Karnataka high court rejects I-T appeal against Sony India Software Centre
The appeal challenged a June 12, 2024 order of the I-T commissioner (appeals), Bengaluru, which had partly allowed the company's challenge to its assessment for the financial year 2016-17 (assessment year 2017-18). That order was later upheld by the Income Tax Appellate Tribunal (ITAT), Bengaluru, on Dec 13, 2024.
At the centre of the dispute were two additions made by the assessing officer. The first, of more than Rs 1.4 crore, concerned assets received by the company from its overseas associated enterprises without cost.
The second, a disallowance of nearly Rs 9.6 lakh, related to payments made to Singapore-based JL Services and Consultancy for employee workshops, allegedly without deduction of tax at source (TDS).
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Sony India Software Centre had declared an income of Rs 40.1 crore under "profits and gains from business" and "income from other sources" in its AY 2017-18 return. The assessing officer increased this to Rs 44.8 crore by adding the value of the assets and disallowing the consultancy fee.
The company argued that the assets were prototypes supplied solely for testing and were not income under Section 28(iv) of the Income Tax Act. It also maintained that the payments to the Singapore firm were for independent personal services and were exempt from TDS under the India–Singapore Double Taxation Avoidance Agreement (DTAA).
The CIT(A) accepted both arguments. It ruled that the fixed asset addition was unwarranted as the assets were covered under an Advance Pricing Agreement and depreciation had been factored in.
The I-T department contended that the workshops did involve technical services and that TDS should have been deducted under Section 195.
A division bench of Chief Justice Vibhu Bakhru and Justice CM Joshi rejected this view, noting there was no dispute that the free assets were returned and that the workshops were general training sessions for staff, without transfer of technical know-how. Finding no grounds to interfere, the court upheld the earlier orders and dismissed the appeal.
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