Royalty characterization fails for database subscription receipts where users get access, not copyright or exploitative rights.

Subscription receipts from the CAS and PUBS divisions were held not taxable in India as royalty under the Income-tax Act or the India-USA DTAA. The Tribunal applied its earlier decisions in the assessee's own case and held that customers obtained only access to copyrighted articles, databases, journals, and search tools, not any copyright or right to exploit the underlying copyright. It further held that mere use of such did not amount to use of industrial, commercial, or scientific equipment, and the receipts were not consideration for information concerning industrial, commercial, or scientific experience in the treaty sense. The issue was decided in favour of the assessee.

---

---

Issues: Whether subscription receipts from the CAS and PUBS divisions were taxable in India as royalty under the Income-tax Act and the India-USA DTAA.

Analysis: The Tribunal followed its earlier decisions in the assessee's own case and held that the customers acquired only access to copyrighted articles and not any copyright or right to exploit the underlying copyright. Mere use of databases, journals, or search tools did not amount to transfer of copyright rights. The Tribunal also held that the customers did not acquire any right to use industrial, commercial, or scientific equipment, and that the receipts were not consideration for information concerning industrial, commercial, or scientific experience in the relevant treaty sense. The payments were therefore not taxable as royalty under the domestic law or the treaty.

Conclusion: The issue was decided in favour of the assessee, and the subscription receipts were held not taxable as royalty in India.

---