IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH - ITAT
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH - ITAT IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH - ITAT
16present case what JTM or any other cellular operator has acquired under thesupply contract is only the copyrighted software, which is an article by itselfand not any copyright therein.168. The actual regulations bring out the distinction very clearly between thecopyright right and a copyrighted article. They also specify the four rightswhich, if acquired by the transferee, constitute him the owner of a copyrightright. They are:(a) The right to make copies of the computer programme for purposesof distribution to the public by sale or other transfer of ownership, orby rental, lease, or lending.(ii) The right to prepare derivative computer programmes based uponthe copyrighted computer programme(iii) The right to make a public performance of the computerprogramme.(iv) The right to publically display the computer programme.169. A copyrighted article has been defined in the regulation (page 147 ofthe paper book) as including a copy of a computer programme from whichthe work can be perceived, reproduced or otherwise communicated eitherdirectly or with the aid of a machine or device. The copy of the programmemay be fixed in the magnetic medium of a floppy disc or in the mainmemory or hard drive of a computer or in any other medium.Finally, the Special Bench of ITAT, Delhi, in para No. 184 concluded as follows :184. In view of the foregoing discussion, we hold that the software suppliedwas a copyrighted article and not a copyright right, and the paymentreceived by the assessee in respect of the software cannot be considered asroyalty either under the Income-tax Act or the DTAA .
17The tests laid down in para 168 of the decisionwhen applied to the terms andconditions stated in para 8 of his order, we have to hold that the payment is for acopyrighted article and not for copyright itself. Similarly, the AO’s observation onwhich it is a Patent, invention etc. have been dealt in this order. Applying thisbinding order to the facts of the case, we have to hold that the payment made bythe assessee in respect of the software cannot be considered a ‘royalty’ either underthe Income-tax Act or under the DTAA. Once it is not “Royalty” under theIncome-tax Act, the assessee has to succeed and it has to be held that no Tax needto be deducted at source, as the payment is “business income” of the partyreceiving the payment, as that non-resident party does not have a PermanentEstablishment in India, as per the D.T.A.A.. The question of taxing the same inIndia does not arise. All the issues raised by the AO have also been dealt with inthese cases.Though we have held that the assessee has to succeed under the IndianIncome tax itself and hence there is no requirement of examining the term‘Royalty’ under the Indo-US DTAA, as we have heard the parties on this issuealso, we hold as follows :The definition of the term “Royalty” under the Indo-USA D.T.A.A. is as under :The term ‘Royalties” as used in this Article 12(3) means:(a) Payments of any kind received as consideration for the use of, or right touse, any copyright of a literary, artistic to use, any copyright of a literact,artistic or scientific work, including cinematograph, films or work onfilms, tapes or other means of reproduction for use in connection withradio or television broadcasting, any patent, trademark, design or model,
- Page 5: 54. Aggrieved, the Revenue is in ap
- Page 8 and 9: 8iv) The assessee cannot provide ac
- Page 10: 103. Limited WarrantiesTIBCO warran
- Page 13 and 14: 13(i) to reproduce the work in any
- Page 15: 15It is clear from the above defini
- Page 19 and 20: 19copyright, does not amount to use
- Page 21: 2114. In the result, all the appeal
17The tests laid down in para 168 of the decisionwhen applied to the terms andconditions stated in para 8 of his order, we have to hold that the payment is for acopyrighted article and not for copyright itself. Similarly, the AO’s observation onwhich it is a Patent, invention etc. have been dealt in this order. Applying thisbinding order to the facts of the case, we have to hold that the payment made bythe assessee in respect of the software cannot be considered a ‘royalty’ either underthe Income-tax Act or under the DTAA. Once it is not “Royalty” under theIncome-tax Act, the assessee has to succeed and it has to be held that no Tax needto be deducted at source, as the payment is “business income” of the partyreceiving the payment, as that non-resident party does not have a PermanentEstablishment in India, as per the D.T.A.A.. The question of taxing the same inIndia does not arise. All the issues raised by the AO have also been dealt with inthese cases.Though we have held that the assessee has to succeed under the IndianIncome tax itself and hence there is no requirement of examining the term‘Royalty’ under the Indo-US DTAA, as we have heard the parties on this issuealso, we hold as follows :The definition of the term “Royalty” under the Indo-USA D.T.A.A. is as under :The term ‘Royalties” as used in this Article 12(3) means:(a) Payments of any kind received as consideration for the use of, or right touse, any copyright of a literary, artistic to use, any copyright of a literact,artistic or scientific work, including cinematograph, films or work onfilms, tapes or other means of reproduction for use in connection withradio or television broadcasting, any patent, trademark, design or model,
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