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2016 (3) TMI 751 - AT - Income TaxSale of software as part of machinery - alleging the same to be income in the nature of “Royalty” within the meaning of section 9(1)(vi) - Held that:- It is clear that if customer makes requisite copies to enable it to use the software for exclusively its own purposes or makes back-up copies purely as a temporary protection against loss, in order only to utilize the computer programme for the purpose for which it was supplied, then section 52 of the Act clearly states that it shall not amount to infringement of the copyright. Thus, in the facts of this case which we have discussed in detail above, neither there was any transfer of copyright or any rights therein nor there was any situation giving rise to any type of infringement of copyright by the customers of the assessee. Thus, in our considered view account of sales consideration received by the assessee on account of sale of machine along with it operating software would not constitute “Royalty” within the meaning of article 12(3) of the Indo-Israel DTAA. We shall like to clarify and reiterate at the cost of repetition that we have not examined the effect of subsequent amendment to section 9(1)(vi) of the Act and also whether the amount received for use of software would be “Royalty” in terms thereof for the reason that the assessee is covered by tax treaty the provisions of which are more beneficial and also for the reason that in this case transaction under consideration was predominantly and essentially of the character of sale and purchase of machine and not that of software. Thus, in view of the discussion above, it is held that the amount received by the assessee was not liable to tax as “Royalty” and therefore addition made by the Assessing Officer is directed to be deleted. - Decided in favour of assessee
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