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TMI Blog2024 (8) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... sales of books / journals or providing access to online journals / online library do not qualify as Royalties under the Act as well as under the Treaty. The services are also do not fall under FIS as the services do not satisfy the clause make available as required for the provisions of Article 12 of DTAA. Assessee appeal allowed. - Dr. B. R. R. Kumar, Accountant Member And Sh. Sudhir Pareek, Judicial Member For the Assessee : Sh. Vishal Kalra, Adv. And Ms. Snigdha Gautam, Adv. For the Revenue : Sh. Vijay B. Vasanta, CIT-DR ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: The present appeal has been filed by the assessee against the order dated 27.06.2023 passed by the AO u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961. 2. Following grounds have been raised by the assessee: 1. That on the facts and in the circumstances of the case and in law, the Assessing Officer ( AO ) has erred in assessing the total income of the Appellant for the relevant AY at INR 16,32,72,111 as against the returned income of INR 17,93,540, making an addition of INK 16,12,78,571, pursuant to the directions issued by Dispute Resolution Panel ( DRP ). 2. That on the facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing been issued on 12.07.2023 is barred by limitation in terms of Section 144C(13) of the Act and hence, bad in law and liable to be quashed. 7. That on the facts and circumstances of the case and in law, the AO has erred in initiating penalty proceedings under section 270A of the Act. 3. The issue of DIN is not pressed. 4. The assessee is registered in United States of America and a tax resident and engaged in the business of providing access to online journals/online library, containing Wiley Blackwell Journals ( WB Journals ), publications, distribution of WB Journals, online books, etc. The assessee online Library provides access to over 7.5 million articles, reference works, laboratory protocols and databases. During the year, the assessee entered into agreements from outside of India with customers in India to provide access to online journals / online library available at its online database maintained outside of India and earned revenue amounting to Rs. 16.12 Cr. in consideration for sales or providing access to online databases / journals etc. to Indian customer from outside of India. 5. The assessee filed its return of income on January 5, 2021, declaring taxable income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any copyright of a literary, artistic, or scientific work. Limited rights to access online journals granted by the assessee to Indian customers, do not amount to granting of any right in the copyright in any manner whatsoever, and hence the receipts from Indian customers do not constitute royalties under the Treaty. 13. In this regard, reliance is placed on following decisions, wherein subscription fees from its Indian customers for providing access to online database and/or journals were not royalty as customers did not acquire copyright: ACIT vs. Relx Inc. [2024] TS-129-HC-2024(Delhi) upholding Relx Inc. vs. ACIT: [2023] 149 taxmann.com 78 (Delhi Trib.) Uptodate Inc. vs. DCIT: [2023] 150 taxmann.com 231 (Del. - Trib.) Elsevier Information System GmbH vs. DCIT [2019] 106 taxmann.com 401 (Mum.) 14. For the sake of ready reference, the relevant portion in the order in the case of ACIT Vs. Relx Inc. (supra) is reproduced below: 10. We have heard the parties and perused the material available on record and gave our thoughtful consideration. 11. It is found that the assessee earns income in the nature of subscription fees from Indian subscriber for providing subscription to data base L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions of Hon'ble Delhi High Court in the case of DIT v. Nokia Networks OY [2013] 358 ITR 259/212 Taxman 68/25 taxmann.com 225. In this case all that the assessee gets right is to access the copyrighted material and there is no dispute about. As a matter of fact, the AO righty noted that 'royalty' has been defined as payment of any kind received as a consideration for the use of, or right to use of, any copyright of literary, artistic or scientific work and that the expression literary work , under section 2(o) of the Copyright Act, includes 'literary database' but then he fell in error of reasoning inasmuch as the payment was not for use of copyright of literary database but only for access to the literary database under limited non exclusive and non transferable licence. Even during the course of hearing before us, learned Departmental Representative could not demonstrate as to how there was use of copyright. In our considered view, it was simply a case of copyrighted material and therefore the impugned payments cannot be treated as royalty payments. This view is also supported by Hon'ble Bombay High Court's judgment in the case of DIT (Internat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be found in the subscription fee received by the assessee. Further, the 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. 13. In the case of Elsevier Information System GmbH (supra) held that receipt of the assessee therein do not qualify as FTS as per the provisions Section 9(1) (vii) of the Act, wherein the Tribunal Bench of Mumbai adjudicated the issue regarding treaty of 'Indo-German Tax Treaty' wherein the provisions of FTS are similar to Section 9(1)(7) of the Act. The only difference to the present appeal is that the applicable treaty is Indo-US Tax Treaty. The Article 7 of India-US DTAA, the income from subscription to Assessee's da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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