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2019 (4) TMI 1818 - AT - Income TaxIncome accrued in India - PE in India - income earned by the Assessee from the Indian Customers with respect to the subscription fees as royalty in terms of section 9(1)(vi) of the Act as well as Article 12(3) of the India-USA DTAA - stand of the assessee was that such incomes constitute business profits which are not taxable in the absence of any Permanent Establishment (PE) in India since the entire products/services were being provided entirely from outside India - HELD THAT - Transfer of any right in a copyrighted article is analogous to the rights acquired by the purchaser of a book. In the case of a book the publisher of the book grants the purchaser certain rights with respect to the use of the content of the book which is copyrighted but the purchaser of the book does not acquire the right to exploit the underlying copyright. When the purchaser reads the book he only enjoys its contents. Similarly the user of the copyrighted software does not receive the right to exploit the copyright in the software; he only enjoys the product/benefits of the product in the normal course of his business. Similarly 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 2004 (11) TMI 11 - SUPREME COURT 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. 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? - As purchaser of the assessee s journals articles or database access does 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. lt 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. 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.
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