|CORAM:||George George K (JM), Sudhakar Reddy (AM)|
|SECTION(S):||9(1)(vi), Article 12|
|CATCH WORDS:||royalty, software licensing|
|DATE:||May 18, 2015 (Date of pronouncement)|
|DATE:||May 27, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|Consideration for supply of software (whether with or without equipment) is not taxable as "royalty" if there is no transfer of right in the copyright to the software|
Consideration received by the Assessee for supply of product along with license of software to End user is not royalty under Article 12 of the Tax Treaty. Even where the software is separately licensed without supply of hardware to the end users (i.e. eight out of 63 customers), we are of the view that the terms of license agreement is similar to the facts of Infrasoft Ltd (Supra). Accordingly, we hold that there was no transfer of any right in respect of copyright by the assessee and it was a case of mere transfer of a copyrighted article. The payment is for a copyrighted article and represents the purchase price of an article. Hence, the payment for the same is not in the nature of royalty under Article 12 of the Tax Treaty. The receipts would constitute business receipts in the hands of the Assessee and is to be assessed as business income subject to assessee having business connection/ PE in India (DIT vs. Ericsson A.B. (343 ITR 470) & DIT vs. Infrasoft Ltd (ITA No. 1034/ 2009) followed).