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2023 (9) TMI 145 - AT - Income TaxIncome deemed to accrue or arise in India - Royalty receipt - amount received by the assessee from sale/distribution of software - addition within meaning of Article 12(3) of India – Singapore DTAA - assessee is a non resident corporate entity incorporated under the laws of Singapore - HELD THAT:- Assessee is simply a distributor of software. It purchases software from non-resident manufacturers/sellers, such as, Microsoft, Adobe etc. and distributes/sells them to distributors and customers in India. Thus, the assessee itself is not the manufacturer or creator of software. Therefore, assessee cannot own copyright over the softwares as the manufacturer or creator of the software can hold copyright over the software. From the submissions made before the departmental authorities, these facts are clearly discernible. Thus, the products sold by the assessee are ready to use off the shelf or shrink wrapped softwares, which are nothing but copyrighted articles. From the nature of software products sold by the assessee, it can be very well construed that the copyright over the software sold by the assessee were owned by the companies creating such softwares like Microsoft, Adobe, etc. The assessee is merely a trader of software, hence, has no domain or ownership over the software. Thus, when the assessee does not have any ownership over the softwares sold, it could not have transferred the right to use of copyright of the software to distributors/customers in India. In case of Engineering Analysis [2021 (3) TMI 138 - SUPREME COURT] while deciding the issue whether the payment made is in the nature of royalty, the Hon’ble Supreme Court very clearly and categorically held that the amount paid by resident Indian end users/distributors to non-resident computer software manufactures/suppliers as consideration for the re-sale/use of the computer software through end user license agreement/distribution agreement is not in the nature of royalty for the use of copyright in the computer software, hence, cannot be treated as royalty Thus, in our considered opinion, Commissioner (Appeals) has adopted the right course of action while deleting the addition made by the Assessing Officer. - Decided in favour of assessee.
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