ITAT: As Indo-US DTAA, No 'Royalty' income for online books, text journals

ITAT: As Indo-US DTAA, No 'Royalty' income for online books, text journals

Under the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and the United States, income from an online database of journals and books would not be regarded as royalty income according to the Delhi bench.

A corporation incorporated in the USA is the appellant. Data and information of the assessee will be accessible upon a fee payment. There is plenty of public domain data, but the appellant creates several value-added content elements such as analysis, indexing, description and appending notes to make access easier. As part of the license agreement, the appellant allows the customer/licensee access to this centralized data. Specifically, the Tribunal was asked to determine whether or not royalty income generated by online databases of text journals and books should be taxed under the provisions of Article 12 of the India USA DTAA.

As per section 92 of the Act, the assessee can invoke the provisions of India-USA DTAA as part of the assessment process to the extent that it is more beneficial to the assessee. This decision was made by a Tribunal bench consisting of Shri N.K. Billaiya, Accountant Member and Shri Anubhav Sharma, Judicial Member.

Upon reviewing the entire factual matrix for the complete business of the assessee, it is clear that no legal title has been transferred and that the copyrighted article belongs to the assessee. The user is not authorized to reproduce the data in any format, to translate or to adapt the data in any way. By using the data they are not acquiring copyright or the right to use the data they have acquired. For us, it is necessary to distinguish between "payments for use of copyright in a program" and "payments for the use of the program itself" when determining whether a payment is for the use of copyright.

According to the Tribunal, "Facts on record show that the appellant is granting access to the appellant's database," that the AO should delete the order. Access to the database of the assessee is the purpose of the transaction under consideration. In that case, the payments cannot be considered a royalty under Article 12 of the India-UAS-DTAA."