The Income Tax Appellate Tribunal (ITAT) recently held that income from online subscription services can be treated as business income and not be taxed as royalty or fee for technical services in all cases.
ITAT Mumbai Bench said that for any service to fall in the category of technical/ managerial service, human intervention is a pre-requisite. The Tribunal further added that even fees for technical services or royalty could not be made applicable to all situations where a database was being made available on subscription fees basis.
ITAT observed, “the assessee has collated data from various journals and articles and put them in a structured manner in the database to make it more user friendly and beneficial to the users/customers who want to access the database. The assessee has neither employed any technical/skilled person to provide any managerial or technical service nor there is any direct interaction between the customer/user of the database and the employees of the assessee. The customer/user is allowed access to the online database through various search engines provided through internet connection. There is no material on record to demonstrate that while providing access to the database there is any human intervention. The assessee even does not alter or modify in any manner the articles collated and stored in the database. In the aforesaid view of the matter, the subscription fee received cannot be considered as a fee for technical services as well.”
ITAT further held that providing access to the database did not involve the transfer of any right to use any copyright to its customers/ subscribers.