June 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

GEETA JANI | DHISHAT B. MEHTA
Chartered Accountants

10

TS-215-ITAT-2019(Mum)

Elsevier Information Systems GmbH vs. DCIT

ITA No.1683/Mum/2015

A.Y.: 2011-12

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

 

FACTS

The 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.

 

The 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.

 

HELD

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