ADIT (I.T) 3(1), MUMBAI V. M/s. GLOBUS STORES P. LTD., MUMBAI

ITA 4432/MUM/2005

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8416 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 24-07-2012
• Assessment Year: misc
• Appeal Filed On: 15-06-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Double taxation relief; Deemed to accrue or arise in india; Advance ruling; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI L BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI P M JAGTAP, AM & SHRI VIJAY PAL RAO, JM ITA NO. 4432/MUM/2005 (ASST YEAR 2005-06) THE ASST DIRECTOR OF IN COME TAX (INTERNATIONAL TAXATION) 3(1), MUMBAI VS GLOBUS STORES P LTD RAHEJA CORNER OF MAIN AVENUE & V P ROAD SANTACRUZ (W) MUMBAI 54 (APPELLANT) (RESPONDENT) PAN NO. AABCG3579Q ASSESSEE BY SH NITESH JOSHI REVENUE BY MS NEERAJA PRADHAN DT.OF HEARING 18 TH OCT 2012 DT OF PRONOUNCEMENT 9 TH , NOV 2012 PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 1.3.2005 OF THE COMMISSIONER OF INCOME TAX(APPEALS) ARISING FROM T HE ORDER OF ADIT(INTERNATIONAL TAXATION) PASSED U/S 195 OF THE I T ACT FOR THE AS SESSMENT YEAR 2005-06. 2 THE REVENUE HAS RAISED THE ONLY GROUND IN THIS AP PEAL AS UNDER: IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE SUBSCRIPTION FEES IS NOT IN THE NATURE OF ROYALTY AND ALSO CANNOT BE TAXED AS BUSINESS INCOME AS THERE IS NO PE . 3 THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF RETAILING FASHIONABLE READY TO WEAR GARMENTS THROUGH ITS STORES. THE ASS ESSEE HAS SET UP LARGE SUPER STORES AND WAS SELLING GARMENTS AND ACCESSORIES IN THE MAJ OR CITIES. THE ASSESSEE HAS ALSO SET UP BACK ACTIVITIES LIKE DESIGN DEPARTMENT, QUAL ITY CONTROL DEPARTMENT ETC., IN ORDER TO MANUFACTURE ITS OWN GARMENTS. IN ORDER TO GET AN IDEA OF INTERNATIONAL TREND ANALYSIS AND OTHER INFORMATION FOR FASHION DE SIGN AND STYLE, THE ASSESSEE ITA NO.4432/M/2005 GLOBUS STORES P LTD . 2 ENTERED INTO AN AGREEMENT WITH WORTH GLOBAL STYLE NETWORK LTD ( IN SHORT WGSN) AND THEREBY SUBSCRIBED TO AN INTERNET SITE NAMELY WWW.WGSN.COM WHICH BELONGS TO WGSN BASED IN UNITED KINGDOM. THE SUBSCRIPTION CHA RGES FOR ACCESSING THE WEBSITE IS UK POUND 17000 FOR WHICH THE FOREIGN COMPANY HAS RAISED AN INVOICE. THE ASSESSEE FILED AN APPLICATION U/S 195(2) OF THE ACT REQUESTING THE REVENUE AUTHORITIES TO ISSUE NO OBJECTION CERTIFICATE FOR REMITTANCE OF THE AFORESAID AMOUNT TO THE FOREIGN COMPANY WITHOUT DEDUCTION OF TAX. 3.1 THE ASSESSEE SUBMITTED BEFORE THE ADIT(IT) THAT AS PER THE PROVISIONS OF SEC. 90(2) OF THE ACT WHERE THE CENTRAL GOVERNMENT HAS E NTERED INTO ANY DTAA WITH THE GOVERNMENT OF OTHER COUNTRIES OUTSIDE INDIA FOR T HE PURPOSE OF GRANTING RELIEF OR AVOIDANCE OF DOUBLE TAXATION, THE PROVISIONS OF THE ACT OR THE DTAA WHICHEVER IS MORE BENEFICIAL TO THE ASSESSEE SHALL APPLY. IT I S STATED THAT THE FOREIGN COMPANY IS A RESIDENT