Database access payments are not royalty where no copyright rights are transferred; Tribunal deletes both additions.

Limited access to a copyrighted article or database, without transfer of copyright or any right to exploit the underlying intellectual property, is not royalty under section 9(1)(vi) of the Income-tax Act or the relevant DTAA. The Tribunal held that administration fees for IMEI allocation and subscription fees for database and research access were paid only for restricted use of copyrighted content, not for use of copyright or any intellectual property right, and followed its earlier coordinate bench view and treaty analysis. Both additions treating the receipts as royalty were deleted, in favour of the assessee.

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Issues: (i) Whether administration fee received for facilitating allocation of IMEI numbers was taxable as royalty; (ii) Whether subscription fee received for providing limited access to database and research material was taxable as royalty.

Issue (i): Whether administration fee received for facilitating allocation of IMEI numbers was taxable as royalty.

Analysis: The earlier orders in the assessee's own case for prior assessment years had already held that the fee arose only from access to and administration of a database used for allocation of unique identification numbers. The arrangement did not transfer any copyright, patent, invention, design, secret formula, process, trademark, or any information concerning industrial, commercial or scientific experience. The payment was for access to a copyrighted article and not for use of, or right to use, any intellectual property right. The Tribunal followed the earlier coordinate bench view and the treaty analysis under Article 12 of the India-USA DTAA.

Conclusion: The administration fee was not royalty and the addition was deleted, in favour of the assessee.

Issue (ii): Whether subscription fee received for providing limited access to database and research material was taxable as royalty.

Analysis: The subscription agreements granted only a non-transferable, non-sub-licensable, non-exclusive and limited licence to access deliverables for internal use. The subscriber had no right to copy, commercially exploit, modify, distribute, or otherwise deal with the material as owner of any copyright. The transaction therefore involved access to copyrighted content, not transfer of copyright or right to use copyright. Applying the treaty definition of royalty, together with the distinction between a copyrighted article and copyright itself, and following the binding principles on treaty interpretation, the receipt did not fall within royalty. The absence of any transfer of rights constituting royalties under the DTAA or the Act also meant that the payment was not taxable as royalty.

Conclusion: The subscription fee was not royalty and the addition was deleted, in favour of the assessee.

Final Conclusion: The assessment additions treating both administration fee and subscription fee as royalty could not be sustained, and the assessee obtained full relief.

Ratio Decidendi: A payment for limited access to a copyrighted article or database, without transfer of copyright or any right to exploit the underlying intellectual property, is not royalty under section 9(1)(vi) of the Income-tax Act, 1961 or under the relevant DTAA.

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