Royalty characterisation of online database subscription fees and reopening of assessment were both upheld on consistency and reassessment principles.

Subscription fees for Indian customers' online access to a research database were analysed as royalty rather than business income, because the access arrangement was treated consistently with earlier precedent involving the same transaction and treaty royalty principles. The Tribunal also considered reopening of assessment, noting that the reassessments were based on material arising from similar receipts in other years and that one year had only been processed under section 143(1), while another had not been originally assessed. Applying the reassessment principle recognised in Rajesh Jhaveri Stock Brokers, the reopening was supported. The appeals therefore failed on both the royalty issue and the reassessment challenge.

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Issues: (i) Whether subscription fees received from Indian customers for online access to research products were taxable in India as royalty; (ii) Whether reopening of assessment under sections 147 and 148 was valid for the relevant assessment years.

Issue (i): Whether subscription fees received from Indian customers for online access to research products were taxable in India as royalty.

Analysis: The receipts arose from service agreements under which Indian subscribers were given access to the assessee's products over the internet from servers located outside India. The assessee contended that the amounts were business receipts not taxable in India in the absence of a permanent establishment. The Revenue relied on the earlier Tribunal decision in the assessee's own case and the Karnataka High Court view in Wipro, treating the payments as royalty under section 9(1)(vi) and Article 12 of the treaty. The Tribunal held that the Karnataka High Court decision dealt with the same transaction and, applying judicial consistency, there was no reason to depart from the earlier view already taken against the assessee.

Conclusion: The receipts were taxable as royalty and the issue was decided against the assessee.

Issue (ii): Whether reopening of assessment under sections 147 and 148 was valid for the relevant assessment years.

Analysis: The reassessments were initiated on the basis of the treatment of similar receipts in other assessment years. For one year there had been only an intimation under section 143(1), and for another year no original assessment had been made. The Tribunal held that the reopening was supported by sufficient cause and justification, and relied on the principle recognised in Rajesh Jhaveri Stock Brokers that reassessment can be validly initiated in such circumstances.

Conclusion: The reopening under sections 147 and 148 was upheld and the issue was decided against the assessee.

Final Conclusion: The appeals failed in entirety, with both the substantive taxability issue and the reassessment challenge determined in favour of the Revenue.

Ratio Decidendi: Where the payment relates to online access to a copyrighted database or research product and the same transaction has already been held taxable as royalty in binding precedent, judicial consistency may justify treating the receipts as royalty for tax purposes; reassessment is also sustainable where it is founded on material emerging from other assessment years and the original processing was only under section 143(1).

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