“computer software”

Payments for the supply or use of computer software, where there is no transfer of copyright but only a right to use the copyrighted product, are generally considered business profits and not 'royalty' or 'fees for technical services' under the Income Tax Act, 1961 or relevant DTAAs. This principle also applies to transponder fees, which are not taxable as royalty.

Payments by Indian residents to non-resident foreign software suppliers for software are considered royalty, constituting income deemed to accrue in India under section 9(1)(v), thereby requiring tax deduction at source under section 195.

Payments for the use of copyrighted software, without the transfer of any rights in the underlying copyright itself, do not constitute 'royalty' under the Income-tax Act or tax treaties. Such payments are often treated as business income, taxable only if a permanent establishment exists.

When computing the deduction available under Section 10A of the Income-tax Act, communication expenses must be excluded from the total turnover for the purpose of calculating the eligible relief.

Payments for computer software are treated as royalty income under Section 9(1)(vi) of the Income-tax Act, particularly concerning the expanded definition provided by Explanation 2 and Explanation 4.

Expenses incurred for software license purchase, development of miscellaneous software, and maintenance of websites are considered revenue in nature. Such expenses are deductible in the year they are incurred.

Depreciation is allowable on computer software, including software licenses, at the rate of 60%.

Payments for data processing services using a mainframe computer and specialized software are not taxable as fees for the use of equipment if the Indian entity lacks independent rights or physical access to use the computer or software.