TaxTMI 
TaxTMI 
2004 (12) TMI 304
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder: TABLE-I ---------------------------------------------------------------- Item Date Particulars Amount (in Rs.) No. ---------------------------------------------------------------- 1. 18-4-2000 Subscription to Dataquest: 72533.04 Consulting & Systems Integration North America 2. 10-8-2000 Annual Subscription Fees: 9716691.87 Gartner Group Services 3. 17-11-2000 Annual Subscription Fees: 699900.00 &n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; Exhibition Charges 563485.20 9. 17-8-2001 Professional Fees 3120566.60 13. 14-6-2002 European Strategic 1817208.00 Sourcing Sponsorship ---------------------------------------------------------------- The appeals pertain to payments grouped in Table-I which are essentially annual subscription/fee paid for providing access to information available in the data base maintained by GG Service. As regards payments made and listed in Table-H above, no tax was deducted but are not treated as income of GG for deducting tax under section 195 of the Act. Brief facts of the issue are the appellant subscribed on annual and semiannual basis to avail the business data collated, collected and maintained by GG, USA. M/s. GG, an internationally renowned, specialized agency which maintains and publish....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as too keen to tax the payments somehow or other without first establishing the nature and extent of liability under the Act. The Assessing Officer has in its order relied on various sections like sections 9(1)(vi), 9 Explanation 2 : (iv) & (vi), 9(1)(vii) and DTAA between India and US, Article 12(3) & 12(4) etc. The very use of the DTAA shows that the assessee is entitled for relief. DTAA is referred to only for relief and not for liability as held by the Supreme Court in 263 ITR 706. Further, the Assessing Officer has not at all dealt with how information gets imparted by a mere access fee [ref.: 182 CTR 353 (MP)]. The liability under the Act is established only when a charge is specific. If the charge is dilatory, illusory or ambiguous as is evident by the Assessing Officer's discussion, the charging section fails as held in 55 ITR 74 (SC). It is clear that the Assessing Officer has not established any liability under any specific section unless it is an income chargeable to tax in India, section 195 is not applicable. It is a matter of significance that section 194J applicable to Technical Services has not been made applicable to subscription of similar nature made within the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(Bom.). Without prejudice to the above submission, if it is held that the Gartner's payments are liable for tax in India, then the same has been utilized by the assessee in its Export business carried on through units eligible to 10A deduction and through its presence in various countries and in totality is a business carried on outside India or it amounts to making or earning of income from a source outside India. Sub-section (2) clearly exempts these from the operation of the main section. It has been held by Madras High Court in 262 ITR 513 that income from export arises from a source outside India. Consequently, it is exempted. For these reasons and reasons already stated the liability under section 195 may be deleted in the interest of justice and render justice." 3.1 Sri Pradeep further argued that there was nothing in section 9(1)(vi) of the IT Act read with Explanation 2 which establishes any kind of liability for deduction of TDS on a payment made towards subscription for web based journal or magazine. Scientific journals or business journals published periodically containing views, opinions and news are not covered within the purview of section 9(1)(vi) of the Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oyalty it has to have some special features. It is also submitted by the counsel for assessee that it is information which is available in the market. On the contrary the proponement of the Revenue is that it is confidential and secret and has the flavour of expertise. In the case at hand what has been given is information. The compilation of the data which as received by the assessee was not produced before the Tribunal and it had no occasion to scrutinize the same. When it was not produced, how the Tribunal could arrive at the conclusion that the correspondence between the parties is only information which is in the sphere of collection of data in the subject available in the market. That apart, as already indicated that every information would not have in the status of royalty. There are various kinds of categories of information. Solely because an entry of the commercial nature would not make it royalty. That cannot be the exclusive base of foundation. Some sort of expertise of skill is required. The aforesaid factor would be the requisite one. The submission that every information if it concerns the industries or commercial venture would be a royalty cannot be accepted. That w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax as such a course would be against the national interest. It was also submitted that entire web based transactions are highly complicated and the tax law is evolving on the issue in the appeal. 4.1 It was further submitted that the assessee cannot be treated as aggrieved as it is a levy on foreign company and not on the assessee. Sri Lachiramka, who appears to possess extensive knowledge on the subject of International Taxation submitted at length from various commentaries written on DTAA, particularly OECD convention, US convention, UN convention, etc. The submission was educative and interesting. However, we do not find it necessary to extract all the references made to OECD convention as it is not relevant for the issue on hand. Accordingly, the learned DR sought for dismissal of the appeal. 4.2 In reply, Sri Pradeep brought to our notice that the argument of national interest while appealing would not be relevant for taxation purpose as held by Hon'ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 wherein at page 763 the court observed thus: "We are unable to agree with the submissions that an act which is otherwise valid in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me from any source in India. Explanation 2 - For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital Gains") for- (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process of trademark or similar property; (ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trademark or similar property; (iii) the use of any patent, invention, model, design, secret formula or process or trademark or similar property; (iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill; (iva) the use or right to use any industrial, commercial, or scientific equipment but not including the amounts referred to in section 44BB; (v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic, or scientific work including films of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Gartner shall have the right to audit client to verify compliance hereunder. Client agrees to co-operate with such audits. 6(a) User Licence: Upon payment of the licence fees set forth in the Service Agreement, Gartner authorizes Client to allow electronic access to the Services to not more than the "maximum number of individual named users" licensed pursuant to the Service Agreement (each, a "User"). All users must (1) be located in the countries for which the licence is purchased; (2) be employees of the same corporation/division as the "ship to" information provided, and (3) gain access to the Services via Client's multi-user computer system. Client agrees not to allow access to the Services by (1) more than the maximum number of Users licensed and (2) employees who do not reside within the country set forth in the Service Agreement. Each User may print one copy of any Gartner research, as the Program allows, for the User's personal use. Such copies may not be further reproduced, or distributed to any party. Electronic mail and "copy and paste" operations are allowed to Users only." In this case facts are not in dispute that the GG was web based publishing house giving acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... It is also to be seen that such experience should give rise to some known form of Intellectual Property Rights. In this case as rightly pointed out no such thing exists. Further the decision of the Madhya Pradesh High Court in HEG Ltd.'s case is applicable to the issue on hand and consequently we hold that receipt of web based material offered by GG, outside India is not amenable for taxation in India. It is trite law that provision of section 195 can be invoked only if the payment is otherwise taxable in India. The only provision invoked is section 9(1)(vi) to bring the payment as chargeable to tax in India. Since we hold that said section is not attracted, payment made is not subject to deduction of tax at source under section 195. On this basis we feel the law is very clear that the payments to GG is not liable for taxation in India, consequently the assessee has no obligation to deduct tax under section 195 of the Income-tax Act. When the law is clear and unambiguous on the liability to tax, it is not possible to confirm the liability on emotional plea of national interest as held by Hon'ble Supreme Court in Azadi Bachao Andolan's case. 5.3 We also feel that the correct re....