Software licence receipts for standard software are not royalty under the treaty when no copyright rights are transferred.

Software licence receipts from supply of standard software in object code form were treated as payments for a copyrighted article, not as consideration for any right to use copyright, process, or know-how. The Tribunal followed the Supreme Court in Engineering Analysis and held that, under the India-Singapore DTAA, such payments do not constitute royalty; the treaty definition prevailed over the wider domestic law position. On the same facts, related support-service receipts did not change that characterisation. The assessee's software-related receipts were therefore outside royalty taxation under the applicable treaty framework.

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Issues: Whether consideration received from sale of software licences and related support services was taxable as royalty or fee for technical services under the Income-tax Act, 1961 and the India-Singapore DTAA.

Analysis: The dispute turned on whether payments for standard software supplied in object code form created any right to use copyright, process, or know-how, or whether they were merely payments for a copyrighted article. The Tribunal noted that the issue had already been decided in the assessee's favour in earlier assessment years and that the Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd. had authoritatively held that consideration paid by resident end-users or distributors to non-resident software suppliers under such arrangements does not constitute royalty under the treaty. The Tribunal further observed that the treaty definition of royalty, being more beneficial, prevailed over the wider domestic law amendment, and that the factual position for the year under appeal was unchanged.

Conclusion: The software licence receipts were not taxable as royalty, and the related support receipts did not alter that position on the facts found. The Revenue's appeal failed and the assessee's appeal succeeded.

Final Conclusion: The assessee's software-related receipts were held to be outside the scope of royalty taxation under the applicable treaty framework, resulting in dismissal of the Revenue's challenge and acceptance of the assessee's claim.

Ratio Decidendi: Where software is supplied as a copyrighted article without conferring any right in the copyright, treaty provisions defining royalty govern and domestic law expansion of royalty cannot be applied to tax such receipts as royalty.

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