THE DDIT(IT)-2(1), MUMBAI V. M/S. RELIANCE INDUSTRIES LTD, MUMBAI

ITA 1182/MUM/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6376 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 06-10-2010
• Assessment Year: misc
• Appeal Filed On: 15-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: ARVIND SONDE
• Keywords: Business income; Double taxation relief; Permanent establishment

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI R.V. EASWAR, HONBLE PRESIDENT AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A. NO. 1182/MUM/2008 DY. DIRECTOR OF INCOME TAX, M/S RELIANCE INDUSTRIES LTD., (INTERNATIONAL TAXATION)-2(1), VS. 3 RD FLOOR, MAKER CHAMBERS-IV, MUMBAI. 222, NARIMAN POINT, MUMBAI-400021. PANAAACR5055K APPELLANT. RESPONDENT. APPELLANT BY : SHRI NARENDRA SINGH RESPONDENT BY : SHRI ARVIND SONDE. O R D E R PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-XXXI, MUMBAI DATED 15-11-2007. THE ISSUE IN THIS APPEAL RELATES TO PURCHASE/USE OF SOFTWARE, FROM A PARTY , WHO IS A RESIDENT OF CYPRUS. THE AGREEMENTS OF PURCHASE/USE OF SOFTWARE ARE COVE RED BY THE DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED INTO BY INDIA WITH CYP RUS. 2 2. THE SOLE ISSUE THAT ARISES FOR OUR CONSIDERATIO N IN THIS APPEAL IS WHETHER THE ASSESSEE IS REQUIRED TO WITHHOLD TAX U/ S 195 OF THE ACT, FOR PURCHASE/USE OF SOFTWARE FROM PARTY WHO IS A RESIDE NT OF CYPRUS. THE SOFTWARE IN QUESTION ARE UNDISPUTEDLY OPERATIONAL SOFTWARES, PU RCHASED FOR THE INTERNAL USE OF THE ASSESSEE. THE ASSESSEE WAS GRANTED NON-EXCLUSIV E , PERPETUAL, IRREVOCABLE, ROYALTY FREE, WORLDWIDE LICENSE TO USE THE NUMBER O F COPIES OF THE SOFTWARE ENUMERATED IN THE AGREEMENT SOLELY FOR INTERNAL OPE RATION, INCLUDING USE OF SOFTWARE FOR ASP SERVICES AND WEB HOUSING SERVICES. THE PARTIES FROM WHOM THE ASSESSEE ACQUIRED THE SOFTWARE DO NOT HAVE A PERM ANENT ESTABLISHMENT IN INDIA. 3. THE ASSESSEE PURCHASED THE SOFTWARE FOR INFORMAT ION TECHNOLOGY INCLUDING CLARITY CR AND SOFTWARE TO BE USED FOR CLEAR REPORT TOOL ETC. FROM AMDOC DEVELOPMENT LTD., CYPRUS. 4. THE LEARNED CIT(APPEALS) IN ORDER DATED 15-11-20 07, HAS CONSIDERED AN AGREEMENT FOR PURCHASE WITH M/S AMDOCS DEVELOPMENT LTD., CYPRUS. THE FACTS ARE BROUGHT OUT AT PARA 1.1 TO 1.4 OF HIS ORDER WHICH A RE EXTRACTED BELOW FOR READY REFERENCE : 1.1 M/S RELIANCE INDUSTRIES LIMITED (APPELLANT), IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF PETROCHEMICAL PRODUCTS ETC. THE APPELLANT HAS PLACED PURCHASE ORD ER NO.XT9/13002551 DATED 08/03/2002 FOR PURCHASE OF CERTAIN SOFTWARE. M/S AMDOCS DEVELOPMENT LTD., CYPRUS (AMDOCS) AND ENTERED INT O LICENSE AGREEMENT DATED 30/03/2002 WITH THE SAID COMPANY. A COPY OF T HE AGREEMENT WAS FILED BY THE APPELLANT BEFORE THE AO ALONG WITH THE APPLI CATION DATED 16/10/02 U/S 195 SEEKING REMITTANCE OF US$13,00,000/- WITHOUT DE DUCTION OF TAX. THE AR HAS EXPLAINED THE NATURE OF THE SOFTWARE WHICH IS A INFORMATION TECHNOLOGY SOFTWARE FOR CLARITY (FRONT OFFICE CONSISTING OF CL ARITY PRODUCT ON THE SUN SOLARIS / ORACLE PLATFORM. AS PER THE SAID PERPETUA L, IRREVOCABLE, ROYALTY FREE, WORLD WIDE LICENSE UNDER TO USE THE NUMBER OF COPIE S OF THE SOFTWARE AS ENUMERATED IN THE AGREEMENT SOLELY FOR INTERNAL OPE RATIONS INCLUDING USE OF SOFTWARE FOR ASP SERVICES AND WEB HOSTING SERVICES WHERE THE SOFTWARE IS 3 NOT DIRECTLY ACCESSIBLE TO THIRD PARTY. ABOVE SOFTW ARE WERE SUPPLIED TO THE APPELLANT BY AMDOCS ON COMPACT DISC OUTSIDE INDIA. AS PER THE LICENSE AGREEMENT THE SAID SOFTWARE WAS TO BE PROVIDED TO T HE APPELLANT SUBJECT TO THE FOLLOWING RESTRICTIONS AND CONDITIONS. THE APPE LLANT STATED THAT AS PER THE SAID AGREEMENT RIL IS NOT ENTITLED TO : A) REVERSE ENGINEER, DISASSEMBLE, REVERSE TRANSLAT E, DECOMPILE OR IN OTHER MANNER DECODE THE SOFTWARE IN ORDER TO DER IVE THE SOURCE CODE OR FOR ANY OTHER REASONS; B) MODIFY, ENHANCE, ADAPT OR TRANSLATE THE SOFTWAR E; C) MAKE ANY DERIVATIVE WORKS SOF THE SOFTWARE; D) MAKE THE SOFTWARE AVAILABLE TO ANY THIRD PARTY IN A SERVICE BUREAU ARRANGEMENT OR A SIMILAR COMMERCIAL TIME SHA RING OR THIRD PARTY USE; E) DISTRIBUTE, RESELL, RENT, LEASE, SUBLICENSE OR LOAN THE SOFTWARE TO ANY THIRD PARTY FOR OUTSOURCING OR ANY OTHER PURPOS E WHATSOEVER. 