TDS on SOftware from foreign country

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This discussion clarifies whether Tax Deducted at Source (TDS) applies to software purchased on a subscription basis from overseas. The core question is whether such payments constitute 'royalty' or are for 'end use', impacting TDS liability. While a Supreme Court ruling suggests TDS isn't applicable for foreign software payments, the nuances of 'allowing the use of' software versus 'resale' are debated, with differing interpretations on whether this falls under royalty and thus attracts TDS.

Pradyumna u k

Pradyumna u k (Querist)

06 September 2023 Wheather TDS is applicable on the purchase of software from Abraod ?

This purchase is in the nature where purchaser is purchasing it for end use on subscription basis and not for resale, doest it fall under Royalty now ? and attract TDS ?

Kindly answer on specific note, section and caselaw

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

06 September 2023 Supreme Court holds that TDS will not be applicable for foreign payments made for use of computer software.

Pradyumna u k

Pradyumna u k (Querist)

06 September 2023 Agreed,

But in the case law you mentioned sir taxpayer is in fact in the position of a distributor or end consumer that only has the right of sale over the software. Hence, no liability of TDS can be imposed on such payments, as they are not royalty fees.
In the case i mentioned consideration was made on behalf of allowing the use of and/or the right to use such computer software or program.
Is this covered under Royalty now and not the case that the apex court mentioned ?
This in turn makes my case attract TDS as it is a Royalty

Thank you

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

06 September 2023 Supreme court only ruled it will not fall under royalty.

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