Software licence payments are not royalty where Supreme Court precedent governs the tax treatment.

Payments made to foreign companies for purchase of licensed software were held not to constitute royalty under section 9(1)(vi) of the Income-tax Act, because the issue was governed by the Supreme Court's decision in Engineering Analysis Centre of Excellence (P.) Ltd. The Revenue could not displace that binding precedent, and the request for liberty to seek review depending on pending proceedings before the Supreme Court did not alter the substantive legal position. The substantial question of law was answered in favour of the assessee, and the impugned order was set aside to that extent.

---

---

Issues: Whether payments made to foreign companies for purchase of licensed software constituted royalty under Section 9(1)(vi) of the Income-tax Act, 1961.

Analysis: The question stood covered by the binding decision of the Supreme Court in Engineering Analysis Centre of Excellence (P.) Ltd., and the Revenue was unable to dispute that position. The appeal also involved a request for liberty to seek review depending on the outcome of pending review proceedings before the Supreme Court, but that did not affect the substantive answer to the question of law.

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

Final Conclusion: The appeal succeeded, the substantial question of law was decided for the assessee, and the impugned order was set aside to that extent.

Ratio Decidendi: Payments for purchase of licensed software are not to be treated as royalty where the governing legal position is covered by the controlling Supreme Court precedent.

---