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Facts
The assessee, American Chemical Society, appealed an assessment order that treated subscription charges for its Chemical Abstract Service (CAS) and Publications (PUBS) divisions as royalty, making them taxable in India. The AO assessed total income at INR 1,47,44,58,663 against a returned income of Nil.
Held
The Tribunal held that the subscription charges received by the assessee for its CAS and PUBS divisions are not in the nature of royalty. It followed the consistent view of coordinate benches that income from copyrighted articles is distinct from income from copyright itself, and thus not taxable as royalty under the Act or the India-US DTAA.
Key Issues
Whether subscription charges for CAS and PUBS divisions constitute royalty under the Income Tax Act and India-US DTAA, and if past decisions on similar issues are binding due to the principle of consistency.
Sections Cited
143(3), 144C(13), 9(1)(vi), 234B, 244A, 270A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “I” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
ORDER
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against final assessment order dated 27.01.2025, passed by the Ld. Assistant/ Deputy Commissioner of Income-tax (International Taxation) – 1(1)(1), Mumbai (in short the Assessing Officer), pursuant to the direction of Ld. Dispute Resolution Panel (in short ld. DRP) for assessment year 2022-23, raising following grounds:
1. That on the fact 1. That on the facts and circumstances of the case and in law, the s and circumstances of the case and in law, the Ld. AO has erred in assessing the total income of the Appellant Ld. AO has erred in assessing the total income of the Appellant Ld. AO has erred in assessing the total income of the Appellant under Section 143(3) read with Section 144C(13) of the Act at INR under Section 143(3) read with Section 144C(13) of the Act at INR under Section 143(3) read with Section 144C(13) of the Act at INR 1,47,44,58,663 as against the returned income of Nil. 1,47,44,58,663 as against the returned income of Nil.
2. That on the facts and 2. That on the facts and circumstances of the case and in law, the circumstances of the case and in law, the Ld. AO/ Dispute Resolution Panel ("DRP") have erred in holding that Ld. AO/ Dispute Resolution Panel ("DRP") have erred in holding that Ld. AO/ Dispute Resolution Panel ("DRP") have erred in holding that the receipts from Indian customers are chargeable to tax as royalty the receipts from Indian customers are chargeable to tax as royalty the receipts from Indian customers are chargeable to tax as royalty in terms of Article 12(3) of India in terms of Article 12(3) of India-US Double Tax Avoidance US Double Tax Avoidance Agreement ("DTAA") Agreement ("DTAA") and under Section 9(1)(vi) of the Act. and under Section 9(1)(vi) of the Act. 2.1 That on the facts and in the circumstances of the case and in 2.1 That on the facts and in the circumstances of the case and in 2.1 That on the facts and in the circumstances of the case and in law, the Ld. AO/ DRP have erred in holding that the subscription law, the Ld. AO/ DRP have erred in holding that the subscription law, the Ld. AO/ DRP have erred in holding that the subscription charges received under Chemical Abstract Service (CAS) division charges received under Chemical Abstract Service (CAS) division charges received under Chemical Abstract Service (CAS) division and Publications (PUB and Publications (PUBS) division would be chargeable to tax in India S) division would be chargeable to tax in India under India- -US DTAA being received for use of information US DTAA being received for use of information concerning industrial, commercial or scientific experience and / or concerning industrial, commercial or scientific experience and / or concerning industrial, commercial or scientific experience and / or for use of industrial, commercial or scientific equipment. for use of industrial, commercial or scientific equipment. for use of industrial, commercial or scientific equipment. 