1.2 THE AR HAS SUBMITTED THAT M/S AMBODOCS IS A COM PANY REGISTERED IN CYPRUS AND TAX RESIDENT OF CYPRUS. AS PER THE LICEN SE AGREEMENT, APPELLANT DID NOT ACQUIRE ANY COPYRIGHT AND ACCORDINGLY WITHI N THE MEANING OF ARTICLE 12 OF INDO-CYPRUS DOUBLE TAXATION AVOIDANCE AGREEME NT (DTAA), THE PAYMENT MADE BY APPELLANT DID NOT AMOUNT TO ROYALTY . THE APPELLANT STATED THAT M/S AMDOCS DOES NOT HAVE A PERMANENT ESTABLISH MENT (PE) IN INDIA AND ACCORDINGLY ITS BUSINESS INCOME IS NOT TAXABLE IN INDIA AS PER ARTICLE 7 AND 5 OF THE DTAA. THE AR HAS SUBMITTED THAT M/S AM DOCS, BEING A TAX RESIDENT OF CYPRUS, PROVISIONS OF THE INCOME-TAX AC T, 1961 WOULD APPLY, IF THEY ARE MORE FAVOURABLE TO IT OVER THE PROVISIONS OF THE DTAA AS PER SECTION 90(2) OF THE I.T. ACT, 1961. 1.3 THE A.R. HAS SUBMITTED THAT THE AO HAS EXAMINED THE TERMS OF PURCHASE AND HAS REFERRED TO PARA 5 & 7 OF THE SPEC IAL TERMS AND HAS CONCLUDED THAT FOR THE REASONS GIVEN BY HIM IN THE ORDER THAT THE PAYMENT MADE BY THE APPELLANT TO M/S AMBADOCS IS ROYALTY WITHIN THE MEANING OF ARTICLE 12 OF THE DTAA AND ALSO U/S. 9(1)(VI) OF TH E I.T. ACT, 1961. 1.4 THE AR HAS ALSO SUBMITTED THAT THE SAME ISSUE H AS BEEN EXAMINED BY ME IN MY ORDER NO. CIT(A)XXXI/DDIT(IT)2(1)/IT-303/0 2-03 DATED 29/10/2007 IN THE APPELLANTS OWN CASE. THE AR HAS SUBMITTED HIS WRITTEN 4 SUBMISSIONS DT. 24/10/2007 AND HAS REITERATED ALL T HE ARGUMENTS TAKEN BY HIM IN THAT APPEAL WHICH HAVE BEEN CONSIDERED IN MY ORDER. THE AR HAS SUBMITTED IN CONCLUSION THAT THE ABOVE PAYMENT MADE FOR PURCHASE OF SOFTWARE IS NOT ROYALTY BUT ONLY BUSINESS INCOME AND IS ACCORDINGLY TAXABLE IN INDIA, ONLY IF M/S AMDOCS, HAS A PE. 5. THE TERMS AND CONDITIONS OF PURCHASE ARE BROUGHT OUT AT PARA 1.5 OF THE ORDER OF THE CIT(APPEALS) WHICH ARE EXTRACTED BELOW FOR READY REFERENCE : 1.5 ON THE OTHER HAND, THE AO HAS EXAMINED THE ISS UE. HE HAS REFERRED TO PARA 5 OF THE LICENSE AGREEMENT AND HAS HELD THAT T HE APPELLANT HAS ONLY GOT A LICENSE AND HAS NOT PURCHASED THE SOFTWARE AND TH US THE TRANSACTION DOES NOT AMOUNT TO SALE. I FIND THAT THE AO HAS TAKEN TH E SAME ARGUMENTS AS TAKEN HIM IN RESPECT OF HIS ORDER WHICH WAS THE SUBJECT M ATTER OF APPEAL BO. CIT(A)XXXI/DDIT(IT)2(1)/IT-303/02-03 DATED 29/10/20 07 IN THE APPELLANTS OWN CASE. THE AO HAS ALSO TAKEN CERTAIN OTHER ADDITIONAL ARGUMENTS IN THIS ORDER WHICH ARE THE SAME AS TAKEN BY HIM IN HIS ORDER WHICH WAS THE SUBJECT MATTER OF APPEAL IN APPEAL NO .CIT(A)XXXI/ DDIT(IT)2(1)IT-407/02-03/07-08 AND WHICH ARGUMENTS HAVE BEEN EXAMINED AND DEALT WITH BY ME IN THE SAID APPEAL OR DER DATED 2.11.2007. I HAVE ALSO EXAMINED THE LICENSE AGREEMENT BETWEEN TH E APPELLANT AND M/S AMDOCS. THE APPELLANT HAS ENTERED INTO AN AGREEMENT FOR PURCHASE OF SOFTWARE WITH M/S AMDOCS. GENERAL TERMS AND CONDITI ONS OF PURCHASE ARE PRESCRIBED IN THE AGREEMENT. THE RELEVANT CLAUSES ARE REPRODUCED BELOW : SOFTWARE LICENSE FEES: THE FEES FOR SOFTWARE LICENSES SHALL BE AS STATED IN EXHIBIT A. EXCEPT TO THE EXTENT OTHERWISE STATED IN THE EXHIBIT A. AM DOCS HEREBY AGREES THAT THE FEE IS THE SOLE, LUMP SUM AND ONE-TIME CONSIDER ACTION PAYABLE BY LICENSEE TO AMDOCS FOR THE GRANT OF LICENSE HEREUND ER. EXCEPT TO THE EXTENT OTHERWISE STATED IN EXHIBIT A. AMDOCS SHALL, AT NO POINT OF TIME, CLAIM OR HAVE THE RIGHT TO CLAIM ANY ADDITIONAL FEES BASED O N THE NUMBER OF COPIES, PROCESSING UNITS OR ANY OTHER MEASUREMENT METRIC IN RELATION TO THE SOFTWARE. 