TaxTMI 
TaxTMI 
2024 (8) TMI 1080
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....e and in law, the AO /' DRP have erred in holding the consideration amounting to INR 16,12,78,571 received by the Appellant for sale of online journals or books constitutes royalty under the provisions of section 9(1)(vi) of the Act read with Article 12 of India-USA tax treaty. 2.1. That on the facts and in the circumstances of the case and in law, the AO /' DRP have erred in holding that the Appellant's receipts were for use or right to use copyright in artistic, literary or scientific work. 3. That on the facts and in the circumstances of the case and in law, the AO / DRP have erred in holding that consideration amounting to INR 16,12,78,571 received by the Appellant for sale of online journals or books constitutes Fees for Technical Services ("FTS") /' Fees for Included Services ("FIS") under section 9(1)(vii) of the Act read with Article 12 of India-USA tax treaty. 3.1. That on the facts and in circumstances of the case and in law, the AO / DRP have failed to appreciate that receipts for services provided to Indian customers merely constitute standard services provided without human intervention, thereby not constituting FTS under section ....
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....ee filed its return of income on January 5, 2021, declaring taxable income of Rs. 17,93,540/- and claiming receipts from Indian customers amounting to Rs. 16.12 Cr. as not chargeable to tax as Royalty / FTS/FIS under the provisions of the Act read with the India-US DTAA. Further, given the undisputable fact that the assessee did not have a Permanent Establishment ('PE') in India, as per Article 5 of the India-USA DTAA, income earned by it was not taxable as business income. Accordingly, the tax withheld by Indian customers on the receipts of Rs. 16,12,78,571/- was claimed as a refund in the return filed by the assessee. 6. The AO passed draft assessment order dated September 30, 2022 proposing to treat the receipts of Rs. 16.12 Cr. from Indian customers as Royalty and Fees for Included Services ("FIS") / Fee for Technical Services ("FTS") as per the provisions of the Act read with Article 12 of India-US tax treaty and proposed an addition of Rs. 16,12,78,571/-. 7. Aggrieved, the assessee sought directions from the ld. DRP which affirmed the findings of the AO in the draft Assessment Order which has been subsequently culminated in the final Assessment Order. 8. Aggrieved, t....
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....nsideration. 11. It is found that the assessee earns income in the nature of subscription fees from Indian subscriber for providing subscription to data base Lexis Nexis wherein host of information started on subject/topic relating to legal and tax matters. The person interested to purchase the electronic version of the books/journals/articles can be purchased it on line by paying the price of the book and in so far as the frequent customers of the books/journals /articles available on Lexis Nexis can opt to subscribe data base for certain period which allows the customers to access the e-books/e-journals/earticles on the online data base. In both the cases, the content received by the user remains the same that is books, journal and articles in an electronic format. 12. The assessee is a part of Elsevier Group and in case of other group entities on the similar issue of access/subscription to web-site, the ITAT Tribunal of Mumbai Bench in the case of Elsevier Information Systems GmbH Vs. Dy. Commissioner of Income Tax (IT) in ITA No. 1683/Mum/2015, dealing with the similar issue for the Assessment Year 2011-12 held as under:- "15. A customer/subscriber ca....
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....se of copyrighted material and therefore the impugned payments cannot be treated as royalty payments. This view is also supported by Hon'ble Bombay High Court's judgment in the case of DIT (International Taxation) v. Dun & Bradstreet Information Elsevier Information Systems GmbH Services India (P.) Ltd. [2011] 338 ITR 95/[2012] 20 taxmann.com 695." 16. The same view was again expressed by the Tribunal in DCIT v/s Welspun Corporation Ltd., [2017] 77 taxmann.com 165. If we examine the facts of the present appeal in juxtaposition to the facts of the decisions referred to herein before, it can be seen that the facts are almost identical and akin. In the referred cases the assessees were also maintaining databases of information collated from various journals and articles and allowed access to the users to use such material as required by them. Keeping in view the ratio laid down in the decisions (supra), the payment received by the assessee has to be held to have been received for use of copyrighted article rather than for use of or right to use of copyright. 17. Having held so, the next issue which arises for consideration is, whether the subscription fee can....
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....provisions of FTS are similar to Section 9(1)(7) of the Act. The only difference to the present appeal is that the applicable treaty is Indo-US Tax Treaty. The Article 7 of India-US DTAA, the income from subscription to Assessee's data base is in the nature of business profit, therefore, the same is not taxable in India as the assessee has no permanent establishment in India. By respectfully following the ratio laid down by the Mumbai Tribunal in the case of Elsevier Information System GmbH (supra), in the absence of any material available on record to prove that the assessee is providing full fledged service and solutions for legal professions, we are of the opinion that the A.O. has committed an error in making the addition. In view of the same, the payment received by the assessee is in the nature of 'Business Profit' which cannot be brought to tax in India in the absence of PE. Accordingly, the grounds of both the appeals of the assessee are allowed." 15. Further, in view of above facts, it is clear that providing access to online database / journals is nothing but providing access to copyrighted article which does not amount to royalty. In this regard, reliance ....