Engineering Analysis Centre Of Excellence Private Limited (SC) – Software Taxation

Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited v. CIT¹ holds that payments made to non-resident computer software manufacturers/ suppliers for the resale/use of the software not taxable as Royalty

Under section 195 of the Act, an obligation is cast on a person making payment to a non-resident of any sum, which is chargeable under the provisions of the Act, to deduct tax at the rates in force at the time of payment of such sum or at the time of credit thereof to the account of the payee, whichever is earlier.

Section 5 of the Act, inter alia, specifies that the 'Total Income' of a non-resident shall include (i) Income received or deemed to be received in India, by or on behalf of the non-resident; (ii) Income accruing or arising to the non-resident in India and (iii) Income deemed to be accruing or arising to the non-resident in India.