OF UK AND THEREFORE, THE PROVISIONS OF D TAA SHALL APPLY. SINCE THE SUBSCRIPTION FEE RECEIVED BY THE FOREIGN COMPANY IS ITS BUSINESS INCOME; THEREFORE, IN THE ABSENCE OF A PE IN INDIA, WITHIN THE MEANING OF ARTICLE 5 OF DTAA, BUSINESS INCOME OF THE FOREIGN COMPANY IS NOT TAXABLE IN IND IA AS PER ARTICLE 7 OF THE DTAA. 3.2 THE ADIT DID NOT AGREE WITH THE CONTENTION OF T HE ASSESSEE AND HELD THAT THE AMOUNT PAYABLE TO THE FOREIGN COMPANY IS NOTHING BU T USE OF INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL EXPERIENCE FALLIN G WITHIN THE DEFINITION OF THE TERM ROYALTIES AS DEFINED IN ARTICLE 13(3) OF THE INDO UK DTAA OF WHICH TAX IS REQUIRED TO BE DEDUCTED AT SOURCE. 3.3 THE ADIT HAS FURTHER OBSERVED THAT AS PER THE C LAUSE (IV) OF EXPLANATION 2 TO SEC. 9(1)(VI) OF THE ACT, THE TERM ROYALTY MEANS CONSIDERATION FOR IMPARTING ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMME RCIAL OR SCIENTIFIC KNOWLEDGE, ITA NO.4432/M/2005 GLOBUS STORES P LTD . 3 EXPERIENCE OR SKILL. THUS, THE ADIT WAS ALSO OF TH E VIEW THAT THE PAYMENT FOR IMPARTING OF INFORMATION CONCERNING COMMERCIAL KNOW LEDGE OR EXPERIENCE OR SKILL IS ROYALTY AND IS INCOME DEEMED TO ACCRUE OR ARISE IN INDIA SUBJECTED TO DEDUCTION OF TAX AT SOURCE. ACCORDINGLY, THE ADIT HAS DIRECTED THE ASSESSEE TO DEDUCT THE TAX AT SOURCE @ 15% PLUS 2% EDUCATIONAL CESS ON THE AMOUNT OF UK POUNDS 17,000. 4 THE ASSESSEE CHALLENGED THE SAID ORDER BEFORE THE CITA) AND MAINLY CONTENDED THAT THE PAYMENT BEING SUBSCRIPTION FEES IS NOT IN THE NATURE OF ROYALTY; BUT IS BUSINESS INCOME IN THE HANDS OF WGSN AND AS PER ARTICLE 7, THE BUSINESS INCOME OF NON-RESIDENT IS NOT TAXABLE IN INDIA UNLE SS THERE IS A PE IN INDIA. THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE MA DHYA PRADESH HIGH COURT IN THE CASE OF CIT VS HEG LTD REPORTED IN 263 ITR 230(MP) AS WELL AS THE DECISION OF THE TRIBUNAL IN THE CASE OF WIPRO LTD REPORTED IN 92 TT J 796 AND SUBMITTED THAT THE SUBSCRIPTION FOR PROVIDING ACCESS DATABASE THROUGH WEBSITE WAS NOT COVERED AS ROYALTIES UNDER DTAA AS WELL AS U/S 9(1)(VI) OF T HE ACT AND CONSEQUENTLY, THE ASSESSEE WAS NOT OBLIGED TO DEDUCT TAX U/S 195. 4.1 THE COMMISSIONER OF INCOME TAX(APPEALS) HAS OBS ERVED THAT THE DECISION IN THE CASE OF WIPRO LTD (SUPRA) AS CITED BY THE ASSES SEE IS COVERED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE COMMISSIONER OF INCOME T AX(APPEALS) HAS HELD THAT THE PAYMENT IN QUESTION IS NOT ROYALTY AS DEFINED IN ARTICLE 13(3)A OF THE DTAA AND THE SAME IS IN THE NATURE OF BUSINESS INCOME AND IN TH E ABSENCE OF PE, THE SAME IS NOT LIABLE TO TAX IN INDIA. ACCORDINGLY, THE COMMISSI ONER OF INCOME TAX(APPEALS) HELD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SO URCE ON THE IMPUGNED PAYMENT TO WGSN. ITA NO.4432/M/2005 GLOBUS STORES P LTD . 