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TMI Blog2023 (7) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for sale of journal also, and accordingly PUBS fee also does not qualify as 'Royalty' in terms of section 9(1)(vi) of the Act as well as Article 12(3) of the India-USA DTAA. Thus we uphold the plea of the assessee and delete the impugned addition in respect of the subscription fee received by the assessee under Chemical Abstract Service and Publications division. Decided in favour of assessee. - ITA No. 735/Mum./2023 - - - Dated:- 31-3-2023 - Shri G.S. Pannu, President And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Paras Savla For the Revenue : Shri Soumendu Kumar Dash ORDER PER BENCH The present appeal has been filed by the assessee challenging the impugned final assessment order dated 12/01/2023, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 ( the Act ), pursuant to the directions dated 28/12/2022 issued by the learned Dispute Resolution Panel 1, Mumbai 2, [ learned DRP ], under section 144C(5) of the Act for the assessment year 2020 21. 2. In its appeal, the assessee has raised the following grounds: Appeal under section 253(1)(d) of the Income-tax Act, 1961 (hereinafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Appellate Tribunal ( ITAT ) in Appellant's own case for immediately preceding assessment years i.e. AY 2014-15 to 2019-20, wherein on similar facts and circumstances, the Hon'ble ITAT held that the revenue from CAS and PUBS division cannot be taxed as royalty under section 9(1)(vi) of the Act as well as Article 12(3) of India-US DTAA. 3. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest of INR 21,40,784 under section 234A of the Act, while the return of income was furnished by the appellant within the due date prescribed under section 139(1) of the Act. 4. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest of INR 7,27,86,656 under section 2348 of the Act. 3. Ground no.1, raised in assessee s appeal being general in nature, hence, no separate adjudication is required. 4. The issue arising in ground no.2, raised in assessee s appeal, is with regard to the taxability of subscription charges received by the assessee as Royalty under the provisions of Article 12(3) of India USA Double Taxation Avoidance Agreement ( DTAA ) and under section 9(1)(vi) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2016-17. 7. Being aggrieved, the assessee filed detailed objections before the learned DRP. Vide Directions dated 28/12/2022, issued under section 144C(5) of the Act, the learned DRP, following its directions rendered in assessee s own case for the assessment year 2019-20, rejected the objections filed by the assessee. In conformity, the Assessing Officer passed the impugned final assessment order dated 12/01/2023. Being aggrieved, the assessee is in appeal before us. 8. During the course of hearing, the learned Authorised Representative ( learned A.R. ) submitted that this issue has been decided in favour of the assessee by the decision of the Co ordinate Bench of the Tribunal in assessee s own case for preceding assessment years. The learned A.R. further submitted that even lower authorities have accepted that facts for the year under consideration are similar to the facts of the preceding assessment years, wherein this issue has been decided in favour of the assessee. 9. On the other hand, the learned Departmental Representative ( learned D.R. ) vehemently relied upon the order of the authorities below. 10. We have considered the rival submissions and perused th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er online or by taking a print) and reproducing or exploiting the same in any manner; and its use for purposes other than personal use is strictly prohibited. Further, in para 7.12 of the assessment order, the Assessing Officer has stated that the assessee has a wealth of industrial, commercial and scientific experience collected, developed and systemized over a period of time. Further, in para 7.13 of the assessment order, the Assessing Officer has also referred to paragraph 11 of OECD commentary on Article 12 to hold that the payment in question is to be understood as 'royalty. As per the Assessing Officer, the technical, commercial or scientific information provided by the assessee to the Indian customers through SciFinder arises from its previous experience which gives economic benefit to the customers. The Assessing Officer also points out that ACS Network and SciFinder serve as a platform as well as a tool/gateway for access to such information. All these have been referred by the Assessing Officer to arrive at an inference that the CAS fee is in the nature of 'royalty'; and, for that purpose, the Assessing Officer has referred to para 11 of the OECD commentary on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r methodology employed in evolving databases with the users, nor imparts any information relating to them. 9. In this context, the learned Counsel pointed out that similar situation has been considered by the AAR ruling in the case of Dun and Bradstreet Espana S.A.