TMI Blog2019 (6) TMI 1620X X X X Extracts X X X X X X X X Extracts X X X X ..... 67/Mum/2017, 7098/Mum/2018 - - - Dated:- 28-6-2019 - Shri Saktijit Dey And Shri G. MANJUNATHA, JJ. Assessee by Shri Niraj Seth Revenue by Shri Narendra Kumar CITDR ORDER Shri Saktijit Dey, J. These three appeals filed by the assessee are directed against separate, but identical orders of the Ld. Assessing Officer passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961(hereinafter the Act ) dated 31/08/2016, 31/10/2017 and 28/09/2018 for Assessment Years 2013-14, 2014-15 and 2015-16 in pursuance to the direction of DRP1, Mumbai. Since, the facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed of by this consolidated order. 2. The assessee, has more or less filed common grounds of appeal for all assessment Years. For the sake of brevity, grounds of appeal taken for AY-2013-14, in ITA No.6573/Mum/2016 are reproduced as under:- The appellant company objects to the order dated 31 August 2016 passed by the Deputy Commissioner of Income Tax (International Taxation), 2(2)(1), Mumbai CAO') under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 ('the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle-5 of India Germany Tax Treaty. 4. During the course of assessment proceedings, the AO asked the assessee to furnish a copy of agreement entered into with various Indian entities and details of amount earned from them. In response, the assessee has filed sample copy of agreement and also filed details of subscription fee earned for the years under consideration. The assessee further claimed that in absence of permanent establishment in India (PE) as per Article-5 of India Germany Tax Treaty, the subscription fee received from the subscribers cannot be taxed India either under provisions of section 9(1)(vi) and (vii) of the Act, or under India Germany Tax Treaty. The AO after considering relevant submissions of the assessee and also taken note of copy of agreement entered into with various Indian entities was of the view that subscription fee received by the assessee is in the nature of royalty/ fee for technical services on the ground that the assessee has received subscription fee for providing specific database facility to different Indian chemical and pharmaceutical companies. He further observed that database includes general science books, magazines, as well as specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction u/s 9(1)(vi) and 9(1)(vii) of the Act, nor under India Germany tax treaty. The Ld. AR further submitted that facts for the impugned assessment years are identical and the Ld. AO as well as the Ld. DRP had reproduced the order for the AY 2011-12 in verbatim and held that subscription fee received from customers in India for access to online database is in the nature of fees of technical services/royalty. The Ld. AR for the assessee further submitted that for AY 2015-16, there is slight difference in facts in as much as for this year the assessee has two data process in addition to existing database which has already been considered by the Tribunal for earlier years in the name of EMBASE but both database are scientific database rendering unique search and research access, therefore, except this limited changes no other changes in its agreement with subscribers as well as content of database. Further, the Ld. DRP has accepted the fact that facts were also similar to the facts considered by the Department for AY 2011-12. 7. The Ld. DR on the other hand, fairly accepted that the issue involved in the present appeals is covered by the decision of ITAT for earlier years, where u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... access it through regular web browsers such as Internet Explorer, Google Chrome or Firefox on payment of subscription fee. The customers and users are allowed to access the online database on a 24 hours basis from an agreed internet protocol range either authenticated via user name and password or via Internet Protocol (IP) number. Thus, it is evident, the database is accessible to the users through regular internet access and no particular software or hardware is required for accessing it. However, each customer/user has to enter into a subscription agreement with the assessee for accessing the database. While accessing the database the customer/user can access, search, browse and view the subscribed products. On a perusal of a sample copy of the subscription agreement placed at Page 56 of the paper book it is to be seen that as per Clause 1.1 of the said agreement, the assessee grants non exclusive and non transferrable right to the subscriber to access and use the products and services identified in schedule I. As per schedule I, the product to be accessed by the subscriber is reaxys.com. Further, schedule I of the subscription agreement provides that upon termination of the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for an addition term upon mutual agreement. 12. Thus, on reading of the aforesaid important terms of the agreement it is very much clear that the assessee has created a database wherein the data relating to Chemistry are collated from various journals and articles and are stored in a structured and user friendly manner which is accessible to customers/users on subscription basis without conferring any exclusive or transferrable right on the customer/user. Further, the assessee retains its exclusive right and ownership over the intellectual property relating to the product and the users subscribers are specifically debarred from using the data in any manner other than for their own exclusive purpose. Keeping in view the aforesaid factual position, we need to examine whether the subscription fee received by the assessee from the customers in India for allowing access to the online database is transfer of right to use the copyright, hence, can be treated as royalty under the India Germany Tax Treaty. The departmental authorities have held that while allowing access to use its online database i.e., reaxys.com the assessee has transferred the right to use the copyright which is in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Further, it is observed, the data available in assessee s database relates to the subject of chemistry and from the list of clients submitted in the paper book it is very much clear that they are either chemical or chemical related companies. There is no material on record which could even remotely demonstrate that while allowing the customer /users to the access the database, the assessee had transferred its right to use the copyright of any literary, artistic or scientific work to the subscribers. Further, from the invoices raised by the assessee, sample copies of which are placed in the paper book, it is noticed that the subscription is period based and further the subscriber may not even use the data stored in the database. That being the case, the payment made cannot be treated as royalty under Article 12(3) of the India Germany Tax Treaty. 14. Having held so, at this juncture, it is necessary to look into some of the decisions governing the issue as cited by the learned Sr. Counsel for the assessee. The first decision which we may refer to is the decision of Authority for Advance Ruling in Dun Brad Street Espana, S.A., (272 ITR 99), wherein the assessee concerned is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined 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. This view is also supported by Hon'ble Bombay High Court's judgment in the case of DIT (International Taxation) v. Dun Bradstreet Information Services India (P.) Ltd. [2011] 338 ITR 95/[2012] 20 taxmann.com 695. 16. The same view was again expressed by the Tribunal in DCIT v/s Welspun Corporation Ltd., [2017] 77 taxmann.com 165. If we examine the facts of the present appeal in juxtaposition to the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribers for accessing the online database. The assessee even does not alter or modify in any manner the articles collated and stored in the database. In the aforesaid view of the matter, the subscription fee received cannot be considered as a fee for technical services as well. By way of illustration we may further observe, online databases are provided by Taxman, CTR online, etc. which are accessible on subscription not only to professionals but also any person who may be having interest in the subject of law. When a subscriber accesses the online database maintained by Taxman/CTR online etc. he only gets access to a copyrighted article or judgment and not the copyright. Similar is the case with the assessee. Therefore, in the facts of the present case, the subscription fee received by the assessee cannot be treated as royalty under Artile 12(3) of India Germany Tax Treaty. 18. In view of the aforesaid, the addition made has to be deleted, as, the payment received by the assessee is only in the nature of business profit which cannot be brought to tax in India in the absence of PE. Grounds are allowed. 9. In this view of the matter and consistent with view taken by the Co-or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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