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| The Tax Publishers2020 TaxPub(DT) 0428 (Mum-Trib) INCOME TAX ACT, 1961
Section 90
Where only limited right to access/use software had been provided by non-resident to Indian entity for its own business purpose and they did not get any right in said software then the access to software was not for use of any copyright albeit for a copyrighted articles during the course of providing service. Accordingly, payment received by assessee could not be held as royalty in terms of article 12(4) of DTAA between India and Netherlands and was, therefore, not taxable.
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Double taxation relief - Agreement between India and Netherlands - Royalty under article 12(4) - Receipts towards access to use software
Assessee based at Netherlands received payments from Indian entity towards access to use software. AO taxed the same as royalty.Held: As evident from terms of concerned agreement only limited right to access/use software had been provided to Indian entity for its own business purpose and they did not get any right in said software. The access to software was not for use of any copyright albeit for a copyrighted articles during the course of providing service. The agreement clearly envisaged Indian entity could use software only for providing services to Shell entities and cannot alter or modify the software. Accordingly, payment received by assessee could not be held as royalty in terms of article 12(4) of DTAA between India and Netherlands and was, therefore, not taxable.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2015-16
INCOME TAX ACT, 1961
Section 90
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