2.2 That on the facts 2.2 That on the facts and circumstances of the case and in law, the and circumstances of the case and in law, the Ld. AO/ DRP have erred in not following the principle of Ld. AO/ DRP have erred in not following the principle of Ld. AO/ DRP have erred in not following the principle of consistency, while holding that subscription charges received by the consistency, while holding that subscription charges received by the consistency, while holding that subscription charges received by the appellant are chargeable to tax under the India appellant are chargeable to tax under the India-US DTAA as being US DTAA as being received for use of received for use of industrial, commercial or scientific equipment, not industrial, commercial or scientific equipment, not appreciating that the same has never been held in the past by the appreciating that the same has never been held in the past by the appreciating that the same has never been held in the past by the Ld. AO/ DRP. Ld. AO/ DRP. 2.3 That on the facts and circumstances of the case and in law, the 2.3 That on the facts and circumstances of the case and in law, the 2.3 That on the facts and circumstances of the case and in law, the Ld. AO/ DRP have erred in holding that the subscription Ld. AO/ DRP have erred in holding that the subscription Ld. AO/ DRP have erred in holding that the subscription charges received under CAS and PUBS divisions would be chargeable to tax received under CAS and PUBS divisions would be chargeable to tax received under CAS and PUBS divisions would be chargeable to tax in India under India in India under India-US DTAA being received for use of ACS US DTAA being received for use of ACS databases / software. databases / software. 2.4 That on the facts and circumstances of the case and in law, the 2.4 That on the facts and circumstances of the case and in law, the 2.4 That on the facts and circumstances of the case and in law, the Ld. AO/DRP have erred in not follo Ld. AO/DRP have erred in not following the decision passed by the wing the decision passed by the Hon'ble Mumbai Bench of the Income Hon'ble Mumbai Bench of the Income-tax Appellate Tribunal ("ITAT") tax Appellate Tribunal ("ITAT") in Appellant's own case for immediately preceding assessment in Appellant's own case for immediately preceding assessment in Appellant's own case for immediately preceding assessment years i.e. AY 2014 years i.e. AY 2014-15 to 2021-22, wherein on similar similar facts and circumstances, the Hon'ble ITAT h circumstances, the Hon'ble ITAT held that the revenue from CAS eld that the revenue from CAS and PUBS division cannot be taxed as royalty under Section 9(1)(vi) and PUBS division cannot be taxed as royalty under Section 9(1)(vi) and PUBS division cannot be taxed as royalty under Section 9(1)(vi) of the Act as well as Article 12(3) of India of the Act as well as Article 12(3) of India-US DTAA.
3. That on the facts and circumstances of the case and in law, the 3. That on the facts and circumstances of the case and in law, the 3. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest Ld. AO has erred in levying interest of INR 4,32,67,210 under of INR 4,32,67,210 under Section 234B of the Act. Section 234B of the Act.
4. That on the facts and circumstances of the case and in law, the 4. That on the facts and circumstances of the case and in law, the 4. That on the facts and circumstances of the case and in law, the Ld. AO has grossly erred in computing the aggregate income tax Ld. AO has grossly erred in computing the aggregate income tax Ld. AO has grossly erred in computing the aggregate income tax liability (including interest) of the Appellant at INR 19,20,49,126. liability (including interest) of the Appellant at INR 19,20,49,126. liability (including interest) of the Appellant at INR 19,20,49,126.
5. That on the facts and circumstances of the case and in law, the t on the facts and circumstances of the case and in law, the t on the facts and circumstances of the case and in law, the Ld. AO has erred in computing the correct amount of interest on Ld. AO has erred in computing the correct amount of interest on Ld. AO has erred in computing the correct amount of interest on refund under Section 244A of the Act. refund under Section 244A of the Act.
That on the facts and circumstances of the case and in law, the 6. That on the facts and circumstances of the case and in law, the 6. That on the facts and circumstances of the case and in law, the Ld. AO has erred in initia Ld. AO has erred in initiating penalty proceedings under Section ting penalty proceedings under Section 270A of the Act.
