Software Supply not Royalty under India-Germany DTAA: ITAT Reaffirms Supreme Court View, Holds Payments Non-Taxable

The Income Tax Appellate Tribunal (ITAT) reaffirmed the Supreme Court’s ruling that payments for software supplied under the India-Germany Double Taxation Avoidance Agreement (DTAA) cannot be categorized as “royalty.” The Tribunal emphasized that such transactions constitute the sale of copyrighted articles, not the transfer of copyright itself, and therefore, are not taxable as royalty income in India. The ruling aligns with global tax principles and offers clarity to multinational corporations engaged in software distribution. This judgment reinforces consistency in tax treatment across jurisdictions and upholds the supremacy of earlier Supreme Court interpretations regarding software payments under DTAAs.