Income Tax Appellate Tribunal - Delhi
Lnrs Data Services Limited,United ... vs Assistant Commissioner Of Income Tax ... on 6 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH, D: NEW DELHI
BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER
AND
SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER
IT(IT)A No.- 1544/Del/2025
[Assessment Year: 2022-23]
LNRS DATA Services Limited, Assistant Commissioner of Income
1-3, Strand, London, WC2N 5JR, Tax,
United Kingdom-999999. Vs Circle Int. Tax 2(2)(1),
Delhi-110002.
PAN- AAKCR4632G
Assessee Revenue
Assessee by Sh. Ravi Sharma, Adv/
Ms. Shruti Khemta, (through VC) Adv.
Sh. Jaskaran Singk, CA
Revenue by Shri M.S. Nethrapal, CIT(DR)
Date of Hearing 08.12.2025
Date of Pronouncement 06.03.2026
ORDER
PER BRAJESH KUMAR SINGH, AM,
This appeal filed by the assessee is directed against the Final Assessment Order (FAO) passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') dated 23.01.2025 pursuant to the directions of the Hon'ble Dispute Resolution Panel (DRP) vide order dated 23.12.2024 u/s 144C(5) of the Act for Assessment Years (AY.) 2022-23.
1IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
1.1 Ground nos. 1 and 2 of the appeal and the assessee's submission are reproduced as under:
" Ground 1: That on the facts and circumstances of the case & in law, the final assessment order passed by the Learned Assessing Officer ('Ld. AO') pursuant to the directions of the Learned Dispute Resolution Panel ('Ld. DRP') under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 ('the Act') is bad in law and barred by limitation in view of the provisions of section 153 of the Act.
In view of the fact that the Hon'ble ITAT had decided the issue of taxability of the Appellant's receipts in its favour vide order dated 29 November 2024 for the AY 2016-17 and AY 2017-18, the Appellant is not pressing for his ground. However, the Appellant reserves its right to urge this issue at a subsequent stage, in accordance with law.
Ground 2: That on the facts and circumstances of the case & in law, the Ld. AO/DRP has grossly erred in computing the taxable income of INR 53,07,91,491 as against the nil income reported by the Appellant in its Return of Income ('ROI') filed for the subject AY.
This ground is general in nature and is not being pressed in view of the specific relief sought by the Appellant in other grounds."
1.2. Ground No. 1 of the appeal is dismissed as not pressed . However, the liberty as prayed for by the assessee in respect of this ground is allowed.
1.2 Ground no. 2 of the appeal is dismissed, as not pressed.
2. Brief facts of the case: The assessee company is incorporated in the United Kingdom and is a tax resident of the United Kingdom within the meaning of Article 4 of the India-UK DTAA. The assessee company not have any office or place of business or Permanent Establishment ('PE') in India. The assessee filed its Return of 2 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
Income (ROI) for the subject year online on the e-filing portal wherein the assessee had shown taxable income as nil.
2.1 The assessee submitted a Copy of Tax Residency Certificate ('TRC") issued by the UK tax authorities, dated January 28, 2022, before the AO vide submission dated September 7, 2023, on the basis which it submitted before the AO that the assessee being a tax resident of the UK was eligible to claim the treaty benefits of India-UK tax treaty for the AY 2022-23.
2.2 The assessee is in the business of providing online analytical tools and publishing articles, reports, books and journals in relation to various aspects such as legal, banking, risk management etc. As a part of its business, during the year the assessee provided online subscription of such online analytical tools, articles, reports, books, etc., to various subscribers across the world, including India. During the year under consideration, the assessee earned income in the nature of subscription fees from India subscribers/customers amounting to Rs. 53,07,91,491 for providing subscription of its services to various subscribers and also earned receipts in relation to advertisement, sponsorship for conferences and exhibition. It was submitted by the assessee that it being a tax resident of UK believed that the said receipts were not taxable in India as 'Fee for Technical Service's ('FTS') or as 3 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
Royalty as per the beneficial provisions of Article 13 of India UK DTAA and hence, the same were not offered to tax in India.
2.3. Further, it was submitted that during the subject AY, the assessee had paid Equalisation Levy @2%, on such subscription charges, under section 165A of the Finance Act, 2016 (as amended by Finance Act, 2020 and Finance Act, 2021) and the assessee had also filed its Equalization Levy return for the subject AY and accordingly, the assessee had claimed the subscription charges as its exempt income under section 10(50) of the Act.
2.4. During the course of assessment proceedings, the AO asked the assessee to clarify if there is any change in the factual matrix as compared to A.Y. 2017-18 for which draft assessment order u/s 144C(1) of the Act was passed on 29.05.2023 Further, the assessee was also asked vide show cause notice dated 08.03.2024 to explain as to why the assessment proceedings should not be concluded as per the preceding assessment year.
2.5. In response, the assessee filed its responses explaining that its receipts were not taxable in India as per the provisions of section 9(1)(vii) of the Act as well as per provisions of India-UK DTAA and relied upon the decision of the Hon'ble Delhi High Court in case of its group entity, i.e., RELX Inc., wherein the Hon'ble Delhi High Court held that the subscription charges could not be considered as 4 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
Royalty/FTS under the provisions of the Act as well as under India-UK DTAA.
Further, the assessee, vide its earlier submission dated September 07, 2023, had also submitted a copy of the standard terms and conditions for providing access to one of its services.
2.6 However, the AO did not accept the submissions of the assessee and held in the Draft Assessment Order (DAO) u/s 144C(1) of the Act dated 31.03.2024 that the amount of Rs. 53,07,91,491/- was chargeable to tax as Royalty / FTS income taxable under India-UK-DTAA.
3. Aggrieved with the said DAO, the assessee filed its objections before the DRP.
4. The DRP upheld the action of the AO. The relevant extract of the order of the DRP is reproduced as below " (iii) in Ground no 2 & 3, assessee has challenged the action of AO of proposing an addition of receipts from subscription fees of INR 53,07,91,491 by treating it as Royalty/FTS as per Article 13 of India UK DTAA.
