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2012 (3) TMI 45 - AAR - Income TaxIndia-Japan DTAC – Japanese company, subsidiary of USA company – product sold are copyrighted material in software form - right to use the application is given to customers by way of vendor licence key and through an independent reseller in India - license is provided on a non-exclusive and non-transferable basis – taxability of payments received for sale of product – whether royalty or business income – withholding of tax – Held that:- As held in Citrix Systems Asia Pacific Pty. Ltd. (2012 - TMI - 210758 - Authority For Advance Rulings) that there cannot be a user of software over which exists a copyright without a use of the copyright therein. The payment for such use can only be royalty. Therefore, in present case, what is paid by the reseller to the applicant and what is paid for updates and maintenance are royalty as defined in Article 12 of the India-Japan DTAC and not business income covered by Article 7 of the India-Japan DTAC. Further, tax needs to be deducted by the customers while making the remittances to the applicant as consideration for the software supplied to them.
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