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"25. We have considered the rival arguments made by both the sides, perused the orders of the AO and DRP and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case is engaged in sale of licenses of its software product called as Project Management Software (PMS). The PMS is considered as a BI Tool i.e. Business Intelligence Tool. It assists the users to regulating effectively utilizing programmer's time on a collectives basis with efficiency. We find the amount received by the assessee from its customers for sale of software products / licenses were treated by the AO as royalty and he taxed the same at applicable rate of tax. According to the AO and Ld. DR the software is delivered at the site of the end customer. There is a specific role out plan and installation and implementation programme. During the same the employees of the customer are given training on how to use the same. The services including updates, maintenance support etc are part and parcel of the contract. Once the license is granted the assessee is responsible to maintain it as it is their proprietary product. After granting of license, the assessee keeps on billing the customers. The software for use of which the license is granted qualified to be technical and commercial equipment. The application of various tests as regards of right to ownership, copying, commercial exploitation etc. clearly establish that the grantee/ license practically steps into the shoes of the owner/grantor/licensor and he enjoys the copy right to the extent of its grant to the exclusion of others. Therefore, the consideration received by the assessee falls in the category of royalty both u/s. 9(1) (vi) of the IT Act, 1961 and article 12 (3) (a) and article 12 (3) (b) of Indo US DTAA.

25.1 It is the submission of the Ld. Counsel for the assessee that the assessee being a USA company enters into agreements with the customers for sale of licenses. As per various clauses in the agreement the assessee retains the ownership of intellectual property rights relating to the software licenses sold to customers. The assessee permits the customers to merely use the software licenses for their business need. The assessee restricts its customers from duplicating/ adopting etc of the software products. It is the submission of the Ld. Counsel for the assessee that the moment restrictions are put regarding copying/duplicating/ reproducing etc a copy right gets converted into a copy righted product. However, in the instant case, the assessee does not part with any copy right to the customers but merely extends a copy righted product to the customers. It is also his submission that unless and until a right protected under the copy right Act is not extended / shared with a party, and unless consideration is received for such a right, there is no case of any royalty for IT purpose. According to the Ld. AR the limb for sale / commercially rent as so made applicable for software, infact, ascribes copyright protection even in making of such use purpose copies. According to him the enhanced kitty of copyright protections for software, elevates the software family and makes the same highly protected from infringements. It is also his submission that the assessee has not transferred any rights for copying the softwares for commercial exploitation.

32. We find the coordinate Bench of the Tribunal in the case of Black Duck Software Inc Vs. DCIT reported in 86 taxman.com 62 has held that where assessee, a US based company, granted a non-exclusive, non-transferable software license to Indian customer for a specific time period, since copyright in said software programme was retained by assessee, payment received by it was not liable to tax in India as royalty.

33. We find the Delhi Bench of the Tribunal in the case of Aspect Software Inc Vs. ADIT reported in 61 taxmann.com 36 has held that consideration received by assessee for supply of 'contact solutions' used for better management, customer interaction, comprising of sale of hardware alongwith license of embedded software to end user is not royalty under article 12 of DTAA between India and USA. Provision of implementation and maintenance services are inextricably and essentially linked to supply of software; where supply of software is itself not taxable as 'royalty', these services are also not royalty.

8. Ld. DR has submitted that the Tribunal had not decided the issue of 'royalty' based on alternative position taken by the Assessing Officer which included PMS software as a patent/process/equipment, etc., and he has highlighted that in this case the payment is also for the consideration for use of 'process'. However, from the reading of the impugned assessment order, we find that it is not the case of the Assessing Officer that the software sold by the assessee involves any kind of 'process'. Assessing Officer has by and large discussed the various judgments and the stress upon the fact that the consideration is vis-a-vis for the use of; or the right to use as given in Article 12(3) and Indo-US DTAA and Explanation 4 to Section 9(1)(vi). It is not in dispute that the assessee is into the sale of project management software licenses to various customers and is providing copyright product on the sale basis. This software is downloaded from the internet and products with the licenses extended with the same and are basically in the nature of sale of Shrink wrapped software. No source code or any authority is extended to the customers for making any changes, duplication of the standard software products and it merely gives user license and no substantial right to reproduce or copyright software is given to the customers. Only restricted rights have been given to the customers. In any case, any retrospective amendment brought in the statute cannot be read into the articles of DTAA when no corresponding management in the bilateral treaty have been made. This precise issue stands covered by the decision of Hon'ble Jurisdictional High Court in the case of Nokia Networks OY and DIT vs. Infra Software (supra).