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7(i) The learned counsel pointed out that acquisition of software component is, therefore, inextricably linked to the acquisition of hardware. None of its units can function independently. The learned counsel pointed out that considering, these facts, there was absolutely no obligation on the part of the assessee to deduct tax at source. The learned counsel explained that so far as the supply of hardware component is concerned, there could be no question of any royalty embedded therein and the provisions of Section 9(1)(vi) do not apply to the facts of the case. It was pointed out that the assessee is not supposed to use software item, which the assessee is required to integrate into the hardware, in any other transaction of activity. The learned counsel pointed out that the entire software is customer-made i.e., to the requirement of a particular buyer. The question of its being used in any other equipment is simply out of place. Even the equipment that is imported for one particular exchange cannot be used in any other exchange. The learned counsel further pointed out that the assessee cannot even duplicate the software for any subsequent use. The ITO (TDS), the learned counsel pointed out, is not justified in treating the acquisition of software that is supplied as patent or invention or a scientific work or a secret formula or process and also erred in treating the payment made for acquisition of the same as in the nature of royalty within the meaning of Section 9(1)(vi) of the Act. The learned counsel pointed out that the software that is supplied in the facts of the case is an integral part of the equipment supplied and the consideration paid for such acquisition is not consideration for the use of or the right to use any industrial, commercial or scientific equipment within the meaning of Article 12(3)(b) of the DTAA entered into between India and US. The learned counsel pointed out that the transaction between the assessee and Lucent, USA, is a transaction for purchase of switching system including parts and components thereof. The software that is purchased is an integral part of the switching system and there is no dispute that the payment made by the assessee for purchase of hardware is not exigible to tax in India inasmuch as the transfer of hardware took place outside India. On a parity of reasoning, as the transfer of the software has also taken place outside India there can be no accrual in respect of the same in India. The learned counsel went on to make a distinction between 'copyrighted article' and 'copyright' rights. The learned counsel illustrated it in the form of purchase of book or a music cassette. In a transaction like this, what is purchased is a copyrighted article, the copyright belonging to the author or the singer as the case may be. The purchaser has no right whatsoever to duplicate or make copies of the work that is purchased. This distinction was again demonstrated with an example viz., if an Indian publisher imports several copies of a book for the purpose of sale in India it would amount to the purchase of a copyrighted article. But if publisher acquires a right to publish in the book in India and thereafter makes copies for the purpose of sale the payment made for acquiring the right would be regarded as a royalty. In the present case, the learned counsel pointed out, all that the assessee has acquired is certain software, which is to be integrated into the hardware that is purchased and thereafter to sell the equipment as a whole. The assessee has no right to duplicate or utilize the software purchased in any other switch that it may sell. It is not disputed that for each switching system sold by the assessee, a corresponding acquisition both of the hardware as well as the software is made from Lucent, USA. The learned counsel pointed out that a certificate issued by the Lucent, USA, wherein it has been clarified that the assessee had no legal authority to duplicate or the software either for the purpose of distribution or resale. A copy of the certificate is kept in the paper book. The distinction between the purchase of a copyrighted article and copyright rights is borne out by the preamble. The learned counsel went on to impress that the distinction between 'copyrighted article' and 'copyright rights' is borne out by the preamble and final regulations and classification of transaction involving computer programs published by the Internal Revenue Service of the Government of the United States. The said document is also placed in the paper book. It was pointed out that a transaction involving the transfer of computer program is treated as either being a transfer of a copyright article in the computer program or a transfer of a copy of the computer program (copyrighted article). It is therefore, clarified that a transfer of a computer program is classified as a transfer of a copyright if, as a result of the transaction, a person acquires either a right to make copies of the computer program for purpose of distribution to public, or the right to prepare a derivative computer program based on the copyrighted computer program or the right to publicly display the computer program. If, on the other hand, a person acquires a copy of the computer program but does not acquire any of the rights referred to hereinbefore, then, the transaction has to be classified as a transfer of a copyrighted article. It was submitted that on the basis of the distinction drawn, it would be clear that what the assessee has acquired is a copyrighted article and accordingly the consideration that is paid thereof has to be regarded as a purchase price and not a payment by way of royalty.