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MANMOHAN, NAVIN CHAWLA
Pr Commissioner Of Income Tax (international Taxation) – Appellant
Versus
Alcatel Lucent France – Respondent
JUDGMENT
Manmohan, J. - The appeals have been heard by way of video conferencing.
2. Present appeals have been filed under Section 260A of the Income Tax Act, 1961 raising the following substantial questions of law:-
"1 Whether on the facts and in the circumstances of the case, the Ld. Income Tax Appellate Tribunal is correct in law in holding that the income from supply of software embedded in the hardware equipment or otherwise to customers in India does not amount to royalty under Section 9(l)(vi) of the Income Tax Act and under Article 12 of the Double Taxation Avoidance Agreement (DTAA) between India and France?
2 Whether on the facts and in the circumstances of the case, the Ld. Income Tax Appellate Tribunal is correct in law in holding that payments which are subject to withholding tax under section 195 of the Income Tax Act, 1961 are not liable for interest under section 234B of the Income Tax Act, 1961?"
3. Admittedly, the first proposed question is covered against the Revenue by virtue of the Supreme Court judgement in Engineering Analysis Centre of Excellence Pvt. Ltd. V. Commissioner of Income Tax and Anr.,2021 432 ITR 471(SC).
4. Even the aforesaid second proposed question
Courts may dismiss appeals if the proposed questions are already covered by previous judgments, and no substantial question of law arises.
Income derived from the supply of software does not constitute royalty under tax law, affirmed by precedent judgments limiting the scope of substantial questions of law for appeals.
The principle of judicial discipline mandates that the High Court is bound to follow the judgment and order of the apex Court till it is set aside.
The High Court upheld the ITAT's ruling that software receipts are not taxable as royalty under the India-UK DTAA, following binding Supreme Court precedent.
Payments for software deemed to be for copyrighted articles are not taxable as royalty, as established by precedent concerning copyright transfer under tax law.
The main legal point established in the judgment is the application of the Supreme Court judgment in determining the classification of income under the 'royalty' definition.
Income from the supply of CAS and middleware products does not constitute 'royalty' under the Income Tax Act or the India-Swiss DTAA, as reaffirmed by the Supreme Court.
The interpretation of the Income Tax Act, Indo US DTAA, and Copyright Act, 1957 in determining the taxability of software licensing in India.
A licence conferring no proprietary interest on the licencee, does not entail parting with the copyright. Where the core of a transaction is to authorise the end-user to have access to and make use o....
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