(iv) On perusal of the Draft Assessment Order passed by the AO, it is observed that the findings arrived at by the AO are based on detailed analysis of the contracts, invoices and the open sources inquiries conducted by the AO. The AO has delved into the arguments put for the by the assessee, discussed the case laws relied upon by the assessee and also distinguished them with the case of the assessee. On the basis of discussions in depth analysis and inquiry, the AO has stated that the assessee company is not just providing a routine or standard facility, the services providers by the assessee company caters to the specific needs of the customers and hence not a standard facility, the services provided by the assessee company are not in the nature of standard services because the Assessee has put in place an architecture to make available technical and protected content along with technology to use such services, the assessec company has not only made available the underlying technology, skills, information, knowledge to the end-user for independent use of its online services by such user, but also made an all- out effort with a substantial human involvement. It has been further stated that as the output is technical, the services are consultancy or technical in nature, the services 5 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
rendered by the assessee company involve substantial human involvement/ human intervention, the solutions provided by the assessee company involves special knowledge provided by the assessee company and hence in the nature of consultancy services. It has been further held that the assessee company had imparted necessary technical skill to the administrator for the independent use of the underlying services and technology. On the basis of the above findings, the AO has concluded that the services provided by the assessee company come under the purview of Royalty/FTS u/s 13 of the India-UK DTAA.
(v) Based on the detailed discussion held above, at this stage the Panel does not find any reason to intervene with the DAO passed by the Assessing Officer Grounds of objection no. 2 & 3 are accordingly disposed off.
(vi) in ground no. 4, the assessee has stated that the AO has erred in treating the subscription receipts of Rs. INR 53,07,91,491 received by the Assessee from its Indian customers for providing access to its online database have already been offered to equalization levy under section 165A of the Finance Act, 2016 and accordingly are exempt under section 10(50) the Act.
(vii) While adjudicating on this issue, it is important to first ascertain whether assessee and the consideration received during the year falls under the purview of the Equalization Levy or not. The relevant portion of Section 163 of the IT Act is quoted as under:
"(3) It shall apply to consideration received or receivable for specified services provided on or after the commencement of this Chapter, and to consideration received or receivable for e-commerce supply or services made or provided or facilitated on or after the 1st day of April, 2020.1 [Provided that the consideration received or receivable for specified services and for e-
commerce supply or services shall not include the consideration, which are taxable as royalty or fees for technical services in India under the Income-tax Act, read with the agreement notified by the Central Government under section 90 or section 90A of the said Act.]"
(viii) From the plain reading of section 163(3) and the Proviso cited above, it clearly states that consideration which is taxable as royalty or fee for technical services in India under Income Tax Act and DTAA, does not fall under the chapter of Equalization Levy.
As clearly discussed above, the assessee's receipts falls under the purview of Royalty/FTS. Hence, these receipts do not fall under the chapter of equalization levy and hence are not eligible for exemption under section 10(50) of the Act.
(ix) In the instant case, the receipts of the assessee have been held to be in the nature of Royalty/FTS. Hence, the panel is unable to agree with the assessee's contention that the receipts are exempts u/s 10(50) of the Act simply because equalization levy has been paid Therefore, ground no objection no: 4 is accordingly disposed off."
6IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
5. Upon perusal of the above directions, the AO passed the FAO u/s 143(3) r.w.s.
144C(13) of the Act on 23.01.2025 by taxing the amount of Rs. 53,07,91,491/- as Royalty /FTS income taxable under India-UK-DTAA.
6. Aggrieved with the said order, the assessee is in appeal before the Tribunal on the following grounds of appeal on this issue:
" 3. That on the facts and circumstances of the case & in law, the Ld. DRP has grossly erred in confirming the action of the Ld. AO in proposing an addition of INR 53,07,91,491 from receipt of subscription fees by erroneously treating it as Fees for Technical Services ('FTS') under the Income-tax Act, 1961 ('the Act') and under Article 13 of the tax treaty between India-UK ('India-UK DTAA'):
3.1 Without appreciating the fact that even if services rendered are considered to be technical or consultancy services, the same do not make available technical knowledge to the recipient and hence are not taxable in India under Article 13 of India-UK DTAA.
4. That on the facts and circumstances of the case and in law, the Ld. DRP grossly erred in confirming the action of the Ld. AO in proposing an addition of receipt from subscription fees of INR 53.07.91,491 by treating it as royalty under the Act as well as under Article 13 of the India-UK DTAA.
5. That on the facts and circumstances of the case & in law, the Ld. AO has grossly erred in not following the decision of the Hon'ble jurisdictional Delhi High Court in the case of a group entity, RELX Inc vs. CIT for AY 2018-19 (ITA 630/2023), wherein the Hon'ble Delhi High Court has held that subscription charges received for providing access to database cannot be
6. That on the facts and circumstances of the case & in law, Ld. DRP has erred in confirming an addition of receipts from subscription fees of INR 53.07,91,491 by treating it as Royalty/FTS as per Article 13 of the India-UK DTAA and Section 9(1)(vi)/ Section 9(1)(vii) of the Act without appreciating that the subscription receipts have already been offered to equalization levy under section 165A of the Finance Act, 2020 and accordingly are exempt under section 10(50) the Act.
6.1 Without prejudice to the aforementioned grounds, the Ld. AO/DRP has failed to appreciate that Equalisation Levy amounting to INR 1,04,79,226 has already been paid on the consideration assessed as Royalty/FTS in the assessment order and thus the Appellant is eligible to claim the credit of such equalization levy against the assessed tax liability."7
IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
7. The Ld. AR before us submitted a point-wise rebuttal to the findings of the AO vide its written submission and stated that the amount of Rs. 53,07,91,491/- was not taxable as FTS. The relevant extracts of the same are reproduced as under:
"
Incorrect facts alleged by the Ld. AO Rebuttal by the Appellant The Appellant is not just providing a As stated above and as evident from the routine or standard facility. manner in which the website operated by the That the services provided by the Appellant functions, the Appellant's database Appellant caters to the specific needs of is available uniformly to all the subscribers the customers and hence not a standard and there are no exclusive services granted to facility. a particular customer.
