Software Royalty Rejected

The Bangalore Bench of the Income Tax Appellate Tribunal reaffirmed that consideration received by a non-resident for the sale of software products and ancillary support services cannot be taxed in India as royalty or fees for technical services (FTS). 

The Tribunal relied on the Supreme Court's landmark ruling in Engineering Analysis Centre for Excellence Pvt. Ltd. v. CITand noted that the Revenue's review petitions against that judgment had already been dismissed. 

The decision reinforces the settled legal position that payments for distribution of copyrighted software, without transfer of copyright rights, do not constitute royalty under the Income-tax Act or applicable tax treaties.