IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12^TH DAY OF AUGUST, 2025 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND INCOME TAX APPEAL NO. 698 OF 2023 BETWEEN:

1. PR. COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), KORAMANGALA, BANGALORE.

2. THE DY. COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION, CIRCLE 1(2), KORAMANGALA, BANGALORE.

…APPELLANTS (BY SRI. SANMATHI E. I., ADV.)

AND:

M/S. SYNAMEDIA LIMITED (FORMERLY KNOWN AS NDS LIMITED), Digitally signed BLOCK NO.9A AND 9 B, by VALLI MARIMUTHU PRITECH PARK, SURVEY NO.51-64/4, SARJAPUR OUTER RING ROAD, Location: HIGH COURT OF BELLANDUR VILLAGE, KARNATAKA BENGALURU-560103 PAN: AABCN 2524L …RESPONDENT (BY SRI. T. SURYANARAYANA, SR. ADV. FOR SMT. TANMAYEE RAJKUMAR, ADV.)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT

1961, ARISING OUT OF ORDER DATED 14/02/2022 PASSED IN ITA NO. 3350/BANG/2018, FOR THE ASSESSMENT YEAR 2014-15, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 14.02.2022 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE’S CASE, IN APPEAL PROCEEDINGS IN ITA NO.3350/BANG/2018 FOR A.Y 2014-15 (ANNEXURE-A) AND ETC.

THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE S.G.PANDIT AND HON'BLE MR. JUSTICE K. V. ARAVIND

ORAL JUDGMENT

(PER: HON'BLE MR. JUSTICE K.V. ARAVIND)

Heard Sri E.I. Sanmathi, learned Senior Standing Counsel for the appellants-Revenue and Sri T. Suryanarayana, learned Senior Advocate for Smt. Tanmayee Rajkumar, learned counsel for the respondent-Assessee.

2. This appeal under Section 260-A of the Income Tax Act, 1961 is filed by the Revenue, challenging the order dated 14.02.2022 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru, in ITA No.3350/Bang/2018, relating to the assessment year 2014-15.

3. The Revenue has formulated the following substantial questions of law for consideration:

“(i) Whether on the facts and in the circumstances of the case, the Tribunal’s order is perverse in nature in setting aside the additions made in assessment order by relying the judgment of Hon'ble Apex Court in case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT (reported in 432 ITR page 471) without appreciating that in the case of assessee are not similar and even when Review Petition filed by Revenue is pending for adjudication before Supreme Court in case Engineering Analysis Centre of Excellence?

(ii) Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature in disregarding the findings rendered by assessing officer that the provisions of the DTAA between India-UK with regard to Royalty are to be interpreted in harmony with the Section 9 of the Act?”

4. The facts in brief are that the respondent-Assessee, being a foreign company, was in receipt of income from the sale of software. The Assessing Officer treated such income as ‘Royalty’. The draft assessment order passed by the Assessing Officer was challenged before the Dispute Resolution Panel (for short, ‘DRP’). The DRP held that the said receipt was taxable under the head ‘Royalty’. Pursuant thereto, the Assessing Officer, by final assessment order dated 23.10.2018, held that the income from sale of software is taxable as ‘Royalty’.

5. The Tribunal, on appeal by the Assessee, upon analyzing the terms of the agreement and applying the principles of law laid down by the Hon’ble Apex Court in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income-Tax and another¹, held that the receipts from sale of software are not taxable as ‘Royalty’. Aggrieved thereby, the Revenue is in appeal challenging the order of the Tribunal.

6. Learned Senior Standing Counsel Sri. E.I. Sanmathi, appearing for the appellants-Revenue, s