine, by general or special order, the appropriate proportion of such sum so chargeable, and upon such determination tax shall be deducted under subsection (1) only on that proportion of the sum which is so chargeable: (3) Subject to rules made under sub-section (5) any person entitled to receive any interest or other sum on which income tax has to be deducted under sub-section (1) may make an application in the prescribed form to the Assessing officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1). (4) A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation. (5) The Board may, having regard to the convenience o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to a situation where a dispute may arise as to whether the provisions of section 195 of the Act are attracted even when the entire payment to a foreign non-resident does not partake the character of income but only some part of that payment partakes the character of income and even then the deduction is obligatory on the part of the payer if the entire payment does not necessarily become income and that the present situations and appeals are not appeals involving such questions but only appeals involving the question as to whether the payment or any part of the payment has a character of income within the meaning of section 9 of the Act read with charging section and that the contention being that no part of the payment made to the non-resident can become income either under the Income Tax Act or enjoys an exemption under the DTAA, and if so then no part of such payment being taxable in India and therefore in the absence of fulfillment of requirement of section 195[1] of the Act, the further non-compliance with the requirements of sub-sections [2], [3], [4], [5] of section 195 of the Act may not even arise for examination, such argument cannot be accepted for the simple reason t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) and (3) of s.195 and s. 197 leaves no doubt that the expression "any other sum chargeable under the provisions of this Act" would mean 'sum' on which income-tax is leviable. In other words, the said sum is chargeable to tax and could be assessed to tax under the Act. Consideration would be-whether payment of sum to non-resident is chargeable to tax under the provisions of the Act or not? That sum may be income or income hidden or otherwise embedded therein. If so, tax is required to be deducted on the said sum - what would be the income is to be computed on the basis of various provisions of the Act including provisions for computation of the business income, if the payment is trade receipt. However, what is to be deducted is income-tax payable thereon at the rates in force. Under the Act, total income for the previous year would become chargeable to tax under s. 4.Sub-s. (2) of s. 4 inter alai, provides that in respect of income chargeable under sub-s.(1), income-tax shall be deducted at source where it is so deductible under any provision of the Act. If the sum that is to be paid to the non-resident is chargeable to tax, tax is required to be deducted. The sum which is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the person responsible for paying such 'sum' to deduct tax thereon before making payment. He has to discharge the obligation of tax deduction at source. The High Court of Calcutta considered and interpreted similar provision of s. 18 (3B) of the IT Act, 1922, in the case of P.C. Ray Co. (India) (P) Ltd. vs. A.C. Mukherjee, ITO (1959) 36 ITR 365 (Cal): TC 5R.355, and rightly held: "if 'chargeable under the provisions of this Act' means actually liable to he assessed to tax, in other words, if the sum contemplated is taxable income, a difficulty is undoubtedly created as to complying with the provisions of the section". The High Court further held that s. 18(3B) contemplated not merely amounts, the whole of which was taxable without deduction, but amounts of a mixed composition, a part of which only might turn out to be taxable income, as well; and the disbursements, which were of the nature of gross revenue receipts, were yet sums chargeable under the provisions of the IT Act and came within the ambit of s. 18(3B) of the Act. 10. Hence, in our view there is no substance in the contention of the learned counsel for the appellant that the expression "any other sum charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interpretation of the supreme court having clarified the legal position of section 195 of the Act, that interpretation is the law declared and binding on all courts in this country and whether the assessees likes it or not it has to be necessarily, applied to the cases on hand and the Judgment rendered in each case, on such application of the law declared by the Supreme Court, to the facts of the particular case. 53. In this background, the picture that emerges is that while under section 195 [1] of the Act, there is an obligation on the part of the person responsible for paying to a non-resident does arise if and only if the payment partakes the character of income payment, in the sense that, if an amount is not in the nature of income payment at all then section 195 [1] of the Act does not operate, we cannot lose sight of the fact that section 195 [1] of the Act is not a provision for assessing the tax liability of a non-resident nor as to whether under section 9 of the Act, any income is deemed to have resulted in the accrual or arisal of income to the non-resident in India, but by simply accepting the operation of the mandate under section 195 [1] on every resident payer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal is filed by the resident payer against the consequential order passed by the assessing officer under section 201 of the Act, for the very reason, we have indicated earlier that question cannot be raised even in the appeal filed under section 246 of the Act against the order under section 201 of the Act and the bar as we have indicated earlier in the wake of the requirement of section 195 [2] of the Act for such purpose and in the wake of the binding Judgment of the supreme court in TRANSMISSION CORPORATION OF A.P. LTD., 's case [supra] even the appellate authority in the appeal of the assessee under section 246 of the Act as against the order of the assessing officer passed under section 201 