5 5. LICENSE : 5.1 GRANT LICENSE : FOR THE PURPOSES OF THIS AGREEMENT, AFIILIATES SH ALL MEAN, WITH RESPECT TO THE LICENSEE, ANY PERSON CONTROLLING, CONTROLLED BY , OR UNDER COMMON CONTROL WITH THE LICENSEE. FOR THE PURPOSE OF THIS DEFINITION OF AFFILIATES, CONTROLLED OR CONTROLLING SHALL MEAN, WITH RESP ECT OF ANY PERSON, ANY CIRCUMSTANCE IN WHICH SUCH PERSON IS CONTROLLED BY ANOTHER PERSON BY VIRTUE OF THE LATTER PERSON CONTROLLING THE COMPOSITION OF THE BOARD OF DIRECTORS OR OWNING THE LARGEST OR CONTROLLING PERCENTAGE OF THE VOTING SECURITIES OF SUCH PERSON OR OTHERWISE. FOR THE AVOIDANCE OF DOUBT, AN Y AFFILIATE THAT CEASES TO THE CONTROLLING, CONTROLLED BY, OR UNDER COMMON C ONTROL WITH, LICENSEE SHALL SURRENDER ANY AND ALL RIGHT TO SUBMIT AN EXHI BIT A UNDER THIS AGREEMENT OR OTHERWISE OBTAIN ADDITIONAL LICENSES IN THE SOFT WARE. SUBJECT TO THE TERMS OF THIS AGREEMENT AND THE AUTHORIZED USAGE LEVELS S ET FORTH IN EXHIBIT A, AND PROVIDED ALL APPLICABLE LICENSE FEES ARE PAID IN AC CORDANCE WITH APPLICABLE TERMS, AMDOCS GRANTS TO LICENSES AND AFFILIATES A P ERSONAL, NON-EXCLUSIVE, NON-TRANSFERABLE, IRREVOCABLE, ROYALTY-FREE EXCEPT TO THE EXTENT PROVIDED HEREIN OR IN THE APPLICABLE EXHIBIT A AND PERPETUAL LICENSE TO USE AND COPY THE SOFTWARE, AND ALL DOCUMENTATION PROVIDED BY OR FOR AMDOCS IN OBJECT CODE FORMAT, IN STRICT ACCORDANCE WITH THE DOCUMENT ATION, AND FOR LICENSEES AND AFFILIATES INTERNAL BUSINESS PURPOSES ONLY. US E OF THE SOFTWARE SHALL INCLUDE STORING, LEADING, INSTALLING EXECUTING, DI SPLAYING, ANALYSIS, DESIGN, CUSTOMIZATION, CONFIGURATION, TRAINING ENHANCEMENT, DEVELOPMENT, IMPLEMENTATION, INTERFACING AND / OR INTEGRATION PU RPOSES, ALL IN ACCORDANCE WITH THIS AGREEMENT, THE EXHIBIT A AND APPLICABLE D OCUMENTATION. LICENSEES LICENSE TO COPY THE SOFTWARE IS LIMITED TO THE NUMBER OF COPIES REASONABLY NECESSARY FOR EXECUTION IN ACCORDANCE WI TH THE AUTHORIZED USAGE LEVELS SPECIFIED IN EXHIBIT A. ONCE COPY OF THE SOF TWARE MAY BE STORED AND USED, AT ALL TIMS, FOR ARCHIVAL OR BANK-UP PURPOSES ONLY. ALL SUCH COPIES MUST INCLUDE A REPRODUCTION OF ALL COPYRIGHT, TRADEMARK OR OTHER PROPRIETARY NOTICES APPEARING IN OR ON THE ORIGINAL COPY OF THE SOFTWARE PROVIDED BY AMDOCS. WHEN LICENSEE PERMANENTLY DISCONTINUES ITS USE OF THE SOFTWARE, LICENSEE SHALL DESTROY THE ORIGINAL VERSIONS AND AL L COPIES MADE BY LICENSEE. 5.3 LICENSED SERVERS & USERS: EACH SOFTWARE LICENSE IS COMPRISED OF SERVER LICENS ES AND USER LICENSES. A SERVER LICENSE GIVES LICENSEE THE RIGHT TO A SING LE INSTANCE ON A COMPUTER TO SUPPORT AN AUTHORIZED NUMBER OF USERS. AN INSTA NCE IS A SINGLE 6 OCCURRENCE OF EXECUTION OR INITIALIZATION OF THE S OFTWARE ON ONE SERVER. A USER LICENSE GIVES LICENSEE THE RIGHT TO AUTHORIZ E AN INDIVIDUAL USER TO HAVE ACCESS TO SOFTWARE INCLUDING ANY RELEVANT DATA BASE THROUGH A SINGLY TERMINAL WORKSTATION OR PERSONAL COMPUTER, OR THROU GH AN INTERFACE FROM AN EXTERNAL SYSTEM IN AN ACTIVE SESSION. 7 PROPRIETARY RIGHT AND INFORMATION. 7.1 USE OF PROPRIETARY INFORMATION: PROPRIETARY INFORMATION INCLUDES WITHOUT LIMITATI ON, (I) DIAGNOSTICS, SOFTWARE, USER MANUALS AND OTHER DOCUMENTATION OR M ATERIALS SUPPLIED BY AMDOCS; AND (II) MATERIAL AND INFORMATION PROVIDED, WHETHER ORALLY OR IN WRITING, BY LICENSEE OR AMDOCS IN PERFORMANCE OF TH IS AGREEMENT, SUCH AS NEW PRODUCT INFORMATION, FINANCIAL OR TECHNICAL DAT A, CUSTOMER INFORMATION, BUSINESS STRATEGIES, OR OTHER THIRD PARTY INFORMATI ON. THE RECEIVING PARTY AGREES TO HOLD THE PROPRIETARY INFORMATION OF THE D ISCLOSING PARTY IN CONFIDENCE AND TO USE THE PROPRIETARY INFORMATION OF THE DISCLOSING PARTY ONLY FOR THE PURPOSES EXPRESSLY PERMITTED, AND TO DISCLOSE PROPRIETARY INFORMATION OF THE DISCLOSING PARTY ONLY TO THE REC EIVING PARTYS EMPLOYEES, REPRESENTATIVES AND CONSTRUCTIONS ONLY ON A NEED-TO -KNOW BASIS. THE RECEIVING PARTY AGREES TO MAINTAIN ADEQUATE INTERNA L PROCEDURES, INCLUDING APPROPRIATE AGREEMENTS WITH EMPLOYEES AND AUTHORIZE D THIRD PARTIES, TO PROTECT THE CONFIDENTIALITY OF THE PROPRIETARY INFO RMATION OF THE DISCLOSING PARTY. FOR THE PURPOSES OF THIS SECTION, INDEPENDEN T CONTRACTORS TO EITHER PARTY ARE CONSIDERED EMPLOYEES OF SUCH PARTY. THE DISCLOSING PARTY IS ENTITLED TO APPROPRIATE INJUNCTIVE RELIEF IN THE EV ENT OF ANY UNAUTHORIZED DISCLOSURE OR USE OF ITS PROPRIETARY INFORMATION BY THE RECEIVING PASRTY. 