4 5. BEFORE US, THE LD DR HAS SUBMITTED THAT THE COMM ISSIONER OF INCOME TAX(APPEALS) HAS RELIED UPON THE DECISION OF THE BA NGALORE BENCHES OF THE TRIBUNAL IN THE CASE OF WIPRO LTD (SUPRA) WHICH HAS BEEN REV ERSED BY THE HONBLE KARNATAKA HIGH COURT REPORTED IN 203 TAXMAN 621. THUS, THE LD DR HAS SUBMITTED THAT NOW THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISI ON OF THE HONBLE KARNATAKA HIGH COURT (SUPRA). SHE HAS REFERRED VARIOUS CLAUSES OF THE AGREEMENT BETWEEN THE ASSESSEE AND WGSN AND SUBMITTED THAT THE PAYMENT IN QUESTION WAS FOR LICENSE GRANTED TO THE ASSESSEE FOR ACCESS AND UTILISATION OF THE SITE OF WGSN. SHE HAS SUBMITTED THAT AS PER THE TERMS OF THE AGREEMENT, T HE SUBSCRIPTION FEE IS NOTHING BUT ROYALTY AGAINST THE GRANT OF LICENSE FOR ACCESS AND UTILISATION OF THE SITE AND THE INFORMATION AVAILABLE ON THE SITE. IT IS STATED I N THE AGREEMENT THAT ALL THE MATERIAL ON THE SITE BELONGS TO WGSN OR ITS LICENSOR AND THE ASSESSEE IS PERMITTED TO RETRIEVE AND DISPLAY CONTENT FROM THE SITE ON A COMPUTER SCR EEN, AND TO TAKE PRINT OF INDIVIDUAL PAGES WITHOUT PHOTOCOPY INFORMATION AVAI LABLE IN THE SITE IS PERMITTED TO BE RETAINED IN ELECTRONIC FORM ON DISC FOR THE ASSE SSEES PERSONAL USE. 5.1 THE LD DR HAS RELIED UPON THE DECISION OF THE A UTHORITY FOR ADVANCE RULINGS (AAR) IN THE CASE OF CARGO COMMUNITY NETWORK PTE LT D REPORTED IN 289 ITR 355(AAR) AND SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN DECI DED BY THE AAR WHEREIN THE SUBSCRIPTION FEE FOR CONCURRENT ACCESS, FEE FOR AD DITIONAL ACCESS AND HELPDESK CHARGES PAID BY THE CARGO IN INDIA FOR USE OF PO RTAL DEVELOPED BY THE NON-RESIDENT AND HOSTED ON HIS SERVER IN SINGAPORE, THE AAR HAS HELD THAT PORTAL AND SERVER TOGETHER CONSTITUTE INTEGRATED COMMERCIAL-CUM-SCIE NTIFIC EQUIPMENT AND FOR OBTAINING INTERNET ACCESS TO AIRLINES THE USE OF P ORTAL WITHOUT SERVER IS UNTHINKABLE. IT WAS OBSERVED THAT THE FACTUAL POSITION IN THE SI TE ACCESS WAS THAT A CARGO BOOKING AGENT/SUBSCRIBER DEPENDING ON HIS BUSINESS NEEDS, C AN USE THE PORTAL AT WILL ON THE ITA NO.4432/M/2005 GLOBUS STORES P LTD . 5 SERVER PLATFORM OF THE ASSESSEE AT ANY TIME ACCORDI NG TO HIS NEEDS FOR PROCESSING HIS REQUEST FOR BOOKING CARGO WITH VARIOUS AIRLINES AND OBTAINING BENEFITS OF OTHER SOPHISTICATED SERVICES OFFERED BY PORTAL. THE AAR HAS CONSIDERED THE MEANING OF TERMS ROYALTIES AS USED IN ARTICLE 12(3) OF INDO- SINGAPORE TREATY AND HELD THAT THE PAYMENT MADE FOR CONCURRENT ACCESS TO UTILISE THE S OPHISTICATED SERVICES OFFERED BY PORTAL WOULD BE COVERED BY EXPRESSION ROYALTIES AS USED IN ARTICLE 12 OF THE DTAA. 5.2 THUS, THE LD DR HAS SUBMITTED THAT IN THE CASE IN HAND, THE ASSESSEE IS ALSO UTILISING THE CONCURRENT ACCESS TO THE PORTAL OF TH E WGSN FOR USING THE INFORMATION AVAILABLE ON THE SITE AND THEREFORE, THE PAYMENT, B EING SUBSCRIPTION FEE FALLS UNDER THE DEFINITION OF ROYALTY AS PER ARTICLE 13(3) OF INDO-UK DTAA. 5.3 THE