We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant materials on record the relevant materials on record. In the grounds raised, the . In the grounds raised, the assessee is aggrieved with the finding of the assessee is aggrieved with the finding of the ld Assessing Officer in Assessing Officer in holding that the subscription charges received under chemical the subscription charges received under chemical the subscription charges received under chemical abstract service division abstract service division and publication division publication division was taxable as ‘royalty’ under domestic law under domestic law as well as under India US DTAA as well as under India US DTAA, being received for use of information concern use of information concerning industrial, commercial or industrial, commercial or scientific experience and/or for use of industrial, commercial or scientific experience and/or for use of industrial, commercial or scientific experience and/or for use of industrial, commercial or scientific equipment. Before us, the Ld. counsel for the assessee scientific equipment. Before us, the Ld. counsel for the assessee scientific equipment. Before us, the Ld. counsel for the assessee submitted that identical issue has been decided by the Co-ordinate submitted that identical issue has been decided by the Co submitted that identical issue has been decided by the Co Bench of the Tribunal in for assessment Bench of the Tribunal in for asses Bench of the Tribunal in for asses year 2014-15 and ITA No. 1160/Mum/2024 for assessment year 15 and ITA No. 1160/Mum/2024 for assessment year 15 and ITA No. 1160/Mum/2024 for assessment year 2013-14 in favour of the assessee and therefore, in view of principle 14 in favour of the assessee and therefore, in view of principle 14 in favour of the assessee and therefore, in view of principle of consistency without any change of consistency without any change of facts and circumstances, the facts and circumstances, the Ld. Assessing Officer/DRP is not justified in upholding addition for Ld. Assessing Officer/DRP is not justified in upholding addition for Ld. Assessing Officer/DRP is not justified in upholding addition for treating the subscription charges under chemical abstract division treating the subscription charges under chemical abstract division treating the subscription charges under chemical abstract division and publication division as royalty. We find that the Tribunal in and publication division as royalty. We find that the Tribunal in and publication division as royalty. We find that the Tribunal in assessment year 2014 assessment year 2014-15 has specifically noted that consideration that consideration received from ‘copyright copyrighted article’ is different from is different from ‘copyright’ and therefore, same does not quality as therefore, same does not quality as ‘royalty’. The relevant finding of . The relevant finding of the Tribunal (supra) is reproduced as under: is reproduced as under:
“17. We have heard the rival We have heard the rival submissions and perused the submissions and perused the relevant material on record including the order of the lower relevant material on record including the order of the lower relevant material on record including the order of the lower authorities on the issue in dispute. We find that issue with authorities on the issue in dispute. We find that issue with authorities on the issue in dispute. We find that issue with respect to the PUBS division coincides with the issues on respect to the PUBS division coincides with the issues on respect to the PUBS division coincides with the issues on the CAS fee. The journal provided by the PUBS d the CAS fee. The journal provided by the PUBS d the CAS fee. The journal provided by the PUBS division do not provide any information arising from assessee's not provide any information arising from assessee's not provide any information arising from assessee's previous experience. The assessee's experience lies in the previous experience. The assessee's experience lies in the previous experience. The assessee's experience lies in the creation creation creation of/maintaining of/maintaining of/maintaining such such such information information information online. online. online. By By By granting access to the journals, the assessee neither shares granting access to the journals, the assessee neither shares granting access to the journals, the assessee neither shares its experiences, tech its experiences, techniques or methodology employed in niques or methodology employed in evolving databases with the users, nor imparts any evolving databases with the users, nor imparts any evolving databases with the users, nor imparts any information relating to them. As is clearly evident from the information relating to them. As is clearly evident from the information relating to them. As is clearly evident from the sample agreements, all that the customers get is the right to sample agreements, all that the customers get is the right to sample agreements, all that the customers get is the right to search, view and display the articles (whether o search, view and display the articles (whether online or by nline or by taking a print) and reproducing or exploiting the same in taking a print) and reproducing or exploiting the same in taking a print) and reproducing or exploiting the same in any manner other than for personal use is strictly any manner other than for personal use is strictly any manner other than for personal use is strictly prohibited. Further, the customers do not get any rights to prohibited. Further, the customers do not get any rights to prohibited. Further, the customers do not get any rights to the journal or articles therein. They can only view the article the journal or articles therein. They can only view the article the journal or articles therein. They can only view the article in the journal that they have subscribed to and cannot nal that they have subscribed to and cannot nal that they have subscribed to and cannot amend or replicate or reproduce the journal. Thus, the amend or replicate or reproduce the journal. Thus, the amend or replicate or reproduce the journal. Thus, the customers are only able to access journal/articles for customers are only able to access journal/articles for customers are only able to access journal/articles for personal use of the information. No 'use or right to use' in personal use of the information. No 'use or right to use' in personal use of the information. No 'use or right to use' in any copyright or any other intellectual p any copyright or any other intellectual property of any kind roperty of any kind is provided by the assessee to its customers. Furthermore, is provided by the assessee to its customers. Furthermore, is provided by the assessee to its customers. Furthermore, the information resides on servers outside India, to which the information resides on servers outside India, to which the information resides on servers outside India, to which the customers have no right or access, nor do they possess the customers have no right or access, nor do they possess the customers have no right or access, nor do they possess control or dominion over the servers in any way. Therefore, control or dominion over the servers in any way. Therefore, control or dominion over the servers in any way. Therefore, the question of such payments qualifying as consideration the question of such payments qualifying as consideration the question of such payments qualifying as consideration for use or right to use any equipment, whether industrial, for use or right to use any equipment, whether industrial, for use or right to use any equipment, whether industrial, commercial or scientific, does not arise. commercial or scientific, does not arise.
