The Mumbai bench of the ITAT has held in the case of Elsevier Information Systems vs. DCIT that the subscription fee paid to access an online database would amount to business income and not royalty or fees for technical services.
The AO held that providing access to a curated online database of was in the nature of literary work and hence the fees paid for accessing the resources would be royalty since it amounted to a transfer of right to use copyright. Hence the AO sought to tax said income as per the provisions of the India Germany DTAA
The Tribunal cited various precedents to hold that payment made for accessing information collated in a database amounted to a fees paid for use of copyrighted article and not for right to use of copyrighted article. Hence the same could not be classified as royalty. The Tribunal also held that the assessee did not provide any technical service and there was no human intervention while providing access to the database. Hence, the fees could also not be categorised as a fee for technical services and would instead amount to business income which was not taxable in India due to the absence of PE.