In an early start to the pantomime season, the earlier sensible decision on shrink-wrap software of the Bangalore Tax Appeal Tribunal appears to have been thoroughly ignored by the Delhi Tax Appeal Tribunal, which has held that payments received by Microsoft from end users in India through distributors for sale of Microsoft off-the-shelf, shrink-wrap, software, are taxable as royalties (and so are subject to Indian withholding taxes). In effect, the decision means that any sale of software to India should have tax withheld from the payment, no matter what form the software actually takes – that’s going to make quite a difference to some profit margins.
Oh, and tax treaties with India can’t apparently be relied on, according to the court.