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TMI Blog2023 (4) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... n basis. Therefore, in our view, the amount received will not fall within the ambit of royalty as defined under Article 12(3) of the tax treaty. Thus we hold that the amount received by the assessee, being not in the nature of royalty under Article 12(3) of the treaty, cannot be brought to tax in India in absence of a Permanent Establishment. Accordingly, we direct the AO to delete the addition. Appeal of assessee allowed. - SHRI G. S. PANNU , HON BLE PRESIDENT AND SHRI SAKTIJIT DEY , JUDICIAL MEMBER For the Appellant : Sh. Salil Kapoor, Advocate Ms. Ananya Kapoor, Advocate Sh. Vibhu Jain, Advocate Sh. Amarbir Singh Walia , CA For the Respondent : Sh. Sanjay Kumar , Sr. DR ORDER PER SAKTIJIT DEY, JM: This is an appeal by the assessee challenging the order dated 25.06.2019 passed by learned Commissioner of Income Tax (Appeals)-43, New Delhi, pertaining to assessment year 2016-17. 2. Though, the assessee has raised multiple grounds, however, the core issue arising for consideration is, whether the amount received by the assessee for allowing access to online database of journals and books is in the nature of royalty under section 9(1)(vi) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing for the assessee submitted that the assessee has collated information available in public domain in relation to healthcare and created a database. The assessee allows access to database from customers across the world, including India on subscription basis. He submitted, the database is the intellectual property of the assessee and copyright is attached to the database. He submitted, by making available the centralized data to customers for a consideration, the assessee has not transferred any right to use of the copyright in favour of the customers. He submitted, the payments received by the assessee for accessing data/information cannot be characterized as royalty, as, while giving access to the database, the user does not get any copyright in the content of the database. The customer merely acquires a right to view information online or to access the database and there is no transfer, including licensing of any right in respect of database. He further submitted, the data is otherwise available in public domain and the only value addition the assessee has made is like analysis, indexing, description and appending notes for facilitating easy access. He submitted, by allowing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... database is like analysis, indexing, description, appending notes for facilitating easy access to the customers. For allowing access to the database to customers the assessee charges subscription fee. It is further observed from the facts on record, as per the terms of the subscription agreement; customers are only granted access to the contents of the database. However, they are not permitted to copy, print, reproduce, modify, translate, adapt or create derivative works based upon the licensed products. Customers are also prohibited to reverse engineer, decode, decompile, disassemble or otherwise attempt to access or derive the source code or structural framework of the licensed products. They cannot access the licensed products for the purpose of developing, marketing, selling or distributing any product or service that competes with or includes features substantially similar to the licensed products. They cannot sell, loan, rent or lease access to the licensed products or use the licensed products as part of a service bureau or similar fee for service purposes. They cannot share usernames, passwords or any other security information for access to the licensed products. All righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial, commercial, or scientific equipment subject to certain exception can be considered as royalty. 8. In the facts of the present appeal, undisputedly, the materials/contents available in the database of the assessee are collated from public domain and assessee certainly is not the creator of such content or material. The assessee has simply put the collated data in database in a user friendly manner. That being the factual position emerging on record, it cannot be said that in terms with Article 12(3) of the Treaty, the assessee has transferred right to use of any copyright of literary, artistic or scientific work or any other secret formula or process or information concerning industrial, commercial, scientific experience. Further, the assessee has not transferred right to use of any industrial, commercial, or scientific equipment as the subscriber are only granted access to online database. By way of illustration, we may observe that various law journals have created online database by collating judgments/orders of courts, tribunals etc. and access is allowed to subscribers upon payment of subscription. However, by allowing such access there is no transfer of right to use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the data. The end user cannot be said to have acquired a copyright or right to use the copyright in the data. In our considered view, for determining whether or not a payment is for use of copy right, it is important to distinguish between a payment for right to use copy right in a program and right to use program itself . 11. 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. When the purchaser reads the book, he only enjoys the content. Similarly, user of the data base does not receive the right to exploit the copyright in the database, he only enjoys the product in the normal course of his business. 12. Facts on record show that the appellant is granting access to its data base. Transaction under consideration is for provision of accessing data base of the assessee. Hence the same cannot be considered as royalty under Article 12 of the India USA - DTAA. 13. While taxing the revenue as royalty, the Assessing Officer has relied upon the decision of the AAR in the case of Skillsoft Ireland Limited wher ..... X X X X Extracts X X X X X X X X Extracts X X X X
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