TMI Blog2022 (10) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... bscription fee received by the assessee under Chemical Abstract Service and Publications division. As a result, ground raised by the assessee is allowed. - ITA No.1521/Mum./2022 And ITA No.1520/Mum./2022 - - - Dated:- 29-9-2022 - Shri Prashant Maharishi, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Vishal Kalra, Shri S.S. Tomar For the Revenue : Shri H.S. Usmani ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeals have been filed by the assessee challenging separate final assessment orders of even date 20/04/2022, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 ( the Act ) for the assessment year 2018 19 and 2019 20. 2. Since both the appeals pertain to the same assessee and issues involved are also, inter-alia, common, therefore these appeals were heard together as a matter of convenience and are being adjudicated by way of this consolidated order. With the consent of the parties, the appeal by the assessee for the assessment year 2018 19 is taken up as a lead case and the decision therein would apply mutatis mutandis to the appeal for the assessment year 2019 20 as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as Article 12(3) of India-US DTAA. 2.4 That on the facts and circumstances of the case and in law, the Ld. AO/DRP have erred in not following the decision passed by the Hon'ble Mumbai Bench of the Income-tax Appellate Tribunal ( ITAT ) in Appellant's own case for immediately preceding assessment years l.e. 2014-15 to 2017-18, 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. Without prejudice to the above grounds of appeal, the Ld. AO has erred in computing the tax payable on assessed income at the rate of 15 percent, instead of 10 percent (inclusive of surcharge and cess), as per the beneficial provisions of the Act. 4. That on the facts and circumstances of the case and in law, the Ld. AO has erred in not granting credit of taxes deducted at source (TDS) amounting to INF 1,38,19,694, duly claimed by the Appellant in the return of income and als appearing in the Form 26AS. 5. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p of M SA division Rs.49,22,425 4. Advertising revenues Rs.7,93,498 8. It was contended by the assessee that none of these receipts qualify as royalty or fee for included services under the India USA DTAA. During the course of assessment proceedings, it was found that the return of income of the assessee for the assessment years 2014 15 to 2017 18 were also scrutinized and in these years, the Assessing Officer has treated all the above revenues of the assessee except membership revenue and advertisement revenue as its income from Royalty taxable under the provisions of India USA DTAA. Further, during the course of assessment, the assessee submitted that its business model has remained same and streams of revenue are also same in comparison to previous years and that no other income was earned by the assessee from India. The Assessing Officer, vide draft assessment order dated 30/06/2021, after noting that similar issue has been decided in favour of the assessee in all the aforesaid assessment years by the Co ordinate Bench of the Tribunal, followed the approach adopted in earlier years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in order to say that the receipts are in the nature of royalty, and therefore the same is taxable in India. On the contrary, as per the assessee, the impugned receipts are in the nature of business profits, and in the absence of any PE in India, the same are not taxable in India. In the earlier part of this order, we have noted in sufficient detail, the manner in which the assessee earns the CAS fee from Indian subscribers, and the same is not being repeated for the sake of brevity. Factually speaking, it is evident that the assessee merely accumulates and organizes information already available in public domain / publicly disclosed information, and organizes the same at one place, thereby creating a database which is accessed by its customers against payment of subscription fee termed as CAS fee. Thus, prima facie, there is no copyright or intellectual property lying with the assessee itself in relation to such information or the contents of the database. Thus, there cannot be a case that the assessee company has transacted in the copyrights or intellectual property rights of the contents of the database of information which is merely collated and collected by it. It is abundan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed chemistry related scientific information or publishes research work submitted by scientists worldwide. Thus, this information is clearly not undivulged; rather, it is an Information which is available in public domain, as is also evident from the factual position noted by the Assessing Officer himself in the assessment order. Further, chemistry and related scientific information accumulated by the assessee in the form of a database is the experience of various scientists, researchers and various other persons and not that of the assessee. Thus, what the assessee collates is experience of others and provides access thereto. The database does not provide any information arising from assessee's own previous experience or knowledge of the subject. The assessee's experience lies in the creation and maintaining the database, which cannot be labelled as industrial or commercial or scientific in any way in the context of the receipts in question. In fact, it is nobody's plea that such experience is shared by the assessee with the Indian customers. The Indian customers do not make payments for availing the knowledge of assessee's experience of creating/maintaining da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... farm is owned and operated by D B US and it contains mirror servers of all the D B associate companies. The modus operandi of the business of DBIS is that whenever an Indian customer places an order for a BIR in respect of a company situated in Spain, DBIS would access the master server of D B US. Thereupon, the master server would identify DBIS and would allow access to connect to the mirror server of the applicant which is situated in US server farm. It was then DBIS would request the applicant for a BIR of the company for which the Indian customer has placed an order. On locating the required BIR, DBIS would download, print and deliver a copy thereof to the customer. DBIS is under an obligation not to take additional copies or reproduce the BIR in any manner or sell it to any customer other than Indian customer on whose requisition the BIR is ordered because the BIR is copyright protected with the copy right vested in the applicant who prepares the BIR. There is further obligation on the Indian customer to use the BIR for its own purpose, the copyright in the BIR would neither be licensed nor assigned to either the DBIS or the Indian customer . 