(supra), which has been upheld by the Hon'ble Bombay High Court in the case of DIT vs. Dun and Bradstreet information Services Indio (P) Ltd. (supra). In this case, the applicant, a non-resident company of Spain was engaged in the business of compilation and selling Business Information Reports (BIR) in their local markets and to other associate companies worldwide. On the issue of whether the payment made for the purchase of BIRS would be in the nature of Royalty, the AAR opined that the applicant has rightly equated the transaction of sale of Business Information Reports in electronic form to a sale of book, which does not involve any transfer of intellectual property and held that the payment to non-resident company for downloading BIRS is not in the nature of Royalty or fee for technical services. The AAR held that the purchase of standardized reports publicly available on the internet upon payment of subscri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce. The Commissioner sought to bring the payments under royalty/fees for technical service for the reason that the BIRS are copyright protected and end-users are required to use for their own purpose and the analysis of raw data provided in the BIRS would be similar to that of providing a technical or consultancy services. We have already mentioned above that a BIR is a standardized product of D B, it provides factual information on the existence, operation, financial condition, management and experience line of business, facility and location of a company; it also provides special events like any suit, lien, judgment or previous or pending bankruptcy. Further, banking relationship and accountants, information like whether it is a patent company or authority concerned, has any branches etc. It also gives a rating of the company. The informations that are provided in a BIR are said to be publicly available; they are collected and complied by D B associates. A BIR is accessible by any subscriber on payment of requisite price with regular internet access for which no particular software or hardware is required. The applicant states that access to data base of the applicant is availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f M. Arye that every information if it concerns the Industres commercial venture would be a royalty. That would tamount to state the low quite broadly That does not seem to be the purpose of the statute or that of the treaty. (Emphasis supplied) 11. With respect to the subscription fee for the CAS division being considered as Royalty for use of or right to use of a copyright, a reference to Copyright Act, 1957 is also relevant. A person can be said to have acquired a copyright or the right to use the copyright in a computer software or database (as described by the Assessing Officer), where he is authorized to do all or any of the acts as per the definition of the term copyright under Section 14 of the Copyright Act, 1957. However, mere access to that work or permission to use the work cannot imply that the payer is paying for use or right to use the copyright. In other words, when no copyright is acquired by the payer, question of using it or getting a right to use it does not arise. 12. In the present context, we may also examine the issue from another angle as follows. The transfer of a copyrighted right means that the recipient has a right to commercially explo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/ e-books and engages in subscription sales of internet and print copies of such research journals. The assessee grants online/ web based access to e-journals, e-books, chapters, articles, proceedings, etc., stored on the server, in consideration for an annual fee /subscription charges. Such e-journals/ e-books can be searched by a subscriber by using relevant keywords on PUBS website after logging in by using their log-in credentials. Customers are merely granted access to search and view the e journals and obtain standardized reports/research articles available therein with no right to use the copyright in the e-journals/ articles. The agreements (as filed in the Paper book at page 43 to 71) entered by the assessee with the customers provide that copyright in the e-books, e-journals etc., remain with the assessee and the customers do not have any right of ownership on the same. The access to e-journals etc. is given only for limited users and the same is restricted to specified authorized sites /users per customer through the IP address of customers. The web access journals can only be accessed by the customers/authorized users through a secure network as prescribed in the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not have the right to make copies for re-sale and does not have the right to make derivative works. In short, the purchaser has not acquired the copyright of the article or of the database. What the buyer gets is a copyrighted product, and accordingly the consideration paid is not royalty, but for purchase of a product. In the instant case too, what is acquired by the customer is a copyrighted article, copyrights of which continue to lie with assessee for all purposes. It is a well settled law that copyrighted article is different from a copyright, and that consideration for the former, i.e. a copyrighted article does not qualify as royalties. 19. Thus, the principles noted by us in the earlier part of this order in the context of the income earned by way of CAS fee are squarely applicable to the subscription revenue received from customers of PUBS division for sale of journal also, and accordingly PUBS fee also does not qualify as 'Royalty' in terms of section 9(1)(vi) of the Act as well as Article 12(3) of the India-USA DTAA. 11. We further find that the Co ordinate Bench of the Tribunal in assessee s own case in American Chemical Society v/s DCIT, ITA no.59 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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