Taxing Times: Copyright Or Copyrighted Article? The Debate Continues

Indian resident persons who purchase software from non-residents under a standalone contract are in effect paying royalty and are liable to withhold tax on the gross purchase amount 

INTRODUCTION

The above is the key message for Indian businesses from the recent decision of the Income Tax Appellate Tribunal, Mumbai bench ("ITAT Mumbai") in the matter of DDIT vs. Reliance Infocomm Ltd/Lucent Technologies ("Reliance").¹ This decision has added another nuance to the debate on the proper characterization of payment for software purchase for income tax purposes. This Hotline discusses Reliance in the context of this debate with the aim of identifying measures that may guide businesses in the way they approach purchase of software going forward (click here to go directly to measures).