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2017 (4) TMI 1504 - HC - Income TaxPayment for supply of customized software - treated as “royalty” under Article 12(3) of the Indo-US Double Taxation Avoidance Agreement (DTAA) read with Section 9(1)(vi) - Indo-China DTAA - HELD THAT:- As decided in ERICSSON AB & ERICSSON RADIO SYSTEM AB & METAPATH SOFTWARE INTERNATIONAL LTD. [2011 (12) TMI 91 - DELHI HIGH COURT] consideration received by the Assessee for supply of product along with license of software to End user is not royalty under Article 12 of the Tax Treaty. Even where the software is separately licensed without supply of hardware to the end users (i.e. eight out of 63 customers), we are of the view that the terms. of license agreement is similar to the facts of Infrasoft Ltd' [2013 (11) TMI 1382 - DELHI HIGH COURT]. Accordingly, we hold that there was no transfer of any right in respect of copyright by the Assessee and it was a case of mere transfer of a copyrighted article. The payment is for a copyrighted article and represents the purchase price of an article. Hence, the payment for the same is not in the nature of royalty under Article 12 of the Tax Treaty. The receipts would constitute business receipts in the hands of the Assessee and is to be assessed as business income subject to assessee having business connection/PE in India - This Court having reiterated the legal position in Commissioner of Income Tax, International Taxation -2 v. ZTE Corporation [2017 (1) TMI 1338 - DELHI HIGH COURT] - Decided in favour of assessee. Interpretation of Section 234B - HELD THAT:- Question has been answered in favour of the Assessee and against the Revenue following the decision in Director of Income Tax v. GE Packaged Power Inc. [2017 (1) TMI 1338 - DELHI HIGH COURT] - Decided in favour of the Assessee.
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