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4. On merits, the assessee drawing support from the terms and conditions of its respective „agreements‟ with its non-exclusive resellers/distributors for the Indian territory, viz. (i). M/s Trimble Solutions India Private Limited (earlier known as Tekla India Pvt. Ltd.); and (ii). M/s DowCoMax Services India Limited, had submitted before the A.O that it exclusively owned all the Intellectual Property Rights (IPR) in relation to the software and had merely granted the distributors the right to distribute a copyrighted article and not the copyright in the article. Accordingly, it was the claim of the assessee that the distributors did not use or had any right to use the copyright in the software programme. Referring to Article 12 of the India-Finland tax treaty, it was submitted by the assessee that the definition of the term „royalty‟ therein envisaged receipt of payments of any kind as a consideration for the use of or the right to use certain specific works which could include intellectual properties (such as copyright, patents etc.) by the owner of such intellectual properties from any other person. Also, it was submitted by the assessee that the India-Finland tax treaty did not contain a definition of such intellectual properties that were included within the scope of „royalty‟. As such, it was the claim of the assessee that the software products provided to its distributors was for the purpose of resale/distribution to the end user customers for use as a „copyrighted article‟ (i.e software products) and there was no right to use the copyright embedded in the software. On the basis of the aforesaid facts, it was submitted by the assessee that the amounts received from its distributors were not in the nature of „royalty‟ but in the nature of sales revenue that was collected from them. It was submitted by the assessee, that for the purpose of categorizing an income from a transaction as amounting to „royalty‟ what is to be seen is as to whether the transferee has the right of commercial exploitation of the Intellectual property contained therein. It was claimed that as the assessee had only granted the right to distribute the software products and not any right to reproduce or make copies of the software product, therefore, the amounts received from its distributors could not be held a „royalty‟ in its hands. Also drawing support from the Copyright Act, it was submitted by the assessee that a transfer of the material object (i.e the software product) which is the subject of copyright did not necessarily involved a P a g e |6 ITA No.6481 & 6482/Mum/2017 A.Ys 2010-11 & 2011-12 M/s. Trimble Solutions (earlier known as 'Tekla Corporation) transfer of the copyright. Accordingly, it was the claim of the assessee that the right acquired by the transferee from the sale of the software was to use the „copyrighted article‟ (i.e software product) and not the „right to use‟ the copyright embedded in the software. In order to support its aforesaid claim, the assessee also relied on Para 14.4 of the OECD Commentary. As such, it was the claim of the assessee that the payments received by the assessee from its distributors for sale of a copyrighted article did not tantamount to „royalty‟ under the provisions of India-Finland tax treaty. As regards the exigibility to tax of the amounts received by the assessee from its distributors, it was submitted by the assessee that as the term „royalty‟ has been defined under Article 12 of the India-Finland tax treaty, therefore, the insertion of „Explanation 4‟ to Sec. 9(1)(vi) of the Act, vide the Finance Act, 2012 w.r.e.f 01.06.1976 cannot be read into the India-Finland tax treaty by resorting to Article 3 of the India-Finland tax treaty. As such, it was submitted by the assessee that the beneficial provisions of the tax treaty would be applicable as per the provisions of Sec. 90(2) of the Act. In sum and substance, it was the claim of the assessee that as per the beneficial provisions of the India-Finland tax treaty, the payments received from its distributors for sale of off-the shelf software license cannot be held to be in the nature of „royalty‟ payment. However, the A.O was not persuaded to subscribe to the aforesaid claim of the assessee. On the basis of reliance placed on certain judicial pronouncements the A.O rejected the claim of the assessee that the payments for off-the-shelf software were towards sale of a "copyrighted article". It was observed by the A.O that the payments received by the assessee from its distributors were in nature of „royalty‟ for certain reasons, viz. (i). that, Sec. 14 of the Copyright Act stated that transfer or use of a copyright in a computer program manifests itself in - (a). allowing the computer program to be stored on a medium by electronic means; or (b). selling or providing the computer program on commercial rental. Accordingly, the A.O was of the view that a mere grant of any right in a copyright as mentioned in Sec. 14 of the Copyright Act would suffice to fulfil the condition of clause (v) of Explanation 2 to Sec. 9(1)(vi) of the Act. It was observed by the A.O, that the acts of the assessee and the distribution under the „agreements‟ to the end user customers through its distributors indicated the transfer or use of some of the copyrights as mentioned in Sec. 14 of the Copyright Act by the assessee to the distributors. Also, relying upon the Explanation 4 and 5 to Sec. 9(1)(vi), as had been made available on the statute vide the Finance Act, 2012 w.r.e.f P a g e |7 ITA No.6481 & 6482/Mum/2017 A.Ys 2010-11 & 2011-12 M/s. Trimble Solutions (earlier known as 'Tekla Corporation) 01.06.1976, the A.O was of the view that after the amendment it could safely be concluded that transfer of all or any rights to use a computer software (including the grant of a license) fell within the ambit of the term „royalty‟ under Sec. 9(1)(vi) of the Act. Further, the A.O was of the view that the definition of „royalty‟ under Article 12 of the India-Finland tax treaty was similar to the definition of „royalty‟ under the provisions of the Act, and the insertion of Explanations 3, 4, 5 and 6 to the definition of „royalty‟ under the Act had not expanded the scope of „royalty‟ under the India-Finland tax treaty. Further, the A.O observed that the doctrine of updating construction was required to be applied to the tax treaty and to the terms appearing in the tax treaty which not having been expressly defined in the treaty were to be understood with the changing environment.