Allowed

M/S Kaseya Software India Private Ltd. v. the Deputy Commissioner of Income Tax

Karnataka HC30 Aug 2021ITA/196/2021

Case brief

AI extract

What is this about?

Income Tax Appeal challenging an ITAT order on software expenses and TDS. The Bench applied the Supreme Court judgment in Engineering Analysis Centre of Excellence, holding that distribution agreements do not create copyright rights requiring TDS. All pending I.As. were disposed of.

What did the court decide?

Appeal allowed against the revenue; substantial questions of law answered in terms of the Supreme Court judgment in favour of the appellant. All pending I.As. disposed of.

M/S Kaseya Software India Private Ltd. Vs the Deputy… — Income Tax | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 30^TH DAY OF AUGUST, 2021

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PRESENT

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THE HON’BLE MRS.JUSTICE S.SUJATHA

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AND

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THE HON’BLE MR. JUSTICE RAVI V. HOSMANI

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I.T.A.No.196/2021

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BETWEEN :

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M/s KASEYA SOFTWARE INDIA PRIVATE LTD., NEIL RAO TECH PARK PLOT NO.118, ROAD NO.3 EPJP PHASE-1, WHITEFIELD BANGALORE-560 066 ...APPELLANT

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(BY SRI M.KAUSHIK, ADV.)

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AND :

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THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -4 (1) (1), BMTC BUILDING 80 FT ROAD, 6^TH BLOCK, KORAMANGALA, BENGALURU - 560 095. …RESPONDENT

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

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THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 27.10.2020 PASSED IN ITA NO.1304/BANG/2018, FOR THE ASSESSMENT YEAR 2013-2014. PRAYING THIS HONBLE COURT TO (A) FORMULATE SUBSTANTIAL QUESTIONS OF LAW (B) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL AS BROUGHT OUT IN ANNEXURE-F DATED 27.10.2020 BEARING ITA NO.1304/BANG/2018 FOR THE ASSESSMENT YEAR 2013-2014.

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THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, S. SUJATHA, J ., DELIVERED THE FOLLOWING:

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J U D G M E N T

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This appeal is filed by the assessee under Section 260A of the Income Tax Act, 1961 challenging the order dated 27.10.2020 passed by the Income Tax Appellate Tribunal “B” Bench, Bangalore in ITA No.1304/Bang/2018 relating to the Assessment Year 2013-14 raising the following substantial questions of

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law:-

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1. Whether the provisions of explanation (2) and explanation (4) below section 9(1)(vi) of the Income Tax Act, 1961 are applicable for the distributor of the software products solely based on the accounting of the transactions in the audited financials?

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2. Whether the provisions of explanation (2) and explanation (4) below section 9(1)(vi) of the Income Tax Act, 1961 are applicable in the absence of transfer of

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all or any right including granting of licence for use of computer software?

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3. Whether the provisions of section 195 of the Act would get attracted to transactions of purchase of software products of the AE in the absence of the obtaining of licence of such products in favour of the appellant?

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4. Whether the Appellate Tribunal was right in sustaining the disallowance of software expenses aggregating to Rs.2,13,03,772/- under section 40(a)(i) of the Income Tax Act, 1961 for nondeduction of Tax at Source under section 195 of the said Act thereby grossly misinterpreting the transaction of purchase simplicitor as one of “Royalty” as brought out in section 9(1)(vi) of the Income Tax Act, 1961?

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Learned counsel for the appellant-assessee inviting the attention of the Court to the judgment of the Hon’ble Apex Court in the case of Engineering Analysis Centre of Excellence Private Ltd., vs.

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Commissioner of Income Tax and another reported in 2021 SCC Online SC 159 , would submit that the issue involved herein is no more res integra . Substantial questions of law raised herein are

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extensively considered by the Hon’ble Apex Court and the judgment is rendered holding that there is no obligation on the persons mentioned in section 195 of the Income Tax Act to deduct tax at source, as the distribution agreements/EULAs do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. Learned counsel submits that this judgment is squarely applicable to the facts of the present case. Hence, substantial questions of law deserves to be answered in terms of the ruling of the Hon’ble Apex Court referred to supra.

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Learned counsel for the revenue is not in a

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position to distinguish the case on hand with the judgment referred to above.

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In the light of the judgment of the Hon’ble Apex Court referred to above, the substantial questions of law being covered as narrated above, the same are answered in terms of the assessee and against the revenue.

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The appeal stands allowed accordingly.

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All pending I.As. stand disposed of.

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Sd/JUDGE

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Sd/JUDGE

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PMR

M/S Kaseya Software India Private Ltd. v. the Deputy Commissioner of Income Tax

Case brief

What is this about?

What did the court decide?

M/S Kaseya Software India Private Ltd. v. the Deputy Commissioner of Income Tax

Case brief

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What did the court decide?

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