6. THE GENERAL TERMS AND CONDITIONS OF AGREEMENT OF PURCHASE CAN BE SUMMARIZED AS UNDER: I) THE ASSESSEE IS NOT ENTITLED TO USE THE SOFTWAR E FOR ASP SERVICES ON BEHALF OF THIRD PARTY. 7 II) THE ASSESSEE HAS NO RIGHT TO USE, COPY, DUPLICA TE OR DISPLAY THE SOFTWARE EXCEPT AS SPECIFICALLY PROVIDED IN THE AGR EEMENT. III) THE ASSESSEE CANNOT MAKE MORE COPIES OF THE SO FTWARE THAN WHAT IS SPECIFIED IN THE AGREEMENT. IV) THE ASSESSEE CANNOT PROVIDE ACCESS TO THE SOFTW ARE TO ANY ONE, OTHER THAN ASSESSEES EMPLOYEES, CONTRACTORS OR CONSULTAN TS UNDER A WRITTEN CONTRACT BY WHICH ALL OF THEM WOULD BE BOUND BY THE TERMS AND CONDITIONS AS ARE APPLICABLE TO THE ASSESSEE ON PURCHASE OF SOFTW ARE. V) THE ASSESSEE CANNOT SELL LICENSE, DISTRIBUTE, PL EDGE, LEASE, RENT OR COMMERCIALLY SHARE (INCLUDING TIMESHARE) THE ABOVE SOFTWARE OR ANY RIGHTS THEREIN. VI) THE ASSESSEE CANNOT USE THE SOFTWARE FOR PURPOS ES OF PROVIDING A SERVICE BUREAU, INCLUDING WITHOUT LIMITATION, FOR P ROVIDING THIRD PARTY HOSTING OR THIRD PARTY APPLICATION, INTEGRATION OR APPLICATION SERVICE PROVIDER OR ANY OTHER SIMILAR SERVICE. VII) THE ASSESSEE CANNOT MODIFY, TRANSLATE, REVERSE , ENGINEER, DECRYPT, DECOMPILE, DISASSEMBLE, CREATE DIRECTIVE WORKS BAS ED ON, OR OTHERWISE ATTEMPT TO DISCOVER THE ABOVE MENTIONED SOFTWARE SO URCE CODE OR UNDERLYING IDEAS OR ALGORITHMS. 7. ANOTHER IMPORTANT FACT IS THAT THE SOFTWARE HAS BEEN SUPPLIED TO THE ASSESSEE ON A COMPUTER DISK, FROM A PLACE OUTSIDE INDIA, ON FOB BASIS. NONE OF THE PARTIES INVOLVED HAVE A PERMANENT ESTABLISHMENT IN INDIA. T HE FIRST APPELLATE AUTHORITY IN HER ORDER IN APPEAL NO. CIT(A)XXXI/DDIT(IT)2(1)IT -303/02-03/07-08 DATED 8 29-10-2007 WHILE CONSIDERING THE PURCHASE FROM A N ON-RESIDENT WHO IS A RESIDENT OF USA WHERE THE TERMS AND CONDITIONS OF PURCHASE ARE ALMOST SIMILAR TO THE TERMS AND CONDITIONS OF PURCHASE IN THE CASE ON HAND, AS ADMITTED BY BOTH THE PARTIES, AT PARA 2.4 OBSERVED AS FOLLOWS : A PERUSAL OF THE AGREEMENT REVEALS THAT THE APPEL LANT HAS NOT RECEIVED ANY RIGHT FOR TRANSFERRING OR MODIFYING THE SOFTWAR E LICENSE OR DECOMPILING, REVERSE ENGINEERING, OR DISASSEMBLING IT. THE APPEL LANT HAS ALSO GOT NO POWER TO DECODE THE MACHINE CODE OF SOFTWARE. THE APPELLA NT HAS GOT NO POWER TO MAKE COPIES OF SOFTWARE EXCEPT FOR BACKUP PURPOSES. FROM A PERUSAL OF THE TERMS OF THE AGREEMENT REPRODUCED ABOVE, IT IS VERY APPARENT THAT THE APPELLANT HAS ACQUIRED THE RIGHT SOLELY IN CONNECTI ON WITH ITS INTERNAL OPERATIONS AND RIGHT TO USE THE SOFTWARE IS CONFINE D FOR THE EXPRESS PURPOSE OF ITS BUSINESS. WITH THESE FACTS IN MIND THE TAXAB ILITY OF PAYMENT RECEIVED BY M/S TIBCO IS EXAMINED. 8. SHE FURTHER OBSERVED AT PARA 1.10 OF THE IMPUGNE D ORDER AS FOLLOWS : 1.10 A CLOSE PERUSAL OF THE DEFINITION OF ROYALTY IN BOTH THESE TREATIES REVEAL THAT SO FAR AS PURCHASE OF COMPUTER SOFTWARE IS CONCERNED, THE DEFINITION OF ROYALTY REGARDING THE COPY RIGHT OR TRADEMARK NOR SECRET FORMULA IS SAME. THE DEFINITION OF INDO-USA DTAA IS PRIMARILY EXPANDING THE DEFINITION OF ROYALTY IN INDO-CYPRUS DTAA. ACCO RDINGLY I HOLD THAT MY DECISION IN THE CASE OF APPELLANT IN APPEAL NO. CIT(A)XXXI/DDIT(IT)2(1)/IT-303/02-03 DATED 29/10/20 07 AND APPEAL NO. CIT(A)XXXI/ DDIT(IT)2(1)IT-407/02-03/07-08 DATE D 02.11.2007, IS SQUARELY APPLICABLE TO THIS CASE AS WELL. THEREFORE FOLLOWING MY ORDERS IN THOSE APPEALS, I HOLD THAT THE PAYMENT MADE BY THE APPELLANT TO M/S AMDOCS IS ONLY BUSINESS INCOME OF M/S AMDOCS AND NOT ROYAL TY. IN THE ABSENCE OF ANY PE IN INDIA, BUSINESS PROFIT IS NOT TAXABLE IN INDIA AS PER ARTICLE 5 & 7 OF DTAA. IN VIEW OF THIS APPEAL ON GROUND NO. 1 TO 5 I S ALLOWED. 