Subscription receipts for database access were not royalty because no copyright or exploitation rights were transferred.

Subscription receipts from access to online scientific databases and journal content were held not to constitute royalty under section 9(1)(vi) of the Income-tax Act or Article 12(3) of the India-US DTAA. The receipts were for viewing and limited personal use only; subscribers obtained no right to reproduce, duplicate, sub-license, or commercially exploit the copyrighted material or software, and the underlying copyright remained with the assessee. Prior co-ordinate bench decisions in the assessee's own case had already reached the same conclusion on unchanged facts, so the royalty addition was deleted.

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Issues: Whether the subscription revenues received from the CAS and PUBS divisions 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 arose from access to online scientific databases and journal content, not from transfer of any copyright or right to commercially exploit copyrighted material. The information accessed was publicly disclosed or otherwise made available to subscribers for viewing and limited personal use, while the assessee retained the underlying copyright. The customers did not acquire any right to reproduce, duplicate, sub-license, or otherwise exploit the underlying work or software. The earlier co-ordinate bench decisions in the assessee's own case for prior assessment years had already held that such subscription receipts are not royalty, and the facts for the year under appeal were found to be unchanged.

Conclusion: The subscription revenues from the CAS and PUBS divisions were not chargeable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 or Article 12(3) of the India-US Double Tax Avoidance Agreement, and the addition was deleted. The appeal was allowed.

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