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Judgment
These four appeals arise out of the common order passed by the Income Tax Appellate Tribunal (hereinafter referred to as ''the Tribunal''), Bangalore Bench ''B'' in I.T.A. Nos. 145 to 148/Bang/2004 in respect of the assessment years 2000-2001, 2001-2002, 2002-2003 and 2003-2004 dated 11.11.2005, wherein the Tribunal following its earlier decision in WIPRaaaaaaaO LTD. Vs. ITO (94 ITD 9) (BANG) has allowed the appeals filed by the respondent herein and reversed the order passed by the appellate authority confirming the order passed by the Assessing Officer by holding that the payments made by the respondent herein - assessee to M/s. Gartner Group, U.S.A. (for short, M/s. Gartner), a non-resident Company was not towards ''royalty'' and the same was not liable for taxation in India and consequently, the assessee had no obligation to deduct fax u/s 195 of the Act and accordingly, deleted the tax liability u/s 201(1) and interest levied u/s 201(1A) of the Act.
The material facts necessary for disposal of these appeals are as follows:
2.1. The revenue found that certain payments had been made by the respondent herein - assessee to M/s. Gartner, a non-resident Company in respect of which no tax was deducted by the respondent in terms of Section 195 of the Act. The details of payments are as under:
Financial year
Amount in US $
Amount in Rs.
1999-00
41641
1810334
2000-01
33000
1450680
2000-01
107567
5023379
2001-02
242500
11571400
2001-02
5287
367032
2001-02
2309
111196
2002-03
226824
11004136
Since prima facie, it was found that the payments appeared to be royalty payment, wherein the respondent - assessee was required to deduct tax at source, show cause notice was issued u/s 201 of the Act to explain the reasons for non-deduction of tax. The assessee explained the reasons for non-deduction of tax by contending that the payments in question would not constitute ''royalty'' within the meaning of explanation 2 to Section 9(1)(vi) of the Act or the Double Taxation Avoidance Agreement (for short, ''DTAA'') and the payments made are akin to payments made for a railway time table, which gives information about the tram schedules or to obtain a book. Therefore, by no stretch of imagination, the said payments can be treated as royalties.
2.2 The Assessing Officer - Income Tax Officer (Internal Taxation), by order dated 25.03.2003, rejected the objections raised by the assessee and held that the payments made by the respondent to M/s. Gartner amount to royalties and accordingly, demanded from the assessee an amount of Rs 41,91,260/- (Rupees Forty One Lakhs Ninety One Thousand Two Hundred Sixty Only) towards tax u/s 195 of the Act and interest of Rs. 13,18,040/- (Rupees Thirteen Lakhs Eighteen Thousand Forty only) u/s 201(1A) of the Act for assessee''s failure to deduct tax at source. Being aggrieved by the same, I.T.A, Nos. 62, 63, 64 and 65 /R-19/CIT(A)IV/03-04 were filed by the respondent -assessee before the Commissioner of Income Tax (Appeals) IV, Bangalore.
2.3 The Appellate Authority by order dated 28.11.2003, confirmed the order passed by the Assessing Officer and dismissed the appeals filed by the respondent -assessee. Being aggrieved by the said order of the appellate authority, I.T.A. Nos. 145 to 148/Bang/2004 were filed by the assessee before the Tribunal.
2.4 The Tribunal, following its earlier judgement passed in WIPRO LTD. Vs. ITO (94 ITD 9) (BANG), which has been impugned in I.T.A, (Mos. 2804, 2805 and 2807 of 2005 before this Court, held that, the payments made by the assessee to M/s. Gartner do not constitute royalties and set aside the order passed by the Appellate Authority confirming the order passed by the Assessing Officer and accordingly, allowed the appeals filed by the assessee by order dated 11.11.2005 and deleted both the tax liability u/s 201(1) and interest levied u/s 205(1A) of the Act.
2.5 Being aggrieved by the said common order passed by the Tribunal, these appeals are filed by the revenue contending that the Tribunal has relied upon its earlier decision in Wipro''s case (supra), which has been challenged in I.T.A. Nos. 2804, 2805 and 2807 of 2005 before this Court and the Tribunal was not at all justified in holding that the payment made by the respondent assessee to M/s. Gartner was not royalty.
In ITA Nos. 2804, 2805 and 2807 of 2005 and connected cases, wherein identical contentions had been raised, this Court by separate order passed today, has reversed the decision of the Tribunal in Wipro''s case in I.T.A. Nos. 150 to 154 of 2004 dated 30.12.2004. Therefore, following the reasons assigned in I.T.A. Nos. 2804, 2805 and 2807 of 2005, disposed of by us by a separate order today, we hold that the order of the Tribunal dated 11.11.2005 impugned in these appeals, wherein the Tribunal has relied upon its earlier decision in WIPRO''s case (supra) in arriving at the conclusion that the payment made by the respondent - assessee to M/s. Gartner, a non-resident Company would not amount to royalty, cannot be sustained and the same is liable to be set aside. We answer the substantial question of law framed in all these appeals as to whether the Tribunal was justified in holding that the payment made by the respondent to M/s. Gartner, a non-resident Company did not amount to royalty, in the negative in favour of the revenue and against the assessee and accordingly, pass the following Order:
All the appeals are allowed. The Order passed by the Income Tax Appellate Tribunal, Bangalore Bench ''B'' in I.T.A. Nos. 145 to 148/Bang/2004 dated 11.11.2005 is set aside and the order passed by the appellate authority confirming the order passed by the Assessing Officer is restored