Software sale receipts are not royalty where only copyrighted articles are transferred, not copyright rights.

Consideration for supply and distribution of copyrighted software products was treated as payment for sale of a copyrighted article, not for transfer of copyright rights. On that legal distinction, the receipts were not taxable as royalty under Article 12 of the India-Ireland DTAA or under section 9(1)(vi) of the Income-tax Act. The analysis also noted that the same issue had already been resolved in the assessee's favour for an earlier year by applying jurisdictional High Court rulings. Because the treaty position was more beneficial, the domestic deeming provision did not require separate examination.

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Issues: Whether consideration received for supply and distribution of copyrighted software products was taxable as royalty under Article 12 of the India-Ireland DTAA and section 9(1)(vi) of the Income-tax Act, 1961.

Analysis: The receipt was for transfer of copyrighted software product and not for transfer of any copyright. The same issue had already been decided in the assessee's own case for the earlier assessment year by following the jurisdictional High Court decisions. The binding legal distinction is between use of copyright and sale of copyrighted article. Since no copyright rights were transferred to the distributor or end user, the amount received from sale of software could not be characterised as royalty. As the treaty provisions were more beneficial, there was no need to examine the matter under the domestic deeming provision.

Conclusion: The software sale receipts were not taxable as royalty; the issue was decided in favour of the assessee.

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