9 9. THIS BENCH OF THE TRIBUNAL, ON SIMILAR ISSUE, IN THE CASE OF PURCHASE OF SOFTWARE FROM USA IN ASSESEES OWN CASE IN ITA NOS.116,119,1123,1125,1126,1127,1129,1131,1134,1181 ,1183,1184,1185,1187, 1188 & 1190/MUM/2008 VIDE ITS ORDER DATED 29 TH OCT., 2010, HAS HELD AS FOLLOWS 12. THE BANGALORE BENCH OF THE TRIBUNAL IN THE CAS E OF SAMSUNG ELECTRONIC COMPANY LTD. VS. ITO REPORTED IN 276 ITR (AT) 1 HELD AS FOLLOWS : HELD, ALLOWING THE APPEALS, THAT THE PROVISIONS O F THE INCOME-TAX ACT WOULD BE APPLICABLE TO THE EXTENT THEY WERE MORE BE NEFICIAL TO THE ASSESSEE. OTHERWISE, THE PROVISIONS OF THE DOUBLE TAXATION A VOIDANCE AGREEMENT HAD TO BE FOLLOWED. THEREFORE, THE PROVISIONS OF TH E DOUBLE TAXATION AVOIDANCE AGREEMENT HAD TO BE FOLLOWED FOR THE PUR POSE OF DECIDING THE ISSUE WHETHER PAYMENTS MADE BY THE ASSESSEE WAS RO YALTY OR NOT. THE PRIMARY CONDITION FOR BRINGING WITHIN THE DEFINITIO N OF ROYALTY IN THE DOUBLE TAXATION AVOIDANCE AGREEMENT IS PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF OR RIGHT TO USE ANY CO PYRIGHT OF A LITERARY, ARTISTIC OR SCIENTIFIC WORK, ETC. THE RIGHT TO USE A COPYRIG HT IS TOTALLY DIFFERENT FROM THE RIGHT TO USE THE PROGRAMME EMBEDDED IN A CASSET TE OR CD OR IT MAY BE A SOFTWARE. IN THIS CASE, WHAT THE ASSESSEE HAD ACQUI RED WAS ONLY A COPY OF THE COPYRIGHTED ARTICLES, THAT IS SOFTWARE, WHEREAS THE COPYRIGHT REMAINED WITH THE OWNER, THAT IS THE FOREIGN PARTIES. NO RIGHT WA S GRANTED TO THE ASSESSEE TO UTILIZE THE COPYRIGHT OF THE COMPUTER PROGRAMME. TH E ASSESSEE HAD MERELY PURCHASED A COPY OF THE COPYRIGHTED ARTICLE, NAMELY , A COMPUTER PROGRAMME WHICH WAS CALLED SOFTWARE . THEREFORE, THE REMITT ANCE MADE BY THE APPELLANT FOR PURCHASE OF SOFTWARE WAS NOT AN INCOM E IN INDIA, HENCE NO TAX WAS TO BE DEDUCTED IN INDIA UNDER SECTION 195 OF TH E ACT. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MOTO ROLA INC VS. DCIT 95 ITD 269 IN THE FOLLOWING PARAS HELD AS FOLLOWS : 155. IT APPEARS TO US FROM A CLOSE EXAMINATION OF THE MANNER IN WHICH THE CASE HAS PROCEEDED BEFORE THE INCOME-TAX AUTHORITIE S AND THE ARGUMENTS ADDRESSED BEFORE US THAT THE CRUX OF THE ISSUE IS W HETHER THE PAYMENT IS FOR A 10 COPYRIGHT OR FOR A COPYRIGHTED ARTICLE. IF IT IS FO R COPYRIGHT, IT SHOULD BE CLASSIFIED AS ROYALTY BOTH UNDER THE INCOME-TAX ACT AND UNDER THE DTAA AND IT WOULD BE TAXABLE IN THE HANDS OF THE ASSESSE E ON THAT BASIS. IF THE PAYMENTS IS REALLY FOR A COPYRIGHTED ARTICLE, THEN IT ONLY REPRESENTS THE PURCHASE PRICE OF THE ARTICLE AND THEREFORE, CANNOT BE CONSIDERED AS ROYALTY EITHER UNDER THE ACT OR UNDER THE DTAA. THIS ISSUE REALLY IS THE KEY TO THE ENTIRE CONTROVERSY AND WE MAY NOW PROCEED TO ADDRES S THIS ISSUE. 156 WE MUST LOOK INTO THE MEANING OF THE WORD COPY RIGHT AS GIVEN IN THE COPYRIGHT ACT, 1957 SECTION 14 OF THIS ACT DEFINES COPYRIGHT AS THE EXCLUSIVE RIGHT SUBJECT TO THE PROVISIONS OF THIS A CT, TO DO OR AUTHORIZE THE DOING OF ANY OF THE FOLLOWING ACTS IN RESPECT OF A WORK OR ANY SUBSTANTIAL PART THEREOF, NAMELY: (A) IN THE CASE OF A LITERARY, DRAMATIC OR MUSICAL WORK, NOT BEING A COMPUTER PROGRAMME,- (I) TO REPRODUCE THE WORK IN ANY MATERIAL FORM INCL UDING THE STORING OF IT IN ANY MEDIUM BY ELECTRONIC MEANS : (II) TO ISSUE COPIES OF THE WORK TO THE PUBLIC NOT BEING COPIES ALREADY IN CIRCULATION; (III) TO PERFORM THE WORK IN PUBLIC, OR COMMUNICATE IT TO THE PUBLIC; (IV) TO MAKE ANY CINEMATOGRAPH FILM OR SOUND RECORD ING IN RESPECT OF THE WORK; (V) TO MAKE ANY TRANSLATION OF THE WORK; (VI) TO MAKE ANY ADAPTATION OF THE WORK; (VII) TO DO, IN RELATION TO A TRANSLATION OR AN ADA PTATION OF THE WORK, ANY OF THE ACTS SPECIFIED IN RELATION TO THE WORK IN SUB-CLAUSES (I) TO (VI); (B) IN THE CASE OF A COMPUTER PROGRAMME,- 11 (I) TO DO ANY OF THE ACTS SPECIFIED IN CL. (A); (II) TO SELL OR GIVE ON COMMERCIAL RENTAL FOR SALE OR FOR COMMERCIAL RENTAL ANY COPY OF THE COMPUTER PROGRAMM E; PROVIDED THAT SUCH COMMERCIAL RENTAL DOES NOT APPLY IN RESPECT OF COMPUTER PROGRAMMES WHERE THE PROGRAMME ITSELF IS NOT THE ES SENTIAL OBJECT OF THE RENTAL, (C) IN THE CASE OF AN ARTISTIC WORK,- (I) TO REPRODUCE THE WORK IN ANY MATERIAL FORM INCL UDING DEPICTION IN THREE DIMENSIONS OF A TWO DIMENSIONAL WORK OR IN