of the Act is precluded from going into such question and if so it is not open even to the appellate Tribunal to venture on finding an answer to the very question in the assessee's further appeal to the Tribunal and opinion rendered by the Tribunal on the question answering it in favour of the assessee is of no consequence in law, is not a proper exercise of its appellate powers; an answer of this nature is not binding in law and is necessarily liable to be set aside and the question answer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducting any sum on or after the 1st day of April, 2005 in accordance with the foregoing provisions of this Chapter or, as the case may he, any person being an employer referred to in sub-section (1-A) of Section 192 shall, after paying the tax deducted to the credit of the Central Government within credit of the prescribed time, prepare quarterly statements for the period ending on the 30th June, the 30th September, the 31st December and the 31st March in each financial year and deliver or cause to be delivered to the prescribed income tax authority or the person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed. 201. Consequences of failure to deduct or pay. - (1) If any such person referred to in Section 200 and I the cases referred to in Section 194, the principal officer and the company of which he is the principal officer does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to he an assessee in default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the non-resident assessee as they are all virtually exercises to be embarked only at the time of determination of the actual tax liability of the non-resident assessee and in the absence of a return being field by the non-resident assessee, examination of such questions does not arise while the assessing officer is in the exercise of taking consequential action on an assessee who has failed to fulfill his obligation under section 195[1] of the Act, and therefore goes against the assessees and are answered accordingly. 58. While examining the scope and the extent of applicability of the provisions of section 195 of the Act, we cannot lose sight of the fact that this section in the first instance is not a charging section nor a section providing for determination of the tax liability of the non-resident who is in receipt of payments from a resident. 59. The section itself occurs in chapter-XVII of the Act providing for collection and recovery by way of a deduction effected at source of payment and the deduction is in advance i.e., even before the determination of the actual tax liability of the non resident foreign company. 60. The amount deducted by the resident who is respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeable to tax as income of the non-resident recipient. 62. Even here, one should bear in mind that it is not actually either an exercise for the assessment of the income of the non-resident nor the actual tax determination of the non-resident. 63. As we are of the opinion that section 195 of the Act is not at all a provision wherein the assessing officer is required to indulge in an exercise of determination of the income of a non-resident and that can be done only on the basis of a return of income filed by the non-resident who can definitely put forth the various contentions as have been urged in the present appeal by the learned senior counsel appearing on behalf of the respondents, i.e., the resident payers and even much more on the authority of the law declared by the supreme court in TRANSMISSION CORPORATION OF A.P. LTD.,'S case [supra], the only scope and the manner of reducing the obligation for deduction imposed on a resident payer in terms of section 195[1] of the Act is by the method of invoking the procedure contemplated under sub-section [2] of section 195 of the Act i.e., only when the person responsible for paying any such sum chargeable under this Act on a non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions urged on behalf of the respondent - assessees on the merits of the question of actual taxability or otherwise of the income in the hands of the non-resident recipient are all to be ignored as irrelevant, as such contentions are not productive for the purpose of the persons who are required to effect deduction and remit it to the account of the revenue as a mandatory obligation in terms of section 195[1] of the Act and the provision being a part of the scheme for advance remittance of tax and the legislature having found ways and means of recovering the tax in advance even before the actual crystallization of the tax liability of an assessee in terms of the provisions contained in chapter-XVII of the Act and section 195 of the Act being one such provision and an exercise of this nature and even before the determination of the actual tax liability non-resident assessee at the time of the resident payer like the respondents in the present appeals being a premature one for the purpose of actual determination of the tax liability of the non-resident recipient. 66. If one is allowed the liberty of giving a rough and crude comparison to the manner in which the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt payers in effecting a deduction from out of the payments made by them in favour of the non-resident recipients even as consideration for acquiring what is known as 'shrink wrapped software' or what is sought to be described as 'ready to sell, off the shelf packaged software, product and even assuming it had partaken the character of goods for the purpose of determination of the tax liability under the provisions of Andhra Pradesh General Sales Tax Act, 1957 as held by the supreme court in 'TATA CONS ULTANCY SERVICES case [supra], all such questions recede to the background while examining the question of the obligation of a resident payer in terms of section 195[1] of the Act and as arguments not relevant for the purpose of answering this question. 