Royalty character denied for information receipts; income treated as business profits and Article 22 held inapplicable.

Receipts for collated information and data supplied to an Indian affiliate were treated as business income under Article 7, because the payment did not involve exploitation of know-how or transfer of technical skill sufficient to constitute royalty or fees for included services under Article 12. The residuary Article 22 was held inapplicable because treaty taxation must first be tested under the specific charging provision that governs the income. Following earlier Mumbai Tribunal orders on similar facts, the receipt was therefore not royalty and was not taxable under Article 22.

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Issues: Whether the receipts from information supplied to the Indian affiliate were taxable as royalty or fees for included services under Article 12, or as business income under Article 7, and whether Article 22 could be invoked as a residuary head of taxation.

Analysis: The receipt was found to relate to information/data supplied in the course of rendering services outside India, and not to any exploitation of know-how or technology so as to constitute royalty. The residuary article could apply only if the income was not chargeable under any other applicable treaty article. Since the receipt was held to be taxable, if at all, under the business profits article, Article 22 had no application. The decision followed earlier Mumbai Tribunal orders on materially similar facts involving group entities.

Conclusion: The receipt was not royalty and was not taxable under Article 22; it was assessable as business income under Article 7, in favour of the assessee.

Ratio Decidendi: Where payments are made for collated information or data supplied abroad without transfer of know-how or technical skill made available, the receipt is not royalty, and the residuary treaty article cannot be applied if another specific article governs the charge.

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