Database access payments are not royalty where only a limited right to use compiled data is granted, without copyright transfer.

Payment for access to a third-party database containing compiled public data was held not to constitute royalty under section 9(1)(vi) or Article 12 of the India-Singapore DTAA. The arrangement granted only a limited, non-exclusive and non-transferable right to use the database for internal business purposes, without transfer of copyright or any right to commercially exploit the underlying work. Applying the distinction between use of a copyrighted article and use of copyright, the payment fell outside the royalty definition and was not chargeable to tax in India on that basis.

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Issues: Whether payment made for access to a third-party database constituted royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-Singapore Double Taxation Avoidance Agreement.

Analysis: The payment was made only for access to compiled public data such as market, financial and exchange-rate information. The agreement showed a limited, non-exclusive and non-transferable right to use the database for internal business purposes, without any transfer of copyright or right to commercially exploit the underlying work. The distinction between use of a copyrighted article and use of copyright was applied, and the payment was held to fall outside the scope of royalty under the treaty and the Act.

Conclusion: The payment was not royalty and was not chargeable to tax in India on that basis.

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