Case Number: ITA 2351/DEL/2022
Appellant: Elsevier Ltd, Gurgoan
Respondent: ACIT, Circle-1(2)(2), International Taxation, New Delhi
Assessment Year: 2018-19
Case Filed on: 2022-09-23
Order Type: Final Tribunal Order
Date of Order: 2023-04-27
Pronounced on: 2023-04-27
Elsevier Ltd, based in Gurgoan, appealed against the final assessment order which classified the subscription fees received from Indian customers for accessing their scientific database as royalty or Fee for Technical Services (FTS), making it taxable in India under the India-UK Double Taxation Avoidance Agreement (DTAA).
The primary issue was whether the subscription fees should be treated as royalty or FTS under both the domestic tax laws and the DTAA between India and the UK. The Assessing Officer classified the revenue from subscription fees as royalty/FTS, a decision which was supported by the Dispute Resolution Panel (DRP).
Elsevier argued that the fees were for business income from a non-resident entity without a Permanent Establishment (PE) in India, thus not taxable under the DTAA. They supported their claim with various tribunal decisions that had similar findings, emphasizing that providing access to a database does not constitute royalty or FTS as it does not involve the right to use intellectual property.
The Tribunal noted similar decisions from other cases involving Elsevier and related entities, affirming that access to online databases should be treated as business income, not royalty or FTS, especially when no PE exists in India. The decision cited by the Departmental Representative from the Karnataka High Court was set aside by the Supreme Court, and the matters were sent back for fresh adjudication, which supported Elsevier’s stance.
Ultimately, the Tribunal allowed Elsevier’s appeal, stating that the subscription fees received are not in the nature of royalty/FTS/FIS under the India-UK DTAA, confirming that such fees are business profits and not taxable in the absence of a PE in India.
Conclusion: The appeal was allowed, setting a significant precedent on the taxation of subscription fees for digital databases provided by non-resident companies without a PE in India.
Order pronounced in the open court on April 27, 2023.
Tax Appeal of Elsevier Ltd for AY 2018-19 – ITA 2351/DEL/2022
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