Royalty characterisation of subscription revenue for platform access also defeats treaty attribution to a permanent establishment.

Subscription revenue from Indian customers for access to a licensed platform, software, equipment, information and matching facilities was analysed as royalty under the Act and the India-United Kingdom Tax Treaty, because the payments were for use and right to use commercial equipment, software and information rather than a passive business receipt. The alternative plea that only royalty attributable to a permanent establishment in India could be taxed under Article 13(6) was rejected, as earlier coordinate bench rulings had already held that the attribution provision did not apply once the receipt was characterised as royalty. The commentary notes that identical facts were treated consistently with prior decisions.

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Issues: (i) Whether the subscription revenue received from Indian customers was taxable as royalty under the Act and the India-United Kingdom Tax Treaty. (ii) Whether Article 13(6) of the treaty could be invoked to tax only the royalty attributable to a permanent establishment in India.

Issue (i): Whether the subscription revenue received from Indian customers was taxable as royalty under the Act and the India-United Kingdom Tax Treaty.

Analysis: The dispute was covered by earlier coordinate bench decisions in the assessee's own case. The revenue arose from a system and related licence arrangements under which Indian subscribers were permitted to access and use the assessee's platform, software, equipment, information and matching facilities. On the terms of the arrangement, the payment was for the use and right to use commercial equipment, software and information, and not merely for a passive business receipt. The prior rulings had already characterised the same subscription charges as royalty under Article 13(3) of the treaty and under the Act.

Conclusion: The subscription revenue was rightly characterised as royalty, against the assessee.

Issue (ii): Whether Article 13(6) of the treaty could be invoked to tax only the royalty attributable to a permanent establishment in India.

Analysis: The assessee's alternative plea was also covered by the earlier decisions. Once the receipt was held to be royalty, the question of attributing income to a permanent establishment did not arise on the facts as presented. The earlier orders had held that Article 13(6) could not be invoked in such circumstances, and there was no change in the material facts for the year under appeal.

Conclusion: Article 13(6) of the treaty was not applicable, against the assessee.

Final Conclusion: The appeal failed on all surviving grounds because the receipt was held to be royalty and the alternative treaty-based attribution plea was rejected.

Ratio Decidendi: Where identical facts are already covered by coordinate bench rulings, subscription charges for access to a licensed commercial system and related facilities may be treated as royalty, and the attribution provision concerning a permanent establishment cannot be pressed once the receipt itself is so characterised.

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