LD DR HAS ALSO RELIED UPON THE DECISION OF THE AAR DATED 7.5.2012 IN THE CASE OF THOUGHT BUZZ PVT LTD REPORTED IN 346 ITR 3 45 AND SUBMITTED THAT THE BUSINESS OF GATHERING, COLLATING AND MAKING AVAILABLE OR IMP ARTING INFORMATION CONCERNING INDUSTRIAL AND COMMERCIAL KNOWLEDGE, EXPERIENCE AND SKILL AND CONSEQUENTLY THE PAYMENT RECEIVED FROM THE SUBSCRIBER WOULD BE ROYAL TY IN TERMS OF CLAUSE (IV) OF EXPLANATION 2TO SEC. 9(1)(VI) OF THE ACT AS WELL AS THE SAID PAYMENT ALSO QUALIFY AS ROYALTY UNDER DTAA BETWEEN INDIA AND SINGAPORE. THUS, THE LD DR HAS SUBMITTED THAT THE PAYMENT IN QUESTION, BEING SUBSCRIPTION FE E IS FOR UTILISING OF THE INFORMATION RELATED TO INDUSTRIAL AND COMMERCIAL KNOWLEDGE, EXP ERIENCE AND SKILL; THEREFORE, THE SAME WOULD FALL UNDER THE DEFINITION AND MEANING OF ROYALTY UNDER EXPLANATION 2 OF SEC. 9(1)(VI) OF THE ACT AS WELL AS ARTICLE 13(3) O F THE DTAA BETWEEN INDO-UK TREATY. SHE HAS RELIED UPON THE ORDERS OF THE ASSESSING OFF ICER AND ADIT. ITA NO.4432/M/2005 GLOBUS STORES P LTD . 6 5.4 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF RETAILING FASHIONABLE READY G ARMENTS THROUGH DEPARTMENTAL STORES AND THEREFORE TO GET AN IDEA OF LATEST INTER NATIONAL TRENDS IN FASHION AND STYLE IN THE GARMENTS, THE ASSESSEE HAD SUBSCRIBED TO AN INTERNET SITE OF WGSN LTD. HE HAS REFERRED ARTICLE 13(3) OF THE INDO UK TREATY AN D SUBMITTED THAT THE TERMS ROYALTY MEANS PAYMENT FOR USE OR RIGHT TO USE ANY COPYRIGHT , ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS OR FOR IN FORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE AS PROVIDED IN SUB. PARA (1) OF PARA 3 OF ARTICLE 13 OF THE INDO-UK TREATY. HE HAS REFERRED THE CLAU SES OF THE AGREEMENT AND SUBMITTED THAT THIS IS NOT THE CASE OF USE OR RIGHT TO USE OF COPY RIGHT, TRADE, PATENT, DESIGN OR MODEL OR ANY OTHER SECRET FORMULA OR PR OCESS. THE INFORMATION USED BY THE ASSESSEE IS NOT RELATED TO INDUSTRIAL, COMMERCI AL OR SCIENTIFIC EXPERIENCE. TO ELABORATE THE TERMS OF INFORMATION CONCERNING IND USTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE AS CONTEMPLATED IN CLAUSE (A) OF PARA 3 OF THE ARTICLE 13 OF INDO UK TREATY, THE ASSESSEE HAS REFERRED OECD COMMENTARY O N ROYALTY UNDER DTAA AND SUBMITTED THAT THE CONSIDERATION FOR INFORMATION CO NCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE ALLUDES TO THE CONCEPT O F KNOW-HOW; THEREFORE, THE INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE AS MENTIONED IN THE DTAA SHOULD BE EQUIVALENT TO CONCEPT OF KNO W-HOW. THE KNOW-HOW IS ALL THE UN-DIVULGED TECHNICAL INFORMATION WHETHER CAPABLE O F BEING PATENTED OR NOT, THAT IS NECESSARY FOR THE INDUSTRIAL REPRODUCTION OF A PROD UCT OR PROCESS; THEREFORE, THE SAME CONDITIONS ARE TO BE APPLIED IN CASE OF INFORM ATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. 