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2020 (9) TMI 64 - AT - Income TaxIncome received from sale of software licenses - Royalty under Article 12 of India Singapore Agreement - whether the receipts on sale of licensed software to the end user customers in India, which was an application software, can be covered under the term ‘Royalty’ income arising on sale of such software as provided in Section 9(1)(vi) of the Act and/ or under Article 12(3) of the India Singapore Treaty? - Whether provision of DTAA over-ride the provision of Income Tax Act, 1961? - HELD THAT:- Hon’ble High Court of Delhi in DIT vs Nokia Networks OY [2012 (9) TMI 409 - DELHI HIGH COURT] had held that Explanation 4 was added to section 9(1)(vi) of the Act by the Finance Act, 2012 with retrospective effect from 01.06.1976 to provide that all consideration for use of software shall be assessable as “Royalty”. However, the definition in the DTAA has been left unchanged It is an admitted fact that though Explanation 5 has been inserted in section 9(1)(vi) of the Act but no amendment has been made to the definition under the DTAA and since the provisions of the DTAA are beneficial to the assessee, then the said provisions would be applied. Thus, we hold that the amended definition of Royalty under the domestic law even if amended with retrospective effect cannot be extended to the definition of “Royalty” under the DTAA since the term “Royalty” under the DTAA has not been amended. As the provision of DTAA over-ride the provision of Income Tax Act, 1961 and being more beneficial shall apply and since the definition of “Royalty” has not been amended in the DTAA, receipts by the assessee on sale of copyright Article was not taxable in the hands of the assessee. Before parting, we may also point out that there is no merit in the plea of the Ld. DR for the Revenue that whether the copyrighted Article was processed or not. We reiterate that as per the provisions of DTAA has not been amended and the same being more beneficial, the same are to be applied and the consideration received by the assessee on sale of copyrighted license is not taxable in the hands of the assessee. Ground of appeal No.1 raised by the assessee is thus allowed.
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