TaxTMI 
TaxTMI 
2023 (6) TMI 1498
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....he Income- tax Act, 1961 (the Act) read with Article 13 of the Double Taxation Avoidance Agreement (the DTAA) entered into between India and UK 2. On the facts and in the circumstances of the case and in law, the Learned AO erred in alleging that Dow Jones Consulting India Private Limited (DJCIPL) could constitute an Agency PE of the Appellant. 3. On the facts and in the circumstances of the case and in law, the Learned AO and the DRP erred in not considering that the sum of INR 6,08 88.436 is in the nature of "Business Profits" under Article 7 of the DTAA, not taxable in India as the Appellant did not have a Permanent Establishment in India under Article 5 of the DTAA. 4. On the facts and in the circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings under Section 270A read with Section 274 of the Act. The Appellant prays to Your Honours to kindly direct the Learned AO to drop/ abate the penalty proceedings and oblige. The Appellant craves leave to add, to amend, to substitute, to withdraw, to modify, to alter and/ or re-instate the foregoing grounds of the appeal on or before the time of hearing....
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....ue has been dealt sine last four years. The AO observed that the DJCIPL was wholly owned indirect subsidiary of the assessee company. The AO was of the view that DJCIPL was the exclusive distributor of the product of the assessee. The AO also noted that assessee and the distributor were part of the same News Corporation Group of Mr. Rupert Murdoch. The AO also observed that in respect of its product the assessee holds the bundle of intellectual property rights contained in the product including trade secrets, patents, trademark, know how as well as moral rights and similar rights of any type under the law of any government authorities, domestic or foreign relating to or arising out of Factiva Products. The AO further stated that the receipt of the assessee was in consideration of the use on or right to use the said IPRs and hence it constitute Royalty under the DTAA as well as section 9(1)(vii) of the Act. 5. The AO also disagreed with the submission of the assessee that sale had nothing to do with the IPR. The AO was of the view that the assessee company provides Factiva Products and services to DJCIPL who in turn distributes to the customers. The right to distribute products a....
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....llant company is a business corporation incorporated in USA and engaged in the business of providing information products and services containing global business and financial news to organizations worldwide. It offers information via newspapers, newswires, websites, applications, newsletters, magazines, proprietary databases, conferences and radio. 5. The appellant company appointed Dow Jones Consulting India Pvt Ltd [DJCIPL] on a principal to principal basis for distributing its products in the Indian market. Accordingly, the appellant company receives purchase price from DJCIPL at an arm's length price. 6. During the course of scrutiny assessment proceedings, the Assessing Officer was of the firm belief that the receipts from DJCIPL should be taxed in India as 'Royalty Income" under the provisions of the Act as well as India-USA DTAA. 7. Referring to the definition 'Royalty' given in Section 9(1)(vi) of the Act, the Assessing Officer treated the Indian receipts as taxable as 'Royalty'. The Assessing Officer further examined the relevant Article of India-USA DTAA and again formed a belief that Indian receipts are also taxable under the India-USA DTAA an....
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....he copyright in the product, are not covered within the scope of royally winch may gel covered under the term 'Royalty' as per the Act. Further, unless the payments are made towards acquiring the right to use a copyright in a literary, artistic, or scientific work, definition of Royalty would not get attracted. 10.1.6 In the current case, there is no transfer of legal title in the copyrighted article as the same rests with the Applicant. All rights, title and interest in the licensed software, which is being claimed to be copyrighted article, are the exclusive property of the Applicant. DJCIPL has no authority to reproduce the data in any material form, to make any translation in the data or to make any adaptation in the data. Further, the end user cannot be said to have acquired a copyright or right to use the copyright in the data and accordingly, the payments made by DJCIPL for accessing the database would not qualify as payments for the use of copyright. 10.1.7 The Applicant submits that the payments made by DJCIPL is not for the transfer of all or any rights in respect of the database Under the agreement, DJCIPL does not acquire any right in relation ....
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.... 15. In the case in hand, the revenue derived by the assessee from granting limited access to its data base is akin to sale of book, wherein purchaser does not acquire any right to exploit the underlying copyright. In the case of a book, the publisher of the book grants the purchaser certain rights to use the content of the book, which is copyrighted. The purchaser of the book does not acquire the right to exploit the underlying copyright. When the purchaser reads the book, he only enjoys the contents. Similarly, the user of the database does not receive the right to exploit the copyright in the database he only enjoys the product in the normal course of his business. 16. In the present case, the appellant is only granting access to its database to DJCIPL. In our considered opinion, the payments received cannot be said to be 'Royalty' in nature. The transaction under consideration is for provision of accessing database of the assessee. Hence the same cannot be considered as 'Royalty' under Article 12 of the India-US DTAA. We, therefore, set aside the findings of the Assessing Officer and direct the Assessing Officer to delete the impugned addition. Ground No. 1 is, acco....
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....rred in the assessment order brings out that the payments which are to be understood as 'royalty' in the context of information concerning industrial, commercial or scientific experience ought to be in relation to information which is undivulged and/or arises from previous experience. In other words, in order to be understood as 'royalty', the payment must be for information which is exclusively possessed or secret under the ownership of the grantor of such information. It is to be considered that the fact-situation in the instant case does not comply with the aforesaid requirement so as to be treated as a payment for 'royalty', [Para 7] In the instant case, the assessee merely identifies, aggregates, and organizes publicly disclosed chemistry related scientific information or publishes research work submitted by scientists worldwide. Thus, this information is clearly not undivulged; rather, it is an information which is available in the public domain. Further, chemistry and related scientific information accumulated by the assessee in the form of a database is the experience of various scientists, researchers and various other persons and not that ....
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....ustomers, as is evident from the terms of the sample agreement of CAS customers. It is to be considered that the transfer of any right in a copyrighted article is analogous to the rights acquired by the purchaser of a book. In the instant case, customers of the assessee only enjoy the benefits of using SciFinder and STN and do not acquire the right to exploit any copyright in these software. The difference between a copyright and a copyrighted article in context of software has been brought out very clearly by the Supreme Court of India in the case of Tata Consultancy Services v. State of Andhra Pradesh [2004] 141 Taxmann 132/271 ITR401. [Para 12] Thus, it is to be held that the income earned by the assessee from the Indian customers with respect to the subscription fees for CAS cannot be taxed as royalty as per section 9(l)(vi) as well as article 12(3) of the Indian-USA DTAA. [Para 13] The issue with respect to the PUBS division coincides with the issues on the CAS fee. The journal provided by the PUBS division do not provide any information arising from the assessee's previous experience. The assessee's experience lies in the creation of/maintaining such....
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....payments which allow payers to use/acquire a right to use a copy right in literary, artistic or scientific work are commissioned under the definition of 'royalty'. In the instant case the assessee used to collect the information available in the public domains viz. newspaper and news wires from all over the world including global business and trade publications, targeted industry and regional publications, key websites and business blogs, market data and company professionals by collaborating with the news publishers and other sources and collates such relevant publically available news/information, then create a systematic database of news, article/information with advanced search capabilities and then subscriber of Factiva product gets access to the database, business puts a query in the search box, various news articles and other information in relation to search term, as actual public appears on the screen. 18. Moreover, payment received by the assessee is not for any information qua industrial scientific or commercial experience rather it is only for preparing a database on the basis of information already available in the public domain in the form of news, articles e....