Software licence payments treated as royalty under the Income-tax Act, with the court following earlier precedents.

Consideration paid by Indian customers to foreign software suppliers for the right to use software was treated as 'royalty' under section 9(1) of the Income-tax Act, 1961. The High Court relied on earlier decisions, including CIT v. Synopsys International Old Ltd. and CIT v. Samsung Electronics (P.) Ltd., which had held that such software payments fall within the royalty definition and are taxable in India. Applying those precedents, the court answered the substantial questions of law in favour of the Revenue and upheld the Tribunal's treatment of the consideration as royalty.

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Issues: Whether consideration paid by Indian customers or end users to a foreign software supplier for transfer of the right to use software or computer programmes in respect of copyrights falls within the meaning of royalty under section 9(1)(vi) read with Explanation 2(v) of the Income-tax Act, 1961.

Analysis: The issue had already been answered by the same High Court in earlier connected matters, where it was held that consideration paid for transfer of the right to use software or computer programmes in respect of copyrights is covered by the definition of royalty. The appeal was decided by following that settled view.

Conclusion: The payment was held to be royalty, and the substantial question of law was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Consideration paid for transfer of the right to use software or computer programmes in respect of copyrights constitutes royalty within the meaning of section 9(1)(vi) of the Income-tax Act, 1961.

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