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4. That the AOand DRP have erred on facts and in law in failing to appreciate that the Appellant's revenues are derived from the sale of a copyrighted article, namely a computer program, and as such there is no transfer of any 'right to use' of the copyrighted in such article, and therefore the same ought not constitute royalty under the provisions of Article 12(3) of the Treaty.
5. That the AOand DRP erred on facts and in law in failing to appreciate that Article 12 of the Treaty provides for an exhaustive definition of 'royalty' and does not include payments for use or right to use a computer software, and therefore the revenues earned by the Appellant in the present case ought not to be taxable in India.

users.4

iii) The third category concerns cases wherein the distributor happens to be a foreign, non-resident vendor, who, after purchasing software from a foreign, non-resident seller, resells the same to resident Indian distributors or end-users.5

iv) The fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or end-users.6 "

101. The High Court of Karnataka, in a judgment impugned in various appeals before us, namely, CIT v. Samsung Electronics Co. Ltd., (2012) 345 ITR 494, also held that what was sold/licensed by way of computer software, included the grant of a right or interest in copyright, and thus gave rise to the payment of royalty, which then required the deduction of TDS. The reasoning of this judgment under appeal is set out as follows:
"...Accordingly, we hold that right to make a copy of the software and use it for internal business by making copy of the same and storing the same in the hard disk of the designated computer and taking back up copy would itself amount to copyright work under section 14(1) of the Act and licence is granted to use the software by making copies, which [would], but for the licence granted, have constituted infringement of copyright and the licensee is in possession of the legal copy of the software under the licence. Therefore, the contention of the learned senior counsel appearing for the respondents that there is no transfer of any part of copyright or copyright and transaction only involves sale of copy of the copyright software cannot be accepted.