Online journal access receipts were not royalty or technical services income without copyright transfer or human service element

Receipts from Indian customers for access to online journals, e-books and databases were treated as consideration for access to copyrighted articles, not as royalty, because the users obtained no right to exploit or use copyright in the underlying works. The arrangement also did not amount to fees for technical services, as it involved no human intervention and did not make available technical knowledge, skill, experience or know-how under the treaty standard. In the absence of a permanent establishment in India, the income was not taxable as business profits. The receipts were therefore held not taxable in India.

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Issues: Whether receipts from Indian customers for access to online journals, online books and online database constituted royalty or fees for technical services under the Income-tax Act, 1961 and the India-USA tax treaty.

Analysis: The receipts arose from granting limited access to compiled and curated online journals and databases maintained outside India. The access did not confer any right to exploit or use copyright in the underlying literary or scientific work, but only to use copyrighted material as a product. The arrangement therefore fell on the side of copyrighted article access rather than transfer of copyright. The activity also did not involve the provision of technical or consultancy services, there being no human intervention or service component that satisfied the treaty standard of making available technical knowledge, skill, experience or know-how. In the absence of a permanent establishment in India, the income was not taxable as business profits either.

Conclusion: The receipts were not taxable as royalty or fees for technical services and could not be brought to tax as business income in India in the absence of a permanent establishment; the issue was decided in favour of the assessee.

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