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National Stock Exchange of India Ltd, ITA no.7735/Mum./2011

(v) The appellant cannot modify, translate, reverse engineer, decrypt, decompile, disassemble, create directive works based on, or otherwise attempt to discover the above mentioned software source code or underlying ideas or algorithms. There is no acquisition of copyright which remains the property with the supplier. Generally there are two types of softwares namely, "Unbranded software" which is specialised and exclusively custom made to cater to the needs of individual clients, and "Branded software" or "off-the-shelf software" which is standardised and marketed as such. When off-the-shelf software is sold there is no doubt that the essence of such transaction is an outright sale. The said software purchased by the appellant company is "off the shelf" software/Shrink wrapped Software. The appellant company is authorized to use only the software and cannot tamper/copy/sale the same to any other person. The said software is delivered electronically by downloads from the respective websites. Activation key/code is then e-mailed for initialization. Software is then installed by putting the activation key/code and prompt-based installation is done thereafter. Thus, the appellant company does the installation by itself and no onsite support is provided by any of the vendors. Source code is not made available to the appellant company and it is provided with Activation code only for installation. Therefore, the appellant company does not have any copyright to give it forward to National Stock Exchange of India Ltd, ITA no.7735/Mum./2011 any other person to use. The transfer of licensed software cannot be considered as 'Royalty' within the meaning of Article 12(3) of the India-US Tax Treaty.

or "use of or right to use of copyrights" Here first of all, the sale of software cannot be held to be covered under the word "use of process", because the assessee has not allowed the end user to use the process by using the software, as the customer does not have any access to the source code. What is available for their use is software product as such and not the process embedded in it. Several processes may be involved in making computer software but what the customer uses is the software product as such and not the process, which are involved into it. What is required to be examined in the impugned case as to whether there is any use or right to use of copyright? The definition of copyright, though has National Stock Exchange of India Ltd, ITA no.7735/Mum./2011 not been explained or defined in the treaty, however, the various Courts have consistently opined that the definition of "copyright" as given in the 'Copyright Act, 1957' has to be taken into account for understanding the concept. Section 14 of the said Act defines the 'copyrights' to mean as under:-