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IN THE HIGH COURT OF DELHI AT NEW DELHI
Manmohan, Navin Chawla, JJ.
Pr Commissioner Of Income Tax (international Taxation) - Appellant
Versus
Alcatel Lucent France - Respondent
I.T.A. (Income Tax Appeal) No. 145 of 2020, 149 of 2020151 of 2020
Decided On : 29-07-2021
Income Tax Act - Section 260A Appeals - Court dismisses appeals as no substantial question of law arises
Fact of the Case:
The appeals were filed under Section 260A of the Income Tax Act, 1961, raising questions regarding the tax treatment of income from software supply and withholding tax liability.
Finding of the Court:
The court found that the proposed questions were covered against the Revenue by previous judgments, and consequently, no substantial question of law arose. The court dismissed the batch of matters.
Issues: Interpretation of tax provisions related to income from software supply and withholding tax liability.
Ratio Decidendi: The court relied on previous judgments to conclude that the proposed questions were already covered against the Revenue, leading to the dismissal of the appeals.
Final Decision: The court dismissed the present batch of matters as no substantial question of law arose.
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 is covered against the Revenue by virtue of the judgment of this Court in DIT v. GE Packaged Power Inc., (2015) 373 ITR 65(Del).
5. Consequently, no substantial question of law arises in the present batch of matters.
6. Accordingly, the present batch of matters is dismissed.
7. The order be uploaded on the website forthwith. Copy of the order be also forwarded to the learned counsel through e-mail
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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