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2024 (3) TMI 1069 - AT - Income TaxAccrual of income in India - Royalty receipts - taxation of revenue from online database of text journal and books as royalty income u/Article 12 of India US DTAA - HELD THAT - Perusal of the order of the Tribunal shows that identical issue came up for consideration in assessment years 2013-14 and 2014-15 2022 (3) TMI 1019 - ITAT DELHI in respect of taxation of revenue from online database of text journal and books as royalty income under Article 12 of India US Double Taxation Avoidance Agreement (DTAA) amounts paid by resident Indian end users/ distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195. Decided against revenue.
Issues:
The judgment involves the issues of whether receipts earned from providing online database access are covered within the ambit of Royalty u/s 9(1)(vi) of the Act and whether such receipts can be construed as Royalty under Article 12 of the India US Double Taxation Avoidance Agreement. Issue 1: The Tribunal considered the appeal filed by the Revenue against the order of the ld.CIT(Appeals) for the assessment years 2020-21 & 2021-22. The Revenue contended that the receipts earned from providing online database access are not covered within the ambit of Royalty u/s 9(1)(vi) of the Act. The Tribunal referred to the decision of the Hon'ble Supreme Court in a similar case and concluded that the payments made for acquiring the right to use the product itself, without allowing any right to use the copyright in the product, are not covered within the scope of Royalty. It was held that the revenue derived by the assessee from granting limited access to its database is akin to the sale of a book, where the purchaser does not acquire any right to exploit the underlying copyright. Therefore, the Tribunal directed the Assessing Officer to delete the impugned addition, ruling in favor of the assessee. Issue 2: The second issue revolved around whether the receipts earned from providing online database access of journals and books can be construed as Royalty under Article 12 of the India US Double Taxation Avoidance Agreement. The Tribunal analyzed the provisions of the Tax Treaty and defined 'Royalty' as payments received for the use of or the right to use any copyright of a literary, artistic, or scientific work. It was emphasized that only payments allowing a payer to use or acquire a right to use copyright in such works are covered within the definition of Royalty. The Tribunal held that in the case at hand, the appellant was granting access to its database, and the transaction was for the provision of accessing the database, which could not be considered as Royalty under Article 12 of the India US DTAA. Citing the decision of the Hon'ble Supreme Court, the Tribunal set aside the findings of the CIT(A) and directed the Assessing Officer to delete the addition, ultimately allowing the appeals of the assessee. Conclusion: The Tribunal, after considering the arguments and precedents, ruled in favor of the assessee on both issues, stating that the revenue earned from providing online database access did not fall within the definition of Royalty u/s 9(1)(vi) of the Act or under Article 12 of the India US Double Taxation Avoidance Agreement. The Tribunal directed the Assessing Officer to delete the additions made, thereby dismissing the appeals of the Revenue.
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