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2023 (9) TMI 252 - AT - Income TaxIncome taxable in India - taxability of foreign income in India - receipts from the Indian customers as subscription revenue - “Royalty” u/s 9(1)(vi) of IT Act and also u/A 12(3) of the tax treaty between India and USA (India – US DTAA) - Assessee is a foreign company incorporated in USA - bringing to tax subscription revenue as “royalty” - Whether the subscription revenue is towards use of, or right to use any copyright? - HELD THAT:- As by subscribing to the assessee’s database, the subscribers merely get ‘access’ to the database to view the videos - which are akin to ‘copyrighted articles’. The subscribers do not receive any right to use the copyright in the videos/database at any point in time. Thus, in view of the principle laid down by the Hon’ble Supreme Court in the case of Engineering Analysis (2021 (3) TMI 138 - SUPREME COURT) the subscription fees received by the assessee does not amount to payment for the ‘use of or right to use copyright’ but rather payments for access to copyrighted products, i.e., the videos on the assessee’s database. In view of the above, we hold that the subscription fees received by the assessee does not amount to ‘royalty’ for use of or right to use of any ‘copyright’. The subscription revenue received by the assessee whether it is for any information concerning industrial, commercial or scientific experience - Since the assessee receives subscription fees merely to grant access to the database of videos and not for imparting any information concerning the assessee’s own knowledge or experience of creating/maintaining the database, the said subscription fees cannot be said to be for imparting of ‘any information concerning industrial, commercial or scientific experience of the Appellant’. The subscription revenue received by the assessee whether it is for granting any right to use of equipment - The consideration received by the assessee is merely for granting access to the database of videos and not for the use or right to use any equipment whatsoever. The subscribers have no access, right or control of any manner whatsoever over the server on which the assessee maintains the database. Therefore, the subscription fee received by the assessee cannot, in any manner, be termed as consideration for use or right to use any industrial, commercial or scientific equipment. In the case of Factset Research Systems Inc. [2009 (6) TMI 28 - AUTHORITY FOR ADVANCE RULINGS] Revenue raised an identical contention that the server is used by the customers as ‘a point of interface’. However, the said contention of Revenue was rejected by the Hon’ble AAR - we hold that the payment made for viewing the videos on the database cannot be termed as consideration for use or right to use any industrial, commercial or scientific equipment. We hold that the subscription revenue received by the assessee is not taxable as ‘Royalty’ in the hands of the assessee under Article 12 of the India-USA DTAA read with the provisions of the Act. Accordingly, the impugned addition made by the AO in this regard, as upheld by the CIT(A) is hereby deleted. Appeal of assessee allowed.
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