To put a comparison, if someone purchases a book, then 18. To put a comparison, if someone purchases a book, then 18. To put a comparison, if someone purchases a book, then the consideration paid is not for the the consideration paid is not for the use of the copyright in use of the copyright in the book/ article. The purchaser of a book does not acquire the book/ article. The purchaser of a book does not acquire the book/ article. The purchaser of a book does not acquire the right to make multiple copies for re the right to make multiple copies for re-sale or to make sale or to make derivative works of the book, i.e., the purchaser of a book derivative works of the book, i.e., the purchaser of a book derivative works of the book, i.e., the purchaser of a book does not obtain the copyright in the book. Similarly, does not obtain the copyright in the book. Similarly, does not obtain the copyright in the book. Similarly, the purchaser of the assessee's journals, articles or database purchaser of the assessee's journals, articles or database purchaser of the assessee's journals, articles or database access does not have the right to make copies for re access does not have the right to make copies for re access does not have the right to make copies for re-sale and does not have the right to make derivative works. In and does not have the right to make derivative works. In and does not have the right to make derivative works. In short, the purchaser has not acquired the copyright of the short, the purchaser has not acquired the copyright of the short, the purchaser has not acquired the copyright of the article or of the d article or of the database. What the buyer gets is a atabase. What the buyer gets is a copyrighted product, and accordingly the consideration paid copyrighted product, and accordingly the consideration paid copyrighted product, and accordingly the consideration paid is not royalty, but for purchase of a product. In the instant is not royalty, but for purchase of a product. In the instant is not royalty, but for purchase of a product. In the instant case too, what is acquired by the customer is a copyrighted case too, what is acquired by the customer is a copyrighted case too, what is acquired by the customer is a copyrighted article, copyrights of which continue to article, copyrights of which continue to lie with assessee for lie with assessee for all purposes. lt is a well settled law that copyrighted article all purposes. lt is a well settled law that copyrighted article all purposes. lt is a well settled law that copyrighted article is different from a copyright, and that consideration for the is different from a copyright, and that consideration for the is different from a copyright, and that consideration for the former, i.e. a copyrighted article does not qualify as former, i.e. a copyrighted article does not qualify as former, i.e. a copyrighted article does not qualify as royalties.
Thus, the principles noted by us in t 19. Thus, the principles noted by us in the earlier part of he earlier part of this order in the context of the income earned by way of this order in the context of the income earned by way of this order in the context of the income earned by way of CAS fee are squarely applicable to the subscription revenue CAS fee are squarely applicable to the subscription revenue CAS fee are squarely applicable to the subscription revenue received from customers of PUBS division for sale of journal received from customers of PUBS division for sale of journal received from customers of PUBS division for sale of journal also, and accordingly PUBS fee also does not qualify as also, and accordingly PUBS fee also does not qualify as also, and accordingly PUBS fee also does not qualify as 'Royalty' in terms of section 9(1)(vi) of the Act as well as yalty' in terms of section 9(1)(vi) of the Act as well as yalty' in terms of section 9(1)(vi) of the Act as well as Article 12(3) of the India Article 12(3) of the India-USA DTAA.” 2.1 Further, in assessment year 2013 Further, in assessment year 2013-14, the Tribunal followed 14, the Tribunal followed the finding of the Co the finding of the Co-ordinate Bench in assessment year 2014 ordinate Bench in assessment year 2014-15. The relevant finding in assessme The relevant finding in assessment year 2013-14 is reproduced as 14 is reproduced as under:
“10. The aforesaid order so passed by the Coordinate 10. The aforesaid order so passed by the Coordinate 10. The aforesaid order so passed by the Coordinate Bench has since been consistently followed by the Bench has since been consistently followed by the Bench has since been consistently followed by the Coordinate Benches while adjudicating the matter for Coordinate Benches while adjudicating the matter for Coordinate Benches while adjudicating the matter for subsequent assessment years right up to A.Y 2021 subsequent assessment years right up to A.Y 2021 subsequent assessment years right up to A.Y 2021-22. As we have noted in the beginning, the AO has al we have noted in the beginning, the AO has also stated in so stated in the assessment order that assessee's business model has the assessment order that assessee's business model has the assessment order that assessee's business model has remained the same in comparison to A.Y. 2014 remained the same in comparison to A.Y. 2014- -15 to A.Y. 2020-21 and stream