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Pa g e | 3 Ixia Technologies International Ltd.

Assessment Year:2013-14 The buyer's right to use the software is absolute and is perpetual i.e. forever. The buyer thus becomes the owner of that copy of the software with limitations like the buyer cannot resale the software. The buyer can customise the software to suit it needs but cannot modify the software the software are generally encrypted, only exe files are sold, source code remains with the seller. Hence it is not possible for the buyer to modify or make any change in the software. It is similar to purchase of copyrighted book with additional condition that the book cannot be further resold or rented. The A.O has mentioned that sale of software is covered under Section 9(1 )(vi) of the Act. Article 12(3) of the DTAA between India and Ireland. Article 12(3) of the DTAA between India and Ireland reads as under:

8. On the other hand, the ld. DR for the Revenue submitted before us that the assessee company sold software licenses to Indian customers and the assessing officer has rightly observed that the sale of software was not merely licensing of software. As per the sales invoice the assessee transferred right to use the software forever. Terms and conditions of sales as mentioned in the sale invoices clearly speak that it is royalty arrangement. The ld DR pointed out that the buyer's right to use the software is absolute and is perpetual i.e. forever. The buyer thus becomes the owner of that copy of the software with limitations like the buyer cannot resale the software. The buyer can customize the software to suit it needs but cannot modify the software, the software are generally encrypted, only exe files are sold, source code remains with the seller. Hence it is not possible for the buyer to modify or make any change in the software. It is similar to purchase of copyrighted book with additional condition that the book cannot be further resold or rented. Therefore, the sale of software is covered under amendedsection9(1)(vi) of the Act, thus it is a 'royalty'. The term "royalties" means payments of any kind received as a consideration for the use of or the right to use, any copyright of literary artistic or scientific work, hence the AO has rightly concluded that the Sale of Software was nothing but receipt of royalty as per section 9(1) of the Income Tax Act and therefore, the addition of Rs. 9,84,51,776/- made by the AO should be sustained.