TWO-DIMENSIONS OF A THREE-DIMENSIONAL WORK; (II) TO COMMUNICATE THE WORK TO THE PUBLIC; (III) TO ISSUE COPIES OF THE WORK TO THE PUBLIC NOT BEING COPIES ALREADY IN CIRCULATION; (IV) TO INCLUDE THE WORK IN ANY CINEMATOGRAPH FILM; (V) TO MAKE ANY ADAPTATION OF THE WORK; (VI) TO DO IN RELATION TO AN ADAPTATION OF THE WORK ANY OF THE ACTS SPECIFIED IN RELATION TO THE WORK IN SUB-C LAUSE (I) TO (IV); (D) IN THE CASE OF CINEMATOGRAPH FILM,- (I) TO MAKE A COPY OF THE FILM, INCLUDING A PHOTOGR APH OF ANY IMAGE FORMING PART THEREOF; (II) TO SELL OR GIVE ON HIRE, OR OFFER FOR SALE OR HIRE, ANY COPY OF THE FILM, REGARDLESS OF WHETHER SUCH COPY H AS BEEN SOLD OR GIVEN ON HIRE ON EARLIER OCCASIONS; (III) TO COMMUNICATE THE FILM TO THE PUBLIC; (E) IN THE CASE OF A SOUND RECORDING,- (I) TO MAKE ANY OTHER SOUND RECORDING EMBODYING IT; 12 (II) TO SELL OR GIVE ON HIRE, OR OFFER FOR SALE OR HIRE, ANY COPY OF THE SOUND RECORDING REGARDLESS OF WHETHER S UCH COPY HAS BEEN SOLD OR GIVEN ON HIRE ON EARLIER OCCA SIONS; (III) TO COMMUNICATE THE SOUND RECORDING TO THE PUB LIC. EXPLANATION FOR THE PURPOSES OF THIS SECTION, A C OPY WHICH HAS BEEN SOLD ONCE SHALL BE DEEMED TO BE A COPY ALREADY IN CIRCUL ATION. IT IS CLEAR FROM THE ABOVE DEFINITION THAT A COMPUT ER PROGRAMME MENTIONED IN CLAUSE (B) OF THE SECTION HAS ALL THE RIGHTS MEN TIONED IN CLAUSE (A) AND IN ADDITION ALSO THE RIGHT TO SELL OR GIVE ON COMMERCI AL RENTAL OR OFFER FOR SALE OR FOR COMMERCIAL RENTAL ANY COPY OF THE COMPUTER PROG RAMME. THIS ADDITIONAL RIGHT WAS SUBSTITUTED W.E.F. 15.1.200. THE DIFFEREN CE BETWEEN THE EARLIER PROVISION AND THE PRESENT ONE IS NOT OF ANY RELEVAN CE. WHAT IS TO BE NOTED IS THAT THE RIGHT MENTIONED IN SUB-CLAUSE (II) OF CLAU SE (B) OF SECTION 14 IS AVAILABLE ONLY TO THE OWNER OF THE COMPUTER PROGRAM ME. IT FOLLOWS THAT IF ANY OF THE CELLULAR OPERATORS DOES NOT HAVE ANY OF THE RIGHTS MENTIONED IN CLAUSES (A) AND (B) OF SECTION 14, IT WOULD MEAN TH AT IT DOES NOT HAVE ANY RIGHT IN A COPYRIGHT. IN THAT CASE, THE PAYMENT MAD E BY THE CELLULAR OPERATOR CANNOT BE CHARACTERIZED AS ROYALTY EITHER UNDER THE INCOME-TAX ACT OR UNDER THE DTAA. THE QUESTION, THEREFORE, TO BE ANSWERED I S WHETHER ANY OF THE OPERATORS CAN EXERCISE ANY OF THE RIGHTS MENTIONED IN THE ABOVE PROVISIONS WITH REFERENCE TO THE SOFTWARE SUPPLIED BY THE ASSE SSEE. FURTHER, THE DELHI SPECIAL BENCH OF ITAT IN PARAS 1 62, 168 AND 169 HELD AS FOLLOWS: 162. A CONJOINT READING OF THE TERMS OF THE SUPPLY CONTRACT AND THE PROVISIONS OF THE COPYRIGHT ACT, 1957 CLEARLY SHOWS THAT THE CELLULAR OPERATOR CANNOT EXPLOIT THE COMPUTER SOFTWARE COMME RCIALLY WHICH IS THE VERY ESSENCE OF A COPYRIGHT. IN OTHER WORDS A HOLDE R OF A COPYRIGHT IS PERMITTED TO EXPLOIT THE COPYRIGHT COMMERCIALLY AND IF HE IS NOT PERMITTED TO DO SO THEN WHAT HE HAS ACQUIRED CANNOT BE CONSIDERE D AS A COPYRIGHT. IN THAT 13 CASE, IT CAN ONLY BE SAID THAT HE HAS ACQUIRED A CO PYRIGHTED ARTICLE. A SMALL EXAMPLE MAY CLARIFY THE POSITION. THE PURCHASER OF A BOOK ON INCOME-TAX ACQUIRES ONLY A COPYRIGHTED ARTICLE. ON THE OTHER H AND, A RECORDING COMPANY WHICH HAS RECORDED A VOCALIST HAS ACQUIRED THE COPY RIGHT IN THE MUSIC RENDERED AND IS, THEREFORE, PERMITTED TO EXPLOIT TH E RECORDING COMMERCIALLY. IN THIS CASE THE MUSIC RECORDING COMPANY HAS NOT ME RELY ACQUIRED A COPYRIGHTED ARTICLE IN THE FORM OF A RECORDING, BUT HAS ACTUALLY ACQUIRED A COPYRIGHT TO REPRODUCE THE MUSIC AND EXPLOIT THE SA ME COMMERCIALLY. IN THE PRESENT CASE WHAT JTM OR ANY OTHER CELLULAR OPERATO R HAS ACQUIRED UNDER THE SUPPLY CONTRACT IS ONLY THE COPYRIGHTED SOFTWARE, W HICH IS AN ARTICLE BY ITSELF AND NOT ANY COPYRIGHT THEREIN. 