70. The Tribunal has clearly committed an error in law in embarking upon to answer the question of the actual tax liability of a non-resident recipient in respect of an amount received by it from a resident payer while examining an appeal at the instance of an a complaining of the correctness or otherwise of enforcement of a demand raised in terms of section 201 of the Act even when admittedly the resident payers were not in any way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll and while the revenue from the very beginning had taken this stand of the payment in the hands of the non-resident recipient being in the nature of a royalty payment and was also affirmed by the appellate authority, that was not made an issue or question for determination before the tribunal by revenue and therefore we do not propose to disturb this factual emergence of facts, particularly, in ascertaining the extent of deduction that was required to be made by the resident payer and therefore we are not disturbing the orders of the assessing authority as affirmed by the first appellate authority and second appellate authority on this aspect of the matter. 72. One another reason for our holding that the assessing officer, even in a situation where an application is made by the resident payer, under section 195[2] of the Act, for the determination of the proportion of the actual amount being remitted to the non-resident recipient So that the resident payer can deduct only the reduced amount and remit it to the credit of the account of the revenue and while doing so i.e., while examining an application under section 195[2] of the Act, the assessing officer cannot embark on an ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Also an erroneous order and demand being raised by the assessing officer under section 201 of the Act, such as an incorrect description of the resident payer or incorrect computation of the amount to be deducted from out of the payment made by the resident payer either by employing a wrong for deduction, at variance with the rate as indicated in the Finance Act or such arithmetical or factual errors committed by the assessing officer, without involving the question of actual determination of the tax liability of the non-resident etc., alone can constitute the subject matter for appeal under section 246-A of the Act [clause [h-a] of sub-section 1 of section 246-A of the Act]. 74. An appeal under section 246-A[1][h-a] of the Act to the first appellate authority against a demand notice/order under section 201 of the Act cannot serve the purpose of seeking correction of the demand/order on the premise that the receipt in the hands of the non-recipient was getting out of the net of taxation under Income Tax Act, 1961 due to one or the other reason. 75. In all these appeals, there being no dispute nor can there be any dispute regarding the payments made by the resident payers, bearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing from any illegality or irregularity and are valid orders though not necessarily for the reasons assigned and discussions made by the authorities in their orders but by the proper application of the law to the fact situation and following and applying the law declared by the supreme court in TRANSMISSION CORPORATION OF A.P. LTD., 's case [supra] 78. For the reasons stated above, while we refrain from answering the questions raised in these appeals relating to the actual determination of the tax liability of the non-resident assessees in respect of the payments that they had received from the resident payer figuring as respondents in all these appeals, we answer all other questions relating to the correctness or otherwise of the orders passed by the tribunal in the negative in favour of the revenue and against the assessee allow the appeals, set aside the orders passed by the Tribunal and restore the orders passed by the assessing authorities and affirming orders passed by the first appellate authorities, so far as it relates to confirming the demand raised on all these respondents-assessees in terms of the provisions of section 201 of the Act for the failure of the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the matter to the Commissioner Income Tax [Appeals] for fresh disposal of the appeals on its merits opining that the Commissioner of Income Tax [Appeals] was wrong in dismissing the first appeals at the threshold as being not maintainable. 84. It is against such common remand order dated 18.07.2007 passed by the Income Tax Appellate Tribunal in these appeals, i.e., ITA No.931-941/Bang/2006 and ITA Nos.672-702/Bang/2007, the revenue has come up with an appeal each i.e., ITA Nos.919 of 2007 921 of 2007 respectively. 85. We notice that though the registry has assigned one appeal number before this court and the appellants - revenue has only paid one set of court fee both in ITA Nos.919 of 2007 and 921 of 2007 i.e., a sum of Rs. 12/- on the memorandum of appeal, in reality, these two appeals are batch of appeals against the common order of the Tribunal passed on 18.07.2007 disposing of all the 43 appeals before it and therefore the registry should have necessarily assigned 11 numbers of appeals instead of one appeal in ITA No.919 of 2007 and 31 numbers of appeals instead of ITA No.921 of 2007 and should have also recovered commensurate court fee from the appellants. Registry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities under the Act in accordance with section 195(3), (4), (5) read with section 200 of the Act? As answered in ITA Nos.919 of 2007, 921of 2007 2 Whether the Tribunal was correct in holding that the payment made by the Assessee Company for purchase of software from Aaymetrix Asia Pacific, Singapore; Peritus Software Service Inc., USA and Astral Computers Pvt. Ltd., Singapore for the amounts of Rs.3,43,095/-, Rs.47,89,419/- and Rs.8,89,611/- was not liable to income tax in India and consequently no TDS as held by the Assessing Officer and confirmed by the Appellate commissioner needs to have been deducted? Not correct , In the negative , against the assessee and in favour of the revenue 3 Whether the Tribunal was correct in merely following the judgment passed by its in the case of Samsung Electronics Co. Ltd. Which has not been accepted by Revenue and appealed against before this Hon'ble Court where the facts were not entirely identical to one subsisting in the present case and therefore the Tribunal was bound to have recorded an independent finding and therefore the impugned order is perverse? Definitely wrong, answered in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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