Characterisation of Software License Payments as royalty admitted for hearing; substantive determination deferred pending full hearing.

The High Court confined the appeal to the single legal issue whether payments for licensing software constitute royalty, admitting that question for substantive hearing; it recorded that related issues on taxability on receipt versus accrual and deletion of interest charges are foreclosed by existing precedent and therefore not entertained in this appeal. Operative effect: the appeal proceeds only on the characterisation question of software-license receipts as royalty, and no final determination on that question is recorded in the order.

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Issues: Whether payment received by the respondent for licensing software constitutes royalty taxable under the Income-tax Act.

Analysis: The Court recorded that questions (i) (taxability on receipt versus accrual basis) and (iii) (deletion of interest under Sections 234B and 234C) are covered against the Revenue by a contemporaneous decision of this Court and therefore cannot be entertained in the present appeal. The appeal is admitted for consideration of question (ii) only; no substantive adjudication on question (ii) is recorded in the order.

Conclusion: Question (ii) (whether payment for software licensing constitutes royalty) is admitted for hearing and remains to be decided on its merits; questions (i) and (iii) are not entertained in this appeal as they are covered against the Revenue by a decision of this Court.

Final Conclusion: The appeal proceeds only on the single substantive issue regarding characterization of payments for software licensing as royalty; no final determination on that issue is recorded in this order.

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