ISSUE:
Whether the sum paid by Indian enterprises to use foreign software is taxable as royalty for copyright as defined in the Act and Double Taxation Avoidance Agreement (DTAA)?
Whether the payer was required to deduct tax at source on such payments under Section 195 of the Act?
RULE:
Payments made for using foreign software by Indian businesses to foreign corporations do not constitute royalties that are taxable in India.
Therefore, there is no liability on the resident Indian companies to deduct tax at source on the purchase of software under section 195 of the Income Tax Act 1961