One month ago, the Court of Justice of the European Union (CJEU) added its authoritative voice to the long-lasting debate on the legal nature of the transfer of software copies. Does the transfer constitute a license or a sale? A license, say most courts in the United States, but also some national courts in the E.U., where the case law is comparatively scarce. A sale, said the CJEU in the judgment of 3 July 2012 (
The Court thus sided with most – but not all – of the legal commentators on both sides of the Atlantic. Those who will not be happy with the judgment are the software companies whose products are at issue. The looming question among the observers in the wake of the
Monday, March 8, 2021
SC” or “
Court”) while ruling in favour of the taxpayers has put to rest the controversy on characterization of payments made by Indian residents for use / resale of computer software (“
Judgement”).
1 The SC held that the amounts paid by resident Indian end-users / distributors to non-resident computer software manufacturers / suppliers, as consideration for the resale / use of the computer software through End-user Licensing Agreements (“
EULAs”) / distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India. Accordingly, the SC concluded that the person referred to in section 195 of the Income-tax Act, 1961 (“