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2017 (1) TMI 1338 - HC - Income TaxTaxability of amount received - PE in India - DTAA - whether payments made by the assessee’s customers to it constituted royalty, in respect of software supplied? - Held that:- The supplies made (of the software) enabled the use of the hardware sold. It was not disputed that without the software, hardware use was not possible. The mere fact that separate invoicing was done for purchase and other transactions did not imply that it was royalty payment. In such cases, the nomenclature (of license or some other fee) is indeterminate of the true nature. Nor is the circumstance that updates of the software are routinely given to the assessee’s customers. These facts do not detract from the nature of the transaction, which was supply of software, in the nature of articles or goods. This court is also not persuaded with the submission that the payments, if not royalty, amounted to payments for the use of machinery or equipment. Such a submission was never advanced before any of the lower tax authorities; moreover, even in Ericson (2011 (12) TMI 91 - Delhi High Court ), a similar provision existed in the DTAA between India and Sweden. Interest payments and Section 234B is concerned, the court is of the opinion that the issue is covered by GE Packaging (2015 (1) TMI 1168 - DELHI HIGH COURT ). This question of law too is answered against the revenue, and in favour of the assessee.
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