5.5 THE LD AR HAS ALSO REFERRED THE REPORT OF HIGH POWERED COMMITTEE ON E- COMMERCE AND SUBMITTED THAT THE INFORMATION PROVIDE D BY THE PROVIDER IS OUT OF A ITA NO.4432/M/2005 GLOBUS STORES P LTD . 7 VAST COLLECTION OF WIDELY AVAILABLE DATA AND NOT AN Y COPYRIGHTED ARTICLE. SIMPLE DATA RETRIEVAL WOULD AMOUNT TO RENDERING OF SERVICE S AND WOULD BE TAXABLE AS BUSINESS INCOME UNDER ARTICLE 7 OF THE INDIA UK DTA A AS PER THE REPORT OF THE HIGH POWERED COMMITTEE OF E COMMERCE. HE HAS SUBMITTED THAT MERELY GIVING RIGHT TO ACCESS TO THE INFORMATION AT THE SITE IS NOT A GIVI NG RIGHT TO USE OF ANY KNOW-HOW. THE INFORMATION AVAILABLE ON THE SITE IS ONLY REGARDING THE LATEST TREND IN THE FASHION. HE HAS REFERRED PARA 2.11 OF THE AGREEMENT AND SUBMITT ED THAT NO SPECIFIC INFORMATION IS DEDICATED TO THE ASSESSEE BUT THE INFORMATION AV AILABLE ON THE SITE IS GENERAL IN NATURE AND AVAILABLE TO ALL THE SUBSCRIBERS. HE HA S RELIED UPON THE DECISION OF THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CO MMISSIONER OF INCOME-TAX V. HEG LTD. REPORTED IN 263 ITR 230 AS WELL AS THE DEC ISION OF THE AAR IN THE CASE OF DUN AND BRADSTREET ESPANA S.A., IN RE. REPORTED IN 272 ITR 99 AND SUBMITTED THAT WHEN THE INFORMATION RECEIVED AND USED BY THE ASSESSEE I S NOTHING BUT COMPILATION OF DATA BASED BY THE PROVIDER, THEN IT IS NOT A KNOW-H OW WHICH EARNED THE ROYALTY. THE PAYMENT IS NOT FOR USE OF OR RIGHT TO USE OF ANY KN OW-HOW AS PER THE OECD COMMENTARY THAT THE INFORMATION CONCERNING INDUSTRI AL, COMMERCIAL OR SCIENTIFIC EXPERIENCE HAS TO BE EQUIVALENT TO KNOW-HOW. 5.7 THE LD AR HAS ALSO RELIED UPON THE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL IN THE CASE OF THE DDIT VS SOLID WORKS CO RPORATION DATED 8.1.2012 IN ITA NO. 3219/MUM/2010. THE LD AR HAS CONTENDED THAT THE AA R IN THE CASE OF CARGO COMMUNITY NETWORK PTE LTD (SUPRA) IS NOT APPLICABLE AS THE PAYMENT IS NOT FOR USE OF ANY EQUIPMENT IN THE CASE OF THE ASSESSEE AS IN THE SAID CASE. THE LD AR HAS FURTHER SUBMITTED THAT THE DECISION IN THE CASE OF WIPRO LT D (SUPRA) IS ALSO NOT APPLICABLE IN THE FACTS OF THE ASSESSEES CASE BECAUSE IN THE SAI D CASE, THE ISSUE WAS PAYMENT FOR USE OF TECHNICAL KNOW-HOW, WHICH IS NOT IN THE CASE OF THE ASSESSEE. THE LD AR HAS ITA NO.4432/M/2005 GLOBUS STORES P LTD . 8 SUBMITTED THAT IN THE CASE OF WIPRO, THE HONBLE HI GH COURT HAS FRAMED THE QUESTION REGARDING WHETHER THE PAYMENT TO THE FOREIGN SOFTWA RE SUPPLIER WAS NOT ROYALTY AND ACCORDINGLY, THE HONBLE HIGH COURT HAS DECIDED THE ISSUE BY HOLDING THAT SUCH RIGHT TO ACCESS THE DATABASE MAINTAINED BY THE SUPP LIER WOULD AMOUNT TO TRANSFER OF RIGHT TO USE THE COPYRIGHT HELD BY THE SUPPLIER AND ACCORDINGLY, SUCH PAYMENT IS TO BE TREATED AS ROYALTY. THE LD AR HAS FURTHER SUBM ITTED THAT NEITHER THE ASSESSING OFFICER NOR THE COMMISSIONER OF INCOME TAX(APPEALS) HAS HELD THAT THE PAYMENT IS TOWARDS TRANSFER OF RIGHT TO USE THE COPYRIGHT. 