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Income Tax Appellate Tribunal, ‘I‘ BENCH
Before: SHRI AMIT SHUKLA & SHRI S.RIFAUR RAHMAN
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against the final assessment order dated 15/02/2022, passed u/s.
M/s. IQVIA AG (previously known as IMS AG) 143(3) r.w.s. 144C(14) in pursuance of directions given by the ld. DRP vide order dated 24/01/2022.
In various grounds of appeal, the assessee has challenged:-
(i) Disallowance of Subscription income received by the assessee for providing access to its online database in the nature of ‘royalty’ u/s.9 (1)(vi) of the Act and under Article 12(3) of the India-Switzerland DTAA of Rs.42,71,17,413/-.
(ii) Further, assessee has also challenged that the ld. AO has erred in computing total income at Rs.106,91,78,623/- as against Rs.64,16,78,198/- after adding the subscription income twice.
This ground has not been pressed at the time of hearing; therefore, the same is dismissed as not pressed.
(iii) Charging of Interest u/s.234B and 234D. These two grounds have been stated to be consequential and therefore, no adjudication is required.
Now coming to the only issue of taxability of ‘royalty’, it has been stated that, this issue is covered by series of the decisions of the Tribunal in assessee’s own case for the A.Y.2013-14 to 2017-18. It has been further stated that the ld. DRP has simply stated that the orders of the Tribunal has not been accepted and appeal has been filed before the Hon’ble High Court u/s.260A of the Act.
M/s. IQVIA AG (previously known as IMS AG) 4. The brief facts are that assessee is a tax resident of Switzerland and TRC has been issued by Cantonal Tax Administration, Zug. It is engaged in providing market research reports on pharmaceutical sector to its customers across the globe at a predetermined subscription price. The assessee company mainly collects process and utilise the data and information, particularly in the fields of medicine and pharmaceuticals for the delivery of reports through online IQVIA knowledge link. The assessee company has entered into an agreement with its customers for providing IQVIA reports who have permitted to get access with applicable fees. It is mostly statistical data based compilations which provide geo-economical data about a pharma molecule and thereby, providing insights into the economic and political issues affecting the pharmaceutical and healthcare industries in a jurisdiction. For the purpose of data base, data was collected by the company and the IQVIA reports which are collected and prepared. It grants non-exclusive and non-transferrable license to use the IQVIA reports provided to the customers and thereby restricts the use of information by the customer for its own benefit, back-up etc.,
5. During the year under consideration, the company has delivered to its Indian Customer majorly the following types of IQVIA Reports: a) World Review Molecule: The said reports provides access to the database to the Indian Customers, of all details/characteristics of the selected molecule. Further the M/s. IQVIA AG (previously known as IMS AG) data comprises of the statistical data of 73 Countries across the Globe. b) World Review Pack. The said reports provides access to the database to the Indian Customers, of selected details/characteristics of the selected molecules based on the customer's requirement. Further the data comprises of the statistical data of 73 Countries across the Globe c) Customized Insight: The said reports provides access to the database to the Indian Customers, of selected details / characteristics of selected molecules and for the selected countries based on requirement of the Indian Customers.
6. The Company has during the Financial Year 2017-18 received an income of Rs. 42,71,17,413/- as Subscription Income from its third party Indian Customers for online Subscription of IQVIA Reports on which taxes have been withheld at source by some of the Indian customers aggregating to Rs.2,68,98,251/-.
7. The ld. AO noted that in the assessment proceedings from A.Y.2013-14 to 2015-16, the ld. DRP has upheld the order of the ld. AO treating that subscription income received by the company is in the nature of ‘royalty’ u/s.9(1)(vi) and also under Article 12(3) of the tax treaty. After detailed discussion, the ld. AO has held the subscription fees taxable as ‘royalty’ in India.
