Mumbai ITAT rejects
Revenue’s request for constitution of Special Bench on software taxation matter
involving various Reliance ADAG group of companies (‘assessees’) rejects
the constitution of Special Bench; ITAT (in its original order) had held that
the receipts from sale of software was not taxable as ‘royalty’, however, upon
writ filed against the MA order (recalling original ITAT order), HC had
directed ITAT to dispose the appeals afresh and accordingly dismissed Revenue’s
writ; After the writ dismissal,
Revenue had filed an application before the ITAT President for making a reference to the Special Bench in view of the conflicting decision of the non-jurisdictional High Courts on software taxation matter and in turn the President constituted the Division Bench to consider the application for the Special Bench involving a batch of cases; Firstly, ITAT clarifies that a reference to constitute a Special Bench must flow from the members and not from the parties to the case, furthermore, such a reference can be made by the members when they do not agree with the view taken by the earlier order of the Tribunal; ITAT observes that in present case the twin conditions are not met, remarks that “only after hearing the matter afresh by the division bench in terms of direction of Hon’ble High Court…, the bench may decide the issue to agree or disagree with the view already taken by the earlier bench.”; Further remarks that “If the present application of the Revenue is accepted, the process of reference to a Special Bench / larger Bench would never reach an end. Reference to Special Bench would continue to be moved by the parties upon every subsequent non-jurisdictional High Court decision, thus, leading to a number of cases being referred to constitute Special Bench ”; Also ITAT clarifies that merely on the conflicting HC views, a reference cannot be made to constitute Special Bench, holds that if the Revenue applications were to be allowed, it would lead to the violation of the principle laid down by SC in Vegetable Products case (wherein it was held that incase of two possible views, the view favourable to assessee must be adopted); Furthermore, ITAT notes that in the list of 21 cases placed on record, the High Courts / Tribunals have held that receipts from sale of software were not taxable as ‘Royalty’ in the hands of recipients / deductees, remarks that “This further supported the contention that the issue was settled by the High Courts and various benches of the Tribunal and did not warrant constitution of Special Bench.”; ITAT also observes that "if the application for constitution of Special Bench of the Revenue be accepted by the Bench then 44 Special Benches need to be constituted, as there are 44 separate agreements entered by the assessee for which payment was made for purchase of software ":ITAT
Revenue had filed an application before the ITAT President for making a reference to the Special Bench in view of the conflicting decision of the non-jurisdictional High Courts on software taxation matter and in turn the President constituted the Division Bench to consider the application for the Special Bench involving a batch of cases; Firstly, ITAT clarifies that a reference to constitute a Special Bench must flow from the members and not from the parties to the case, furthermore, such a reference can be made by the members when they do not agree with the view taken by the earlier order of the Tribunal; ITAT observes that in present case the twin conditions are not met, remarks that “only after hearing the matter afresh by the division bench in terms of direction of Hon’ble High Court…, the bench may decide the issue to agree or disagree with the view already taken by the earlier bench.”; Further remarks that “If the present application of the Revenue is accepted, the process of reference to a Special Bench / larger Bench would never reach an end. Reference to Special Bench would continue to be moved by the parties upon every subsequent non-jurisdictional High Court decision, thus, leading to a number of cases being referred to constitute Special Bench ”; Also ITAT clarifies that merely on the conflicting HC views, a reference cannot be made to constitute Special Bench, holds that if the Revenue applications were to be allowed, it would lead to the violation of the principle laid down by SC in Vegetable Products case (wherein it was held that incase of two possible views, the view favourable to assessee must be adopted); Furthermore, ITAT notes that in the list of 21 cases placed on record, the High Courts / Tribunals have held that receipts from sale of software were not taxable as ‘Royalty’ in the hands of recipients / deductees, remarks that “This further supported the contention that the issue was settled by the High Courts and various benches of the Tribunal and did not warrant constitution of Special Bench.”; ITAT also observes that "if the application for constitution of Special Bench of the Revenue be accepted by the Bench then 44 Special Benches need to be constituted, as there are 44 separate agreements entered by the assessee for which payment was made for purchase of software ":ITAT
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