Online advertisement receipts not royalty where no copyright or royalty-bearing rights are transferred under the DTAA.

Receipts from Google India and other Indian advertisers for sale of online advertisement space were treated as not constituting royalty under the Act or the India-Ireland DTAA. The Tribunal followed its earlier view in the payer's case and held that the same payment could not be characterised differently in the payee's hands. It also relied on coordinate bench rulings that online advertising space does not involve use of, or right to use, copyright, industrial equipment, or other royalty-bearing rights. As the treaty definition was more beneficial, it controlled, and the addition was deleted.

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Issues: Whether receipts from Google India Private Limited and from other Indian advertisers for sale of online advertisement space were taxable as royalty under the Act and the India-Ireland DTAA.

Analysis: The receipts from Google India were examined in the light of the Tribunal's decision in the payer's case, where the corresponding payment was held not to be royalty or fees for technical services under the Act or the DTAA. The Tribunal applied the same treatment to the assessee in the present appeal and held that a different result could not follow in the hands of the payee. For receipts from other Indian customers, the Tribunal relied on earlier coordinate bench rulings dealing with online advertisement space, where payments for such advertising were held not to involve use of, or right to use, copyright, industrial equipment, or other royalty-bearing rights. The Tribunal also noted the distinction between use of software or advertising systems and transfer of underlying copyright, and treated the treaty definition as controlling because it was more beneficial to the assessee.

Conclusion: The receipts were not taxable as royalty, and the addition was deleted.

Ratio Decidendi: Mere use of an online advertising platform or software, without transfer of any copyright or other royalty-bearing rights, does not constitute royalty under the DTAA.

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