8. We find that this issue had come up for consideration in assessee’s own case in all the earlier years. This Tribunal in the M/s. IQVIA AG (previously known as IMS AG) latest judgement for A.Y.2017-18 vide order dated 10/10/2022 in has observed and held as under:-
7. Considered the rival submissions and material placed on record, we observe that Coordinate Bench in assessee’s own case in ITA.No.1203/Mum/2021 dated 11.05.2022 for the A.Y. 2016- 17 in the immediate previous assessment year held as under: - “10. We have considered the rival submissions and perused the material available on record. We find that the Co–ordinate Bench of the Tribunal in assessee’s own case in IMS AG (now known as IQVIA AG) v/s DCIT, in ITA no.6445/Mum./2016, vide order dated 13.07.2020, for the assessment year 2013–14, while holding that subscription fees received by the assessee is not taxable as Royalty under the provisions of DTAA, observed as under:– “3. To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before us is a company incorporated, and fiscally domiciled, in Switzerland. The assessee company is engaged in providing market research report on pharmaceutical sector to its customers across the world at a predetermined subscription prices, The company collects, processes and utilizes the data and information, particularly in the field of medicine and pharmaceuticals for the delivery of reports through online IMS knowledge link. The company enters into agreements with its customers for providing the review reports (IMS reports) setting out the details of modules required to be accessed by the customers and the consideration for these services. In essence thus, the IMS reports, based on module selected, are statistical database compilations, providing geo economical data, about a pharma molecule, providing insight into the connected issues relating to information and developments. The licence access so granted is a non-exclusive and non-transferable right. It is consideration received, as allowing this non- exclusive, non-transferable access to the database and IMS reports which is subject matter of dispute before us. The authorities below have held that in the light of Hon’ble M/s. IQVIA AG (previously known as IMS AG) Karnataka High Court's judgment in the case of CIT Vs Wipro Ltd [(2011) 203 Taxman 621 (Kar)] and other judgments by the same Hon'ble High Court, which have been followed by a coordinate bench of this Tribunal as well, these receipts are required to be taxed as royalty under section 9(l)(vi) as also under article 12(3) of the Indo Swiss DTAA. The assessee is aggrieved and is in further appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
We find that Hon'ble jurisdictional High Court, in the case of DIT Vs Dun and Breadstreet Information Services India Pvt Ltd[(2012) 20 taxmann.695 (Mum)] has, while approving and concurring with the approach of Authority for Advance Ruling in the case of this very assessee, observed as follows: “The assessee had imported business information reports from Dun and Bradstreet, USA, and made remittances in respect thereof without deducting tax at source. The Assessing Officer held that the assessee was liable to deduct tax at source and accordingly passed an order under section 195 read with section 201 of the Act. The appeal filed by the assessee was dismissed by the Commissioner of Income-tax (Appeals). On further appeal, the Income-tax Appellate Tribunal set aside the order passed under section 195 read with section 201 of the Act by following its decision in the assessee's own case for the assessment year 2002-03 in and the decision of the Authority for Advance Rulings on identical facts in the case of Dun and S.A. Bradstreet Espana In re Authority for Advance Rulings No. 615 of 2003 [2005] 272ITR 99 (AAR)), D and B Europe Authority for Advance Rulings No. 657 of 2005, dated October 27, 2005, and D and B UK Authority for Advance Rulings No. 656 of 2005, dated October 27, 2005. In all these cases the Authority for Advance Rulings held that the sale of very same business information reports by the subsidiaries of Dun and Bradstreet US in Spain, Europe and V. K. to the assessee did not attract M/s. IQVIA AG (previously known as IMS AG) the provisions of section 195 of the Act. Though the decision of the Authority for Advance Rulings is not binding in the present case, since the decision of the Authority for Advance Rulings relates to the very same business information reports imported by the petitioner and no fault in the decision of the Authority for Advance Rulings is pointed out, we see no reason to interfere with the decision of the Income-tax Appellate Tribunal.”
The AAR's decision, which is so concurred with, inter alia states as follows: “The instant case it is not a case of paying consideration for the use of or right to use any copyright of literary, artistic or scientific work or any patent trade mark or for information of commercial experience. The Commissioner sought to bring the payments under royalty/fees for technical service for the reason that the BIRs are copyright protected and end-users are required to use for their own purpose and the analysis of raw data provided in the BIRs would be similar to that of providing a technical or consultancy services. We have already mentioned above that a BIR is a standardized product of D&B, it provides factual information on the existence, operation, financial condition, management and experience line of business, facility and location of a company; it also provides special events like any suit, lien, judgment or previous or pending bankruptcy. Further, banking relationship and accountants, information like whether it is a patent company or authority concerned, has any branches etc. It also gives a rating of the company. The informations that are provided in a BIR are said to be publicly available; they are collected and complied by D&B associates. A BIR is accessible by any subscriber on payment of requisite price with regular internet access for which no particular software or hardware is required. The applicant states that access to data base of the applicant