Tax treatment of online database subscriptions turns on copyright use, and no royalty or technical service income arose.

Receipts from Indian subscribers for access to online journals, online libraries and online databases were treated as consideration for copyrighted articles, not royalty, because no copyright or right to exploit copyright was transferred. The distinction applied was between use of copyright and mere use of copyrighted material. The receipts were also not fees for technical services or fees for included services under the India-USA tax treaty, as the arrangement did not involve technical or consultancy services satisfying the make-available requirement. The addition was therefore deleted and the amounts were held not taxable on those grounds.

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Issues: Whether receipts from Indian customers for access to online journals, online library and online databases constituted royalty or fees for technical services fees for included services under the Income-tax Act, 1961 and Article 12 of the India-USA tax treaty.

Analysis: The receipts arose from subscription and access arrangements for online journals and databases. The controlling distinction applied was between use of copyright and use of copyrighted material. Access to an electronically delivered database or journal, without transfer of any copyright or right to exploit copyright, was treated as consideration for a copyrighted article and not royalty. The same receipts were also not regarded as fees for technical services or fees for included services, as the arrangement did not involve the provision of technical or consultancy services satisfying the make available requirement under Article 12.

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

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