Abstract

With the extensive and rapid growth of the Information Technology, the dependency on the softwares, imported/purchased from a non-resident, foreign supplier or manufacturer, too has increased a lot. However, the increasing use of the software driven computers has shown a far reaching implication on the tax regime of India. The major debate was about, whether the income earned from the payment made towards the import/purchase of the software by a resident in India from a non-resident supplier, was deemed to be earned from the transfer of copyrighted right or the copyrighted article and whether the importers/purchasers of software were required to withhold tax, in form of ‘Tax Deducted at Source’, on the aforesaid payments. The dispute of taxation of softwares had taken a toll on the software purchasers/importers and it is after a couple of decades that the Apex Court ruled that the payments made towards the purchase of the softwares do not fall under the ‘Royalty’ and are to be treated as purchase of products and therefore a tax liability does not arise in India.

Keywords