TaxTMI 
TaxTMI 
2015 (7) TMI 843
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....e assessee company was desirous of procuring a CDMA Mobile Telephone System from Huawei International Pte Limited, Singapore for the purposes of installation in various telecom circles in the country, in respect of which it had obtained telecom licenses. There was a contract between the assessee company and Huawai for supply of system as whole which comprised of both hardware and software and the software supplied was specifically designed for the hardware supplied and can be used only to make the hardware supplied under the contract, operational. Accordingly, the payments were made by the assessee company pursuant to the supply of integrated equipment i.e. CDMA Mobile Telephone System was ordered as per purchase orders in terms of Article 4 of the Contract. As contended by the assessee, the assessee was under belief that the consideration payable under the supply contract for purchase of embedded software does not attract a withholding tax as per the provisions of Act read with DTAA between India and Singapore, made payments without deduction of tax at source. 4. The AO issued show cause notices dated 25.02.2010 wherein the assessee was required to submit various documents and al....
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....dgment on the issue which were rightly considered by the CIT(A) while granting relief to the assessee. The Ld. counsel further pointed out that the issue is squarely covered in favour of the assessee by the judgment of the Hon'ble Jurisdictional High court of Delhi in the case of DIT Vs. Ericsson AB (2011-TII-46-HC-DEL-INTL) and view taken by the Hon'ble Delhi HighCourt in the case of DIT Vs. M/s Nokia Network Oy(2012-TTI-49-HC-DEL-INTL). 8. The Ld. AR also took us through finding of the CIT(A) from Paras 6.1 to 6.4 of the impugned order and submitted that the Revenue Department has agitated issue without any basis and the appeals may kindly be dismissed and the order of the CIT(A) may kindly be upheld. 9. On careful consideration of above, at the very outset, we note that the CIT(A) has decided the issue in favour of the assessee after considering the ratio laid down by the Hon'ble Jurisdictional High Court of Delhi in the case of DIT Vs. Ericsson AB (Supra) and DIT Vs. Nokia Network Oy (Supra) the relevant observations and finding of the CIT(A) on this issue reads as under: 6.1 I have carefully considered the facts of the case, the submissions of the appellant and the ar....
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....le for the Revenue to assess the same under two different articles. The software that was loaded on the hardware did not have any independent existence. The software supply is an integral part of the GSM mobile telephone system and is used by the cellular operator for providing the cellular services to its customers. There could not be any independent use of such software. The software is embodied in the system and the revenue accepts that it could not be used independently. This software merely facilitates the functioning of the equipment and is an integral part thereof On these facts, it would be useful to refer to the judgment of the Supreme Court in TATA Consultancy Services Vs. State of Andhra Pradesh, 271 ITR 401, wherein the Apex Court held that software which is incorporated on a media would be goods and therefore, liable to sales tax. 56. A fortiorari when the assessee supplies the software which is incorporated on a CD, it has supplied tangible property and the payment made by the cellular operator for acquiring such property cannot be regarded as a payment by way of royalty. .............. 58. No doubt, in an annexure to the Supply Contract the lump sum price is bi....
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....tle and GSM system of which software was an inseparable parts incapable of independent use and it was a contract for supply of goods. Therefore, no part of the payment therefore can be classified as payment towards royalty. " Further, the above view has also been upheld by a very recent ruling of jurisdictional Delhi high court in the case of Director ofIncome-tax vis Mls Nokia Networks OY [2012-II- 49-HC-DEL-INTL]. 6.2 There is no other ruling of any other High Court on the issue of taxability of integrated supply of hardware and software. Moreover, being ruling of jurisdictional high court, it is binding upon all subordinate judicial authorities. The appellant has demonstrated that the facts of its case are similar to those under consideration of Hon'ble Delhi High Court in the case of Ericsson (supra). I am also in agreement with the contention of the appellant that facts of its case are distinguishable from the recent ruling of Karnataka High Court in the case of CIT Vs. Samsung Electronics Company Ltd. which was given which was given in the context of standalone import of software. Similarly, the ruling of Delhi Bench of Tribunal in the matter of Gracemac Corpn was in !he ....