More Stories

Informist, Monday, May 11, 2026

 

NEW DELHI – The Supreme Court Monday refused to review its earlier 2021 order that held that payments made by resident Indian end-users to non-resident computer software manufacturers for use of the computer are not royalties for copyright use in software, and the same is not taxable in India. Rejecting appeals by the income tax department, the apex court upheld its 2021 order that resident Indian end-users were not liable to deduct any tax deducted at source for these transactions of buying software from foreign companies.

 

The apex court noted that it had earlier also rejected review petitions by the income tax department in 2024 against the same order. The earlier order said the court had dismissed the income tax department's arguments not only on grounds of delay in filing appeals but also on merits and had not found any justiciable reason to interfere with the 2021 verdict. It would not be proper for the current bench to reopen the issue, said a bench of Justice Sanjay Kumar, Justice K.V. Viswanathan and Justice K. Vinod Chandran, dismissing the review petitions by the income tax department.

 

The case has its genesis from Engineering Analysis Centre of Excellence Pvt. Ltd., a resident Indian end-user of shrink-wrapped computer software, directly importing software from the US. In 2002, the income tax department had found that the transaction between the parties was copyright which attracted the payment of royalty under provisions of the Double Taxation Avoidance Agreement between India and USA sections of the Income Tax Act. Hence the income tax department said that tax be deducted at source by the Indian importer and the end-user, Engineering Analysis. 

 

In 2021, the top court had said that according to the definition of royalty in the Double Taxation Avoidance Agreement between India and US, it was clear that there was no obligation on the Indian companies to deduct tax at source, as the distribution agreements between the parties did not create any interest or right in such distributors or end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income Tax Act, which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases, the top court had said.  End

 

Reported by Surya Tripathi

Edited by Tanima Banerjee

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.