HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR
I.T.T.A.No.485 OF 2014
DATED: 25.07.2014 Between:
Commissioner of Income Tax-II, Hyderabad … Appellant And M/s.Infotech Enterprises Limited … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.485 of 2014 JUDGMENT: (per the Hon’ble The Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be preferred against the judgment and order of the learned Tribunal dated 16.01.2014 in I.T.A.No.115/Hyderabad/2011 in relation to the assessment year 2006-07 on the following suggested questions of law.
(i) In the facts and circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in holding that with reference to the licenses in software acquired by the Respondent-assessee from M/s.GE Network Technologies, Netherlands disallowance under Section 40(a)(i) of the Income Tax Act 1961 is not applicable despite the fact that the licenses are for the use of copyrighted article and the payments would be taxable as royalty?
(ii) In the facts and circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in holding that article of Indo Netherlands treaty does not include payments to license for use copy right article under the definition of royalty without appreciating the fact that article 12 does not prohibit inclusion of such payments?
(iii) In the facts and circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in directing that the communication charges shall not be excluded from Export Turnover though Explanation 2 to Section 10A of the Income Tax Act 1961 clearly states that they need to be excluded?
(iv) In the facts and circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in holding that foreign exchange fluctuation arisen on account of conversion of funds in EEPC account into Indian Rupees is eligible for deduction under Section 10A of the Income Tax Act 1961 though the said sum is not derived from the export of software?
(v) In the facts and circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in holding that interest ought to be charged at LIBOR + 2% when Indian entity advancing loan to its AE located in United States of America is in the nature of outbound loans effecting rupee loans on which PLR is applicable rather than LIBOR?
First two questions are concerned, the learned Tribunal on fact found that the supplier has no business operations in India to which the income may be attributed to as required under Explanation 1(a) to Section 9(1)(i) of the Income Tax Act, 1961 (for short ‘the Act’). As this conclusion was arrived at by the Tribunal on appreciation of fact, we do not find any wrong in it. As far as the second issue is concerned, the Tribunal found that the royalty is not payable as required under Section 9(1)(i) of the Act or Article 12 of India-Netherlands DTAA. As it was a case of frequent purchases of software, the question of payment of expenses incurred on account of the import does not arise.
The other issues raised in this matter are covered by earlier judgment of the Tribunal.
While deciding the issue on third question, the learned Tribunal has followed the decision of Coordinate Bench of the learned Tribunal in case of PATNI TELECOM (P) LTD. v.
[1]
ITO . This decision does not appear to have been upset by
higher fora. The fourth question raised by the appellant has been decided by the learned Tribunal following the decision of the Tribunal in case of SANYO LSI TECHNOLOGY INDIA PRIVATE LIMITED v. DEPUTY COMMISSIONER OF INCOME
[2]
TAX which was decided following Supreme Court decision
in case of SUTLEJ COTTON MILLS LIMITED v. CIT. As far as fifth question is concerned, it is legally acceptable discretion of the learned Tribunal, this Court does not think fit to interfere with the same.
Therefore, we do not find any reason to interfere with the impugned judgment and order of the learned Tribunal.
The appeal is accordingly dismissed. No order as to costs.
25th JULY, 2014.
K.J. SENGUPTA, CJ SANJAY KUMAR, J
kvni
[1] 120 ITD 105
[2] ITA No.977/Bang/2010 dated 13.5.2011