Database access fees are not royalty where no right to exploit copyright is granted under the treaty and the Act.

Receipts for online access to journals and books were held not to constitute royalty because the payment was for limited access to a database product, not for any transfer of copyright or right to exploit copyrighted material. The user received no authority to reproduce, adapt, translate, or otherwise use the underlying copyright, so the amounts fell outside section 9(1)(vi) and Article 12 of the India-US DTAA. The more beneficial treaty position prevailed, following earlier authority distinguishing a copyrighted article from copyright itself.

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Issues: Whether receipts from providing online database access to journals and books were taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-US Double Taxation Avoidance Agreement.

Analysis: The access fee was held to be consideration for use of a database as a product, not for any transfer of a copyright or right to exploit copyrighted material. The user obtained only limited access and no authority to reproduce, adapt, translate, or otherwise use the underlying copyright. Applying the treaty definition of royalty and the principle that the more beneficial treaty provision prevails, the receipts were treated as outside the scope of royalty. The earlier decision in the assessee's own case and the Supreme Court ruling on the distinction between copyright and copyrighted article were followed.

Conclusion: The receipts were not royalty and were not taxable in India on that basis; the issue was decided in favour of the assessee.

Ratio Decidendi: Consideration for mere access to a database or software product, without conferring any right to use or exploit the underlying copyright, is not royalty under the treaty or the Act.

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