Retrospective amendment cannot override treaty; Sale of copyrighted article not taxable as royalty (Director of Income-tax v. Nokia Networks OY)

Retrospective amendment cannot override treaty; Sale of copyrighted article not taxable as royalty (Director of Income-tax v. Nokia Networks OY)

Question of “copyrighted article” or actual copyright docs not arise in the context of software both in
the DTAA and in the Income Tax Act since the right to use simpliciter of a software program itself is
a part of the copyright in the software irrespective of whether or not a further right to make copies is
granted. The decision of the Delhi Bench of the ITAT has dealt with this aspect in its judgment in
Gracemac Co. v. ADIT 134 TTJ (Delhi) 257 pointing out that even software bought off the shelf, does
not constitute a “copyrighted article” as sought to be made out by the Special Bench of the ITAT in
the present case. However, the above argument misses the vital point namely the assessee has opted to
be governed by the treaty and the language of the said treaty differs from the amended Section 9 of
the Act. It is categorically held in CIT v. Siemens Aktiongesellschaft, 310 ITR 320 (Bom) that the
amendments cannot be read into the treaty. On the wording of the treaty, we have already held in
Ericsson (supra) that a copyrighted article docs not fall within the purview of Royalty.

Please click on the link below to view the judgement

Income Tax Case Law-Retrospective amendment cannot override treaty; Sale of copyrighted article not taxable as royalty

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