of revenue was also the same and no 21 and stream of revenue was also the same and no 21 and stream of revenue was also the same and no other income has been earned by the assessee company other income has been earned by the assessee company other income has been earned by the assessee company from India. Thus, admit from India. Thus, admittedly and undisputedly, there are no tedly and undisputedly, there are no changes in the facts and circumstances of the case in the changes in the facts and circumstances of the case in the changes in the facts and circumstances of the case in the impugned assessment year except that the matter was impugned assessment year except that the matter was impugned assessment year except that the matter was reopened u/s 147 of the Act. Though the Revenue has reopened u/s 147 of the Act. Though the Revenue has reopened u/s 147 of the Act. Though the Revenue has challenged the orders so passed by the Coordinate Benches challenged the orders so passed by the Coordinate Benches challenged the orders so passed by the Coordinate Benches before the Hon'ble Bombay High Court and the matter is before the Hon'ble Bombay High Court and the matter is before the Hon'ble Bombay High Court and the matter is currently pending adjudication, however, there is no stay currently pending adjudication, however, there is no stay currently pending adjudication, however, there is no stay which has either been sought or granted against the orders which has either been sought or granted against the orders which has either been sought or granted against the orders so passed by the Coordinate Benches. Given that there are so passed by the Coordinate Benches. Given that there are so passed by the Coordinate Benches. Given that there are no changes in the facts a no changes in the facts and circumstances of the case, we nd circumstances of the case, we see no reason to deviate from the view so taken by the see no reason to deviate from the view so taken by the see no reason to deviate from the view so taken by the Coordinate Bench which has consistently been followed in Coordinate Bench which has consistently been followed in Coordinate Bench which has consistently been followed in subsequent years. In light of the same, we uphold the plea subsequent years. In light of the same, we uphold the plea subsequent years. In light of the same, we uphold the plea so taken by the ld AR on behalf of the assessee and so taken by the ld AR on behalf of the assessee and so taken by the ld AR on behalf of the assessee and hold that subscription revenues for CAS as well as PUBS that subscription revenues for CAS as well as PUBS that subscription revenues for CAS as well as PUBS divisions cannot be brought to tax as royalty in terms of divisions cannot be brought to tax as royalty in terms of divisions cannot be brought to tax as royalty in terms of section 9(1)(vi) as well as Article 12(3) of India section 9(1)(vi) as well as Article 12(3) of India-USA DTAA in USA DTAA in the hands of the assessee and the addition so made is the hands of the assessee and the addition so made is the hands of the assessee and the addition so made is hereby directed to be del hereby directed to be deleted.
In light of the aforesaid, where we have deleted the 11. In light of the aforesaid, where we have deleted the 11. In light of the aforesaid, where we have deleted the addition, other grounds raised by the assessee including addition, other grounds raised by the assessee including addition, other grounds raised by the assessee including the ground challenging the jurisdiction of the AO have the ground challenging the jurisdiction of the AO have the ground challenging the jurisdiction of the AO have become academic in nature and we donot deem it become academic in nature and we donot deem it become academic in nature and we donot deem it necessary necessary necessary to to to adjudicate adjudicate adjudicate the the the same same same and a a the same are left left open.” 2.2 As facts and circumstances in the year under consideration As facts and circumstances in the year under consideration As facts and circumstances in the year under consideration being identical, without being identical, without there being any material change change, following the principle of consistency and respectfully following the Co- the principle of consistency and respectfully following the Co the principle of consistency and respectfully following the Co ordinate Bench of the Tribunal, we ordinate Bench of the Tribunal, we hold that subscription charges hold that subscription charges received under chemical abstract service division and publication received under chemical abstract service division and publication received under chemical abstract service division and publication division are not in the nature of royalty under the division are not in the nature of royalty under the provisions of the provisions of the Income-tax Act or under the provisions of the India US DTAA. tax Act or under the provisions of the India US DTAA. tax Act or under the provisions of the India US DTAA. Accordingly, the issue in d Accordingly, the issue in dispute raised in the grounds of appeal of ispute raised in the grounds of appeal of the assessee is allowed. the assessee is allowed.
In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on ounced in the open Court on 13/11/2025. /11/2025.