ITAT: No Royalty Tax on Fee for Access of Database License

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench removed the sum on account of presumed authority taxable under section 9 (l)(vi) of the Income Tax Act, 1961 “Get to know complete guide of TDS provisions under income tax act 1961 at here. Also, we include several topics as TDS returns, TDS due dates, penalt. Read more read with Article 12(3) of India Switzerland Double Taxation Avoidance Agreement (DTAA).

The taxpayer IMS AG is a company based in Switzerland. The work of the company is to give market research reports over the pharma sector to its customers all over the world at a fixed price. The company takes data, processes and uses the details about the medicines and pharmaceuticals to provide the reports via IMS knowledge link which is an online portal.

The company does the agreements with their customers to give the review reports (IMS reports) providing the information in module mode which can be accessed by the clients and deliberate for these services. In contrast to that, the IMS reports chosen are the statistical database which gives geo economical information about the pharma details giving in-depth within the associated problems about the details and developments.

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The licence procured so allowed is a non-exclusive and non-transferable right. This is compensation collected which permits this non-exclusive, non-transferable grant to the database and the IMS reports that is the reason for conflict.

Under section 9(l)(vi) as also under article 12(3) of the Indo Swiss DTAA, the lower authorities ruled that the receipts are liable to tax as a royalty.

Under section 9 (l)(vi) of the Income Tax Act, 1961, the taxpayer quarrelled that the proper officer failed in getting the addition of Rs.29,49,80,527 on account of claimed royalty taxable read with Article 12(3) of India Switzerland Double Taxation Avoidance Agreement.

Under the Income Tax Act 1961, ITAT declares that it is an essential thing that the taxpayer is not levied under the procurement of the corresponding DTAA and no function to investigate the taxability as the article income Tax Act 1961 applies only when the procurement is according to the taxpayer in context to the plan of the applicable DTAA.

The appeal of the taxpayer and delete the addition of Rs 29,49,80,527 held by the judges Vice President Pramod Kumar.