The High Court examined whether payments made by an Indian...

The High Court examined whether payments made by an Indian company to its associated entity in the US for supply of computer software constituted "royalty" under the Income Tax Act and the India-US DTAA. The court held that the tax authority failed to consider the assessee's submissions that such payments did not constitute royalty, merely relying on a draft assessment order which is not a final determination. Citing precedents, the court ruled that for payments to qualify as royalty, there must be a transfer of copyright enabling acts under the Copyright Act. Mere right to use software without any proprietary rights does not amount to royalty. The court quashed the orders denying nil withholding certificates and directed fresh examination.