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2012 (5) TMI 179 - AT - Income TaxTransactions under a software license agreement - assessee a German company taxed as a non-resident in India owning 26% of the shareholding in two Insurance companies in India – Revenue treated transaction towards Royalty receipt within the meaning of section 9(1)(vi)- Held that:- The license charges earned by assessee was not liable to be treated as royalty following the judgment in Director of Income-tax Versus Ericsson A.B [2011 (12) TMI 91 - Delhi High Court] - in order to qualify as royalty payment, within the meaning of Section 9(1) (vi) it is necessary to establish that there is transfer of all or any rights (including the granting of any license) in respect of copy right of a literary, artistic or scientific work - in order to treat the consideration paid by the cellular operator as royalty, it is to be established that the cellular operator, by making such payment, obtains all or any of the copyright rights of such literary work but in the presence case, this has not been established - even issuing the payment made by the cellular operator is regarded as a payment by way of royalty u/s Section 9(1)(vi) it can never be regarded as royalty within the meaning of the said term in article 13 para 3 of the DTAA Article 13(3) - that payment received by the assessee was towards the title and GSM system of which software was an inseparable parts incapable of independent use and it was a contract for supply of goods thus no part of the payment therefore can be classified as payment towards royalty - where two views are available on an issue one favorable to the assessee and does not support levy of tax on the assessee should be preferred, should be applied to non-resident assessee in this case – in favour of assessee.
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