TMI Blog2023 (5) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd [ 2011 (10) TMI 370 - KARNATAKA HIGH COURT] the coordinate Bench has held that the subscription fee received by the assessee is not in the nature of royalty or FTS. DR has brought to our notice two decisions of CIT vs. Wipro Ltd [ 2011 (10) TMI 473 - KARNATAKA HIGH COURT] and CIT vs. Infosys Technology [ 2011 (10) TMI 370 - KARNATAKA HIGH COURT] wherein contrary view has been expressed by the Hon'ble High Court but as observed, while deciding the Special Leave Petition filed by the concerned assessees, the Hon'ble Supreme Court has set aside the respective judgments of the Hon'ble Karnataka High Court and restored the matters back for fresh adjudication keeping in view the decision of the Hon'ble Supreme Court in case of Engineering Analgsis Centre of Excellence [ 2021 (3) TMI 138 - SUPREME COURT] This is so because while deciding the matters relating to Wipro Ltd. and in Infosys Technology Ltd.,it followed its own decisions in case of CIT vs. Samsung Electronics Co. Ltd. [ 2011 (10) TMI 195 - KARNATAKA HIGH COURT] which stood reversed by the Hon'ble Supreme Court in case of Engineering Analysis Centre to Excellence Pvt. Ltd. (supra). We hold, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Assessing Officer. 5. Before us, learned counsel appearing for the assessee submitted, the issue is squarely covered by the decision of Authority for Advance Ruling and ITAT in case of sister concerned. In this context, he relied upon the following decisions: i) Elsevier BV. In re: [2021] 432 ITR 251 (AAR-Mum); ii) Elsevier Information System GmbH vs. DCIT (2019) 106 Taxmann.com 401 (Mum); iii) RELX Inc. Vs. CIT ITA No.1876 1877/Del/2022 dated 05.04.2023. 6. In reply, learned Departmental Representative, though, agreed that the decisions cited by the learned counsel for the assessee covers the issue in dispute, however, he submitted that those decisions have not considered to other decisions of Hon'ble Karnataka High Court, wherein, receipts from similar nature of transactions have been held to be in the nature of royalty/FTS. In this context, he relied upon the following decisions: i) CIT vs. Wipro Ltd. (2011) 16 Taxmann.com 275 (Kar.); ii) CIT vs. Infosys Technology Ltd. (2012) 17 Taxmann.com 115 (Kar,) . 7. In rejoinder, learned counsel for the assessee submitted that the decision cited by the learned Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 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 allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e all that the assessee gets right is to access the copyrighted material and there is no dispute about. As a matter of fact, the AO righty noted that 'royalty' has been defined 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 license. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowledge of chemical industry either to assist in collating articles from journals / magazines which are publicly available or through them the assessee provides instructions to subscribers 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. 10. Following the decision of the Tribunal, the Authority for Advance Ruling and Delhi Bench of the Tribunal have decided th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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