Research website subscription fees can constitute royalty where access is a restricted licence to specialised proprietary information.

Subscription fees for access to a research website were treated as royalty because the arrangement granted only a restricted licence to use proprietary research products, with confidential logins and restrictive covenants against disclosure, copying, sublicensing and unauthorised access. The information was specialised and segmented, not public information, so the payment was for imparting technical, industrial, commercial or scientific knowledge and not for general access to published material. On that basis, the fee was held taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and article 13(3) of the India-UK tax treaty, and the addition was upheld.

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Issues: Whether the subscription fees paid for access to the research website constituted royalty for imparting information concerning technical, industrial, commercial or scientific knowledge, experience or skill and were taxable under the domestic law and the India-UK tax treaty.

Analysis: The access arrangement was held to be a restricted licence to use proprietary research products and confidential user names and passwords, not mere public information. The information was segmented, specialised, subject to restrictive covenants against disclosure, copying, sublicensing and unauthorised access, and was made available only for a fee under an agreement. On those facts, the payment was found to be for specialised technical information and not for general information available to the public at large. The tribunal distinguished the authorities relied on by the assessee on the ground that they involved materially different facts.

Conclusion: The subscription fee was held to be royalty within section 9(1)(vi) of the Income-tax Act, 1961 and article 13(3) of the India-UK Double Taxation Avoidance Agreement, and the addition was upheld against the assessee.

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