Online database subscription payments may be royalty when access amounts to a licence to use copyright, requiring fresh TDS review.

Subscription fees for access to a subscriber-only online database may constitute royalty where the payment amounts to a licence to use copyright, with corresponding TDS implications. The earlier view treating similar database access payments as non-royalty could not be relied on after the jurisdictional High Court reversed that position. As the appellate authority had not examined the payment under the binding later ruling, its order deleting TDS liability could not be sustained. The matter was remitted for fresh consideration in line with the High Court decision and other relevant authorities.

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Issues: Whether the subscription fee paid for access to an online website was royalty and liable to tax deduction at source, and whether the appellate order deleting the TDS liability could be sustained.

Analysis: The payment was made for subscription to a website containing information available only to subscribers. The appellate authority had followed an earlier Tribunal view treating similar database access payments as not constituting royalty. That foundation no longer survived because the earlier view had been reversed by the jurisdictional High Court, which held that access to a database may amount to a licence to use copyright and therefore attract royalty treatment. Since the appellate authority had not returned a specific finding on the correct legal character of the payment in the light of the later binding decision, the order could not be sustained.

Conclusion: The matter was remitted to the appellate authority for fresh decision in accordance with the binding High Court ruling and other relevant authorities.

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