fiogf49gjkf0d
New Page 3
Part C : Tribunal & AAR International Tax Decisions
8. Microsoft Corporation v. ADIT
ITA No 1331 to 1336 of 2008
Article 12(3) of India-US DTAA
S. 9(1)(vi) of Income-tax Act
A.Ys. : 1999-00 to 2004-05. Dated : 26-10-2010
Reliance Industries Ltd.
(2010) TII 154 ITAT-Mum.-Intl.
Article 12(3) of India-US DTAA
S. 9(1)(vi) of Income-tax Act
Dated : 29-10-2010
The Delhi Tribunal in the case of Microsoft
Corporation, US & its affiliates (2010 TII 141 ITAT-Del.-Intl.), recently
adjudicated on the issue whether the use of or the right to use (including the
granting of licence), in respect of computer program, amounts to royalty or
business profits (sale of copyrighted articles). In this case, the software
copies were sold/delivered to Indian distributors, who in turn, sold these
products to re-sellers/end users in India. Microsoft Corporation, being the
registered owner of Intellectual Property Rights (IPRs) in Microsoft software,
entered into an end-user licence agreement, directly with end-users. The
Tribunal, having regard to various agreements, observed that a copyrighted
article cannot be treated as a product, and the payments made are for the
licence granted in the copyright and other IPRs in the product, and will amount
to ‘royalty’ under the Income-tax Act, 1961 and the India-US tax treaty.
However, in the case of Reliance Industries Ltd, on
the issue of whether consideration paid to a US resident for licensing of
computer software would be in the nature of ‘royalty’, the Mumbai Tribunal held
that the payment was for the purchase of a copyrighted article and not the
copyright itself. Furthermore, the Mumbai Tribunal stated that it is incorrect
to hold that computer software on a media continues to be an intellectual
property right. Therefore, the payment made for the purchase of software cannot
be termed as ‘royalty’.
