Database access receipts not royalty where no IP rights pass; lockdown period may be excluded from Tribunal pronouncement time limits.

Receipts for granting non-exclusive, non-transferable access to database reports were held not to constitute royalty where no copyright or other intellectual property right was transferred; the treaty provision was treated as materially identical to the binding jurisdictional precedent, and the amount was therefore not taxable under the Act on a less favourable basis. The Tribunal also held that delay in pronouncing its order beyond 90 days could be justified by Covid-19 lockdown conditions, treating the lockdown period as excludable in computing the pronouncement time limit under the Tribunal Rules. The appeal was allowed.

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Issues: (i) Whether receipts from granting non-exclusive, non-transferable access to database reports were taxable as royalty under the Income-tax Act, 1961 and the applicable double taxation avoidance agreement. (ii) Whether delay in pronouncement of the Tribunal's order beyond 90 days could be justified in the prevailing lockdown conditions under the Tribunal Rules.

Issue (i): Whether receipts from granting non-exclusive, non-transferable access to database reports were taxable as royalty under the Income-tax Act, 1961 and the applicable double taxation avoidance agreement.

Analysis: The Tribunal followed the binding jurisdictional precedent that had approved the view that sale or access to business information reports and similar database compilations, where no copyright or intellectual property right is transferred, does not amount to royalty. The treaty provision considered was materially the same as the corresponding provision earlier examined by the jurisdictional High Court. Once the receipts were held not to be taxable as royalty under the treaty, there was no occasion to assess them under the Income-tax Act, 1961 on a less favourable basis.

Conclusion: The addition made on account of alleged royalty was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether delay in pronouncement of the Tribunal's order beyond 90 days could be justified in the prevailing lockdown conditions under the Tribunal Rules.

Analysis: The Tribunal interpreted the rule governing pronouncement of orders pragmatically and held that the period of lockdown caused by the Covid-19 pandemic constituted an extraordinary circumstance. It applied the principle that the prescribed time limit is ordinarily to be followed, but the lockdown period could be excluded while computing the time for pronouncement, especially in light of contemporaneous directions issued by superior courts and the force majeure nature of the situation.

Conclusion: The delayed pronouncement was treated as permissible and did not invalidate the order.

Final Conclusion: The assessee succeeded on the substantive tax issue, and the Tribunal also upheld the validity of the delayed pronouncement in the exceptional pandemic circumstances, resulting in allowance of the appeal.

Ratio Decidendi: Consideration for mere non-exclusive, non-transferable access to database information does not constitute royalty where no right in copyright or other intellectual property is transferred, and extraordinary lockdown conditions may justify exclusion of the lockdown period while applying the Tribunal's pronouncement time limit.

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