PCIT Vs IBM Singapore Pvt. Ltd. (Karnataka High Court)
Buying Software Is Not Buying Its Copyright: Karnataka HC Rejects Revenue’s “Royalty” Argument
The Karnataka High Court dismissed the Revenue’s appeal concerning payments received by IBM Singapore Pvt. Ltd. from the sale of software.
The AO had characterised the software receipts as royalty under Section 9(1)(vi) and contended that the payments attracted deduction of tax under Section 195. The ITAT, following its decisions in IBM Singapore’s own cases for earlier assessment years, deleted the royalty addition.
The High Court held that the controversy was conclusively covered by the Supreme Court’s decision in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT (432 ITR 471). Payment for acquiring copyrighted software, without transferring any right or interest in the underlying copyright, does not constitute royalty and does not give rise to taxable income in India on that basis.
The Court also followed its earlier judgment dated 12 August 2025 in IBM Singapore’s connected appeals and held that the questions raised by the Revenue were no longer res integra. The Revenue’s reference to a pending review petition against Engineering Analysis did not prevent dismissal of the appeal.
List of Cases Discussed / Relied Upon
- PCIT Vs IBM Singapore Pvt. Ltd. (Karnataka High Court)
- ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED VS. COMMISSIONER OF INCOME-TAX AND ANOTHER (2021) 432 ITR 471 — [destination verified for the Supreme Court ruling]
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
