New Delhi: The Income Tax Department has held that the price charged for use of Microsoft's software in India is royalty and tax is payable on it. It has determined that the royalty income is Rs 2,240 crore for the six years to 2005 (1999-2005) and not Rs 868 crore as originally assessed.
Microsoft’s estimated tax liability on royalty stands at Rs 700 crore, including interest.
The Department has also held that the price paid for right to use software is royalty. The software is not sold, but licensed, it feels. This is because Microsoft retains its IPR (Intellectual Property Rights). Its agency has to activate the software. Also, the end-user agreement says that the product is licensed and not sold.
The tax is payable in India. Taxindiaonline estimates the tax and interest at Rs 700 crore.
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