TaxTMI 
TaxTMI 
2021 (5) TMI 633
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....ndia. 2. Subscription fees considered as fees for technical services The learned AO erred in holding that the subscription fees of Rs. 14,86,39,250 received by the appellant are in the nature of "fees for technical services" CRTS') as defined under section 9(l)(vii) of the Act and also under Article 12 of the India-Germany Tax Treaty. 3. Subscription fees considered as Royalty The learned AO erred in holding that the subscription fees of Rs. 14,86,39,250 received by the appellant are also in the nature of "Royalty" as defined under section 9(l)(vi) of the Act and also under Article 12 of the India-Germany Tax Treaty. 4. The learned AO/ DRP erred in holding that the subscription fees received by the appellant are in the nature of FTS as well as royalty. The appellant submits that the subscription fees received by the appellant are not subject to tax in India. 5. Without prejudice to the above, the appellant submits that the subscription payments could either fall under the definition of FTS or fall under the definition of royalty and not both. 6. The learned AO/ DRP erred in not considering the submissions filed by the appellant and also the following decisions rel....
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.... to the database to Indian clients during the period relevant to assessment year under appeal. The contention of the assessee is that since the assessee is not having any Permanent Establishment (PE) in India, the receipts from subscription are not taxable in India as per Article -12 of India Germany DTAA. The Assessing Officer while passing the draft assessment order held that the subscription fee receipts are in the nature of Royalty/Fee for Technical Services (FTS) and hence, taxable in India under section 9 of the Act read with Article 12 of India-Germany DTAA. Consequently, the Assessing Officer made addition of the aforesaid amount as Royalty/FTS. Against the draft assessment order dated 08/12/2018, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP rejected the objections of the assessee in toto. The assessing Officer passed the impugned assessment order in line with the directions of DRP making addition of Rs. 14,86,39,251/- on account of Royalty/FTS taxable in India. 4. Shri Ketan Ved appearing on behalf of the assessee submitted that in the immediately preceding assessment years i.e. assessment year 2013-14 to 2015-16 similar addition was ma....
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....s carried on by the assessee for generating such income. Undisputedly, the assessee has created an online database named "reaxys.com" pertaining to chemical information which the users having interest in chemistry topic, substance data and preparation and reaction method can access for their own benefit and use. It is also not disputed that the data stored in the online database is collated by the assessee from articles printed in various journals on similar topics which are otherwise available to public on subscription basis. The data collated by the assessee from various journals are entered and stored in the database in a structured and user-friendly manner to enable the users to search and retrieve the data required by them and beneficial to them. The users of the online database can 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 thro....
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....makes it clear that all right, title and interest in the subscribed products remain with the assessee and any unauthorized re-distribution of the subscribed products which may harm the assessee and its supplier is prohibited. Clause-2.3 of the agreement provides that the assessee reserves the right to withdraw from the subscribed products content that it no longer retains the right to provide or that it has reasonable grounds to believe is unlawful, harmful, false or infringing. As per clause-4 of the agreement, subscriber shall pay the subscription fee to the assessee as set forth in Schedule-1 within 30 days of the date of invoice. Clause-5.1 of the agreement stipulates the duration of agreement from 1st February 2010 to 30th June 2010 with an option for renewal of the agreement 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....
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....." 13. As per the aforesaid definition of royalty in the tax treaty, any amount received for use of or right to use of any copyright or literary, artistic or scientific work, etc., can be treated as royalty. In the facts of the present case, there is no dispute that the assessee has collated data from various journals and articles, which are otherwise available for subscription to the general public, and entered them into the database in structured manner. It is also clear from the terms of subscription agreement, the assessee has not transferred use or right to use of any copyright of literary, artistic or scientific work to its subscribers. What the assessee has done is, it has allowed customers to access its database and utilize the information available therein for their use. 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 transfer....
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....nline 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." [Emphasised by us] Thus, the Co-ordinate Bench in an unambiguous manner has held that the assessee has not transferred any of its right to use copyright of any literary, artistic or scientific work to the subscribers nor any technical services have been provided by the assessee to its subscribers, therefore, subscription fee received....