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2019 (5) TMI 535 - AT - Income TaxIncome accrued in India - consideration received by a non-resident entity for the licensing of copyrighted article/software - royalty under Article 12(3) of the India-Ireland DTAA - existence of PE in India - effect of retrospective amendment made in the provisions of section 9(1)(vi) - HELD THAT:- We note that terms of the definition of 'royalty' provided in Article 12, ordinarily the receipt for sale of software shall be treated as 'royalty' only if it is for the use of a 'copyright'. Given the meaning of the term 'copyright' as has been discussed above in the Copyright Act, 1957, we note that the revenue accruing from supply of software in India is not chargeable to tax in India based on reading of the Article 12(3) of the India-Ireland DTAA. The amount received by the assessee towards sale of software is on account of sale of 'copyrighted article' and not on transfer of any 'copyright right'. The right to use any copyright in the software was never transferred by the company in favor of the Indian customers. Hence, the said sale proceeds cannot be characterized as 'Royalty' as per Article 12 of the India- Ireland DTAA, as the same is towards the use of 'copyrighted article' and not towards the use of 'copyright'. The sale proceeds is also not towards the use of or right to use any industrial, commercial or scientific equipment, as per the provisions of the India-Ireland DTAA. Further, as per the Licensing Agreement entered into between the assessee and its Indian customers, it is apparent that the assessee has not given any right to the customers to use the copyright in the software. The copy of Licensing Agreement is enclosed at pages 16 to 22 of the paper-book vide para 3(b) of the agreement. Payments for any license for simple use of computer software i.e., where the end-user acquires only the right to run the programme, whether on a single computer or on the licensee's computer network, and does not acquire any rights to use the copyright in the programme may not be construed as 'royalties'. Therefore, we note that since assessee`s case is covered by beneficial provisions of the India-Ireland DTAA, hence the retrospective amendment made in the provisions of section 9(1)(vi), which provides that royalty would include consideration for transfer of all or any rights in respect of any right property, (including granting of software)etc, will not override the provisions of the India-Ireland DTAA. We note that the retrospective amendment made in the Act cannot override, the provision of Treaty, finds support from the principles laid down in the case of Director of Income vs Nokia Networks OY [2012 (9) TMI 409 - DELHI HIGH COURT] and CIT Vs Siemens Aktiongesellschaft [2008 (11) TMI 74 - BOMBAY HIGH COURT]. The amount received by the assessee towards sale of software is on account of sale of 'copyrighted article' and not on transfer of any 'copyright right'. As we have noted above that the right to use any copyright in the software was never transferred by the company in favor of the Indian customers. Hence, the said sale proceeds cannot be characterized as 'Royalty' as per Article 12 of the India-Ireland DTAA. Therefore, we delete the addition.
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