Software access charges and managerial support fees were not treated as royalty or technical services under the treaty.

Receipts from General Business Support Services were held not to be fees for technical services because the cost contribution arrangement involved managerial support that did not make available technical knowledge, experience, skill, know-how or processes under the treaty; the addition was deleted. Receipts for access to and maintenance of SUN and GSAP software, including licence, Go-Live and application access charges, were held not to be royalty because royalty arises only on use of, or right to use, copyright, not mere use of copyrighted software, and the treaty definition prevailed over the domestic deeming rule; those additions were also deleted. The common issues were thus decided partly in favour of the assessee.

---

---

Issues: (i) Whether receipts from General Business Support Services constituted fees for technical services; (ii) whether receipts towards access to and maintenance of SUN and GSAP software, including GSAP licence, Go-Live and application access charges, constituted royalty.

Issue (i): Whether receipts from General Business Support Services constituted fees for technical services.

Analysis: The issue was covered by the earlier decision in the assessee's own case, which had followed the jurisdictional High Court's ruling quashing the advance ruling relied upon by the Revenue. The services under the cost contribution arrangement were managerial in nature and did not satisfy the treaty requirement of technical or consultancy services that make available technical knowledge, experience, skill, know-how or processes. The Revenue did not place any material to distinguish the facts for the years under appeal.

Conclusion: The receipts from General Business Support Services did not constitute fees for technical services and the addition was deleted, in favour of the assessee.

Issue (ii): Whether receipts towards access to and maintenance of SUN and GSAP software, including GSAP licence, Go-Live and application access charges, constituted royalty.

Analysis: The governing principle from the Supreme Court decision on computer software was applied, namely that royalty arises only where there is use of, or right to use, copyright and not merely use of copyrighted software. The treaty definition under Article 13 was more beneficial than the domestic deeming provision, and section 90(2) required the treaty to prevail. On the facts, the payments were cost allocations on a cost-to-cost basis for access to software and related implementation or maintenance support, and did not create any right in the copyright itself.

Conclusion: The receipts towards SUN and GSAP software-related charges were not royalty and the additions were deleted, in favour of the assessee.

Final Conclusion: The common issues were decided partly in favour of the assessee, and the additions founded on fees for technical services and royalty treatment were set aside to that extent.

Ratio Decidendi: Managerial support services that do not make available technical knowledge, skill or know-how are not fees for technical services under the treaty, and payments for use of copyrighted software, without transfer of copyright or any right in it, are not royalty where the treaty definition is more beneficial than the Act.

---