The Supreme Court Dismissed the department’s Special Leave Petition (SLP) on taxability of interconnect charges and TDS liability fastening basis retrospective amendment.
The court relied on its decision of Engineering Analysis Centre of Excellence Private Limited vs. Commissioner of Income Tax and Anr. in which it was held that the amount paid by resident Indians to non-resident manufacturers/ suppliers of computer software in terms of distribution agreement or End-User Licence Agreement (EULA) does not amount to royalty and that such payment does not give rise to any income taxable in India and therefore, there is no liability on the resident Indian companies to deduct tax at source on purchase of software under section 195 of the Income Tax Act 1961.
Issue Raised
Whether the payments made by an Indian resident payer for purchase of software from foreign software suppliers were in the nature of ‘royalty’ as defined in explanation 2 to Section 9(1)(vi) of the Act and Double Taxation Avoidance Agreement (DTAA) and consequently whether the payer was required to deduct tax at source on such payment under Section 195 of the Act?
Case Information
Case Name: DEPUTY DIRECTOR OF INCOME TAX & ANR. v/s M/S. VODAFONE IDEA LTD.
Judicial Level & Location : Supreme Court of India
Case Number : SPECIAL LEAVE PETITION (CIVIL) Diary No(s). 24154/2024
Date of Decision : 26/07/2024
Decision in favor of: Respondent
Judges: JUSTICE B.V. Nagarathna and Justice Nongmeikapam Kotiswar Singh
Counsel for Petitioner : Mr. K M Nataraj, A.S.G.(N/P)
Counsel for Respondent : Mr. Percy Pardiwala, Sr. Adv.
