Microsoft nets $620 million benefit on top court withholding tax verdict

Technology giant Microsoft said it had recorded a $620 million income tax benefit in the March quarter due to the Supreme Court’s verdict on withholding taxes for software sales and on an agreement between India and the United States on transfer pricing.

In March, the apex court said companies that distribute software of overseas entities in India are not liable to withhold tax as the money being paid to the parent is not payment of royalty for the user of copyright in computer software.

“Although we were not a party to the appeals, our software sales in India were determined to be not subject to withholding taxes,” Microsoft said in regulatory filings after its third quarter results on Tuesday.


“Therefore, we recorded a net income tax benefit of $620 million in the third quarter of fiscal year 2021 to reflect the results of the India Supreme Court decision impacting fiscal year 1996 through fiscal year 2016,” it said.

The top court’s ruling had come in the case of Engineering Analysis Centre of Excellence Pvt Ltd vs The Commissioner of Income Tax (CIT).

CITs’ decision involved appeals filed by 86 individual companies operating in India, some dating back to 2012.

The US-based developer of the Windows operating system did not elaborate on the transfer pricing agreement.