The AO sought to assess business income earned by the Assessee on sale of software/license as Royalty income u/s 9(1)(vi) of the Act r.w. Article 12 of the India-USA DTAA. On appeal, the Tribunal held that the transaction was for sale of license/software, where the end-user will have access to and make use of the licensed computer software product and not for parting with copyright the software. Therefore it is not a Royalty income as defined under Article 12 of the India-USA DTAA. Since it is not Royalty, the income is in the nature of business profits of the Assessee. For business profits of a non-resident entity to be taxable in India under Article 7 of the India-USA DTAA, it is necessary that such foreign enterprise must have a permanent establishment (“PE”) in India in terms of Article 5 of the said DTAA. The Tribunal noted the decision of the DRP which held that the Assessee does not have a PE in India and therefore held that provisions of Article 7 are not applicable in the case of Assessee and therefore the income earned on sale of license/software is exempt from tax in India. (AY. 2009-10, 2014-15)