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Do payments made to NRI computer software manufacturers/suppliers constitute as royalty?

Atishay Jain 
Updated on 07 April 2021


I am pleased to share a copy of my presentation, wherein I have analysed the recent decision of the Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited v. CIT [Civil (Appeal) 8733-8734 of 2018 (SC)]. 

In the said case, the Court has held that payments made by resident Indian end-users / distributors to non-resident computer software manufacturers/ suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, does not constitute royalty since the payment is not for the use of or the right to use copyright in the computer software.

Do payments made to NRI computer software manufacturers/suppliers constitute as royalty

The controversy surrounding the taxation of payments for computer software in international transactions has been a subject matter of extensive litigation for over two decades in India. Ruling of the Supreme Court in a batch of appeals involving cases of IBM India, Samsung Electronics, GE India, Hewlett Packard India, Mphasis of the world, is a welcome respite.

In its succinct and well-reasoned decision, the Supreme Court has settled the vexed issue of characterization of payments to non-resident vendors for import of software licenses for use or resale in India, holding as business profits as opposed to royalty and hence in absence of a PE not taxable, as per the source rule in India – a view which is also aligned to the international understanding.

I trust that you will find the same useful.


Looking forward to receiving your valuable feedback.


Presentation copy of the judgment has been enclosed herewith

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Category Income Tax
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Atishay Jain 

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