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2. In order to understand the facts and implications thereof on the issue involved, we will take up the appeal for the A.Y. 2006-07, wherein the Revenue has raised the following grounds:-

"1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the payment received by the assessee for network access and related services is payment for acquisition of copyrighted software and not for any copyright over such software and hence the payments have wrongly been held by the AO as royalty.

3.5.7 Under the Services Agreements, WIPRO and IBM have been granted the mere user right in the copyrighted software 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.

Shell International Techonology International BV.

7. The learned CIT(A) after considering the entire gamut of facts and submissions made by the assessee, observed that the agreement for supply of software provided to WIPRO/IBM was for mere use and access the copy righted software of the assessee. The assessee does not provide them the right to use the copy right embedded in the software; WIPRO/IBM are not either making copies or selling the software, except for the limited right to access the copyrighted software for its own business purpose. They do not acquire any right to exploit the copyright in the software. He further observed that "use of copyright" encompasses exploitation of the right embedded in the copyright. Such user right is just a limited right and consideration paid for such limited right cannot be considered as "use of right" to use a copyright. Hence, he came to the conclusion that payment received for allowing mere use of copyrighted article cannot be held as payment for royalty. He further held that 'royalty' as per treaty has a more restricted scope and definition than under the Act. After analysing sections 13 & 14 of the 'Copyright Act 1957', he held that no copyright as envisaged under this Act has been transferred. His relevant conclusion on this point reads as under:

"1.22 Examination of the agreement of the appellant with WIPRO/IBM reveals that the agreement forbids Wipro/IBM Shell International Techonology International BV.

from transferring or modifying the software. The agreement also forbids them decompiling, reverse engineering, disassembling or decoding the software. The agreement also provides that the end user shall use the software only for the operation and shall not sublicense or modify the software. The perusal of the agreement clearly reveals that WIPRO/IBM has got no right as envisaged in section -14 of the Copyright Act to duplicate the software, to issue copies of software in public or to reverse engineer, de compile or modify the software. Thus, sale of software by the Appellant to WIPRO/IBM cannot be said to be the transfer of the copyright either in part or in whole. Thus, consideration paid by WIPRO/IBM to Appellant for acquiring copy of software is not for the use of copyright or transfer of right to use of copyright. As mentioned above, copyright is different from the work in respect of which copyright subsist, WIPRO/IBM has only got a copy of software without any part of the copyright of the software. Thus, payment by WIPRO/IBM for acquiring copy of software does not amount to royalty within the definition of Article- 12(3) of the DTAA."