168. THE ACTUAL REGULATIONS BRING OUT THE DISTINCTI ON VERY CLEARLY BETWEEN THE COPYRIGHT RIGHT AND A COPYRIGHTED ARTICLE. THEY ALS O SPECIFY THE FOUR RIGHTS WHICH, IF ACQUIRED BY THE TRANSFEREE, CONSTITUTE HI M THE OWNER OF A COPYRIGHT RIGHT. THEY ARE: (A) THE RIGHT TO MAKE COPIES OF THE COMPUTER PROGRA MME FOR PURPOSES OF DISTRIBUTION TO THE PUBLIC BY SALE OR OTHER TRAN SFER OF OWNERSHIP, OR BY RENTAL, LEASE, OR LENDING. (II) THE RIGHT TO PREPARE DERIVATIVE COMPUTER PROGR AMMES BASED UPON THE COPYRIGHTED COMPUTER PROGRAMME (III) THE RIGHT TO MAKE A PUBLIC PERFORMANCE OF THE COMPUTER PROGRAMME. (IV) THE RIGHT TO PUBLICALLY DISPLAY THE COMPUTER P ROGRAMME. 169. A COPYRIGHTED ARTICLE HAS BEEN DEFINED IN THE REGULATION (PAGE 147 OF THE PAPER BOOK) AS INCLUDING A COPY OF A COMPUTER P ROGRAMME FROM WHICH THE WORK CAN BE PERCEIVED, REPRODUCED OR OTHERWISE COMMUNICATED EITHER DIRECTLY OR WITH THE AID OF A MACHINE OR DEVICE. TH E COPY OF THE PROGRAMME MAY BE FIXED IN THE MAGNETIC MEDIUM OF A FLOPPY DIS C OR IN THE MAIN MEMORY OR HARD DRIVE OF A COMPUTER OR IN ANY OTHER MEDIUM. 14 FINALLY, THE SPECIAL BENCH OF ITAT, DELHI, IN PARA NO. 184 CONCLUDED AS FOLLOWS : 184. IN VIEW OF THE FOREGOING DISCUSSION, WE HOLD T HAT THE SOFTWARE SUPPLIED WAS A COPYRIGHTED ARTICLE AND NOT A COPYRIGHT RIGHT , AND THE PAYMENT RECEIVED BY THE ASSESSEE IN RESPECT OF THE SOFTWARE CANNOT BE CONSIDERED AS ROYALTY EITHER UNDER THE INCOME-TAX ACT OR THE DTAA . (EMPHASIS SUPPLIED) THE BANGALORE A-BENCH OF TRIBUNAL IN THE CASE OF H EWLETT-PACKARD (INDIA)(P) LTD. VS. ITO 5 SOT 660 (BANG) HELD AS FO LLOWS : SECTION 9(1)(VI) PROVIDES THAT ROYALTY RECEIVABLE BY A NON-RESIDENT FROM A PERSON IN INDIA IS DEEMED TO ACCRUE OR ARISE IN IND IA. FURTHER, SECTION 90(2) PROVIDES THAT IF THE PROVISIONS OF TAX TREATY BETWE EN INDIA AND THE COUNTRY OF THE NON-RESIDENT ARE MORE BENEFICIAL TO SUCH NON -RESIDENT, THEN THE PROVISIONS OF TAX TREATY SHALL OVERRIDE THE PROVISI ONS OF THE ACT [PARA 6). ARTICLE 12(3) OF THE INDIA-USA DTAA DEFINES THE TER M ROYALTY. AS PER THE INDIA-USA DTAA ROYALTY IN RESPECT OF THE SUBJECT-MA TTER OF A COPYRIGHT INCLUDES ONLY THE PAYMENTS FOR THE USE I.E., EXPLOI TATION OF THE COPYRIGHT OF SUCH LITERARY/ARTISTIC OR SCIENTIFIC WORK. THEREFOR E, IN ORDER TO BE CLASSIFIED AS ROYALTY, THE RIGHT OF THE PERSON IN POSSESSION OF T HE SUBJECT-MATTER OF A COPYRIGHT SHOULD BE TO UTILIZE SUCH COPYRIGHT IN TH E MANNER WHICH IS OTHERWISE PROTECTED BY THE RESPECTIVE COPYRIGHT LAW IN FAVOUR OF THE OWNER OF THE COPYRIGHT. THE USE OF A COPYRIGHT OF A COPYR IGHTED WORK IS DIFFERENT FROM USE OF SUCH WORK ITSELF. THE ACQUISITION OF A PRODUCT, WHEREIN THE SUBJECT-MATTER OF COPYRIGHT IS EMBEDDED, WITHOUT RI GHT TO EXPLOIR THE COPYRIGHT, DOES NOT AMOUNT TO USE OR RIGHT TO USE T HE COPYRIGHT OF SUCH LITERARY/ARTISTIC/SCIENTIFIC I.E., COPYRIGHTED WORK [PARA 6]. FURTHER, AS PER CLAUSE 13.1 OF THE OECD MODEL COMME NTARY, PAYMENTS MADE FOR ACQUISITION OF PARTIAL RIGHTS IN COPYRIGHT WOUL D REPRESENT A ROYALTY WHERE THE CONSIDERATION IS FOR THE RIGHT TO USE THE PROGR AMMES IN A MANNER THAT WOULD, WITHOUT SUCH LICENSE, CONSTITUTE AN INFRINGE MENT OF THE COPYRIGHT. IN OTHER WORDS, THE PAYMENT CAN CONSTITUTE ROYALTY ONL Y IF THE TRANSFEROR GRANTS TO THE TRANSFEREE THE RIGHT TO USE THE COPYRIGHT OF THE PRODUCT. IF, ON THE OTHER HAND, THE USE OF THE PROGRAMMES BY THE TRANSFEREE ( BY ACQUIRING A COPY OF 15 SUCH PROGRAMME) IS IN A MANNER WHICH DOES NOT CONST ITUTE INFRINGEMENT OF THE COPYRIGHT, THE PAYMENT THEREFOR WOULD NOT AMOUN T TO ROYALTY. THEREFORE, UNDER THE OECD MODEL COMMENTARY ALSO PAY MENTS FOR ACQUIRING A COPY OF A COMPUTER PROGRAMME WOULD NOT BE TREATED AS PAYMENTS FOR RIGHT TO USE THE COPYRIGHT IN THE COMPUTER PROGRAMMES. AC CORDINGLY SUCH PAYMENTS ARE TO BE CONSIDERED S COMMERCIAL INCOME U NDER ARTICLE 7 AND NOT AS ROYALTY UNDER ARTICLE 12 OF THE INDIA-USA DTAA [ PARAS 6.2 AND 6.3]. FURTHER, THE COMPUTER PROGRAMME MAY BE COPYRIGHT AS INTELLECTUAL PROPERTY DOES NOT ALTER THE FACT THAT ONCE IN THE FORM OF A FLOPPY DISC OR OTHER MEDIUM, THE PROGRAMME IS TANGIBLE, MOVABLE AND AVAILABLE IN THE MARKET PLACE. THE FACT THAT SOME PROGRAMMES MAY BE TAILORED FOR SPECI FIC PURPOSES NEED NOT ALTER THEIR STATUS AS GOODS BECAUSE THE CODE DEFI NITION INCLUDED SPECIALLY