5.8 IN REBUTTAL, THE LD DR HAS SUBMITTED THAT THE D ECISION OF THE AAR IN THE CASE OF DUN AND BRADSTREET ESPANA S.A. (SUPRA) IS NOT APPLI CABLE BECAUSE IN THE SAID CASE, THE INFORMATION PROVIDED BY THE PROVIDER FROM THE D ATA BASE COLLECTED FROM THE AVAILABLE INFORMATION IN THE PUBLIC DOMAIN WHEREAS IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAS RECEIVED TECHNICAL KNOWLEDGE AND INFOR MATION WITH RESPECT TO THE LATEST DESIGN OF THE GARMENTS. SHE HAS FURTHER SUB MITTED THAT THE DECISION IN THE CASE OF HONBLE MADHYA PRADESH HIGH COURT (SUPRA) I S ALSO NOT APPLICABLE BECAUSE IN THE SAID DECISION, NO FINDING HAS BEEN GIVEN BY THE HONBLE HIGH COURT AND THE MATTER WAS REMITTED TO THE RECORD OF THE TRIBUNAL F OR DECIDING THE FACTUAL ASPECT ON THE BASIS OF THE RELEVANT RECORD AND MATERIAL. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE PAYMENT IN QUESTION HAS BEEN MADE BY TH E ASSESSEE TOWARDS THE SUBSCRIPTION FOR ACCESS TO THE WEBSITE OF WGSN THER EBY HAVING ACCESS TO THE INFORMATION AVAILABLE AT THE SAID WEBSITE. THE AS SESSING OFFICER HELD THAT THE ASSESSEE IS PERMITTED TO KEEP THE DESIGN, TRADE MAR K AND NOT PERMISSIBLE TO REDISTRIBUTE ANY OF THE CONTENTS ACCESSIBLE AT THE WEBSITE; THEREFORE, THE ASSESSEE ITA NO.4432/M/2005 GLOBUS STORES P LTD . 9 HAS NO OTHER RIGHT EXCEPT THE RIGHT TO USE THE INFO RMATION FROM THE WEBSITE. ACCORDINGLY, THE ASSESSING OFFICER HAS HELD THAT AM OUNT PAYABLE TO FOREIGN COMPANY IS NOTHING BUT FOR USE OF INFORMATION CONCE RNING INDUSTRIAL, COMMERCIAL EXPERIENCE FALLS WITHIN THE DEFINITION TERM ROYALT Y AS DEFINED IN ARTICLE 13(3) OF THE DTAA. 6.1 EVEN UNDER THE PROVISIONS OF THE ACT, THE ROYAL TY IS DEFINED UNDER CLAUSE (IV) OF EXPLANATION TO SEC 9(I)(VI), THE TERM ROYALTY ME ANS CONSIDERATION FOR IMPARTING ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMME RCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL. 6.2 ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPEA LS) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF WIPRO WHEREIN IT WAS HELD THAT THE PAYMENT MADE FOR ACCESS OF DATABASE IS NOT ROYALTY SINCE IT IS USED FOR COPY RIGHT THE ARTICL E AND NOT TRANSFER OF RIGHT IN THE COPYRIGHT IN THE ARTICLE. ACCORDINGLY, THE COMMISS IONER OF INCOME TAX(APPEALS) HAS HELD THAT THE FOREIGN COMPANY HAS NOT TRANSFERRED T HE COPY RIGHT THEREIN; BUT ONLY ONLINE FASHION MAGAZINE AVAILABLE ON THE WEBSITE. 6.3 THERE IS NO DISPUTE THAT THE INFORMATION AVAILA BLE ON THE WEBSITE OF THE WGSN IS NOT A DATABASE AVAILABLE IN PUBLIC DOMAIN BUT AC CESS TO THE INFORMATION IS RESTRICTED ONLY TO THE SUBSCRIBERS. THE COMMISSIO NER OF INCOME TAX(APPEALS) HAS DECIDED THE ISSUE BY FOLLOWING THE ORDER OF THE TR IBUNAL IN THE CASE OF WIPRO WHICH HAS BEEN REVERSED BY THE HONBLE KARNATAKA HIGH CO URT REPORTED IN 203 TAXMAN 621 AND HELD IN PARA 6 AS UNDER: 6. IT IS CLEAR FROM THE MATERIAL ON RECORD THAT IN IDENTICAL CASES I.E., I.T.A. NO. 2988/2005 AND CONNECTED CASES, THIS COURT AFTER CON SIDERING THE CONTENTIONS, WHICH ARE IDENTICAL TO THE CONTENTIONS RAISED IN TH ESE APPEALS. IN THE LIGHT OF ITA NO.4432/M/2005 GLOBUS STORES P LTD . 