IMEI/TAC database access fee not treated as royalty; TDS credit remains subject to factual verification.

Administrative fee for access to an IMEI/TAC database is analysed as not constituting royalty under section 9(1)(vi) of the Income-tax Act, 1961 or Article 12(3) of the India-USA DTAA. The arrangement was treated as a revenue-sharing model involving maintenance and allocation of unique numbers, without transfer of any right to use intellectual property, imparting of technical, industrial, commercial or scientific experience, or use of industrial, commercial or scientific equipment. The text also notes that TDS credit depends on factual verification by the Assessing Officer before grant in accordance with law.

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Issues: (i) Whether the administrative fee received for providing access to the IMEI/TAC database was taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-USA DTAA; (ii) Whether the assessee was entitled to credit of tax deducted at source on factual verification.

Issue (i): Whether the administrative fee received for providing access to the IMEI/TAC database was taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-USA DTAA.

Analysis: The assessee's activity was limited to maintaining a database of unique IMEI/TAC numbers and facilitating allocation of such numbers to mobile manufacturers through the reporting body. The arrangement showed a revenue-sharing model and did not transfer any right to use a patent, invention, model, design, process, trademark, or similar property. It also did not involve imparting technical, industrial, commercial, or scientific experience, nor use or right to use any industrial, commercial, or scientific equipment. Access to the database was compared to allocation of registration numbers from a numbering system, which by itself does not amount to royalty.

Conclusion: The receipt was not royalty under section 9(1)(vi) of the Income-tax Act, 1961 or Article 12(3) of the India-USA DTAA, and the additions were liable to be deleted.

Issue (ii): Whether the assessee was entitled to credit of tax deducted at source on factual verification.

Analysis: The claim required factual verification by the Assessing Officer before credit could be granted in accordance with law.

Conclusion: The matter was restored for factual verification and appropriate grant of TDS credit as per law.

Final Conclusion: The assessee succeeded on the main royalty issue, while the TDS credit claim was directed to be verified and allowed in accordance with law, resulting in a partial allowance of the appeals.

Ratio Decidendi: Mere access to a maintained database of unique identification numbers under a revenue-sharing arrangement, without transfer of any right to use protected intellectual property or imparting of technical experience, does not constitute royalty.

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