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TMI Blog2013 (9) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to Wood Mackenzie (in short hereinafter, WM) is not in the nature of royalty for information conforming to industrial, commercial or scientific experience because WM is not imparting any information, knowledge or skill from its experience acquired over a period of time. It was submitted that the industrial experience, that from the other parties from whom information has been obtained, is simply put on website, therefore, it cannot be termed as royalty because it is merely general information concerning commercial aspect of upstream sector of various countries rather than the commercial experience of WM. Therefore, the subscription fees paid for supply of such information, electronically, cannot be treated as royalty. Learned counsel relied upon the decisions in Factset Research Systems Inc., In re [2009] 317 ITR 169 (AAR), Wipro Ltd. v. ITO [2005] 278 ITR (AT) 57 (Bang), Dun and Bradstreet Espana S.A., In re [2005] 272 ITR 99 (AAR), and the decision from the hon'ble Madhya Pradesh High Court in CIT v. HEG Ltd. [2003] 263 ITR 230 (MP). Our attention was also invited to the decision in Gartner Ireland Ltd. v. Deputy DIT (International Taxation) [2010] 42 SOT 21 (Mum)(URO) alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stry in different countries. Accordingly, OVL subscribed to the website of a company, WM, which is a global energy and mining research unit by way of a research agreement dated June 14, 2006. WM collects and compiles various informations in the field of oil and gas exploration and products thereof and such informations are put on the website. Such informations can be obtained on payment of certain fees by entering into an agreement. Under the agreement, the assessee paid charges/subscription fees to WM for obtaining such informations. In turn, WM granted non-transferable licence to the assessee for downloading such information from its websites and such downloaded information was to be used only by the assessee for its purposes. Further, the agreement does not grant any right or sub-licensing etc. and also not to deviate from the terms and conditions of the agreement unless expressly provided in the agreement (agreement is available on pages 21 to 31 of the paper book). To determine the taxability of the subscription fee paid by the assessee to WM, an application was filed before the Deputy Director of Income-tax (International Taxation) (pages 32 to 35 of the paper book). The Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce in India : Provided that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property, if such income is payable in pursuance of an agreement made before the 1st day of April, 1976 and the agreement is approved by the Central Government : Provided further that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum payment made by a person, who is a resident, for the transfer of all or any rights (including the granting of a licence) in respect of computer software supplied by a non-resident manufacturer along with a computer or computer-based equipment under any scheme approved under the Policy on Computer Software Export, Software Development and Training, 1986 of the Government of India. Explanation 1.-For the purposes of the first proviso, an agreement made on or after the 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endering of any services in connection with the activities referred to in sub-clauses (i) to (iv), (iva) and (v). Explanation 3.-For the purposes of this clause, 'computer software' means any computer programmer recorded on any disc, tape, perforated media or other information storage device and includes any such programme or any customised electronic data. Explanation 4.-For the removal of doubts, it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred. Explanation 5.-For the removal of doubts, it is hereby clarified that the royalty includes and has always included consideration in respect of any right, property or information, whether or not (a) the possession or control of such right, property or information is with the payer ; (b) such right, property or information is used directly by the payer ; (c) the location of such right, property or information is in India. Explanation 6.-For the removal of doubts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by keeping the agreement between the parties in juxtaposition. The term "royalties" as used in article 12.3 of the Double Taxation Avoidance Agreement means payment of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films, or work on films, tape or other means of reproduction for use in connection with radio, television, broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productive use or disposition thereof, and payment of any kind as consideration for the use of, or the right to use any industrial, commercial or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) of article 8. If this provision of the Act is analysed with respect to research agreement with OVL dated June 14, 2006 (available at pages 21 to 31 of the paper book), firstly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorised persons to gain access to the website or any product. You may not copy or distribute any user name or password except in accordance with this agreement. 1.6 Each product provided to you is proprietary and confidential to Wood Mackenzie, and you and your officials shall protect each product as a trade secret. Wood Mackenzie shall have the right to audit your use of any product to verify your compliance with the provisions of this agreement. You may not permit any product or any information or data contained in or derived from any product to be disclosed to unauthorised persons or allow unauthorised persons to gain access to any product or any of such information or data. You may not copy or distribute all or any portion of a product except in accordance with the agreement." If the aforesaid restrictive clause is analysed, user names and passwords were provided to the assessee which were considered as trade secrets and proprietary and confidential information of WM. The use of such password or information was of restrictive use of the assessee. The assessee was specifically denied of disclosing to unauthorised person and even the assessee is not authorised to copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial name and passwords, if any, subject to the condition to enter the restricted portion of the website for the sole purpose of down- loading to a permitted computer and reproducing in storage media of a permitted computer copies. The terms of the agreement shall end at 00.01 GM on the last of the then current terms unless such terms are extended or terminated. If the totality of the facts are analysed the information/know- ledge available to the assessee was made through a licence ; consequently, it is covered under the definition of "royalty" under the domestic law under section 19(1)(iv) and (vi) along with article 13(3) of the Double Taxation Avoidance Agreement with the U.K. Therefore, the cases relied upon by the assessee are not of much help, being on different facts. So far as the exact nature of permanent establishment is concerned, it has not been examined by the Assessing Officer in the case of the recipients. Even other- wise, this is not an issue before us. In view of these facts, we find no infir- mity with the order of the learned Commissioner of Income-tax (Appeals), consequently affirmed. Finally, whole of the appeals of the assessee are dismissed. The order prono ..... X X X X Extracts X X X X X X X X Extracts X X X X
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