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2014 (4) TMI 569 - AT - Income TaxApplicability of section 9 of the Act – Royalty for technical services – Supply of software on license – Article 12 of Indo-Singapore Treaty – Liability to deduct TDS u/s 195 of the Act - Held that:- Relying upon Motorola Inc. Versus Deputy Commissioner Of Income-tax, Non-resident Circle [2005 (6) TMI 226 - ITAT DELHI-A] – Copyright is distinct from the material object, copyrighted - It is an intangible incorporeal right in the nature of a privilege, quite independent of any material substance, such as a manuscript - He has an individual right of exclusive enjoyment - The transfer of the manuscript does not, of itself, serve to transfer the copyright - The transfer of the ownership of a physical thing in which copyright exists gives to the purchaser the right to do with it (the physical thing) whatever he pleases, except the right to make copies and issue them to the public - Just because one has the copyrighted article, it does not follow that one has also the copyright in it. In order to qualify as royalty payment, it is necessary to establish that there is transfer of all or any rights (including the granting of any licence) in respect of copyright of a literary, artistic or scientific work - In order to treat the consideration paid by the Licensee as royalty, it is to be established that the licensee, by making such payment, obtains all or any of the copyright rights of such literary work - Distinction has to be made between the acquisition of a "copyright right" and a "copyrighted article" - The decision in Director of Income Tax Versus Infrasoft Ltd. [ 2013 (11) TMI 1382 - DELHI HIGH COURT] followed - the assessee has acquired a readymade off - the shelf computer programme to be used in their business and no right was granted to the assessee to utilize the copy right of the programme – the consideration cannot be treated as royalty - As held by the CIT(A), the payments made by the assessee company cannot be held as 'royalties' coming into the ambit of Article 12 of DTAA or 'fee for technical services' u/s 9(1)(vii) of the IT Act and accordingly no tax need to be deducted u/s 195 of the IT Act – thus, the order of the CIT(A) upheld – Decided against Revenue.
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