Database subscription receipts were treated as access fees, not royalty or technical services, and escaped Indian taxation without a permanent establishment.

Subscription receipts for access to an online scientific database were characterised as consideration for access to copyrighted material, not for use of or right to use copyright. The arrangement granted only non-exclusive, non-transferable user access to search, browse, view, print and store material for personal use, while title and intellectual property in the database remained with the owner. As the service involved no human intervention or managerial, technical or consultancy support, the receipts did not satisfy the treaty definition of royalty or fees for technical services. In the absence of a permanent establishment, the receipts were not taxable in India as business profits.

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Issues: Whether subscription receipts from access to an online scientific database were taxable in India as royalty or fees for technical services, and whether in the absence of a permanent establishment they could be brought to tax under the India-Germany tax treaty and the Act.

Analysis: The subscription arrangement granted users only a non-exclusive, non-transferable right to access, search, browse, view, print and store material for their own use, while all title and intellectual property in the database remained with the assessee. The receipts were for access to copyrighted material, not for use of or right to use copyright. The database was compiled from publicly available journals and articles and was made user-friendly for access through ordinary internet browsers without any human intervention or deployment of managerial, technical or consultancy services. The payment therefore did not satisfy the treaty definition of royalty or fees for technical services, and in the absence of a permanent establishment the amount could not be taxed in India as business profits.

Conclusion: The subscription receipts were neither royalty nor fees for technical services and were not taxable in India in the absence of a permanent establishment; the additions were liable to be deleted.

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