The Delhi High Court upheld the
order of the Tribunal that amount received by the assessee under the
license agreement for allowing the use of the software would not be
royalty under the DTAA.
The Delhi High Court held as under:
1)
What was transferred was neither the copyright in the software nor the
use of the copyright in the software, but
what was transferred was the right to use the copyrighted material or
article which was distinguishable from the rights in a copyright;
2)
It further held that the right that was transferred was not a right to
use the copyright but was only limited to the right to use the
copyrighted material and the same would not give rise to any royalty
income and would be business income;
3)
The Delhi High Court expressed its disagreement
with the decision of the High Court in the case of CIT v. Samsung
Electronics Co. Ltd. (2011) 203 Taxman 477 (Kar.) that right to make a
copy of the software and storing the same in the hard disk of the
designated computer and taking backup would amount to copyright work –
DIT v. Infrasoft Ltd. (2013) 39 taxmann.com 88 (Delhi)
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