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2021 (9) TMI 27 - AT - Income TaxIncome deemed to accrue or arise in India - Royalty receipts - amounts received by the assessee on account of sale of software and other incidental receipts - whether it would constitute royalty within the meaning of section 9(1)(vi) and Article 12 of the DTAA between India and Australia - HELD THAT:- Hon'ble Supreme Court in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED [2021 (3) TMI 138 - SUPREME COURT] after considering the end-users agreement, categorically held that in all the above four situations that sale of software would not constitute royalty within the provisions of section 9(1)(vi) of the I.T. Act and Article 12 of the treaty. In the instant case, the assessee is a foreign company, which sells software licences to the end- users in India. Therefore, this case falls within the first category grouped by the Hon'ble Apex Court. On perusal of the end-users licence agreement, it is seen that the end-users licence agreement considered by the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence P. Ltd. (supra) is identical to the end users licence agreement in the instant case. On perusal of the end-users licence agreement, it is clear even in cases where some element of source code were made available to the end-users i.e. the Indian customers, it is only for the purpose of fixing the bugs, customizations etc. Under no circumstances we noticed there is a transfer of copy right in the software. In the facts of the instant case, it is clear the amounts received by the assessee is on account of sale of copyrighted software and not transfer of copyright in a software. Receipts on account of sale of software licences and other incidental receipts such as provision for software maintenance and related training services would not constitute royalty within the meaning of DTAA between India and Australia and provisions of section 9(1)(vi) - Decided in favour of assessee.
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