TMI Blog2024 (3) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... journals were not royalty as customers did not acquire copyright, therefore, such fees were not liable to be taxed in India. Thus following the decision of the ITAT we direct the AO to delete the addition made on account of royalty. Accordingly, ground no. 1 2 are allowed. - Shri Amarjit Singh, Accountant Member And Ms. Kavitha Rajagopal, Judicial Member For the Appellant : Vishal Karla For the Respondent : Ajay Kumar Sharma ORDER PER AMARJIT SINGH (AM): This appeal filed by the assessee is directed against the order passed by the ld. DCIT(IT) Circle 1(1)(1), Mumbai, dated 30.10.2023 for A.Y. 2021-22 in pursuance of directions of the Dispute Resolution Panel under section 144(C(5) of the Act issued on 21/09/2023. The assessee has raised the following grounds before us: Appeal under section 253(1)(d) of the Income-tax Act, 1961 (hereinafter referred to as the Act ), against the order dated 30 October 2023, passed by the Deputy Commissioner of Income Tax, International Taxation Circle 1(1)(1), Mumbai ( Ld AO ) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in incorrectly computing the demand for the subject assessment year by erroneously considering the receipts of the Appellant at INR 2,71,61,78,122 as against the actual receipt amount of INR 1,37,25,62,534, even after correctly mentioning the receipt amount in the impugned assessment order. 4. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest of INR 1,28,03,845 under section 234A of the Act without appreciating that the return of income was furnished by the Appellant within the due date prescribed under section 139(1) of the Act. 5. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest of INR 7,93,83,839 under section 2348 of the Act. The Appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal before or at the time of hearing. 2. The American Chemical Society (ACS) (the assessee) is a scientific society based in the United States that support scientific inquiry in the field of chemistry. Its publications division produces 51 scholarly journals including prestigious journal of the American Chemical Society, as well as weekly trade magazine Chemical Engin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed data only for viewing by its customers but the assessee make available recordings of some oral presentations as well. He also stated that assessee collects data and documents from various sources, journals etc, and classifies, categorises, catalogues and indexes these data in appropriate database for access and use for its customers and subscribers. The AO further stated that the payments made by the customers to the assessee were nothing but consideration for transfer or any rights in respect of copyright, literary artistic or scientific work and the same was royalty within the meaning of clause (v) of explanation 2 of Sec. 9(1)(vi) of the Act. Therefore, the amount of Rs. 88,27,92,099/- and Rs. 46,08,23,489/- being revenue from subscription CAS division and revenue from subscription - PUBS division aggregating to Rs. 1,34,36,15,588/- was taxable as royalty income of the assessee. 3. The assessee filed objection before the ld. Dispute Resolution Panel. The DRP after following the direction of the DRP for the earlier years dismissed the objection filed by the assessee for the reason that revenue has not accepted the decision of the ITAT for earlier years and has filed appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and the customer do not have any right of ownership in the database. During the course of appellate proceedings before us the ld. Counsel has referred various decision of the ITAT on the similar issue and identical fact for earlier years in the case of the assessee itself wherein held that subscription received from customer in India in respect of subscription to database and subscription to journals was not taxable as royalty. With the assistance of ld. representative we have perused the decision of ITAT in the case of the assessee itself for assessment year 2016-17 which was further followed in the other assessment year wherein the ITAT in its decision dated 30.04.2019 vide ITA No. 6952/Mum/2019 held that subscription fees received by the assessee from its customers for providing access to database and journals were not royalty as customers did not acquire copyright, therefore, such fees were not liable to be taxed in India. The relevant operating part of the decision is reproduced as under: 7. We have heard the rival submissions of the parties and also gone through the material on record. The assessee has challenged the action of the AO/Ld. DRP in holding that the subscripti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok, 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 docs not receive the right to exploit the copyright m the software; he only enjoys the product/benefits of the product in the normal course of his business. Similarly, in the instant ease, customers of the assessee only enjoy the benefits of using SciFinder and do not acquire the right to exploit any copyright m these software. The 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) (v) of the Act as well as Article 12(3) of the India USA DTAA. Thus, assessee succeeds on this issue . 17. We have heard the rival submissions and perused the relevant material on record including the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the customer is a copyrighted article, copyrights of which continue to lie with assessee for all purposes. It is a well settled law that copyrighted article is different from a copyright and that consideration for the former i.e. a copyrighted articles does not qualify as royalties. 19. Thus, the principles noted by us in the earlier part of this order in the context of the income earned by way of CAS fee are squarely applicable to the subscription revenue received from customers of PUBS division for sale of journal also, and accordingly PUBS fee also does not qualify as Royalty‟ in terms of section 9(1) )vi) of the Act as well as Article 12 (3) of the India-USA DTAA. 20. Ground No. 3 relates to alternative plea that the Assessing Officer erred in determining tax payable on the assessed income @ 20%, instead of 15% as prescribed in Article 12(2) of India-USA DTAA. Since we have allowed Ground No. 2 of the appeal holding that the income of the assessee is not liable to be taxed in India, therefore, this Ground of appeal is rendered academic. 8. We notice that in the assessment year 2014-15, the assessee filed its return of income declaring nil income on the plea that it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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