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Delhi High Court's Ruling on Legal Database Subscriptions: Implications for Copyright and Tax Liability


The Hon’ble High Court of Delhi (‘HC’) in the case of CIT(IT) v. Relx INC[i], addressed a pivotal issue in international taxation regarding the nature of subscription fees received by the assessee. The HC examined whether these fees, derived from a legal database subscription, constitute business income that is not taxable in India due to the absence of a permanent establishment (‘PE’) of the assessee. This determination hinged on whether the services, characterized in the dealings, independently triggered tax liability under a. 12(4)(b) of the India-USA double taxation avoidance agreement (‘DTAA’) and Explanation-2 of s. 9(1)(vii) of the Income-tax Act, 1961 (‘Act’). Upholding the Income Tax Appellate Tribunal’s (‘ITAT’) decision, the HC ruled that merely subscribing to the legal database does not constitute a transfer of copyright and thus, the receipts collected do not amount to ‘royalty.’ Consequently, in the absence of PE in India, the income from the receipt is not taxable under the Act.

Brief Facts

  • The assessee, known for providing database services under the brand ‘Lexis Nexis,’ enables Indian subscribers to access judgments, articles, legislations, and other relevant legal materials.

  • The assessee filed a return of income (‘ROI’) declaring nil income. The case was selected for scrutiny assessment, primarily focusing on a subscription fee amounting to Rs.18,65,00,000.

  • The income tax department (‘ITD’), invoking s. 144C of the Act contended that the income stemmed from technical consultancy, thus falling under a. 12(4) of the DTAA, which addresses fees for technical services (‘FTS’).

  • The assessee's objections were rejected by the Dispute Resolution Panel in an order dated 28.04.2022, which upheld the assessment. Subsequently, the assessee appealed to the ITAT.

  • The ITAT ruled in favour of the assessee, stating that the receipts did not qualify as FTS under s. 9(1)(vii) of the Act. It further noted that, according to a. 7 of the DTAA, as there was no PE in India, the income was classified as business profits and thus not taxable. Dissatisfied with ITAT’s decision, the ITD appealed to the HC.


  • The HC dismissed the appeal filed by the ITD and observed that the assessee merely provided access to their legal database and did not render any managerial, technical, or consultancy services. This meant the income did not fall under s. 9(1)(vii) of the Act, which addresses FTS.

  • The HC concurred with the ITAT finding that the nature of the database access did not constitute the rendering of any technical or consultancy services, thus falling outside the scope of 'fees for included services' as per the DTAA.

  • Referring to the decision in Commissioner of Income Tax (International Taxation) v. Bio-Rad Lab (Singapore) Pte. Ltd.[ii], the HC applied the 'make available' clause, stating that for services to be considered under this clause, technical knowledge or skills must be transferred in such a manner that the recipient can independently utilize the learned skills post-contract without ongoing reliance on the provider.

  • The HC further observed that the subscription fee does not constitute 'royalty' as defined under a. 12(3) of the DTAA. It emphasized that mere access to a database does not equate to a transfer of the right to use copyrighted material, as the department had contended.

  • Relying upon the decisions in Director of Income Tax v. Infrasoft[iii], Engineering Analysis Centre for Excellence v. CIT[iv] and CIT v. Microsoft Corporation[v], the HC highlighted the distinction between transferring a copyright and merely granting the right to use copyrighted material. In this case, the subscription agreement and the benefits provided to subscribers were not considered legal transfers of copyright, since the copyright always remained with the assessee.

  • Consequently, the HC affirmed the ITAT's judgment, stating there was no legal basis to challenge the interpretation that the transactions between the Indian subscribers and the assessee did not involve a transfer of copyright or technology as defined in a. 12(4)(b) of the DTAA.

Our Analysis 

The case at hand explores the complex interaction between intellectual property rights and taxation obligations, specifically questioning if a subscription to a legal database equates to a transfer of copyright that would necessitate taxation under the Act and the DTAA.

a. PE: International taxation principles stipulate that a non-resident company is taxable in India either if it has a PE in India, or when the source of such income is in India.

b. Definition of 'Royalty': Royalty typically involves payments for the use of or the right to use intangible property such as copyrights, trademarks, or patents. A. 12(3) of the DTAA defines 'royalty' to encompass such payments. The HC determined that the subscription fees were for access to a database, not for the transfer of any copyright therein, aligning with the provision that mere access does not constitute a transfer of rights. This distinction was pivotal in deciding that the fees do not qualify as royalty, reaffirmed by referencing the precedent in Director of Income Tax v. Infrasoft (supra).

c. FTS: For fees to be classified as FTS under s. 9(1)(vii) of the Act, they must be in return for managerial, technical, or consultancy services. The HC affirmed that the assessee did not render such services within India, which would necessitate the application of FTS taxation norms. As such, the operations did not trigger the FTS clauses under both the Act and the DTAA.

The HC's judgment offers significant relief to non-resident companies providing subscription-based services to Indian users, clarifying the tax obligations related to such transactions. By establishing that such subscriptions do not equate to the transfer of copyrights or the provision of technical services, the HC helps ensure clearer taxation pathways for similar cases in the future.

End Notes

[i] 2024 SCC OnLine Del 1314

[ii] (2023) SCC OnLine Del 6770

[iii] 2013 SCC OnLine Del 4694

[iv] (2022) 3 SCC 321

[v] 2022 SCC OnLine Del 1514

Authored by Kushagra Gahlot, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.


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