Software access and maintenance payments were not royalty or FTS where the treaty test of transfer or making available was unmet.

Limited user access to software was treated as consideration for access to copyrighted software, not a transfer of copyright or a right to exploit it, so the treaty definition of royalty was not met and the receipt was not taxable as royalty in India. Maintenance of existing software involved operational technical services, but the treaty protocol required that technical knowledge, experience, skill, know-how, or processes be made available to the recipient; that threshold was not satisfied, so the receipt was not taxable as fees for technical services. The broader domestic-law position yielded to the more beneficial treaty treatment.

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Issues: (i) Whether receipts for granting limited user access to software application constituted royalty under the Income-tax Act and the India-Sweden DTAA; and (ii) whether receipts for maintenance of existing software constituted fees for technical services under the Income-tax Act and the India-Sweden DTAA read with the India-Portugal DTAA protocol.

Issue (i): Whether receipts for granting limited user access to software application constituted royalty under the Income-tax Act and the India-Sweden DTAA.

Analysis: The payment was for limited access to copyrighted software and did not involve transfer of copyright or any right to exploit the copyright itself. The treaty definition of royalty required consideration for the use of, or the right to use, copyright, which was not satisfied. The beneficial treaty position prevailed over the broader domestic-law characterization.

Conclusion: The receipt was not royalty and was not taxable in India as royalty.

Issue (ii): Whether receipts for maintenance of existing software constituted fees for technical services under the Income-tax Act and the India-Sweden DTAA read with the India-Portugal DTAA protocol.

Analysis: The maintenance activity involved technical services, but the treaty test under the protocol required that technical knowledge, experience, skill, know-how, or processes be made available to the recipient. The services rendered were only operational maintenance and did not make available any enduring technical knowledge to the Indian recipient. Accordingly, the treaty restricted the scope of taxation below the domestic-law position.

Conclusion: The receipt was not fees for technical services and was not taxable in India as FTS.

Final Conclusion: The receipts in dispute were held outside the taxable ambit as royalty or fees for technical services under the applicable treaty provisions, so the additions made in assessment did not survive.

Ratio Decidendi: Where a DTAA is more beneficial than the Act, treaty definitions govern; limited software access without transfer of copyright is not royalty, and software maintenance services are not FTS unless technical knowledge is made available to the recipient.

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