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2013 (7) TMI 725 - ITAT MUMBAIAmount received from the Assessee to be treated as Royalty under Article 12 of the DTAA – Held that:- The crucial words used in para 4 of the Article 12 of the DTAA are, the 'consideration for the use of or right to use …..'. It therefore, becomes vivid that in order to cover any amount within the purview of "royalties" as per Article 12 (4) of the DTAA, it is imperative that the payment must be a consideration for use or right to use any copyright of the literary artistic work etc. or any patent, trademark etc. (collectively referred to as the 'defined property'). Payment can be made as a consideration for the use or right to use of the defined property only when such property is in existence at the time of use. If a property does not pre-exist or is likely to come into existence because of the given payment, the same cannot qualify as 'royalties' because it would, in such circumstances, lack the condition of 'use or right to use'. In other words, the term 'royalties' as per article 12(4) contemplates a consideration for the use of or right to use of the defined property which is already in existence and the payment is agreed for its use or right to use. If the payment made is of such a nature which helps in the creation of the defined property, that cannot fall within the ambit of Article 12(4) of the DTAA. When admittedly contribution at the rate of 1.5% by AHL to the assessee, amounting to Rs. 38.59 lacs, is towards marketing activities, it can not be characterized as 'royalties' falling within the ambit of Article 12 of the DTAA – Decided in favor of Assessee.
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