10 THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL APP EARING FOR THE PARTIES IN THE SAID CASES, BY A SEPARATE ORDER, HELD THAT THE P AYMENT MADE BY THE RESPONDENT TO M/S. GARTNER, WHICH IS A NON-RESIDENT COMPANY WOULD AMOUNT TO ROYALTY AND WHEREFORE, THERE IS STATUTORY OBLIGAT ION ON THE PART OF THE RESPONDENT TO MAKE TAX DEDUCTION, FAILING WHICH, IT IS LIABLE TO PAY TAX AND INTEREST UNDER SECTION 201(L) AND 201(1A) OF THE ACT , MERE FACT THAT IN THE INSTANT CASE, THE ISSUE DO NOT PERTAIN TO SHRINK WRAP PED SOFTWARE OR OFF-THE- SHELF SOFTWARE AND ACCESS TO DATABASE MAINTAINED BY M/S GARTNER IS GRANTED ONLINE, WOULD NOT MAKE ANY DIFFERENCE IN THE REASONI NG ASSIGNED BY US TO HOLD THAT SUCH RIGHT TO ACCESS WOULD AMOUNT TO TRANS FER OF RIGHT TO USE THE COPYRIGHT HELD BY M/S. GARTNER AND THE PAYMENT MADE BY THE RESPONDENT TO M/S. GARTNER IN THAT BEHALF IS FOR THE LICENCE TO USE THE SAID DATA BASE MAINTAINED BY M/S. GARTNER AND SUCH PAYMENT IS TO BE TREATED AS ROYALTY. THEREFORE, FOLLOWING THE DETAILED REASONS ASSIGNED BY US IN ITA NO.. 2808/2005 AND CONNECTED CASES, WE HOLD THAT THE FINDING OF TH E TRIBUNAL THAT PAYMENT MADE BY THE RESPONDENT TO MIS. GARTNER, A NON-RESIDEN T COMPANY WOULD NOT AMOUNT TO ROYALTY IS NOT JUSTIFIED AND LIABLE TO BE SET ASIDE AND ACCORDINGLY, WE ANSWER THE SUBSTANTIAL QUESTION OF LAW IN THE NEG ATIVE IN FAVOUR OF THE REVENUE AND AGAINST THE RESPONDENT AND PASS THE FOLL OWING ORDER: 6.4 AS REGARDS THE CONTENTION OF THE LD AR OF THE A SSESSEE THAT THE HONBLE HIGH COURT HAS DECIDED THE ISSUE BY HOLDING THAT THE PAY MENT WAS MADE FOR TRANSFER OF RIGHT TO USE THE COPYRIGHT IN THE CASE OF WIPRO WHE REAS THE AUTHORITIES BELOW HAVE NOT HELD THAT IN THE CASE OF THE ASSESSEE THE PAYME NT WAS FOR TRANSFER OF RIGHT TO USE OF COPYRIGHT AND THE SUBSCRIPTION WAS MADE ONLY FOR ONLINE FASHION MAGAZINE. 6.5 IT IS TO BE NOTED THAT THE FACTS IN THE CASE OF WIPRO AS REPRODUCED BY THE HONBLE HIGH COURT IN PARA 2.1 ARE AS UNDER: 2.1 ON PERUSAL OF THE DETAILS TILED IN RESPECT OF F OREIGN REMITTANCES MADE BY THE RESPONDENT-ASSESSEE, IT WAS NOTICED BY THE REVE NUE THAT CERTAIN PAYMENTS HAD BEEN MADE BY THE ASSESSEE TO A NON-RESI DENT, M/S. GARNER GROUP (HEREINAFTER REFERRED TO AS THE M/S. GARTNER), U.S.A/ILRELAND, ON WHICH NO TAX WAS DEDUCTED UNDER SECTION 195 OF THE INCOME TAX ACT. 1961 (HEREINAFTER REFERRED TO AS THE ACT). IT WAS FOUND THAT THE FOLLOWING PAYMENTS HAD BEEN MADE BY THE ASSESSEE DURING THE PERIOD FROM 1 8.04.2000 TO 02.12.2002: ITA NO.4432/M/2005 GLOBUS STORES P LTD . 