2022 (7) TMI 1496

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....-10. The appeal had been admitted on the following substantial question of law vide order dated 26th August, 2014:- "Whether the Income Tax Appellate Tribunal was right in holding that the payments received were taxable as royalty as per Section 9(1)(vi) or Article 12 of the Double Taxation between India and United States of America? In the opinion of this Court, the aforesaid issue is no longer res integra as the Supreme Court in Engineering Analysis Centre of Excellence Private Limited vs. Commissioner of Income Tax and Anr., (2021) SCC OnLine SC 159 has held as under:- "...4. The appeals before us may be grouped into four categories: (i) The first category deals with cases in which computer software is purch....

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....t, and that there was no justification for the use of the doctrine of noscitur a sociis to confine the transfer by way of a licence to only include a licence which transferred rights in respect of copyright, by referring to explanation 2 to section 9(1)(vi) of the Income Tax Act. It then held: "Considerable arguments are raised on the so-called distinction between a copyright and copyrighted articles. What is a copyrighted article? It is nothing but an article which incorporates the copyright of the owner, the assignee, the exclusive licensee or the licencee. So, when a copyrighted article is permitted or licensed to be used for a fee, the permission involves not only the physical or electronic manifestation of a programme, but als....

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.... definition contained in the DTAA, as per section 90(2) of the Income Tax Act read with explanation 4 thereof, and Article 3(2) of the DTAA. Further, the expression "copyright" has to be understood in the context of the statute which deals with it, it being accepted that municipal laws which apply in the Contracting States must be applied unless there is any repugnancy to the terms of the DTAA. For all these reasons, the determination of the AAR in Citrix Systems (AAR) (supra) does not state the law correctly and is thus set aside. xxxx xxxx xxxx 173. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to nonresident computer software manufacturers/suppliers, as co....