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TMI Blog2016 (7) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2010-11. 3. The main question urged by the Revenue for consideration before the Court is whether the consideration received by the Respondent Assessee on sale of pre-packaged software was 'royalty or 'fee for technical services' and was, therefore, not taxable as business income? 4. It is not in dispute that Article 12 (3) of the Double Taxation Avoidance Agreement ('DTAA') between India and the United States of America (USA) is relevant for deciding the above issue. In the synopsis forming part of the memoranda of appeals, it is mentioned that the above question also forms the subject matter of the ITA No. 477 of 2014. That ITA pertained to AY 2008-09. The said ITA No. 477 of 2014 was dismissed by this Court by an order dated 1st Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copyright of a literary, artistic or scientific work. In order to treat the consideration paid by the Licensee as royalty, it is to be established that the licensee, by making such payment, obtains all or any of the copyright rights of such literary work. Distinction has to be made between the acquisition of a "copyright right" and a "copyrighted article". Copyright is distinct from the material object, copyrighted. Copyright is an intangible incorporeal right in the nature of a privilege, quite independent of any material substance, such as a manuscript. Just because one has the copyrighted article, it does not follow that one has also the copyright in it. It does not amount to transfer of all or any right including licence in respect of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingrained in Article 12 of DTAA. Where the purpose of the licence or the transaction is only to restrict use of the copyrighted product for internal business purpose, it would not be legally correct to state that the copyright itself or right to use copyright has been transferred to any extent. The parting of intellectual property rights inherent in and attached to the software product in favour of the licensee/customer is what is contemplated by the Treaty. Merely authorizing or enabling a customer to have the benefit of data or instructions contained therein without any further right to deal with them independently does not, amount to transfer of rights in relation to copyright or conferment of the right of using the copyright. The trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in their business and no right is granted to them to utilize the copyright of a computer programme and thus the payment for the same is not in the nature of royalty." 7. Thereafter in para 95 the Court concluded as under: "95. We have not examined the effect of the subsequent amendment to Section 9 (1) (vi) of the Act and also whether the amount received for use of software would be royalty in terms thereof for the reason that the Assessee is covered by the DTAA, the provisions of which are more beneficial." 8. It is sought to be urged by Mr. Rahul Chaudhary, learned Senior standing counsel for the Revenue, that although the Court in Director of Income Tax v. Infrasoft Limited (supra) took note of the subsequent amendment to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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