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TMI Blog2023 (7) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... O") under section 143(3) read with section 144C(13) of the Act. 1. That on the facts and circumstances of the case and in law, the Ld. AO has erred in assessing the total income of the Appellant under section 143(3) read with section 144C(13) of the Act at INR 2,14,76,13,270 as against Nil returned income. 2. That on the facts and circumstances of the case and in law, the Ld. AO / Dispute Resolution Panel ("DRP") have erred in holding that the receipts from Indian customers amounting to INR 2,14,76,13,270 are chargeable to tax as royalty in terms of Article 12(3) of India-US Double Tax Avoidance Agreement ("DTAA") and under section 9(1)(vi) of the Act. 2.1 That on the facts and in the circumstances of the case and in law, the Ld. AO/ DRP have erred in holding that the subscription charges received under Chemical Abstract Service (CAS) division and Publications (PUBS) division would be chargeable to tax in India under India-US DTAA being received for use or right to use of copyright in artistic, literary or scientific work and / or for use of information concerning industrial, commercial or scientific experience and / or for use of industrial, commercial or scientific equipmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's largest scientific society by membership. For the year under consideration, the assessee filed its return of income on 02/11/2020 declaring a total income of Rs. Nil. During the year, the assessee received payment for providing the following products/services from outside India to Indian customers:- 1. Fee for providing access (by subscription) to online chemistry databases (CAS division) Rs. 51,54,87,392 2. Subscription revenue from sale of online journals (PUBS division) Rs. 1,63,21,25,879 3. Subscription revenue from membership of M&SA division Rs. 52,05,699 4. Advertising revenues Rs. 16,14,076 6. During the assessment proceedings, the assessee submitted that none of these receipts qualify as royalty or fee for included services under the India-USA DTAA. During the course of assessment proceedings, it was found that the return of income of the assessee for the assessment years 2014-15 to 2019-20 were also scrutinized and in these years, the Assessing Officer has treated all the above revenues of the assessee except membership revenue and advertisement revenue as its income from Royalty taxable @15% under the beneficial provisions of India USA DTAA. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Co-ordinate Bench of the Tribunal are as under:- "7. We have carefully considered the rival submissions, perused the relevant material, including the orders of the lower authorities as well as the case laws referred at the time of hearing. Notably, the controversy before us primarily revolves around the characterization of the income earned by the assessee from the Indian subscribers. The income-tax authorities have invoked section 9(1)(vi) of the Act and/or Article 12(3) of the India-USA Treaty in order to say that the receipts are in the nature of royalty, and therefore the same is taxable in India. On the contrary, as per the assessee, the impugned receipts are in the nature of business profits, and in the absence of any PE in India, the same are not taxable in India. In the earlier part of this order, we have noted in sufficient detail, the manner in which the assessee earns the CAS fee from Indian subscribers, and the same is not being repeated for the sake of brevity. "Factually speaking, it is evident that the assessee merely accumulates and organizes information already available in public domain / publicly disclosed information, and organizes the same at one pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om previous experience. In other words, in order to be understood as 'royalty', the payment must be for information which is exclusively possessed or secret under the ownership of the grantor of such information. In our considered opinion, the fact-situation in the instant case does not comply with the aforesaid requirement so as to be treated as a payment for 'royalty'. 8. As discussed earlier, in the instant case, the assessee merely identifies, aggregates, and organizes publicly disclosed chemistry related scientific information or publishes research work submitted by scientists worldwide. Thus, this information is clearly not undivulged; rather, it is an Information which is available in public domain, as is also evident from the factual position noted by the Assessing Officer himself in the assessment order. Further, chemistry and related scientific information accumulated by the assessee in the form of a database is the experience of various scientists, researchers and various other persons and not that of the assessee. Thus, what the assessee collates is experience of others and provides access thereto. The database does not provide any information arising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h associate company of D&B compiles the information in respect of companies functioning in its country in the standardized D&B format which is electronically uploaded on the server of the associates companies and is copied (mirrored) on the Central data base server situated in US. DBIS is also engaged in a similar business of compilation and selling BIRs in respect of business entities, either they are incorporated in their respective countries or doing business in their country. The US server farm is owned and operated by D&B US and it contains mirror servers of all the D&B associate companies. The modus operandi of the business of DBIS is that whenever an Indian customer places an order for a BIR in respect of a company situated in Spain, DBIS would access the master server of D&B US. Thereupon, the master server would identify DBIS and would allow access to connect to the mirror server of the applicant which is situated in US server farm. It was then DBIS would request the applicant for a BIR of the company for which the Indian customer has placed an order. On locating the required BIR, DBIS would download, print and deliver a copy thereof to the customer. DBIS is under an oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. From these aspects it is clear that the aforementioned ruling of the Authority is distinguishable on facts. If a group of companies collects information about the historical places and places of interest for tourists in each country and all informations are maintained on a central computer which is accessible to each constituent of the Group in each country, can a supply of such information electronically on payment of price be treated as royalty or fee for technical services? We think not. (underlined for emphasis by us) 10. In this context, we also think it apposite to refer to the judgment rendered by the Hon'ble Madhya Pradesh High Court in the case of CIT vs. HEG Limited [2003] 263 ITR 230 (MP). In the aforesaid case, the assessee paid certain amount to a firm of USA for purchase of some information. The Assessing Officer held that the said transaction involved imparting of information concerning technical, industrial, commercial or scientific knowledge, experience or skill, and, therefore, the payment was royalty for purchase of data of confidential nature and the assessee was liable to deduct TDS thereon. The matter travelled to the High Court and it held that pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 (supra). 13. In view of the aforesaid discussion, in our considered view, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... division do not provide any information arising from assessee's previous experience. The assessee's experience lies in the creation of maintaining such information online. By granting access to the journals, the assessee neither shares its experiences, techniques or methodology employed in evolving databases with the users, nor imparts any information relating to them. As is clearly evident from the sample agreements, all that the customers get is the right to search, view and display the articles (whether online or by taking a print) and reproducing or exploiting the same in any manner other than for personal use is strictly prohibited. Further, the customers do not get any rights to the journal or articles therein. They can only view the article in the journal that they have subscribed to and cannot amend or replicate or reproduce the journal. Thus, the customers are only able to access journal/articles for personal use of the information. No 'use or right to use' in any copyright or any other intellectual property of any kind is provided by the assessee to its customers. Furthermore, the information resides on servers outside India, to which the customers have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot show us any reason to deviate from the aforesaid decisions rendered in assessee's own case and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided by the Co-ordinate Bench of the Tribunal in preceding assessment years. Thus, respectfully following the orders passed by the Co-ordinate Bench of the Tribunal in assessee's own case cited supra, we uphold the plea of the assessee and delete the impugned addition in respect of the subscription fee received by the assessee under Chemical Abstract Service and Publications division. As a result, ground no.2, raised by the assessee is allowed. 13. Insofar as the levy of interest under section 234A of the Act is concerned, we deem it appropriate to remand this issue to the file of the Assessing Officer for de novo adjudication after the necessary examination of the fact whether the return of income was filed by the assessee within the prescribed time under the Act. Accordingly, ground no.3, raised in assessee's appeal is allowed for statistical purposes. 14. Insofar as ground no.4, raised in assessee's appeal is concerned, the same rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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