Merely because the customers can refine their search results basis the search tools available on the database / website does not mean that the Appellant is provided a customised service.
The facility provided by the Appellant is merely in the nature of standard facility available to public at large who wishes to subscribe for it.
That the services provided by the The Appellant has merely provided online Appellant are not in the nature of subscription of such books, journals and standard services because the online analytical tools to its subscribers. Appellant has put in place an architecture to make available Even assuming that the Appellant has put in technical and protected content along place an architecture, the same is merely to with technology to use such services enable access to its database to the subscribers. Mere infrastructure for furtherance of its own business by the Appellant should not result in technology in the underlying services being made available to the customers.
Given the above, the subscription services provided by the Appellant is merely in the nature of standard facility.
Merely because the output is technical, Merely because the information / data the services are consultancy or downloaded from the Appellant's website technical in nature /database is technical in nature does not mean that the services rendered by the Appellant are consultancy or technical in nature.
8IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
The Appellant's role is limited to providing a subscription to the books, journals and online analytical tools. This in itself is not a technical or consultancy service.
That the solution provided by the The Appellant's role is limited to granting Appellant involves special knowledge subscription to the customers. Mere fact that provided by the Appellant and hence in the information, books or journals accessible the nature of consultancy services. from the Appellant's database / website involve special knowledge does not mean that the Appellant is involved in providing any solution involving special knowledge.
Therefore, the facility provided by the Appellant is not in the nature of consultancy services.
That the Appellant has made available Merely because the Appellant maintains a
the underlying technology, skills, database and provides online information
information, knowledge to the end-user does not mean that there is a human
for independent use of its online intervention involved while rendering the
services by such user services to the customers.
That the services rendered by the The customers subscription fees for accessing Appellant involve substantial human the database merely paying while is fully involvement/human intervention automated and does not require any assistance from the Appellant or its personnel.
Therefore, the services rendered by the Appellant to the customers do not involve any human involvement intervention That the Appellant had imparted Merely because the end-user is required to as necessary technical skill consultancy designate an administrator for a single-user services. subscription does not mean that the Appellant has imparted any technical skill to such administrator for use of underlying services or technology.
The Appellant's facility is limited to enable the customer to access its database. This in itself is not a technical or consultancy service.
17.6. The Appellant submits that the subscription receipts from the Indian customers are not taxable as FTS as per the provisions of section 9(1)(vii) of the Act.
17.7. The terms 'technical' and 'consultancy' have neither been defined in the Act nor in the DTAA.
Therefore, The Appellant wishes to place reliance on the dictionary meanings as well as meanings as prevalent in the general (commercial) parlance and judicial precedents, the following can be drawn:
9IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
Consultancy Consultancy services involve providing expert advice in a particular field. The Mumbai Tribunal in the case of Boston Consulting Group Pvt. Ltd. [94 ITD 31] has defined the term consultancy services as 'services which are in the nature of strategy and business consulting intended to improve the performance of its clients by focusing on fundamentals of business'.
A consulting service is an advisory service, which can cover managerial/ non managerial as well as technical/ non-technical advice. Consultancy services refer to services constituting in the provision of advice by a person/ professional, who has special qualifications to do so.
In the present case, the Appellant merely provides an access to the online facility operated by it. The information / data accessed by the customers on the Appellant's database/ website does not constitute any advice or opinion or recommendation given by the Appellant. Therefore, such facility provided by the Appellant is not in the nature of consultancy service.
Technical services Given the wide connotation of the term, 'technical services' involve services consisting use of specialised skills or services driven by technology In relation to technical services, the Appellant humbly/ submits that, the word 'technical' as appearing is succeeded by the word 'consultancy' and therefore, the rule of noscitur a sociis is applicable while interpreting the term technical services.
Thus, the word 'technical' would take colour from the words' consultancy', and accordingly, the term "technical' ought to be read in a narrower sense so as to include only those services which involve human intervention in performance thereof. Accordingly, where the services rendered are standard in nature and do not involve human intervention, such services would not be technical in nature and therefore, consideration paid for such services would not qualify as technical services.
17.8. On the perusal of the facts mentioned in the earlier paras, one would note that the entire process of accessing and searching the tools and database is fully automated and does not require any assistance from the Appellant or its personnel. The collation, managing the data etc, which the Appellant does at the back end is available to all subscribers uniformly and there is no exclusive service granted qua a particular customer.
There is no human intervention involved when the subscription to the database is provided to the customers. Merely because the subject matter of the database is highly technical, it cannot be said that the Appellant has rendered any technical services.
17.9. This issue is already covered by virtue of the recent decision issued in case of a group entity by Delhi High Court in case of RELX Inc vs. CIT (ITA 630/2023). wherein the HC has held that mere access to a database should not be construed as providing any 10 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
managerial, technical or consultancy service to a subscriber and in any case, this also did not amount to technical knowledge, experience, skill, know-how or processes being made available. Therefore, the HC held that such subscription fees are not in the nature of fees for technical services as well as royalty under the Act as well as treaty. Accordingly, it has been held by the Delhi High Court that in absence of PE in India, such income should not be taxable. (refer page 104 to 118 of the paperbook).
