Commissioner of Income Tax vs Rational Software Corpn. India Ltd.

N. Kumar, J.—The Revenue has preferred this appeal against the order passed by the Tribunal which has granted relief to the assessee following the Judgment of the Tribunal dated 29.9.2005 in ITA No. 3707-37110/Bang/2004 in the case of M/s. Hewlett-Packard [India] Pvt. Ltd. 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. Sinopsis International Old Ltd. [IT Appeal Nos. 11 to 15 of 2008, dated 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.

Again in the case of Commissioner of Income Tax, International Taxation Vs. Samsung Electronics Co. Ltd., and connected matters decided on 15.10.2011, the substantial question of law framed is 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?

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 fells 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 Act, 1961.

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.

Ordered according. Appeals are allowed.

In favour of revenue.