Payments by Indian firms for foreign software not taxable: Supreme Court

The Supreme Court has ruled in favour of companies by rejecting the income tax (I-T) department’s stand that the money paid by Indian companies for use of software developed by foreign firms amounts to royalty and is taxable in the country.

The apex court has settled the long-pending dispute between companies such as Samsung Electronics, IBM, Hewlett Packard, Mphasis, Sonata Software, GE India & others and the tax department.

The court held that there is no liability for Indian companies to deduct tax at source with respect to purchase of software from foreign companies.

The Bench, comprising Justices R F Nariman, Hemant Gupta