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2017 (1) TMI 554 - AT - Income TaxTDS u/s 195 - payment made to Non-Resident, viz. Chemical Abstract Services USA, for online access to the database system "SciFinder" - Held that:- Payment made for access to online publication/database cannot be considered as being in the nature of royalty, liable to withholding tax, either under the Income-tax Act or under the DTAA with USA. Therefore, hold that the payment made to Chemical Abstract Service USA was not liable to TDS under the provisions of Sec. 195 and accordingly, the appellant could not be held liable to pay tax as an assessee in default u/s. 201(1). Payments treated as royalty payments - copyright work - Indo US tax treaty - Held that:- It is only when the use is of the copyright that the taxability can be triggered in the source country. In the present case, the payment is for the use of copyrighted material rather than for the use of copyright. The distinction between the copyright and copyrighted article has been very well pointed out by the decisions of Hon’ble Delhi High Court in the case of DIT Vs Nokia Networks OY [2012 (9) TMI 409 - DELHI HIGH COURT ]. 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.
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