Mere access to databases and journals is not royalty without copyright rights or commercial exploitation rights.

Subscription receipts for mere access to online databases and journals were held not to constitute royalty where customers acquired no right to exploit copyright or commercially use it. The controlling test was whether the payer obtained copyright rights or only access to copyrighted material; on that basis, the receipts were not taxable under section 9(1)(vi) of the Income-tax Act or Article 12(3) of the India-US DTAA. The computational demand based on correct receipts was restored for verification, and interest under sections 234A and 234B was remitted for fresh consideration.

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Issues: (i) Whether subscription receipts from access to databases and journals were taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-US Double Tax Avoidance Agreement. (ii) Whether the assessment demand was liable to be recomputed on the basis of the correct receipts. (iii) Whether interest under sections 234A and 234B of the Income-tax Act, 1961 was correctly levied.

Issue (i): Whether subscription receipts from access to databases and journals were taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-US Double Tax Avoidance Agreement.

Analysis: The receipts related to subscription access to online chemistry databases and online journals. The controlling test applied was whether the customers acquired any right to exploit copyright, or merely obtained access to copyrighted material. The Tribunal followed its earlier decisions in the assessee's own case and held that mere access to databases or journals, without transfer of copyright or any right to commercially exploit it, does not amount to royalty. The receipts were therefore not chargeable as royalty under the Act or the treaty.

Conclusion: The issue is decided in favour of the assessee and against the Revenue.

Issue (ii): Whether the assessment demand was liable to be recomputed on the basis of the correct receipts.

Analysis: This issue required verification of the supporting material and the correct receipt figures. The matter was not finally decided on merits and was restored to the Assessing Officer for fresh verification.

Conclusion: The issue was remitted for verification and is allowed for statistical purposes.

Issue (iii): Whether interest under sections 234A and 234B of the Income-tax Act, 1961 was correctly levied.

Analysis: The levy of interest was also sent back for reconsideration after verification of the relevant material. No final adjudication on the merits of the levy was recorded at this stage.

Conclusion: The issue was remitted for fresh consideration and is allowed for statistical purposes.

Final Conclusion: The addition on account of royalty was deleted, while the computational and interest-related grounds were restored for verification, resulting in the assessee succeeding on the substantive taxability issue.

Ratio Decidendi: Mere access to databases or journals, without acquisition of copyright or the right to commercially exploit it, does not constitute royalty.

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