Online research subscription fees held not to be royalty where no right in copyright was transferred and no permanent establishment existed.

Subscription fees for access to online research products were treated as consideration for access to market data and research material, not as payment for transfer of any right in copyright. Applying the earlier co-ordinate bench view, the receipts did not fall within the royalty provisions and, because the assessee had no place of business or permanent establishment in India, the income was not taxable in India under the treaty. The addition was deleted.

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Issues: Whether subscription fees received from Indian customers for access to online research products constituted royalty taxable in India, or business income not chargeable to tax in the absence of a permanent establishment.

Analysis: The subscription payments were for access to market data and research material made available online to subscribers under identical service arrangements. The earlier co-ordinate bench decision on the same kind of subscription receipts had held that the payment was for use of copyrighted material and access to a database outside India, not for transfer of any right in copyright, and therefore did not fall within the royalty provisions. The same reasoning applied here. In these circumstances, the authorities below ought to have followed the binding co-ordinate bench view in adherence to judicial discipline. Since the assessee had no place of business in India, the receipts could not be taxed as royalty under the treaty.

Conclusion: The subscription income was not royalty and was not taxable in India. The addition was deleted and the assessee succeeded.

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