Mumbai ITAT rules that
payment by Reliance Communication Ltd. (‘assessee’) to non-resident vendors
(based in Australia, Israel, Sweden, Singapore and USA) for supplying software,
not royalty under respective DTAA, holds it as payment for 'copyrighted
article' and not ‘copyright’ itself; Observes that all software license agreements
stipulate that the assessee would be using the software for ‘operation of its
wireless network only’ and it was prevented from utilizing the software for
commercial uses; Further, observes that copyrights in the software were not
transferred to the customers and access to the ‘source codes’ in the software
was not granted to assessee, also there was restriction on copying the
software; Moreover, ITAT observes that in individual supplier's hands (i.e.
Nortel Networks India International Inc. USA, Team Telecom International Ltd.,
Israel, Motorola Inc USA, Alcatel USA International Marketing Inc USA, ZTE
Corporation China and Ericsson AB Sweden), the Courts / Tribunals have held
that sums received by them from assessee for supply of software for wireless
network were not taxable and that the payments could not be termed as royalty;
Cites plethora of rulings including Madras HC ruling in Neyveli Lignite
Corporation Ltd., Delhi HC ruling in Asia Satellite Telecommunications Co.Ltd.,
rejects Revenue’s reliance on Karnataka HC ruling in Samsung, relies on SC
ruling in Pradip J. Mehta to hold that when two views were possible, then the
interpretation in favour of the taxpayer should be adopted:ITAT
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