Sections 9(1)(vi), 9(1)(vii) and Article 12 of the India-Germany DTAA – subscription fees received for access to online database does not qualify as FTS or royalty
GEETA JANI | DHISHAT B. MEHTA Chartered Accountants
Elsevier Information Systems GmbH vs.
Dated: 15th April, 2019
Sections 9(1)(vi), 9(1)(vii)
and Article 12 of the India-Germany DTAA – subscription fees received for
access to online database does not qualify as FTS or royalty
assessee is a tax resident of Germany and is engaged in the business of
providing access to online database pertaining to chemical information
consisting of articles on the subject of chemistry, substance data and inputs
on preparation and reaction methods as experimentally validated. The assessee
earned subscription fees by providing access to the online database from
customers worldwide, including India.
assessee, contended that subscription fee received from the customers is not in
the nature of royalty or fee for technical services (FTS). Further, in the
absence of a PE in India, such income is not taxable in India.
But the AO
noted that the database was akin to a well-equipped library which provided
users with the desired result without much effort. Further, the AO concluded
that the data was in relation to a technical subject collated from various
researchers and journals involving technical expertise, which would not have
been possible without technical expertise and human element. Hence, he treated
the subscription fees as FTS under the Act as well as the DTAA. Further, the AO
also held that the online database was in the nature of a literary work which
amounts to right to use copyright and hence it qualifies as royalty under
section 9(1)(vi) of the Act as well as the DTAA.