Software access and support receipts were not royalty or fees for technical services under the Act or treaty.

Receipts from granting limited user access to software and providing related IT support were held not to constitute royalty because payment for a copyrighted article, without any transfer of copyright, does not amount to royalty. The Tribunal also held that the domestic law amendment to the royalty definition could not be read into the India-Sweden treaty where the treaty term remained unchanged. On the same reasoning, the consideration for software and connected support services was not taxable as fees for technical services under either the Act or the treaty.

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Issues: Whether the receipts from grant of limited user access to software and related IT support services were taxable as royalty or fees for technical services under the Income-tax Act, 1961 and the India-Sweden tax treaty.

Analysis: The Tribunal followed its earlier view that payment for purchase or use of a copyrighted article, without any transfer of copyright, does not amount to royalty. It held that the domestic law amendment to the definition of royalty could not be extended to the treaty where the treaty term had not been correspondingly amended. Applying the same reasoning to the assessee's receipts, the Tribunal concluded that the consideration for software services and connected support services did not fall within royalty or fees for technical services under the Act or the treaty.

Conclusion: The receipts were not taxable as royalty or fees for technical services, and the assessee succeeded on the merits issue.

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