Income from Online Database of Text Journals and Books not 'Royalty' as per Indo-US DTAA: ITAT [Read Order]

The Delhi bench has held that the income from an online database of text journals and books would not constitute royalty income under the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and the USA.

The appellant is an entity incorporated under the laws of the USA. The assessee is allowing access to data/information on payment of a fee. Data is available in the public domain and the appellant makes some value additions like analysis, indexing, description, and appending notes for facilitating easy access. The appellant is allowing this centralized data available to the customer/licencee for consideration. The question before the Tribunal was the taxation of the revenue from the online database of text journals and books as royalty income under the provisions of Article 12 of the India USA DTAA.

At the outset, the Tribunal bench comprising Shri N.K. Billaiya, Accountant Member, and Shri Anubhav Sharma, Judicial Member observed that as per the provisions of section 92 of the Act, the assessee is entitled to invoke the provisions of India-USA DTAA to the extent it is more beneficial to the assessee.

“On an understanding of the entire factual matrix of the business of the assessee shows that there is no transfer of legal title in the copyrighted article as the same rests with the assessee. The user has no authority to reproduce the data in any material form to make any translation in the data or to make an adaptation in the data. The end user cannot be said to have acquired copyright or the right to use the copyright in the data. In our considered view, for determining whether or not a payment is for use of copyright, it is important to distinguish between “a payment for right to use copyright in a program” and “right to use the program itself”,” the Tribunal said.

Directing the AO to delete the order, the Tribunal held that “Facts on record show that the appellant is granting access to its database. Transaction under consideration is for the provision of accessing the database of the assessee. Hence the same cannot be considered as royalty under Article 12 of the India USA - DTAA.”

To Read the full text of the Order CLICK HERE

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