7. It will be . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derlined for emphasis by us) 10. In this context, we also think it apposite to refer to the judgment rendered by the Hon'ble Madhya Pradesh High Court in the case of CIT vs. HEG Limited [2003] 263 ITR 230 (MP). In the aforesaid case, the assessee paid certain amount to a firm of USA for purchase of some information. The Assessing Officer held that the said transaction involved imparting of information concerning technical, industrial, commercial or scientific knowledge, experience or skill, and, therefore, the payment was royalty for purchase of data of confidential nature and the assessee was liable to deduct TDS thereon. The matter travelled to the High Court and it held that purchase of any and every type of commercial information cannot earn the status of royalty. To have the status of royalty, the information transacted should have some special features, which is hitherto not available in public domain. The relevant extract of the said ruling is as follows: 20...... That apart we have already indicated that every information would not have in the status of royalty. There are various kinds of categories of information. Solely because an entry of the commercial na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly, in the instant case, customers of the assessee only enjoy the benefits of using SciFinder and STN and do not acquire the right to exploit any copyright in these software. The difference between a copyright and a copyrighted article in context of software has been brought out very clearly by the Hon'ble Supreme Court of India in the case of Tata Consultancy Services vs. State of Andhra Pradesh (supra). 13. In view of the aforesaid discussion, in our considered view, the income earned by the assessee from the Indian Customers with respect to the subscription fees for CAS cannot be taxed as royalty as per section 9(1)(vi) of the Act as well as Article 12(3) of the India-USA DTAA. Thus, assessee succeeds on this issue. 14. We shall now advert to another issue, which pertains to whether income earned by the assessee from the Indian Customers with respect to the subscription fees for PUBS division be taxed as royalty in terms of section 9(1)(vi) of the Act as well as Article 12(3) of the India-USA DTAA. 15. Before us, the Ld. Senior Counsel pointed out that the characteristics of the PUBS divisions is similar to CAS division, which has been dealt at length by us i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search, view and display the articles (whether online or by taking a print) and reproducing or exploiting the same in any manner other than for personal use is strictly prohibited. Further, the customers do not get any rights to the journal or articles therein. They can only view the article in the journal that they have subscribed to and cannot amend or replicate or reproduce the journal. Thus, the customers are only able to access journal/articles for personal use of the information. No 'use or right to use' in any copyright or any other intellectual property of any kind is provided by the assessee to its customers. Furthermore, the information resides on servers outside India, to which the customers have no right or access, nor do they possess control or dominion over the servers in any way. Therefore, the question of such payments qualifying as consideration for use or right to use any equipment, whether industrial, commercial or scientific, does not arise. 18. To put a comparison, if someone purchases a book, then the consideration paid is not for the use of the copyright in the book/article. The purchaser of a book does not acquire the right to make multiple copi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned addition in respect of subscription fee received by the assessee under Chemical Abstract Service and Publications division. As a result, ground no.2, raised by the assessee is allowed. 15. Ground no.3, relates to alternate plea that the Assessing Officer has erred in determining the tax payable on assessed income at 15% instead of 10%. Since we have allowed ground no.2, of the appeal holding that the income of the assessee is not liable to be taxed in India, therefore, this ground of appeal is rendered academic. 16. Ground no.4, raised in assessee s appeal is pertaining to non grant of credit of TDS. This issue is restored to the file of the Assessing Officer with direction to grant TDS credit, in accordance with law, after conducting necessary verification. As a result, ground no.4 raised in assessee s appeal is allowed for statistical purpose. 17. Insofar as ground no.5, raised in assessee s appeal is concerned, the same relates to charging of interest under section 234B of the Act, which is consequential in nature. Therefore, ground no.5 is allowed for statistical purpose. 18. In the result, appeal by the assessee is allowed for statistical purpose. ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India-US DTAA. 2.4 That on the facts and circumstances of the case and in law, the Ld. AO/DRP have erred in not following the decision passed by the Hon'ble Mumbai Bench of the Income-tax Appellate Tribunal ( ITAT ) in Appellant's own case for immediately preceding assessment years i.e. AY 2014-15 to 2017-18, 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 10,17,03,380 under section 2348 of the Act. 20. Ground no.1, raised in assessee s appeal being general in nature, hence, no separate adjudication is required. 21. The issue arising in ground no.2, raised in assessee s appeal, is with regard to taxability of subscription charges received by the assessee as Royalty under the provisions of Article 12(3) of India USA DTAA and under section 9(1)(vi) of the Act. As similar issue has been decided in assessee s appeal for assessment year 2018-19, the decision rendered therein will ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
