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A computer programme is a process when it executes instructions lying in it in passive state. Therefore, any consideration made for the use of process would amount to royalty. Explanation 2 has to be read as part and parcel of section 9(1)(vi) of the Act. Keshavji Ravji and Co. v. CIT [1990] 183 ITR 1 (SC) applied.

The second proviso to section 9(1)(vi) carves out an exception from the main section exempting lump sum payment made by a resident for the transfer of all or any rights (including the granting of a licence) in respect of computer software supplied by a non-resident manufacturer along with a computer or computer-based equipment under any scheme approved under the Policy on Computer Software Export, Software Export, Software Development and Training, 1986 of the Government of India. It cannot stand on its own and hence cannot be held a substantive provision. Therefore, section 9(1)(vi) from the very inception included computer software for the purposes of royalty. If royalty income from the use or the right to use or transfer of all or any right (including the granting of the licence) in respect of copyright in computer programme was not taxable under section 9(1)(vi) of the Act, Parliament would not have prescribed a special rate of income-tax in respect of royalty income in respect of any computer software under section 115A(1A). The provisions of section 9(1)(vi) have to be considered in the light of the provisions of section 115A(1A) of the Act. The use of the expressions "in respect of copyright in any book to an Indian concern" or "in respect of any computer software to a person resident in India" in section 115A(1A) shows that for the purposes of income-tax copyright in "computer software" is IT(IT)ANos.1190, 1295/Bang/2014, 2845, 949, 950/Bang/2017, IT(TP)A Nos.374, 466/Bang/2013, 68, 205, 1299/Bang/2015, IT(TP)A Nos. 69, 191/Bang/2014, 559, 881/Bang/2016, IT(TP)A No.387/Bang/2017 different from copyright in any "book" though both are literary works under the Copyright Act, 1957.

(vi) the rendering of any services in connection with the activities referred to in sub-clauses

(i) to [(iv), (iva) and] (v).

Explanation 3.---For the purposes of this clause, "computer software" means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme or any customized electronic data;

Explanation 4.--For the removal of doubts, it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium throuct which such right is transferred.

IT(IT)ANos.1190, 1295/Bang/2014, 2845, 949, 950/Bang/2017, IT(TP)A Nos.374, 466/Bang/2013, 68, 205, 1299/Bang/2015, IT(TP)A Nos. 69, 191/Bang/2014, 559, 881/Bang/2016, IT(TP)A No.387/Bang/2017 A computer programme is a literary work under the Copyright Act, 1957 and the consideration received will be in the nature of royalty if it is in respect of the transfer of all or any rights (including the granting of a licence) in respect thereof under clause (v) of Explanation 2 to section 9(1)(vi) of the 1961 Act. The definition of royalty in Explanation 2 to section 9(1)(vi) and article 12(3) of the Double Taxation Avoidance Agreement takes into its ambit both industrial as well as copyright royalties. It will not be appropriate to restrict the scope of the definition, of royalty under the income-tax law only on the ground that since computer programme has been provided protection under the Copyright Act, the provisions of other intellectual property rights laws will not be applicable. Therefore, section 9(1)(vi) from the very inception included computer software for the purposes of royalty. If royalty income from the use or the right to use or transfer of all or any right (including the granting of the licence) in respect of copyright in computer programme was not taxable under section 9(1)(vi) of the Act, Parliament would not have prescribed a special rate of income-tax in respect of royalty income in espect of any computer software under section 115A(1A). The provisions of section 9(1)(vi) have to be considered in the light of the provisions of section 115A(1A) of the Act. The use of the expressions "in respect of copyright in any book to an Indian concern" or "in respect of any computer software to a person resident in India" in section 115A(1 A) shows that for the purposes of krIcome-tax copyright "computer software" is different from copyright in any "book" though both are literary works under the Copyright Act, 1957. Therefore, once the consideration is received by a non-resident for the transfer or all or any rights including the granting of a licence in respect of a patent, invention, model, design, secret formula or process or similar property or any copy-right literary, artistic or scientific work, the consideration received shall be deemed to accrue or arise in India and will be taxable in India. Hence, by virtue of the amended Explanation to section 9(1)(vi) royalty income will be taxable in India whether or not the non-resident has a residence or place of business or business connection in India.
It has been universally accepted that a literary work is entitled to copyright and wherefore, a literary work is entitled to be registered as copyright. In India, the provisions of section 2(o) of the Copyright Act, 1957, defines "literary work" as under:
"'literary work' includes computer programmes, tables and compilations including computer databases"

