ITAT Rejects Revenue’s Application for Constitution of Special Bench to decide Reliance Communication’s Appeals [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench, on Wednesday, rejected the Revenue’s application to constitute a special bench to decide the appeals against the telecom giants in pursuant to the direction of the High Court that to the Tribunal to decide the 44 appeals within six months.

127 appeals were pending before the Tribunal wherein the sole was that whether the income from the sale of software would constitute ‘royalty’ or not. Out of this, 50 appeals were dismissed on the ground of having tax effect of less than 10 lakhs. In 21 appeals, the High Courts/ Tribunals took a view that receipts from the sale of software were not taxable as ‘Royalty’.

The appellants submitted before the Tribunal that the issue was settled by the High Courts and various benches of the Tribunal and did not warrant constitution of Special Bench. They further contended that reference to constitute Special Bench must necessarily flow from the members and not from the parties to the case.

Rejecting the Revenue’s request, the bench said that if the application for constitution of Special Bench of the revenue is accepted by the Bench then all 21 cases wherein hands of deductees the Hon’ble High Courts / Tribunal has already held that income from the sale of software is not royalty will be affected. “Under these facts and circumstances, if the application for constitution of Special Bench of the Revenue is 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 the purchase of software. Since some agreements contain purchase of independent software and some of the agreement contains purchase of software along with hardware, every agreement would have to be examined for which 44 Special Benches would have to be constituted.”

Relying on the Office Manual of the Income Tax Appellate Tribunal dated October 24, 2008, wherein the procedure for the constitution of Special Bench has been prescribed, the Tribunal rejected the application.