1. Introduction

On 2 March 2021, the Indian Supreme Court pronounced a 226-page long landmark decision the issue concerning income characterization of software income from the tax treaty perspective (Art. 12 of the tax treaties). The Indian Supreme Court examined various aspects including transaction characterization, whether the domestic tax law definition of ‘royalties’ was relevant for interpretation of the tax treaty definition of that term, the relevant aspects of the Indian copyright law, and certain tax treaty interpretation principles. The Indian Supreme Court upheld many decisions of a High Court and rejected several decisions of another High Court.

About 10 years ago, the Portuguese Supreme Administrative Court has dealt with the identical issue. Though the Indian Supreme Court and the Portuguese Supreme Court reached the same conclusion, they walked on somewhat different paths.

This article analyzes in depth both the above-mentioned landmark decisions of global relevance.