Software licence receipts treated as payment for a copyrighted article, not royalty, under the India-Singapore tax treaty.

Consideration for sale of software licences was treated as payment for a copyrighted article, not royalty under section 9(1)(vi) of the Income-tax Act or Article 12(3) of the India-Singapore DTAA. The licences were non-exclusive and non-transferable, and customers obtained only restricted internal-use rights without any transfer of copyright or commercially exploitable rights. Domestic law amendments expanding the royalty definition could not enlarge the narrower treaty meaning, which remained applicable because it was more beneficial to the assessee. The receipt was therefore held not to be taxable as royalty.

---

---

Issues: Whether consideration received on sale of software licences was taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-Singapore DTAA, or was consideration for a copyrighted article.

Analysis: The software licences were granted on a non-exclusive, non-transferable basis, with the customers obtaining only restricted use for their own internal operations. No right in the copyright itself was transferred, and the purchasers were not given any of the commercially exploitable rights that constitute copyright. The domestic law amendments expanding royalty could not be extended to the treaty definition, which remained narrower and continued to govern because it was more beneficial to the assessee. The receipt was therefore characterised as payment for a copyrighted article and not for use of, or the right to use, copyright.

Conclusion: The software licence consideration was not royalty and was not taxable on that basis in the hands of the assessee.

---