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2011 (9) TMI 86 - AAR - Income TaxDTAA with Sri Lanka - Implementation fee and ‗Licence and Maintenance fee - No PE - TDS u/s 195 - it is clear that the license to use computer Program means right to use the intellectual property that is the copyright in the computer program in a particular way - Since a license gives a right to do something which would otherwise be unlawful, let us examine whether the ICEL would be liable for copyright infringement if it uses the Computer Programme without entering into the SLMA - If it was to be in the nature of business income then the SLMA would have been sale and service of Licensed Program and the fee paid would have been taxable as business income under Article 7 of the DTAA, depending on whether the applicant has a PE in India or not under Article 5 of the DTAA - since without the SLMA being in place, any usage of the computer programme by the customers would have amounted to copyright infringement, the payment made under the SLMA was for obtaining the right to use the copyright in the software and taxable as royalty under the DTAA and the Act The definition of royalty contained in this Treaty in Article 12.3 shows that it is a payment of any kind received as consideration for the use of or the right to any copyright - In the present case, not merely the use is licensed but the licensee is given the right to copy it and use it wherever it is needed by it for its business - Held that:the right given to ICEL to copy the software for its purposes, is a right to use the copyright. In any event, the use of a copyright has been given to ICEL for consideration and that would be royalty in terms of the DTAA - Ruling is given
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