is available to public at large at a price as in case of buying a book and it is not a pre-requisite, that BIR must be downloaded by DBIS only and in fact some clients, such as Expert credit M/s. IQVIA AG (previously known as IMS AG) guarantee corporation, in fact, access the server themselves to download BIR. The applicant does not have any server in India for the use of DBIS. Indeed the applicant has specifically averred that the copyright in the BIR would neither be licensed nor assigned to either the DBIS or the Indian customer. From these aspects it is clear that the aforementioned ruling of the Authority is distinguishable on facts. If a group of companies collects information about the historical places and places of interest for tourists in each country and all informations are maintained on a central computer which is accessible to each constituent of the Group in each country, can a supply of such information electronically on payment of price be treated as royalty or fee for technical services ? We think not. The next case relied upon by the Commissioner is also a ruling of the Authority in Ericsson Telephone Corpn. India AB, In re [ 1997] 224ITR 2031. In that case the applicant was a company incorporated in Sweden. It provided, inter alia, services within radio and telecommunication. It entered into contracts with three Indian companies for the introduction of the cellular system of telecommunication in India and opened branch offices in India at New Delhi, Bombay and Madras. The Indian company informed applicant that while making payments under the agreement they would withhold income tax at 55% as provided in the Finance Act, 1995. According to the applicant tax deduction could not have exceeded 5,5% of the gross payments, as the net profit on the contract would not be more 10%, It was, therefore, not a case of whether the amount paid could be termed as fee for technical services. It was admittedly a case of payment of fee for technical services. For the abovementioned reasons, payments made by the DBIS to the applicant for purchases of BIRs do not answer the description of 'royalties' within the meaning of para 3 of article 13 of the treaty. So payments made by the DBIS to the applicant cannot be regarded as royalty payment. In our view, the applicant has rightly equated the M/s. IQVIA AG (previously known as IMS AG) transaction of sale of BIRs to sale of a book, which does not involve any transfer of intellectual property or a book.”
7. Article 12(3) of Indo Swiss DTAA, that we are currently dealing with, is verbatim the same as Article 13(3) of India Spain DTAA that Hon'ble Authority of Advance Ruling was dealing with. The conclusions so arrived at by the Authority for Advance Ruling, which now stand approved by Hon'ble jurisdictional High Court, are equally applicable in the context of Indo Swiss DTAA as well. It is only elementary that when the assessee is not taxable under the provisions of the respective DTAA, there is no occasion to examine the taxability under the Income Tax Act 1961, since the provisions of the Income Tax Act 1961 apply only when these provisions are more favourable to the assessee vis-a-vis the provisions of the applicable DTAA.
When the above position was brought to the notice of the learned Departmental Representative, he simply placed his reliance on the stand of the authorities below. He could not, however, neither point out any legally distinguishable features between the case before Hon'ble jurisdictional High Court vis- a-vis this case, nor any other reasons for not following the binding precedent from Hon'ble jurisdictional High Court. Once our Hon'ble jurisdictional High Court has expressed a view, it cannot be open for us to be swayed by a contrary view expressed by any other Hon'ble High Court. No decision from Hon'ble jurisdictional High Court, contrary to the above decision of Hon'ble jurisdictional High Court, was brought to our notice.
In view of the above discussions, as also bearing in mind entirety of the case, we delete the impugned addition of Rs 23,01,00,058 as royalty in the hands of the assessee. The assessee gets the relief accordingly.
No other issues were pressed before us. In any event, the other points raised in the appeal were in the nature of consequential levies. Once the main addition itself is deleted, all these issues are rendered academic.”
We further find that similar findings were also rendered by the Co– ordinate Bench of the Tribunal in assessee’s own case in IMS AG (now known as IQVIA AG) v/s DCIT, in ITA M/s. IQVIA AG (previously known as IMS AG) no.7291/Mum./2017, vide order dated 13.07.2020, for the assessment year 2014–15. The learned Departmental Representative could not show any reason to deviate from the aforesaid orders and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decision of the Co–ordinate Bench of the Tribunal for preceding assessment years. Thus, respectfully following the orders passed by the Co–ordinate Bench of the Tribunal in assessee’s own case cited supra, we uphold the plea of the assessee and delete the impugned addition in respect of subscription fees received by the assessee. As a result, ground nos. 1(1) to 1(4), raised in assessee’s appeal are allowed.”
8. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee’s own case for the A.Y. 2016-17 and also following rule of principle of consistency, we allow the ground raised
by the assessee.
9. Since, this issue has been decided in favour of the assessee in all the years holding that the said subscription fees is not taxable as ‘royalty’, therefore, consistent with the view taken and also no new facts are brought on record and the authorities below had also relied upon earlier years, therefore, consistent with the view take, the grounds raised b the assessee on this issue is allowed.
In the result, appeal of the assessee is partly allowed Order pronounced on 27th April, 2023 Sd/- Sd/- SHRI S.RIFAUR RAHMAN (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 27/04/2023 KARUNA, sr.ps M/s. IQVIA AG (previously known as IMS AG) Copy of the Order forwarded to :
1. 1. The Appellant 2. The Respondent.