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2019 (5) TMI 405 - ITAT MUMBAIIncome accrued in India - royalty or fees for technical services - subscription fees receipts - assessee company is a tax resident of Germany - Permanent Establishment (PE) in India - India–Germany Tax Treaty - Whether payment received by the assessee is only in the nature of business profit ? - HELD THAT:- A customer/subscriber can access the data stored in the database by paying subscription. Tribunal, Ahmedabad Bench, in ITO v/s Cedilla Healthcare Ltd. [2017 (1) TMI 554 - ITAT AHMEDABAD] following decision of Authority for Advance Ruling in Dun & Brad Street Espana, S.A. [2011 (7) TMI 957 - BOMBAY HIGH COURT] 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. Assessees were 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. Whether the subscription fee can be treated as fees for technical services ? - It is evident that the assessee has collated data from various journals and articles and put them in a structured manner in the database to make it more user friendly and beneficial to the users/customers who want to access the database. The assessee has neither employed any technical/skilled person to provide any managerial or technical service nor there is any direct interaction between the customer/user of the database and the employees of the assessee. The customer/user is allowed 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. 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 even does not alter or modify in any manner the articles collated and stored in the database. In the aforesaid view of the matter, the subscription fee received cannot be considered as a fee for technical services as well. Online databases are provided by Taxman, CTR online, etc. which are accessible on subscription not only to professionals but also any person who may be having interest in the subject of law. When a subscriber accesses the online database maintained by Taxman/CTR online etc. he only gets access to a copyrighted article or judgment and not the copyright. Similar is the case with the assessee. Therefore, in the facts of the present case, the subscription fee received by the assessee cannot be treated as royalty under Artile–12(3) of India–Germany Tax Treaty. Thus the addition made has to be deleted, as, the payment received by the assessee is only in the nature of business profit which cannot be brought to tax in India in the absence of PE. - Decided in favour of assessee.
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