17.10. Recently, the Hon'ble ITAT, in the case of the Appellant for AY 2016-17 & AY 2017- 18 (ITA No. 2617 & 2618/Del/2024), by placing reliance on the above-referred judgment of the Hon'ble Delhi High Court in the case of RELX Inc, held that subscription fees received by the Appellant/assessee is in the nature of business profit/income, which cannot be charged to tax in India in absence of the PE. The relevant extract is reproduced below for your goodself kind reference (refer page 94 to 103 of the paperbook): -
6. We have heard both the parties at length and have perused the material available on record. We are of the considered view that this case is squarely covered by the decision of the Hon'ble Delhi High Court in the case of RELX INC (supra). We therefore, following the reasoning given by the Hon'ble Delhi High Court in its decision in the case of RELX INC (supra), hold that the subscription fees received by the appellant/assessee is in the nature of business profit/income, which cannot be charged to ta in India in absence of the PE. Accordingly, we delete the addition of INR 248,077,042 which has been taxed in AY 2016-17. This finding shall apply mutatis mutandis in AY 2017-18 also. Thus, both appeals are allowed.
17.11. In the view of the above, for the ready reference of the Hon'ble ITAT, the status chart of past years' litigation of the Appellant is provided below: -
17.12 As evident from the above, the facts of the aforementioned ruling are squarely applicable to the present case. Accordingly, since this is a covered matter where jurisdictional High Court (i.e. Hon'ble Delhi High Court) has already ruled in the favour 11 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
of another group entity of the Appellant with similar facts, we humbly submit to your goodself that the same principle should also be followed in the case of the Appellant.
17.19 The facts in the case of the Appellant are pari materia similar to those in Elsevier Information Systems GmbH and other group entities as mentioned above. The above decisions are therefore squarely applicable to the current case. The Company thus submits that the receipts are do not qualify as FTS as per the provisions of section 9(1)(vii) of the Act itself and hence are not taxable in India.
Further, since this is a covered matter wherein the Hon'ble Delhi High Court has already ruled in the favour of another group entity (Relx Inc.) of the Appellant with similar facts and considering that the Hon'ble ITAT has passed a favourable order for earlier years i.e., AY 2016-17 & AY 2017-18 in the case of Appellant itself by placing reliance on the aforesaid judgement of the Hon'ble Delhi High court, we humbly submit to your goodself that the same principle should also be followed in the case of the Appellant for the subject year as well."
7.1 Further, the Ld. AR submitted that the same was also not taxable as Royalty.
The relevant extracts of the submissions are reproduced as under:
" 17.25 The appellant hereby refutes the incorrect facts alleged by the Ld. AO refuting that the Appellant has 'made available' the services to its customers."
Incorrect facts alleged by the Rebuttal by the Appellant Ld. AO That the Appellant has made The Appellant's role is limited to available the highly specialised providing a subscription to its and technical content to its database.
customers Mere fact that the online information accessible from the Appellant's database involve special knowledge, this does not mean that the Appellant has made available any highly specialised and technical content to its customers.
12IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
That the Appellant has made The customers are merely paying available the underlying subscription fees for accessing technology, skills, information, the database which is fully knowledge and information with automated and does not require a substantial human involvement any assistance from the Appellant or its personnel.
Therefore, the services rendered by the Appellant to the customers do not involve any human involvement intervention.
Even assuming that the
Appellant has put in place an
architecture, the same is merely
to enable access to its database
to the subscribers. Mere
maintenance infrastructure for
furtherance of its own business
by the Appellant should not
result in technology or skills in
the underlying services being
made available to the customers.
Further, the Appellant has mere
provided an access to customers
to its database. This does not
mean that the Appellant has
made available the information
and knowledge of its database to
its customers.
That the Appellant's expertise The Appellant's facility is limited
solutions were made available to to providing access to the
the customers so that they can customers to its database.
use this solving their problems
independently without support of Merely because of the fact that
the Appellant the content accessible through
the database of the Appellant
may enable the customers in
solving their problems does not
mean that the Appellant is
engaged in making available
13
IT(IT)A-1544/Del/2025
LNRS Data Services Limited.
expert or customised solutions to
the customers.
18.10 To facilitate better understanding, the Appellant wishes to draw a parallel
between its database and other online databases provided by various companies on the subject of taxation and law such as Taxman, SCC Online, Taxsutra, CTR Online, etc. Consider the example of Taxmann-
Taxman Appellant's database
Its online database contains publicly The Appellant's database contains
available information such as bare publicly available information on
acts, articles, case laws reported in legal, banking and risk management
various journals such as ITR, CTR, related topics in the form of books,
TTJ, etc. journals and articles.
The database can be accessed The database can be access online by
www.taxmann.com. one and all in this world on the
website of the Appellant.
The database can be accessed by any The database can be accessed by any
subscriber having regular internet person having regular internet
facility through platforms such as facility through platforms such as
Google, Firefox, Internet Explorer, Google, Firefox, Internet Explorer,
etc. etc..
The content on the website can be The content of the website can be
downloaded, stored, printed, etc. for printed, copied, stored and provided
internal use of the subscriber. Copies to other authorised users and third-
can also be produced and submitted party colleagues for
in a Court of law such as the Hon'ble scholarly/research use.
High Courts, Hon'ble Income-tax
Appellate Tribunal.
18.14 he Appellant also places reliance on the recent decision of the Supreme Court
in the case of Engineering Analysis Centre of excellence (P) Ltd [2021] 125 taxmann.com 42 (SC) wherein the Supreme Court held that amount paid for use of computer software is not payment of royalty for use of copyright in computer software and thus same does not gives rise to any income taxable in India.
18.19 Based on the above, it is submitted that the consideration for cloud computing services and / or SaaS is not in the nature of Software Royalty. Therefore, in the present case even if the subscription service rendered by the Appellant are considered to be in 14 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
the nature of cloud computing services and / or SaaS, the consideration received by the Appellant should not be considered to be in the nature of Royalty under the provisions of the India-UK tax treaty as well as section 9(1)(vi) of the Act and not be taxable in India.
18.20 The Ld. DRP has erred in confirming an addition of receipt from subscription fees of INR 53,07,91,491/- by treating it as royalty as per Article 13 of the India-UK DTAA without appreciating that the receipt is for the use of copyrighted article and not copyright and hence cannot be taxed in India."
8. On the other hand, the Ld. CIT(DR) filed a written submission, supporting the order of the AO and the relevant extract of the same are reproduced as under:
"On behalf of the Revenue, the following detailed legal note is submitted to support the contention that the subscription fees received by the Assessee (a UK-based entity) for providing access to online analytical tools and databases constitute "Royalty" and/or "Fees for Technical Services" (FTS) under the Income Tax Act, 1961 ("the Act") read with the India-UK Double Taxation Avoidance Agreement ("DTAA"). Reliance is placed on the recent and squarely applicable judgment of the Coordinate Bench in Sabre Decision Technologies International LLC v. ACIT [2023] 152 taxmann.com 51 (Delhi - Trib.).
1. FACTUAL MATRIX AND ISSUE AT HAND The Assessee is engaged in the business of publishing specialized information (legal, banking, risk management) and providing online analytical tools to access this database. The Indian subscribers pay a "subscription fee" to access this platform. The Assessee contends that this is merely the sale of a "copyrighted article" (akin to a book) and constitutes business income, not taxable in the absence of a Permanent Establishment (PE).
The Revenue contends that the provision of an interactive analytical tool where the user queries the system and receives processed results constitutes the "use of a process" and the "imparting of commercial/scientific knowledge," thereby qualifying as Royalty.
2. LEGAL ARGUMENTS BASED ON JUDICIAL PRECEDENT A. The Platform Constitutes "Use of a Process" (Royalty) The Assessee's platform is not a static repository of data. It employs a search engine/algorithm (analytical tool) that processes the user's specific queries to retrieve results. The Tribunal in Sabre Decision Technologies held that such a mechanism involves a "series of steps" which qualifies as a "process."
15IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
Extract from Sabre Decision Technologies (Para 5.4):
"Sub-clause (in) clearly mentions that royalty means consideration for the use of any process. Sub-clause (1) refers to the imparting of any information concerning the use of a process... Process in the context of the assessee has already been discussed above. It is the series of steps involved in creation of an electronic platform, followed by input of data by the client and this data is analyzed and an output advice generated."
"It is actually a set of steps or a combination of processes which are followed for the analysis of data... The payment being made is prima facie for the purpose of specific services being rendered to the client. These services take the shape of royalty since the consideration for these services is for the use of a process."
Submission: In the present case, the subscriber does not merely "read" data, they utilize the Assessee's proprietary analytical tool (process) to filter, sort, and analyze the data. Therefore, the subscription fee is consideration for the use of a process.
B. "Interactive Use" Distinguishes the Service from a "Copyrighted Article"
The Assessee may rely on judgments related to "copyrighted articles" (passive software sales). However, the Tribunal in Sabre distinguished between passive use and interactive use via a login portal. The Tribunal held that where a unique login is provided and the user inputs data/queries to control the output, it is not a standard product sales scenario but a licensing of IP/Process.
Extract from Sabre Decision Technologies (Para 4.4.7):
"The aforesaid decision (referring to Dell/ passive use) relates to a cast where there is passive use of a facility created by a network operator... This is not the case of the assesse... On an electronic platform, a unique login which enables upload of data is certainly an interactive use where the outputs of the intellectual property equipment are controlled by the inputs of the client."
Submission: The Assessee provides a unique login to Indian subscribers. The subscribers "interact" with the database using the Assessee's tool. This "interactive use" places the transaction squarely within the ambit of Royalty as per the ratio laud down above.
C. Imparting of Commercial and Scientific Knowledge The database contains specialized knowledge regarding banking, law, and risk management. Granting access to this database constitutes "imparting of information concerning industrial, commercial or scientific knowledge, experience or skill" under the DTAA.
Extract from Sabre Decision Technologies (Para 5.4):
16IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
"The sub-clause (iv) is also squarely applicable as it covers imparting of any information concerning commercial knowledge."
Extract from Sabre Decision Technologies (Para 4.4.11):
"The issue is that the client has been authorized an access to an intellectual property and snch access results in delivery of consultancy advice to the client. Such services would necessarily qualify under the definition of royalty referred to in Section 9(1)(m) of the Income-tax Act."
D. The Domestic Definition and DTAA Definition are "At Par"
The Assessee may argue that the DTAA definition is narrower. However, the Tribunal in Sabre, relying on the AAR ruling in Cargo Communication, affirmed that for such digital services, the definitions under the Act and the DTAA are analogous.
Extract from Sabre Decision Technologies (Para 4.6.1):
"After carefully going through the above provisions we find that meaning of the term "Royalty' as used in Explanation (2) to clause (vi) of sub-section (1) of section 9, it at par with the term "Royalties' as used in article 12. (3)(b) of the DTAA (analogous to Article 13 of India-UK DTAA)."
"In view of this position, the payments being made by the agents/ subscribers (residents), to the [Non-resident... are chargeable to tax in India, under article 12 of the DTAA as also under section 9 of the Act."
In light of the detailed findings in Sabre Decision Technologies, it is established that:
1. The provision of an online platform for data access constitutes the "use of a process."
2. The interactive nature of the login-based system distinguishes it from the mere sale of a copyrighted article.
3. The subscription fees are consideration for the use of this process and the imparting of commercial knowledge.
Therefore, the Revenue humbly prays that the Hon'ble Tribunal upholds the order of the Lower Authorities treating the subscription fees as Royalty taxable in India."
8.1 Earlier, during the course of the hearing Ld. CIT(DR) had relied down upon the findings of the Ld. CIT(A) as reproduced in para no. 5.3 and 5.4 of the order of the co-ordinate Bench of the Tribunal in Sabre Decision Technologies International 17 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
LLC v. ACIT (supra) to support of his case. The said para no. 5.3 and 5.4 are reproduced as under:
" 5.3 The mechanism is listed out again that the assessee would provide the login and password to the client, through which the client would be able to interact with the assessee. In such interaction, the client would be able to avail to the specific services which are offered in the functionality. In other words, the client would furnish some data or write up after logging in on his login portal. This data would be utilized and analyzed by the assessee on it's off shore location in the US. The assessee company after application of its Intellectual Property and expert advice would generate some solution for the customer or the client. It has been clearly mentioned in the Master Agreement that the data analyzed and outputs of the data collected at the customer portal have been worked on through exclusive IP. The advice or the solutions provided are based on principally protected software and the experience and data analyzed by experts, which has been developed by the assessee company. This protected software offers facility to the clients to login, furnish some data and then access reports generated on the data. Now it is important to see the definition of Royalty under the Act. Again it is reiterated that the assessee does not have a TRC of the US and therefore the taxability is to be determined only in accordance with the domestic tax law. The definition 'royalty' under section 9 of the Income-tax Act is as under:
Explanation 2. For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for-
(i) the transfer of all or any rights (including the granting of a licence) in respect of a pater invention, model, design, secret formula or process or trade mark or similar property;
(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property;
(iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property;
(iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill;
(iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB;]
(v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films 18 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
5.4 As seen above the nature of services rendered by the assessee qualify under three clauses of the definition of royalty: -
(ii) the imparting of any information concerning the use of, a process
(iii) the use of any process;
(iv) the imparting of any information concerning commercial knowledge, experience or skill;
Sub-clause (iii) clearly mentions that royalty means consideration for the use of any process. Sub-clause (ii) refers to the imparting of any information concerning the use of a process and the sub-clause (iv) is also squarely applicable as it covers imparting of any information concerning commercial knowledge. Process in the context of the assessee has already been discussed above. It is the series of steps involved in creation of an electronic platform, followed by input of data by the client and this data is analyzed and an output advice generated. In the present case, the source code of the process developed by the assessee is the basis of supplied information to the clients. It is actually a set of steps or a combination of processes which are followed for the analysis of data. The consideration being paid by the client is mentioned above is both for:
Execution and implementation of the software on the client's end. Per month charges payable by the client to the parent company, and Payment also made on a passenger based usage fee The payment being made is prima facie for the purpose of specific services being rendered to the client. These services take the shape of royalty since the consideration for these services is for the use of a process. It is also noteworthy that this process [ a dedicated software] is actually Intellectual Property of the client. On both accounts, the use of such process or property is in the nature of royalty. The assessee in his submission has tried explaining that the consideration received is for use of a standardized product. The detailed submission by the assessee has already been discussed on various limbs of the definition of royalty. A number of case laws have been also quoted by the assessee to be in its favour. It is however seen that almost all the judgments are distinguishable on facts which have been discussed above. The assessee is not providing standardized services. In its submission dated 24-7-2017 it is submitted that SDT is responsible for configuration of its services according to customer specifications. The nature of services is dependent on the client inputs."
9. We have heard both the parties and perused the material available on record.
As noted above, the AO taxed the amount of Rs. 53,07,91,941/- as Royalty Income / FTS income under Article 13 of India - UK-DTAA for the reasons as noted by the 19 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
AO in the DAO and summarized by the DRP in its findings as reproduced earlier in para 4 of this order. Further, the ld. CIT(DR) relying upon the order of the Co-
ordinate Bench of the Tribunal in the case of ACIT, International Taxation vs. Sabre Decision Technologies International LLC (supra) and in view of his written submission submitted that it was taxable as FTS Royalty. The submissions of the Ld. CIT(DR) have been reproduced earlier in para no. 8 of this order.
9.1 In this case, the co-ordinate Bench of the Tribunal vide order dated 29.11.2024 in ITA No. 2617 & 2618/Del/2024 for A.Y. 2016-17 and 2017-18 in assessee's own case on similar facts deleted similar addition of Rs. 24,80,77,042/- for A.Y. 2016-17, which was treated by the AO on similar reasoning as FTS / Royalty under Article 13 of the tax treaty between India -UK(India-UK-DTAA). The Tribunal held that that the subscription fees received by the appellant/assessee was in the nature of business profit/income, which could not be charged to tax in India in absence of the PE.
Accordingly, the Tribunal deleted the addition of Rs. 24,80,77,0421/-. The Tribunal further stated that the said findings for A.Y. 2016-17 shall apply mutatis mutandis in AY 2017-18 also and allowed both appeals. The relevant extracts of the said order is reproduced as under:
" 2. The case of AY 2016-17; ITA No. 2617/Del/2024, is taken as a lead case. Following grounds have been taken in AY 2016-17:
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IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
Ground No.4: That on the facts and in the circumstances of the case & in law, the Hon'ble Panel has grossly erred in confirming the action of the Ld. AO in proposing an addition of INR 24,80,77,042 from receipt of subscription fees by erroneously treating it as Fees for Technical Services (FTS") under the Income-tax Act, 1961 [the Act) and under Article 13 of the tax treaty between India-UK (India-UK DTAA) Ground No 5: That on the facts and in the circumstances of the case & in law, the Ld. AO has grossly erred in not following the decision of the Hon'ble jurisdictional Delhi High Court in the case of a group entity, RELX Inc us. CIT for AY 2018-19 (ΙΤΑ 630/2023), wherein the Hon'ble Delhi High Court has held that subscription charges received for providing access to database cannot be considered as Royalty/FTS under the provisions of the Act as well as under the tax treaty between India and USA Ground No. 6: That on the facts and in the circumstances of the case and in law, the Hon'ble Panel grossly erred in confirming the action of the Ld. AO in proposing an addition of receipt from subscription fees of INK 24,80,77,042 by treating it as royalty under the Act as well as under Article 13 of the India-UK DTAA
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2.1 In nut shell, the appellant/assessee has challenged the assumption of jurisdiction under section 148 of the Act, treating of subscription fees as Fees for Technical Services (hereinafter, the 'FTS) and or royalty under the Act as well as under Article 13 of the India-
UK DTAA, chargeability of tax@ 40% and initiation of penalty proceedings under the Act. Grounds numbered 1 and 3, being general in nature, do not require specific adjudication. Ground No. 7 and 8 being consequential also stand dismissed. Ground No. 9 is in respect of initiation of penalty proceedings, which is premature; hence, it is dismissed. Ground No. 4 to 6 are being adjudicated here as these involve the core issue that whether subscription fees received by appellant for publishing books, journals, articles in relation to various aspects such as legal, banking, risk management etc. and providing on line analytical tools to access the same is Fees for Technical Services (hereinafter, the 'FTS') and or royalty under the Act as well as under Article 13 of the India-UK DTAA.
3. The relevant facts giving rise to these appeals are that the appellant/assessee, incorporated in the United Kingdom (hereinafter 'UK'), is a tax resident of UK within the meaning of Article 4 of the India-UK DTAA. The appellant/assessee has not had any Permanent Establishment (hereinafter, the 'PE') in India. The appellant/assessee is engaged in the business of publishing books, journals, articles in relation to various aspects such as legal, banking, risk management etc. and providing on line analytical tools to access the same to the subscribers worldwide including India. The appellant/assessee is a non-filer asserting that no part of its income is taxable in India under the Act. Later on, its case has been reopened on the reasoning that the appellant/assessee's receipts of subscription fee of INR 248,077,042 from Indian subscribers for use of its database is liable to tax in India.
21IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
3.1 The database of the appellant/assessee enables Indian subscribers to access books, journals, articles in relation to various aspects such as legal, banking, risk management etc. The appellant/assessee's claim is that the income earned from the subscription fee is in the nature of business income and thus, the same, in absence of its PE in India, is not liable to tax as the aforesaid income does not fall within the ambit of Article 12 of the India-UK DTAA.
3.2 The appellant/assessee has also claimed that since the access accorded to the Indian consumers was neither a transfer of copyright nor would it satisfy the requirement of included service comprising of an element where technical knowledge, experience, skill, know-how or processes has been made available. The Income Tax Department, by virtue of Section 144C of the Act hold that the income is in the nature of technical consultancy and will thus fall within the ambit of Article12.
3.3 Aggrieved by the Draft Assessment Order so framed, the appellant/assessee approached the Dispute Resolution Panel which rejected the objections vide its order dated 23 February 2024 and confirmed the proposed assessment as framed by the AO. Pursuant thereto, a Final Assessment Order was on 26 March 2024. In the Final Assessment Order, the AO has taxed the subscription fee of INR 248,077,042 by holding these receipts fall in the purview of section 9(1)(vii) of the Act and also under the Article 13 of the India-UK DTAA. Alternatively, the AO has also held that the said receipts are in the nature of royalty and thus, the same is taxable under section 9(1)(vi) of the Act and also under Article 13 of the India-UK DTAA. Similar facts and issues are involved in AY 2017-18 also.
4. The Ld. Authorized Representative (hereinafter, the 'AR') contended that the receipts of INR 248,077,042 in absence of any PE in India were not taxable in India under Article 5 read with article 7 of India-UK DTAA. Further, he contended that such receipts would not qualify as a FTS under section 9(1)(vii) of the Act as these were not in the nature of fee for technical services. In support of the said argument, the Ld. AR placed reliance on the decision of the Hon'ble Delhi High Court in the case of RELX INC, ITA No. 630/2023 order dated 07.02.2024. It was categorically submitted that the RELX INC, a group entity of the appellant/assessee and was also engaged in the similar business and therefore, the appellant/assessee's case got squarely covered by the decision of the Jurisdictional High Court in the case of RELX INC (supra). He prayed for relief following the judicial precedent. A copy of the Tax Residency Certificate (hereinafter, the 'TRC') issued by the UK Tax Authority bearing the erstwhile name of the assessee is filed not only during the assessment proceedings but before also.
4.1 The Ld. AR drew our attention on the finding of the Hon'ble Delhi High Court in the case of RELX INC. The relevant portion of the said decision is reproduced hereunder:
"10. It must at the outset be noted that Section 9(1)(vii) of the Act could have been resorted to, provided it were found to be more beneficial to the assessee when compared to the provisions of the DTAA. However, notwithstanding the above, it is apparent that the submissions addressed on this score are clearly unmerited. As is plainly evident from a reading of Explanation 2 of Section 22 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
9(1)(vii) of the Act and which defines FTS, it contemplates consideration which may be said to fall within the ambit of rendering of a managerial, technical or consultancy service. The mere access granted to a subscriber to the legal data base would clearly not fall within the ambit of Section 9(1)(vii) of the Act. All that the assessee does is provide access to the database. It has not been shown to be providing any further managerial, technical or consultancy service to a subscriber. We, in any case, find ourselves unable to countenance the contention that the access so granted could be construed as providing services of the nature spoken of in Section 9(1)(vii) of the Act.
11. We find that similar would be the position which would obtain when subscription fee is examined on the anvil of Article 12 of the DTAA. If the Department were to describe subscription fee as royalty', they would necessarily have to establish that the payments so received by the assessee was consideration for the use of or the right to use any copyright or a literary, artistic or scientific work as defined by Article 12(3) of the DTAA. Granting access to the database would clearly not amount to a transfer of a right to use a copyright. We must bear in mind the clear distinction that must be recognised to exist between the transfer of a copyright and the mere grant of the right to use and take advantage of copyrighted material. Neither the subscription agreement nor the advantages accorded to a subscriber can possibly be considered in law to be a transfer of a copyright. In fact, it was the categorical assertion of the assessee that the copyright remains with it at all times.
12. This issue in any case no longer appears to be res integra in light of the judgment of this Court in Director of Income Tax Vs. Infrasoft8. We deem it apposite to extract the following passages from that decision:-
...............................................
