Software licence payments and royalty classification required fresh examination of contractual rights and treaty position.

Payments for software licences required determination of whether the rights acquired amounted to royalty or merely purchase of copyrighted articles. The existing findings were insufficient because the licence agreements had not been examined against their contractual terms, and the widened domestic definition of royalty, together with the relevant treaty position, had to be considered. The matter was therefore remitted for fresh adjudication on merits after examining the agreements and giving the assessee a proper opportunity of hearing.

---

---

Issues: Whether the payments made for software licences were royalty or payments for copyrighted articles, and whether the matter required remand for fresh consideration.

Analysis: The dispute turned on the nature of the rights acquired under the licence agreements, which had not been examined by the lower appellate authority with reference to the contractual terms. The scope of royalty under the domestic law had also been widened by the retrospective amendments introducing Explanations (iv) and (v) to section 9(1)(vi), and the corresponding treaty position was also relevant. As the decisive question was whether there was a transfer of copyright rights or merely purchase of a copyrighted article, the existing findings were found insufficient for final adjudication.

Conclusion: The matter was remitted to the first appellate authority for fresh decision on merits after examining the licence agreements and after granting the assessee adequate opportunity of hearing.

---