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It can be, therefore, noticed that computer software, as an intangible item, has intellectual property right (IPR) embedded therein belonging to the developer/author of the software and the Indian Copyright law does recognize this position, as referred to above.

(5.4) In the present case, it is submitted that, as mentioned earlier, it is an admitted fact that the appellant has imported software under end user license agreement' which is a legal agreement entered into between the appellant-importer and the exporter of the software. Such a software license agreement so entered into is the most common form of agreement entered into in respect of the software. Under such an agreement, the developer of the software licenses its intellectual property in the software in favour of the licensee. As a result of such agreement, the licensor-developer of the software retains ownership over the copyright in the software and licensee out certain rights for use of such software in favour of the licensee such as the appellant. The appellant has placed on record the software license agreement with M/s Telelogic end with M/s OSS Nokalva Inc. (The related and relevant terms of the agreement with M/s Telelogic are reproduced elsewhere).

It can be noticed on a perusal of the foregoing terms and conditions of the software license agreement entered into between the appellant and the exporter of the software that by virtue of such license agreement, the appellant acquires the right to use the copyrighted software, Indeed, the software are imported under end user license agreement constituting a binding agreement between the appellant and the developer of the copyrighted software whereby in terms of such agreement, the appellant has acquired the right to use the copyrighted article. At this stage, it is relevant to note the peculiarity of the computer software is that it is not sold in the ordinary sense like any traditional goods or article. By licensing the software and through the medium of the licensing agreement, the owner of the copyrighted software enables the licensee to use the software. In other words, through the end user license agreement, software developers take care to ensure that their intellectual creation does receive its due share of protection and as per the terms of such agreement the persons procuring such software are contractually bound to certain obligations as stipulated thereto. In the present case, the appellant is the recipient of the right to use the software. The end user licensing agreement undoubtedly enable the appellant to use the software. This being the factual position, it is not tenable for the appellant to contend that the acquisition of the software by them does not entail or involve the right to use the software in question. The CIT(A), while passing the order, has addressed to this pertinent issue and has recorded a positive and categorical finding on the basis of the end user license agreements to the effect that by virtue of there being a right conferred on the importer a right to use the software, the consideration paid by the appellant partakes the character of royalty. The finding recorded by the CIT(A) does not suffer from any infirmity at all.

13. It appears that the argument of the learned counsel appearing on behalf of the assessee that by acquiring the software, the assessee had only received a copy of the copyrighted article and this argument has been accepted by the Revenue in its submission which is quoted below :

"It can be noticed on a perusal of the foregoing terms and conditions of the software license agreement entered into between the appellant and the exporter of the software that by virtue of such license agreement, the appellant acquires the right to use the copyrighted software. Indeed, the software are imported under end user license agreement constituting a binding agreement between the appellant and the developer of the copyrighted software, whereby, in terms of such agreement, the appellant has acquired the right to use the copyrighted article. At this stage, it is relevant to note the peculiarity of the computer software in that it is not sold in the ordinary sense like any traditional goods or article. By licensing the software and through the medium of the licensing agreement, the owner of the copyrighted software enables the licensee to use the software. In other words through the end user license agreement software developers take care to ensure that their intellectual creation does receive its due share of protection and as per the terms of such agreement the persons procuring such software are contractually bound to certain obligations as stipulated thereto. In the present case, the appellant is the recipient of the right to use the software. The end user licensing agreement undoubtedly enables the appellant to use the software. This being the factual position, it is not tenable for the appellant to contend that the acquisition of the software by them does not entail or involve the right to use the software in question. The CIT(A), while passing the order has addressed to this pertinent issue and has recorded a positive and categorical finding on the basis of the end user license agreements to the effect that by virtue of there being a right conferred on the importer a right to use the software, the consideration paid by the appellant partakes the character of royalty. The finding recorded by the CIT(A) does not suffer from any infirmity at all."

18. On perusal of the agreement between the parties, we are of the view that in the present case also what the assessee had acquired is only a copy of the copyrighted articles i.e., software, whereas the copyright remains with the owner, i.e., foreign parties. The decisions relied upon by the learned Departmental Representative are distinguishable on facts of the case.

19. From the aforesaid discussion, we find that the incorporeal right to software i.e., copyright remained with the owner and the same was not transferred to the assessee. We have also noticed the definition of 'royalty' in the DTAA, which has been quoted above. The primary condition for bringing within the definition of 'royalty' in DTAA is that the payments of any kind received as consideration for the use of or right to use any copyright of a literary, artistic or scientific work, etc. Right to use of a copyright is totally- different from right to use the programme embedded in a cassette or CD or it may be a software.