TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 814
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....the returned income of INR 18,308,194 making an addition of INR 181,19,094, pursuant to the directions issued by the Dispute Resolution Panel ('DRP"). 2 That on the facts and in circumstances of the case and in law, the AO/DRP have erred in holding the Revenues amounting to INR 181,199,094 earned by the Appellant for sale of online journals or books constitutes royalty under the provisions of section 9(1)(vi) of the Income Tax Act, 1961 ("Act") read with Article 12 of India-USA tax treaty. 2.1. That on the facts and in 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 of artistic, literary or scientific work. 3. That on the facts and in circumstances of the case and in law, the AO/DRP have erred in holding the revenue amounting to INR 181,199,094 earned 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 hav....
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....s, societies and individual researchers and other professionals. It was further noted by the Assessing Officer that customers directly approach the assessee inter alia through Wiley's website for purchasing the products and services offered by the assessee. The Assessing Officer further noted that during the year under assessment, substantially all of the assessee's customers (particularly the educational institutions) are recurring customers i.e., these customers renew their subscription to the assessee's products year after year. During the year, the assessee entered into agreements from outside of India with customers in India to provide access to online journals/online library available at its online database maintained outside of India and earned revenue amounting to Rs. 18,11,99,094/- in consideration for sales or providing access to online databases / journals etc. to Indian customer from outside of India, which it claimed as exempt in Schedule EI of its return of income filed. In addition, the assessee has also receipt of royalty income of amounting to Rs. 1,83,08,194, which it offered for directions. 5. Against the order of the Assessing Officer, the assesse....
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....does not give right to the users to amend, modify or alter the product sold to them. The assessee sells compiled, indexed or curated articles obtained from other authors as copyrighted article/product, for easy access to customers. Further it is submitted that information accessed by customers on assessee's online journals, was publicly available and could be obtained through various other means such as purchasing a book published on the subject matter. 12. It was submitted that Article 12 of the Treaty deals with the taxation of royalty and FIS. Article 12(3) of the Treaty defines 'royalty' mean payments of any kind received as a consideration for the use of, or the right to use, any copyright of aliterary, artistic, or scientific work. Limited rights to access online journals granted by the assessee to Indian customers, do not amount to granting of any right in the copyright in any manner whatsoever, and hence the receipts from Indian customers do not constitute royalties under the Treaty. 13. In this regard, reliance is placed on following decisions, wherein subscription fees f rom its Indian customers for providing access to online database and/or journals wer....
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....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 Cour t in the case of DIT v. Nokia Networks OY [2013] 358 ITR 259/212 Taxman 68/25 taxmann.com 225. In this case al l that the assessee gets right is to access the copyrighted material and there is no dispute about. As a matter of fact, the Assessing Officer righty noted that 'royalty' has been defined as "payment of any kind received as a co....
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....access to the online database through various search engines provided through 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 inst....
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....ghts in the copyright, hence are not taxable as royalty. Thus, receipts from Indian customers for offshore sales of books/journals or providing access to online journals/online library do not qualify as Royalties under the Act as well as under the Treaty. The services are also do not fall under FIS as the services do not satisfy the clause 'make available' as required for the provisions of Article 12 of DTAA. 17. Since, the matter has been adjudicated on merits of the case viz., Royalties/FIS, the other grounds taken up by the assessee are not being adjudicated being academic in nature. 18. In the result, the appeal of the assessee is allowed." 12. On perusal of the assessment order for the present assessment year, it is seen that the Assessing Officer has not brought about any distinguishing facts about the nature of receipt amounting to Rs. 17,48,65,171/- as compared to similar receipt of Rs. 16,12,78,571/- in AY 2020-21 and treated as Royalty/FTS by the Assessing Officer, which was deleted by the Co-ordinate Bench of the Tribunal as discussed above. The Ld. CIT-DR has also not brought any contrary facts to distinguish the treatment of the said receipts....