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Issues: (i) Whether subscription revenue from the Chemical Abstracts Service and Publications divisions was taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-US Double Taxation Avoidance Agreement; (ii) whether credit of tax deducted at source was to be granted on verification.
Issue (i): Whether subscription revenue from the Chemical Abstracts Service and Publications divisions was taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-US Double Taxation Avoidance Agreement.
Analysis: The receipts arose from access to databases, journals and related online content. The material on record showed that the subscribers only obtained the right to search, view and use the content for personal use, while the copyright in the underlying material remained with the assessee. The payments were therefore for a copyrighted article or product, not for the use of or right to use copyright. The same recurring issue had already been decided in the assessee's own case for earlier years on identical facts, and no change in law or facts was shown.
Conclusion: The subscription receipts were not taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 or Article 12(3) of the India-US Double Taxation Avoidance Agreement, and the issue was decided in favour of the assessee.
Issue (ii): Whether credit of tax deducted at source was to be granted on verification.
Analysis: The claim required factual verification by the Assessing Officer before grant of credit in accordance with law.
Conclusion: The issue was restored to the Assessing Officer for verification and appropriate credit, and was not finally determined on merits.
Final Conclusion: The principal addition on royalty was deleted, while the TDS-credit claim was sent back for verification, so the appeals ended with limited relief to the assessee and no surviving determination on the royalty charge.
Ratio Decidendi: Mere access to databases, journals or online content without transfer of the underlying copyright is consideration for a copyrighted product, not royalty.
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