John Wiley And Sons Vs ACIT (ITAT Delhi)
Copyright vs Copyrighted Article- Online Access Not Royalty: ITAT Delhi Deletes Entire 18 Cr Addition- No PE, No Royalty, No FIS- Standard Online Journals Cannot Be Taxed as Royalty
Tribunal allowed the appeal of John Wiley & Sons Inc., a USA tax resident supplying access to online journals & databases to Indian institutions. AO had taxed Rs.18.11 crore as royalty/FTS u/s 9(1)(vi)/(vii) r.w. Article 12 of India–USA DTAA, treating online access as use of copyright.
Tribunal noted that identical receipts were already held non-taxable in Assessee’s own cases for AYs 2020-21, 2021-22, 2018-19 & 2019-20, where it was held that customers only accessed copyrighted articles & did not acquire any right to use copyright. Relying on Engineering Analysis (SC), Relx Inc (Del HC), Uptodate Inc, Elsevier decisions, Tribunal reiterated that such receipts are payments for a copyrighted article, not for copyright, hence not royalty. Tribunal also held that services do not “make available” any technical knowledge, therefore not FIS, & are not FTS as there is no human intervention. Income constitutes business profit taxable only if PE exists, which Assessee does not have in India. Accordingly, Rs.18.11 crore addition was deleted. Grounds on limitation & treaty applicability were not pressed. Interest is consequential. AO was directed to verify Assessee’s claim that refund was never issued. Penalty initiation u/s 270A was held premature. Tribunal partly allowed the appeal.
