Document Fragment View

Matching Fragments

2. That it has obtained only a user right in the copyrighted article in the form of software applications and not the right of use of copyright. Whereas use of copyright encompasses exploitation of the rights embedded in a copyright, a mere user right is a limited right and consideration paid for such user right cannot be regarded as consideration for use of or right to use a copyright;
3. None of the suppliers have provided the assessee with source code or any technical documentation pertaining to software application. The intellectual property right associated with the software does not vest with the assessee but is retained by the concerned supplier. Hence the payments cannot be held for the use of copyright but the payment would be towards use of copyrighted article;
(iv) The appellant cannot sell license, distribute, pledge, lease, rent or commercially share (including timeshare) the above software or any rights therein.
(v) The appellant cannot modify, translate, reverse engineer, decrypt, decompile, disassemble, create directive works based on, or otherwise attempt to discover the above mentioned software source code or underlying ideas or algorithms.

There is no acquisition of copyright which remains the property with the supplier. Generally there are two types of softwares namely, "Unbranded software" which is specialised and exclusively custom made to cater to the ITA No. 926 & 927/Bang/2012 M/s. Shell India Markets Private Limited needs of individual clients, and "Branded software" or "off-the-shelf software"

From the plain reading of the article it can be inferred that, it refers to 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, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience. Thus, in order to tax the payment in question as "royalty", it is sine qua non that the said payment must fall within the ambit and scope of Para 4 of Article 12. The main emphasis on the payment constituting 'royalty' in Para 4 are for a consideration for the 'use of' or the 'right to use' any copyright.......... The key phrases "for the use" or "the right to use any copyright of'; "any patent.......; "or process", "or for information.........,"; "or scientific experience", etc., are important parameter for treating a transaction in the nature of "royalty". If the payment doesn't fit within these parameters then it doesn't fall within terms of "royalty" under Article 12(4). The computer software does not fall under most of the term used in the Article barring "use of process" or "use of or right to use of copyrights" Here first of all, the sale of software cannot be held to be covered under the word "use of process", because the assessee has not allowed the end user to use the process by using the software, as the customer does not have any access to the source code. What is available for their use is software product as such and not the process embedded in it. Several processes may be involved in making computer software but what the customer uses is the software product as such and not the process, which are involved into it. What is required to be examined in the impugned case as to whether there is any use or right to use of copyright? The definition of copyright, though has not been explained or defined in the treaty, however, the various Courts have consistently opined that the definition of "copyright" as given in the 'Copyright Act, 1957' has to be taken into account for understanding the concept. Section 14 of the said Act defines the 'copyrights' to mean as under:-