Royalty character of CRM subscription fees rejected where platform access did not transfer control, process rights or know-how.

Subscription fees for CRM access and database use were not royalty where customers merely used a web-based platform to generate reports from their own data, while the assessee retained control over the servers, equipment, process and database infrastructure outside India. The arrangement did not confer any right to use the underlying equipment or process, nor did it make available any industrial, commercial or scientific experience, knowledge, skill, technique or methodology. The receipts were therefore outside royalty under section 9(1)(vi) and Article 12 of the India-Singapore DTAA, and the additions were deleted.

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Issues: Whether the subscription fees received for CRM services and database access were taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-Singapore DTAA.

Analysis: The customer only accessed the assessee's web-based platform to use its services and generate reports from data supplied by the customer. The assessee retained control over the equipment, servers, process, and database infrastructure, all located outside India, and the customers obtained no control over the equipment or any right to use the assessee's process. The services did not involve imparting any industrial, commercial, or scientific experience, nor did they amount to making available the assessee's knowledge, skill, technique, or methodology to the customers. The receipts were therefore distinguishable from royalty-based use or right to use arrangements.

Conclusion: The subscription fees were not taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 or Article 12 of the India-Singapore DTAA, and the additions were liable to be deleted.

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