Payment for copyrighted goods not royalty: ITAT

MUMBAI: The over 3 crore paid by erstwhile Reliance Infocomm, now Reliance Communications, for software sold by an Israel-based company does not amount to royalty fees and cannot be taxed in India, according to a ruling of the Income-tax Appellate Tribunal ( ITAT), Mumbai.

The income tax department had asked Israel -based TII Team Telecom International to pay tax on software it sold to the Indian company. The department said that the payment was in the form of royalty fees and liable to be taxed in India.

However, in its ruling a two-member bench of the ITAT said that the payment was not royalty because it was for the software which was a copyrighted article and not for the copyright itself. The ITAT said that since the payment was not for a copyright, the provision of I-T Act applicable for royalty fees does not apply to the transaction.

Reliance Infocomm had purchased the copyrighted software from the Israeli company for its wireless network in India.