TMI Blog2016 (7) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee, the treaty would prevail over the Act. the right to use a copyright in a programme is totally different from the right to use a programme embedded in a cassette or a CD which may be a software and the payment made for the same cannot be said to be received as consideration for the use of or right to use of any copyright to bring it within the definition of royalty as given in the DTAA. What the licensee has acquired is only a copy of the copyright article whereas the copyright remains with the owner and the Licensees have acquired a computer programme for being used 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 royal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised in the present appeal is whether the consideration received on sale of pre-packaged software is royalty or fee for technical services and thus was not taxable as business income? In the present case, Double Taxation Avoidance Agreement between India and the United States of America is applicable and to construe royalty conditions stipulated in the DTAA have to be satisfied. The question raised, it is accepted, is covered by the decision of this Court in ITA No. 1034 of 2009, DIT v. Infrasoft Limited decided on 22nd November 2013 . In view of the aforesaid decision, the present appeal is dismissed. We note that the Revenue has not disputed that the issue is covered by the aforesaid decision, but has stated that an appeal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use copyright is distinguishable from sale consideration paid for copyrighted article. This sale consideration is for purchase of goods and is not royalty. 88. The license granted by the Assessee is limited to those necessary to enable the licensee to operate the program. The rights transferred are specific o the nature of computer programs. Copying the program onto the computer's hard drive or random access memory or making an archival copy is an essential step in utilizing the program. Therefore, rights in relation to these acts of copying, where they do no more than enable the effective operation of the program by the user, should be disregarded in analyzing the character of the transaction for tax purposes. Payments in these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight or the conferment of the right of use of copyright implies that the transferee/licensee should acquire rights either in entirety or partially co-extensive with the owner/ transferor who divests himself of the rights he possesses pro tanto . 90. The license granted to the licensee permitting him to download the computer programme and storing it in the computer for his own use is only incidental to the facility extended to the licensee to make use of the copyrighted product for his internal business purpose. The said process is necessary to make the programme functional and to have access to it and is qualitatively different from the right contemplated by the said paragraph because it is only integral to the use of copyrighted produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act as regards the term royalty , it actually did not discuss the effect of the said amendment. 9. Section 90 (3) of the Act makes it clear in the context of an agreement ('treaty') for avoidance of double taxation, that it is only when the provisions of the Act are more beneficial to the Assessee the Act will prevail over the treaty. Conversely, where the provision of the treaty is more beneficial to the Assessee, the treaty would prevail over the Act. This legal position has been reiterated in Director of Income Tax v. Infrasoft Limited ( supra ) which was followed in dismissing the Revenue's appeal in the Assessee s own case for AY 2008-09 i.e. ITA No. 477 of 2014. 10. The Court is not persuaded to re-examine th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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