MANUFACTURED GOODS. IN THE CASE OF TATA CONSULTAN CY SERVICES V. STATE OF ANDHRA PRADESH [2004] 271 ITR 401 / 141 TAXMAN 132 THE APEX COURT AFTER CITING SEVERAL DECISIONS OF THE COURTS OF THE USA H AS NOTED THAT ACQUISITION OF A COPY OF COMPUTER PROGRAMMES, WHICH IS A COPYRI GHTED ARTICLE, AMOUNTS TO SALE OF SUCH ARTICLE [PARA 6.7]. THEREFORE, THE PAYMENT MADE BY THE ASSESSEE TO H WAS NOT IN THE NATURE OF ROYALTY BUT WAS SUBJECT-MATTER OF ARTICLE 7 OF THE INDIA-USA DTAA. FURTHER IT WAS AN ADMITTED FACT THAT H, DID NOT HAVE ANY PE RMANENT ESTABLISHMENT IN INDIA. THEREFORE, THE ASSESSEE HAD NO OBLIGATION TO DEDUCT TAX AT SOURCE ON SUCH PAYMENTS MADE TO H, USA. THEREFORE, THE CLAIM OF THE ASSESSEE WAS LIABLE TO BE ALLOWED.[PARA 6.8]. 10. NOW WE EXTRACT THE RELEVANT PROVISION UNDER THE INDO-CYPRUS DTAA : THE DEFINITION OF ROYALTY AS PER INDO-CYPRUS DT AA READS AS UNDER : 12(3) THE TERM ROYALTIES AS USED IN THIS ARTICL E MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF , OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS AND FILMS OR TAPES FOR RADIO OR TELEVISION BR OADCASTING TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, O R FOR THE USE OF, OR THE 16 RIGHT TO USE, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE. 11. THE DEFINITION OF ROYALTY IS SIMILAR TO THE DEF INITION OF ROYALTY IN THE INDO- US DTAA. IN ANY EVENT, WE DO NOT GO INTO IT, AS THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MOTOROLA INC. VS. DCIT (SUPRA) HELD THAT SECTION 9(1)(VII) IS NOT ATTRACTED IN SUCH CASES, WHERE THERE IS A TRANSFER OF COPYRIGHTED ARTICLE AND NOT A TRANSFER OF THE COPY RIGHT ITSELF. ON FACTS WE CONC LUDE THAT WHAT IS TRANSFERRED IN THIS CASE IS A COPYRIGHTED ARTICLE ONLY. HENCE SEC. 9(1)(VII) IS NOT ATTRACTED. 12 APPLYING THE PROPOSITIONS TO THE FACTS OF THE CA SE, WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY WHEREIN IT IS HELD THAT : A) IT IS NOW ESTABLISHED LAW THAT COMPUTER SOFTWARE AF TER BEING PUT ON TO A MEDIA AND THEN SOLD, BECOMES GOODS LIKE ANY OTHER A UDIO CASSETTE OR PAINTING ON CANVAS OR A BOOK AND THAT THE AO IS WRO NG IN HOLDING THAT COMPUTER SOFTWARE ON A MEDIA, CONTINUES TO BE AN IN TELLECTUAL PROPERTY RIGHT. B) THAT THE ASSESSEE HAS PURCHASED A COPYRIGHTED ARTIC LE AND NOT THE COPYRIGHT ITSELF. THERE IS NO TRANSFER OF ANY PART OF COPYRIGHT. C) THE PRESENT COMPUTER SOFTWARE CANNOT BE TREATED AS A PATENT OR AN INVENTION. 13. IN VIEW OF THE ABOVE DISCUSSION, WE RESPECTFULL Y FOLLOW THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MOTORO LA INC. (SUPRA) AND HOLD THAT THE SOFTWARE SUPPLIED WAS A COPY RIGHTED ARTICLE AND NO T A COPY RIGHT AND THAT THE PAYMENT RECEIVED BY THE ASSESSEE IN RESPECT OF THE SOFTWARE CANNOT BE CONSIDERED AS ROYALTY UNDER THE INCOME-TAX ACT. ONCE IT IS NO T ROYALTY UNDER THE INCOME-TAX ACT, THE QUESTION OF EXAMINING WHETHER IT IS ROYAL TY UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT WITH CYPRUS DOES NOT ARISE. ONC E IT IS NOT ROYALTY, IT IS BUSINESS INCOME AND AS THE ASSESSEE DOES NOT HAVE A P.E. IN INDIA IT IS NOT TAXABLE 17 IN INDIA. IT IS WELL SETTLED THAT WHEN A PARTICULA R TRANSACTION IS TAXABLE AS ROYALTY UNDER THE INDIAN INCOME-TAX ACT, THEN ONLY, WE HAVE TO EXAMINE WHETHER THE DOUBLE TAXATION AVOIDANCE AGREEMENT GIVES AN EXEMP TION OR BENEFIT. WHEN A TRANSACTION CANNOT BE BROUGHT TO TAX AS ROYALTY U NDER THE INCOME-TAX ACT ITSELF, THE QUESTION OF EXAMINING THE POSITION UNDER THE DO UBLE TAXATION AVOIDANCE AGREEMENT DOES NOT ARISE. HENCE WE LEAVE THAT ISSUE OPEN. THUS, WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY FOR THE REAS ONS GIVEN HEREIN ABOVE AND DISMISS THE APPEAL OF THE REVENUE. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH NOV.. , 2010. SD/- SD/- (R.V. EASWAR) (J. S UDHAKAR REDDY) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 26 TH NOV., 2010. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, L-BENCH (TRUE COPY) BY ORDER ASSTT. R EGISTRAR, ITAT, MU MBAI , WAKODE.