ITAT : Reliance Communication's software payments for wireless network operation, not royalty under DTAA

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