The Assessing Officer sought to attribute profits to the Italian parent company on the ground that its Indian subsidiary, which carried out onshore services of installation, testing, and maintenance, constituted a Permanent Establishment (PE) in India. Further, the consideration received as a licensing fee for the right to use software was treated as royalty income. On appeal, the Hon’ble Supreme Court found and held that it was not inclined to interfere with the order passed by the High Court. The High Court had rightly upheld the Tribunal’s view that since the sales of hardware components were concluded and titles transferred outside India, and the subsidiary offered its own onshore service income to tax, the assessee did not have a PE in India under Article 5. Furthermore, following settled law, consideration for a mere right to use software without transferring the copyright is not taxable as royalty. Accordingly, the SLP filed by the revenue was dismissed. (AY. 2011-12)