Therefore, "computer software" has been recognized as copyright work is also. Having regard to the above said definition of "royalty", we have to consider• the contents of software licence agreement entered into by the nonresident with Samsung Electronics and also the respondents IT(IT)ANos.1190, 1295/Bang/2014, 2845, 949, 950/Bang/2017, IT(TP)A Nos.374, 466/Bang/2013, 68, 205, 1299/Bang/2015, IT(TP)A Nos. 69, 191/Bang/2014, 559, 881/Bang/2016, IT(TP)A No.387/Bang/2017 in the case represented by Sri Ganesh, learned senior counsel and Sri Aravind Dattar, wherein it is a case of purchase, sale or distribution or otherwise of the off-the-shelf software. It is described as a "software licence agreement", wherein it is averred that customer accepts an individual, non- transferable and non-exclusive licence to use the licenced software program(s) on the terms and conditions enumerated in the agreement. It is further averred that the customer-Samsung Electronics- shall protect confidential information and shall not remove any copyright, confidentiality or other• proprietary rights provided by the nonresident. However, what is granted under the said licence is only a licence to use the software for internal business without having any right for making any alteration or reverse engineering or creating sub-licences. What is. transferred under the said licence is the licence to use the software and the copyright continue to be Jvith the non-resident as per the agreement. Even as per the agreement entered into with the other distributors as also the end-user licence agreement, it is clear that the distributor would get exclufive non-transferable licence within the territory for• which he is appointed and he has got right to distribute via resellers the software, upon payment of the licences set forth in exhibit A to the agreement only to end users pursuant to a valid Actuate shrinkwrap or other actuate licence agreement and except as expressly set forth in the said agreement, distributor may not rent, lease, loan, sell or• otherwise distribute the software the documentation or any derivative works based upon the software or documentation in whole or in part. Distributor shall not reverse engineer, decompile, or otherwise attempt to derive or modem the source code for the software. The distributor shall have no rights to the software other than the rights expressly set forth in the agreement. The distributor shall not mods or• copy any part of the software or documentation. The distributor may not use subdistributors for firther distribution of the software and documentation without the prior consent of Actuate. What is charged is the licence fee to be paid by the distributor of the software as enumerated in exhibit A to the agreement. Further, clause 6.01 of the agreement dealing with title states that the distributor acknowledges that actuate and its suppliers retain all right, title and interest in and to the original, and any copies (by whomever produced), of the software or documentation and ownership of all patent copyright, trade mark, trade secret and other intellectual property rights pertaining thereto, shall be and remain the sole property of Actuate. The distributor shall not be an owner of any copies of, or any interest in, the software, but rather is licenced pursuant to the agreement to use and distribute such copies. Actuate represents that it has the right to enter into the agreement and grant the licences provided therein and confidentiality is protected. Therefore, on reading the contents of the respective agreement entered into by the respondents with the non-resident, it is clear that under the agreement, what is transferred is only a licence to use the copyright belonging to the non-resident subject to the terms and conditions of the agreement, as referred to above, and the nonresident supplier continues to be the owner of the copyright and all other intellectual property rights. It is well settled that copyright is a negative right. It is an umbrella of many rights and licence is granted for making use of the copyright in respect of shrink wrapped software/off-the-shelf software under the respective agreement, which authorizes the end user, i.e., the customer to make use of the copyright software contained in the said software, which is purchased off the shelf or imported as shrink wrapped software and the same would amount to transfer of part of the copyright and transfer of right to use the copyright for internal business as per the terms and conditions of the agreement. Therefore, the contention of the learned senior counsel appearing for the respondents that there is no transfer of copyright or any part thereof under the agreements entered into by the respondent with the nonresident supplier of software cannot be accepted ............