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of <h1>Supreme Court Rules Software Payments Aren't Always 'Royalty'; DTAAs Can Override Domestic Tax Laws for TDS.</h1> The Supreme Court case between an engineering company and the tax authorities addressed the classification of payments for software purchased from non-resident suppliers, determining whether these payments constitute 'royalty' under the Income Tax Act, 1961, and thus require tax deductions at source (TDS). The court clarified that such payments cannot be universally classified as 'royalty'; it depends on the transaction terms and relevant Double Taxation Avoidance Agreements (DTAAs). The ruling emphasized that DTAAs, if more beneficial, take precedence over domestic tax laws, impacting the IT industry and international trade by offering a nuanced interpretation of 'royalty' and cross-border taxation principles.
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