FEE FOR SOFTWARE IS NOT ROYALTY & TDS U/S 195 NOT REQUIRED

The effect of the judgements in Tata Consultancy Services vs. State of AP 271 ITR 401 (SC), Samsung Electronics Co 94 ITD 91 (Bang), Motorola Inc 95 ITD 269 (SB) & Dassault Systems 229 CTR 105 (AAR) is that the primary condition for coming within the definition of 'royalty' is that the payment must be received as consideration for the use of or right to use any copyright of a literary, artistic or scientific work etc. A 'right to use the copyright' is totally different from the 'right to use the programme embedded in a CD'. In acquiring a ready made off- the-shelf computer programme, no right was granted to the assessee to utilize the copyright of the computer programme. The assessee had merely purchased a copy of the copyrighted article, namely, a computer programme which is called 'software'. Computer software when put into a media and sold becomes goods like any other audio cassette or painting on canvas or book. Accordingly, the amount paid by the assessee towards purchase of the software cannot be treated as payment of "royalty" so as to be taxable in India under Article 12 of the DTAA and the assessee was not liable to deduct tax at source.