Online journal subscription receipts are not royalty where access is given to copyrighted articles, not copyright itself.

Receipts from offshore access to online journals, books and databases were treated as payment for copyrighted articles, not as consideration for the use of copyright, so they were not taxable as royalty under the Act or the India-USA treaty. The arrangement also did not satisfy the treaty's make available requirement for fees for included services, and the royalty/FTS addition was deleted. The Tribunal further directed verification of the assessee's claim for short TDS credit and incorrect tax computation, with consequential relief if substantiated. Interest under sections 234A, 234B and 234C was to follow the final assessed figures as a consequential matter.

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Issues: (i) Whether receipts from sale of online journals and access to the online library were taxable as royalty or fees for technical services under the Income-tax Act and the India-USA tax treaty; (ii) whether the assessee was entitled to TDS credit and correction of tax computation; (iii) whether interest under sections 234A, 234B and 234C was leviable as a consequential matter.

Issue (i): Whether receipts from sale of online journals and access to the online library were taxable as royalty or fees for technical services under the Income-tax Act and the India-USA tax treaty.

Analysis: The receipts arose from offshore supply of access to online journals, books and databases, with no change in the business model from the earlier assessment year. The material showed that the assessee supplied access to copyrighted articles or compiled content, and not any right to use copyright. The Tribunal followed its earlier decision in the assessee's own case for the preceding year and applied the settled distinction between use of a copyrighted article and use of copyright. It also held that the arrangement did not satisfy the make available requirement for fees for included services under the treaty.

Conclusion: The receipts were not taxable as royalty or fees for technical services, and the addition was deleted in favour of the assessee.

Issue (ii): Whether the assessee was entitled to TDS credit and correction of tax computation.

Analysis: The assessee claimed short grant of tax deducted at source and an incorrect computation of tax on a higher income figure than the assessed income. The Tribunal directed verification of the claims by the Assessing Officer and consequential correction where found due.

Conclusion: The matter was remitted for verification and appropriate relief, to the extent admissible, in favour of the assessee.

Issue (iii): Whether interest under sections 234A, 234B and 234C was leviable as a consequential matter.

Analysis: The levy of interest was treated as consequential to the final computation and assessment outcome.

Conclusion: Interest was to be charged as per law on the final assessed figures.

Final Conclusion: The appeal succeeded on the core taxability issue, while the remaining monetary and consequential issues were either allowed for verification or left to be worked out in accordance with law, resulting in a partial allowance of the appeal.

Ratio Decidendi: Access to an online database or journal that supplies a copyrighted article does not amount to use of copyright, and subscription receipts are not taxable as royalty or fees for technical services absent a transfer of copyright or satisfaction of the treaty make available test.

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