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5. The assessee had contended before the AO that the software embedded in the telecom equipment or provided to the customers separately, or software supplied to the various customers in India should not be treated as royalty under Section 9(1) (vi) of the Act and also under Article 12 (3) of the DTAA. The assessee had argued that:

a) Software is sold in the same manner as telecom equipment,

b) The software is an integral part of the telecom equipment, which facilitates running of the said equipment.

c) The subject software has no independent value of its own.

d) No copyrights in the software are transferred to the customers.

e) No access to the "source codes" in the software is granted to the customer.

f) Payment for software is not related to the productivity, use or number of subscribers.

g) Customers do not have the right to commercially exploit the software.

h) Software supply is in the nature of transfer of copyrighted article and not transfer of "a copyrighted right".

13. It was urged on behalf of the revenue that the term "copyrighted article" is not defined in the Indian Copyright Act. The assessee has assigned the customers "the right to use the software". Such assignment meant that the customers were given the "right to use the copyrighted right in the software." It was urged, furthermore that right and title passed to the customer in the case of hardware but not in the case of software. In terms of the contract between the assessee and the customers, the buyer has no title or ownership rights. The buyer could neither license nor sell nor alienate or part with its possession. In view of this the said transaction is not a sale under Sale of Goods Act but is a limited right to use the software and hence the payment for the same is a form of royalty. It was stressed that as the agreement specifically provided for licensing of the software, such licensing amounted to transfer of copyright and not merely transfer of copyrighted article as is the contention of the assessee.

inhere in the owner of copyright of a computer programme. Therefore, the copyright owner's rights are spelt out comprehensively by this provision. In the context of the facts of this case, the assessee is the copyright proprietor; it made available, through one time license fee, the software to its customers; this software without the hardware which was sold, is useless. Conversely the hardware sold by the assessee to its customers is also valueless and cannot be used without such software. This analysis is to show that what was conveyed to its customers by the assessee bears a close resemblance to goods- significantly enough, Section 14 (1) talks of sale or rental of a "copy". The question of conveying or parting with copyright in the software itself would mean that the copyright proprietor has to assign it, divesting itself of the title implying that it has divested itself of all the rights under Section 14. This would mean an outright sale of the copyright or assignment, under Section 18 of the Act. Section 16 of the Copyright Act enacts that there cannot be any other kind of right termed as "copyright".