Software licensing and cloud subscription receipts are not royalty where Engineering Analysis governs the tax treatment.

Income from licensing or sale of software products and subscription receipts for cloud services was treated as not taxable as royalty under Section 9(1)(vi) of the Income-tax Act, 1961 and the applicable treaty provisions. The Delhi HC applied the Supreme Court's ruling in Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT, which held that consideration for software transactions is not royalty, and extended the same approach to cloud-service subscription receipts. On that basis, no substantial question of law survived, and the issue was decided in favour of the assessee.

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Issues: Whether income from licensing or sale of software products and subscription receipts for cloud services were taxable as royalty under Section 9(1)(vi) of the Income-tax Act, 1961 read with the applicable treaty provisions.

Analysis: The questions raised were covered by the Supreme Court's ruling in Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT, under which consideration for software transactions was not treated as royalty. The same position was applied to cloud-service subscription receipts. As the proposed questions stood concluded by binding precedent, no substantial question of law survived.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

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