Software payments to non-residents were not royalty where no copyright was transferred; deferment pending review was refused.

Consideration received on sale or licence of software to non-resident entities was analysed by distinguishing transfer of copyright from sale of copyrighted articles. On the facts recorded, the respondent had not parted with copyright in a manner that would make the receipts royalty under the Income-tax Act, so the software sale receipts were not taxable in India as royalty. The court also noted that the governing tax position on software payments had already been settled by the Supreme Court, applying equally to the payee, and therefore the request to defer the appeal pending a review petition was untenable and no interference was warranted.

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Issues: Whether consideration received on sale or licence of software to non-resident entities constituted royalty chargeable to tax in India under the Income-tax Act, and whether the appeal required deferment pending consideration of a review petition.

Analysis: The dispute turned on whether the respondent had transferred copyright or merely sold copyrighted articles. The assessment record showed that the respondent had not parted with copyright in a manner that would convert the receipts into royalty. The legal position on taxation of software payments was already settled by the Supreme Court, and the same principle applied equally in the hands of the payee. The request to defer the appeal on account of a pending review petition was held to be untenable because the governing law had already been declared.

Conclusion: The receipts from software sales were not taxable in India as royalty, and the appeal did not merit deferment or interference.

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