11 SINCE PRIMA-FACIE, THE PAYMENTS APPEARED TO BE ROYALTY PAYMENTS, WHEREIN THE RESPONDENT-ASSESSEE WAS REQUIRED TO DEDUCT TAX A T SOURCE ON SUCH REMITTANCES AND NO DEDUCTION HAD BEEN MADE AS REQUIRE D UNDER SECTION 195(1) OF THE ACT, SHOW CAUSE NOTICE UNDER SECTION 201 OF THE ACT WAS ISSUED TO THE ASSESSEE TO EXPLAIN THE REASONS FOR NON-DEDUCT ION OF TAX. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE TILED A REPLY D ATED 10.01.2003 WHEREIN IT WAS SUBMITTED THAT PAYMENT IS AKIN TO MAKING A SUBS CRIPTION FOR A JOURNAL OR MAGAZINE OF A FOREIGN PUBLISHER AND THOUGH THE JOURNA L CONTAINED INFORMATION CONCERNING COMMERCIAL, INDUSTRIAL OR TECHN ICAL KNOWLEDGE, THE PAYEE MAKES NO ATTEMPT TO IMPART THE SAME TO THE PAY ER. THUS, THE PAYMENT FALLS OUTSIDE THE SCOPE OF CLAUSE (II) OF EXPLANATI ON 2 TO SECTION 9(L)(VI) OF THE ACT AND THE PAYMENT WAS NOT CONTINGENT ON PRODUCTIVI TY, USE OR DISPOSITION OF THE INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE IN ORDER TO BE CONSTRUED AS ROYALTY WITHIN THE MEANIN G OF ARTICLE 12 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT (FOR SHORT, THE DTAA) BETWEEN INDIA AND USA. IN ANY CASE, THE PAYMENT WILL NOT BE COVERE D BY SECTION 9(L)(VI) AS IT WOULD FALL INTO THE EXCEPTION (B) UNDER THAT SECTION AND THE PAYMENT IS FOR THE PURPOSES OF A BUSINESS CARRIED ON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE I NDIA. 6.6 IT IS CLEAR THAT IN THE CASE OF WIPRO, THE ASSE SSEE HAS CONTENDED THAT THE PAYMENT WAS MADE FOR SUBSCRIPTION FOR A JOURNAL OR A MAGAZINE OF A FOREIGN PUBLISHER WHICH IS SIMILAR TO THE FACTS OF THE CASE IN HAND WHERE THE ASSESSEE HAS ALSO CLAIMED THAT THE PAYMENT IS TOWARDS SUBSCRIPTION TO ONLINE FASHION MAGAZINE. THE ASSESSING OFFICER HAS HELD THAT THE PAYMENT IS TOWA RDS ROYALTY WHEREAS THE COMMISSIONER OF INCOME TAX(APPEALS) HAS STRAIGHTAW AY DECIDED THE ISSUE BY HOLDING THAT THE PAYMENT IS NOT FOR TRANSFER OF RIG HT TO USE IN THE COPYRIGHT AS HELD BY THE TRIBUNAL IN THE CASE OF WIPRO. ITA NO.4432/M/2005 GLOBUS STORES P LTD . 12 7 SINCE NO SPECIFIC FINDING HAS BEEN GIVEN BY THE C OMMISSIONER OF INCOME TAX (APPEALS) ON THE POINT OF TRANSFER OF RIGHT TO USE THE COPYRIGHT AND THE DECISION RELIED UPON BY THE COMMISSIONER OF INCOME TAX(APPEA LS) HAS BEEN REVERSED BY THE HONBLE HIGH COURT; THEREFORE, THE IMPUGNED ORDER O F THE COMMISSIONER OF INCOME TAX(APPEALS) IS NOT SUSTAINABLE AS THE VERY BASIS O F THE SAME HAS BEEN REVERSED. ACCORDINGLY, WE REMIT THE ISSUE TO THE RECORD OF TH E COMMISSIONER OF INCOME TAX(APPEALS) TO DECIDE THE SAME AFRESH IN THE LIGH T OF THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF WIPRO (SUPRA) A S WELL AS THE OTHER DECISIONS/RULINGS AVAILABLE ON THE POINT. 8 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH DAY OF NOV 2012. SD/- SD/- ( P M JAGTAP ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 9 TH NOV 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI