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Elsevier Information Systems GmbH However, in the absence of a PE in India, the amount received is not taxable as per the provisions of India-Germany DTAA. Proceeding further, learned Sr. Counsel submitted, the assessee being a tax resident of Germany has to be governed under the India-Germany Tax Treaty. He submitted, the definition of royalty under Article-12 of the India-Germany Tax Treaty is narrower than the definition of royalty under the Income Tax Act, 1961. He submitted, while providing access to the online database the assessee does not provide the customers any right to use the copyright in the database. He submitted, the assessee does not transfer any ownership right to the subscriber such as right to copy the database for reproduction and sale, right to grant license to any person who wishes to use the database. He submitted, by providing access to the database the assessee does not impart any information relating to underlying experience, skill, etc., which is required for evolving the database. It does not share its experience, technique, or methodology employed in evolving the database with the subscriber. It does not provide any right to the subscriber to use any industrial, commercial or scientific equipment. He submitted, the articles in the database provided by the assessee are collated from various magazines and journals which are available publicly. Thus, he submitted, the subscription fee received by the assessee for providing publicly available information cannot be treated as royalty. In support Elsevier Information Systems GmbH of such contention, learned Sr. Counsel relied upon the following decisions:-

12. Thus, on reading of the aforesaid important terms of the agreement it is very much clear that the assessee has created a database wherein the data relating to Chemistry are collated from various journals and articles and are stored in a structured and user friendly manner which is accessible to customers/users on subscription basis without conferring any exclusive or transferrable right on the customer/user. Further, the assessee retains its exclusive right and ownership over the intellectual property relating to the product and the users subscribers are specifically debarred from using the data in any manner other than for their own exclusive purpose. Keeping in view the aforesaid factual position, we need to examine whether the subscription fee received by the assessee from the customers in India for allowing access to the online database is transfer of right to use the copyright, hence, can be treated as royalty under the India-Germany Tax Treaty. The departmental authorities have held that while allowing access to use its online database i.e., reaxys.com the assessee has transferred the right to use the copyright which is in the nature of a literary work, hence, to be treated as royalty. No doubt, the assessee Elsevier Information Systems GmbH being a tax resident of Germany is governed by India-Germany DTAA. Therefore, it is necessary to examine whether the subscription fee received by the assessee fits into the definition of royalty as provided under Artricle-12 of the India-Germany Tax Treaty. Article-12.1 of the Tax Treaty provides that royalty and fees for technical services arising in a contracting state and paid to a resident of the other contracting state may be taxed in the other state. As per the plain meaning of the aforesaid provision, the subscription fee paid to the assessee is ordinarily taxable in Germany. However, Article-12.2 also provides for taxation of royalty and fees for technical services in India subject to condition that the tax leviable shall not exceed 10% of the gross amount of royalty or fees for technical services. Article-12.3 of the Tax Treaty defines royalty in the following manner.

13. As per the aforesaid definition of royalty in the tax treaty, any amount received for use of or right to use of any copyright or literary, artistic or scientific work, etc., can be treated as royalty. In the facts of the present case, there is no dispute that the assessee has collated Elsevier Information Systems GmbH data from various journals and articles, which are otherwise available for subscription to the general public, and entered them into the database in structured manner. It is also clear from the terms of subscription agreement, the assessee has not transferred use or right to use of any copyright of literary, artistic or scientific work to its subscribers. What the assessee has done is, it has allowed customers to access its database and utilize the information available therein for their use. Further, it is observed, the data available in assessee's database relates to the subject of chemistry and from the list of clients submitted in the paper book it is very much clear that they are either chemical or chemical related companies. There is no material on record which could even remotely demonstrate that while allowing the customer /users to the access the database, the assessee had transferred its right to use the copyright of any literary, artistic or scientific work to the subscribers. Further, from the invoices raised by the assessee, sample copies of which are placed in the paper book, it is noticed that the subscription is period based and further the subscriber may not even use the data stored in the database. That being the case, the payment made cannot be treated as royalty under Article-12(3) of the India-Germany Tax Treaty.

"17. We find that as the treaty provision unambiguously requires, it is only when the use is of the copyright that the taxability can be triggered in the source country. In the present case, the payment is for the use of copyrighted material rather than for the use of copyright. The distinction between the copyright and copyrighted article has been very well pointed out by the decisions of Hon'ble Delhi High Court in the case of DIT v. Nokia Networks OY [2013] 358 ITR 259/212 Taxman 68/25 taxmann.com 225. In this case all that the assessee gets right is to access the copyrighted material and there is no dispute about. As a matter of fact, the AO righty noted that 'royalty' has been defined as "payment of any kind received as a consideration for the use of, or right to use of, any copyright of literary, artistic or scientific work" and that the expression "literary work", under section 2(o) of the Copyright Act, includes 'literary database' but then he fell in error of reasoning inasmuch as the payment was not for use of copyright of literary database but only for access to the literary database under limited non exclusive and non transferable licence. Even during the course of hearing before us, learned Departmental Representative could not demonstrate as to how there was use of copyright. In our considered view, it was simply a case of copyrighted material and therefore the impugned payments cannot be treated as royalty payments. This view is also supported by Hon'ble Bombay High Court's judgment in the case of DIT (International Taxation) v. Dun & Bradstreet Information Elsevier Information Systems GmbH Services India (P.) Ltd. [2011] 338 ITR 95/[2012] 20 taxmann.com 695."