The Supreme Court on March 2, 2021 ruled that payments made to foreign software manufacturers and suppliers for use or re-sale of computer software through end-user licence agreements (EULA) can’t be taxed (TDS) as royalty.
- Justice Rohinton F. Nariman said the consideration paid by them for use or sale of computer software cannot be considered a payment of “royalty for the use of copyright in the computer software”.
- He also said that payment of royalty is made only for exclusive use of copyright of a work.
- Justice Rohinton while writing the judgement, gave the example of the computer software which is sold in the form of a CD to an Indian buyer under a non-exclusive licence. Again, the Indian buyer only receives the right to use the software. He does not get any copyright on the software.
- Impact: The ruling will lower the cost of software purchases for Indian firms as the overseas sellers may chose to lower prices.
