TaxTMI 
TaxTMI 
2023 (5) TMI 1037
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....lly, the assessee maintains a database of books, journals, material in the field of science, technology, life, health and physical and social sciences subject areas. The assessee provides excess to such database to interested person on subscription basis. In the year under consideration, the assessee receives subscription of fee of Rs.14,53,954 towards subscription fee for providing excess to the database. 4. Before the Assessing Officer, assessee claimed that the amount not being in the nature of royalty/FTS either under the domestic law or under the India-UK Double Taxation Avoidance Agreement (DTAA), is not taxable in India. The Assessing Officer, however, did not find merit in the submissions of the assessee and treated the amount towards subscription fee as royalty/FTS, both under the provisions of the Act as well as under the India-UK DTAA and brought it to tax. Accordingly, he framed the draft assessment order. Against the draft assessment order, assessee raised objection before the learned DRP. However, learned DRP upheld the decision of the Assessing Officer. 5. Before us, learned counsel appearing for the assessee submitted, the issue is squarely covered by the decision....
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....e considered rival submissions and perused material on record. We have also applied our mind to the decisions relied upon. Before we proceed to decide the nature of subscription fee earned by the assessee from Indian entities, whether fees for technical services/royalty or business profit, it is necessary to understand the activities carried on by the assessee for generating such income. Undisputedly, the assessee has created an online database named "reaxys.com" pertaining to chemical information which the users having interest in chemistry topic, substance data and preparation and reaction method can access for their own benefit and use. It is also not disputed that the data stored in the online database is collated by the assessee from articles printed in various journals on similar topics which are otherwise available to public on subscription basis. The data collated by the assessee from various journals are entered and stored in the database in a structured and user-friendly manner to enable the users to search and retrieve the data required by them and beneficial to them. The users of the online database can access it through regular web browsers such as Internet Explorer, G....
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....mers as they appear in the Subscribed Products; or 1.4.3 Substantially or systematically reproduce, retain or redistribute the Subscribed Products. Authorized Users who are independent contractions may use the Subscribed Products only for the purposes of the contracted work for the Subscriber." 11. Clause 1.5 of the agreement makes it clear that all right, title and interest in the subscribed products remain with the assessee and any unauthorized re-distribution of the subscribed products which may harm the assessee and its supplier is prohibited. Clause-2.3 of the agreement provides that the assessee reserves the right to withdraw from the subscribed products content that it no longer retains the right to provide or that it has reasonable grounds to believe is unlawful, harmful, false or infringing. As per clause-4 of the agreement, subscriber shall pay the subscription fee to the assessee as set forth in Schedule-1 within 30 days of the date of invoice. Clause-5.1 of the agreement stipulates the duration of agreement from 1st February 2010 to 30th June 2010 with an option for renewal of the agreement for an addition term upon mutual agreement. 12. Thus, on reading of ....
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....t, trade mark, cinematograph films or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience." 13. As per the aforesaid definition of royalty in the tax treaty, any amount received for use of or right to use of any copyright or literary, artistic or scientific work, etc., can be treated as royalty. In the facts of the present case, there is no dispute that the assessee has collated data from various journals and articles, which are otherwise available for subscription to the general public, and entered them into the database in structured manner. It is also clear from the terms of subscription agreement, the assessee has not transferred use or right to use of any copyright of literary, artistic or scientific work to its subscribers. What the assessee has done is, it has allowed customers to access its database and utilize the information available therein for their use. Further, it is observed, the data available in assessee's database rela....
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....2017] 77 taxmann.com 309, while considering the nature of subscription paid to a U.S. based company viz. Chemical Abstract Services, which is in the same line of business and is stated to be the competitor of the assessee, held that the subscription paid for online access to the database system "scifinder" is not in the nature of royalty. The observations of the Tribunal while deciding the issue in favour of the assessee are as under:- "17. We find that as the treaty provision unambiguously requires, it is only when the use is of the copyright that the taxability can be triggered in the source country. In the present case, the payment is for the use of copyrighted material rather than for the use of copyright. The distinction between the copyright and copyrighted article has been very well pointed out by the decisions of Hon'ble Delhi High Court in the case of DIT v. Nokia Networks OY [2013] 358 ITR 259/212 Taxman 68/25 taxmann.com 225. In this case all that the assessee gets right is to access the copyrighted material and there is no dispute about. As a matter of fact, the AO righty noted that 'royalty' has been defined as "payment of any kind received as a consider....
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....ugh internet connection. There is no material on record to demonstrate that while providing access to the database there is any human intervention. As held by the Hon'ble Supreme Court in CIT v/s Bharati Cellular Ltd., [2010] 193 taxman 97 (SC) and DIT v/s A.P. Moller Maersk A.S., [2017] 392 ITR 186 (SC), for providing technical / managerial service human intervention is a sin qua non. Further, Article-12(4) of India-Germany Tax Treaty provides that payment for the service of managerial, technical or consultancy nature including the provisions of services by technical or other personnel can be termed as fees for technical services. None of the features of fees for technical services as provided under Article 12(4) of the India- Germany Tax Treaty can be found in the subscription fee received by the assessee. Further, the Department has not brought any material on record to demonstrate that the assessee has employed any skilled personnel having knowledge of chemical industry either to assist in collating articles from journals / magazines which are publicly available or through them the assessee provides instructions to subscribers for accessing the online database. The assessee....