Commissioner of Income Tax International Taxation-2 v. Micro Focus Ltd.

Delhi High Court · 15 Mar 2022 · 2022:DHC:969-DB

Manmohan; Dinesh Kumar Sharma

ITA No.52/2022

2022:DHC:969-DB

tax appeal_dismissed Significant

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The Delhi High Court dismissed the Revenue's appeal, affirming that receipts from software sales are not taxable as royalty under the India-UK DTAA, following binding Supreme Court precedent.

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ITA No.52/2022 HIGH COURT OF DELHI
ITA 52/2022
COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION-2 ..... Appellant
Through Mr.Sanjay Kumar with Ms.Easha Kadian, Advocates.

VERSUS

MICRO FOCUS LTD. ..... Respondent
Through Mr.S.S.Tomar with Mr.Vishal Kalra, Advocates.
Date of Decision: 15th March, 2022

CORAM:

HON'BLE MR. JUSTICE MANMOHAN
HON'BLE MR. JUSTICE DINESH KUMAR SHARMA

JUDGMENT

MANMOHAN, J (Oral)

1. Present appeal has been filed under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’) for the Assessment Year 2014- 15 challenging the judgment and order dated 04: th

“A. Whether on facts and circumstances of the case and in law, the ITAT erred in holding that receipts of the assessee from sale of software is not taxable as royalty under the India-UK DTAA? November, 2020 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’, New Delhi. The questions of law sought to be agitated by the appellant-Revenue in the present appeal are reproduced hereinbelow:- 2022:DHC:969-DB

B. Whether on the facts and circumstances of the case and in law, the ITAT was right in holding the Explanation 4 to Section 9(1)(vi) of the Income Tax Act, 1961, would not apply to India-UK DTAA without considering the fact that Explanation 4 is reiteration of legislature view already expressed in Circular No.588 dated 2nd January, 1991 and Circular No.621 dated 19th

2. Learned counsel for the appellant fairly states that the aforesaid questions of law are covered by the decision dated 02 December, 1991 which were issued prior to entry into force of India-UK DTAA?”

C. Whether the ITAT erred in not holding receipts of assessee as Royalty though as per Section 14(b)(ii) of India copyright Act selling or giving on commercial rent any copy of computer programme is copyright? D.Whether the ITAT erred in not appreciating that receipts by the assessee is ultimately due to use of software by end users and users use the software only as licensee?” nd

3. He, however, states that the Revenue has preferred a review petition against the said order. He states that the present appeal has been filed to keep the matter alive. March, 2021 passed by the Supreme Court in Engineering Analysis Centre of Excellence Private Limited vs. Commissioner of Income Tax and Anr.,

4. 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 mere fact that the appellant-Revenue has filed a review application will not be a ground for the High Court to not follow the binding judgment of the Apex Court.

5. Consequently, as the issues of law raised in the present appeal have been conclusively decided in favour of the respondent-assessee by the Supreme Court, no substantial question of law arises for consideration in the present appeal. Accordingly, the same is dismissed. MANMOHAN, J DINESH KUMAR SHARMA, J MARCH 15, 2022 KA

Commissioner of Income Tax International Taxation-2 v. Micro Focus Ltd.

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