13. The distinction between the transfer of a copyright as distinct from a mere right to use copyrighted material was again highlighted by the Supreme Court in Engineering Analysis Centre for Excellence Vs. CIT9 when it observed-
...................................................
14. The distinction between the right of access to copyrighted content as opposed to parting with the copyright itself was again explained by our Court in CIT Vs. Microsoft Corporation10 where the following pertinent observations were made:-
.................................................
15. Similarly, in order for that income to fall within the ambit of fees for included services', it was imperative for the Department to establish that the assessee was 23 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
rendering technical or consultancy services and which included making available technical knowledge, experience, skill, know-how or processes. As has been found by the Tribunal, the access to the database did not constitute the rendering of any technical or consultancy services and in any case did not amount to technical knowledge, experience, skill, know-how or processes being made available.
16. We note that while explaining the meaning liable to be ascribed to the expression make available', the Court in Commissioner of Income Tax (International Taxation) v. Bio-Rad Lab (Singapore) Pte. Ltd. had affirmed the following opinion as expressed by the Tribunal. This is evident from a reading of paras 14, 14.1 and 15, which is extracted below:
......................................
17. As we examine the nature of the transaction between an Indian subscriber and the assessee, it becomes manifest and apparent that it neither comprises of a transfer of copyright nor does it include a transfer of a right to apply technology and other related aspects which are spoken of in Article 12(4)(b) of the DTAA.
18. We thus find no justification to interfere with the view as expressed by the Tribunal. The appeal fails and shall consequently stand dismissed on the aforesaid terms."
5. The Ld. CIT-DR, placing reliance on the observations and finding in para 6.10 to 13.3 of the order of the DRP, submitted that the services provided by the appellant/assessee involved technologies and fulfilled the condition of make available clause. Therefore, the subscription fees should be taxed in India as the users and payers are based in India. He further put submitted that the appellant/assessee had provided services in India through cloud-based solutions. The Ld. CIT-DR submitted that the cloud-based solutions provided by the appellant/assessee involved technology. Further, the appellant/assessee also trained the employees of the Indian customers enabling them to Act independently. Thus, the make available clause also got fulfilled as users in India, over the years, would be able to use Data independently without the support of the appellant/assessee. The customer users were held responsible for any damage for the system software. These attributes were nothing but independent performance. He prayed for dismissal of the appeal.
6. We have heard both the parties at length and have perused the material available on record. We are of the considered view that this case is squarely covered by the decision of the Hon'ble Delhi High Court in the case of RELX INC (supra). We therefore, following the reasoning given by the Hon'ble Delhi High Court in its decision in the case of RELX INC (supra), hold that the subscription fees received by the appellant/assessee is in the nature of business profit/income, which cannot be charged to tax in India in absence of the PE. Accordingly, we delete the addition of INR 248,077,042 which has been taxed in 24 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
AY 2016-17. This finding shall apply mutatis mutandis in AY 2017-18 also. Thus, both appeals are allowed."
(emphasis supplied by us)
7. In the result, both the appeals are allowed."
9.1 The facts in the present case and the arrangement of the assessee's business are identical to assessee's own case for A.Y. 2016-17 and 2017-18 as referred above.
The written submissions as relied upon by the Ld. CIT(DR) as reproduced earlier in this order have already been considered by the Tribunal in above order and the same were not found to be acceptable. Moreover, upon consideration of the facts of the case, we are again of the considered view that the clients are only given access to the platform in respect of published books, journals, articles in relation to various aspects such as legal, banking, risk management etc. and providing on line analytical tools and that there was no imparting of any information concerning the use of, a process, on the use of any process and the imparting of any information concerning commercial knowledge, experience or skill as contended by the Ld. CIT(DR), in the present case.
9.2 In the absence of any change in the factual matrix and the legal proposition and as per our discussion above and following the order of the Co-ordinate Bench in assessee's own case for A.Y. 2016-17 and A.Y. 2017-18, as referred above, we hold that the subscription fees of Rs. 53,07,91,491 is in the nature of business 25 IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
profit/income, which cannot be charged to tax in India in absence of the PE of the assessee company. Accordingly, we delete the addition of Rs. 53,07,91,491/- .
Ground nos. 3 to 5 of the assessee's appeal are allowed.
10. In view of ground nos. 3 to 5 of the appeal being allowed, ground nos. 6 & 6.1 becomes academic and are left open in this case.
11. Ground No. 7 of its appeal is reproduced as under:
" Without prejudice to Grounds No. 1 to 6 above, the Ld. AO has erred in computing the gross total income at INR 1,06,15,82,982/- as against the addition made in the final assessment order of INR 53,07,91,491/- to the nil returned income."
11.1 In view of ground nos. 3 to 5 of the appeal being allowed, the AO is directed to verify the gross total income and determine the total income correctly while giving effect to this order. Ground No. 7 of the appeal is allowed for statistical purposes.
12. Ground no. 8 of the appeal is against the levy of interest u/s 234B of the Act and is reproduced as under.
" On the facts and in the circumstances of the case, the Ld. AO has erred in incorrectly computing the consequential interest charged amounting to Rs. 3,48,31,149/- under section 234B of the Act. "
12.1 The levy of interest is consequential in nature and the AO will levy interest as per law. Ground no. 8 is allowed accordingly.
26IT(IT)A-1544/Del/2025 LNRS Data Services Limited.
13. Ground no. 9 of the appeal is against the initiation of penalty u/s 270A of the Act and is reproduced as under:
"On the facts and circumstances of the case & in law, the Ld. AO/ DRP has erred in initiating penalty under Section 270A of the Act against the Appellant."
13.1 This ground is premature, and accordingly dismissed.
14. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 06.03.2026.
Sd/- Sd/-
[VIKAS AWASTHY] [BRAJESH KUMAR SINGH]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated- 06.03.2026.
Pooja/ Pooja Mittal
Copy forwarded to:
1. Assessee
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar,
ITAT, New Delhi,
27