Delhi High Court: Subscription amount received from subscribers of e-journals cannot be treated as royalty

The Delhi High Court in the case The Commissioner of Income Tax Versus Springer Nature Customer Services Centre GMBH observed and has held that the subscription amount received from subscribers of e-journals cannot be treated as royalty.
The bench comprising of Justice Rajiv Shakdher and Justice Girish Kathpalia in the case observed and has stated that the subscription amount cannot be treated as royalty, with regards to the fact that there being nothing on record for suggesting that the respondent or assessee has granted the right in respect of copyright to the concerned subscribers of the e-journals.
Therefore, all the respondent and the assessee did was sell the copyrighted publication to the entities concerned without conferring any copyright in the said material.
In the present case, the respondent or the assessee, which being the German Company was the part of Springer Science plus the Business Media Group. However, the Springer Group was engaged in the business of publishing books and the academic journals in the fields of natural sciences, technology, and the medicine.
Further, the respondent or the assessee functioned as a non-exclusive sales representative globally, except in the Americas, of the Springer Group’s affiliated the publisher entities, which included SIPL. Therefore, the Commissionaire Agreement was being executed between the respondent or the assessee and the SIPL captured the functions performed by the respondent or assessee as the part of the Springer Group.
The assessee in the case filed its return of income. Thus, the Assessing Officer made the addition equivalent for an amount of Rs. 16,67,83,110. The amount which is represented the subscription fees received by the respondent or the assessee against e-journals from two Indian entities, namely, Informatics Publishing Private Ltd. and ZS Associates.
The assessee in the case appealed against the order of the Assessing Officer before the ITAT wherein it is contended that the subscription fee could not be treated as royalty.
The department in the case contended before the court that services such as promotion, sale, and distribution of products globally could be categorised as consulting service. The services like such as order handling, the inventory management, the debtor management, and subscription management could be classified as managerial services.
On the other hand, it has been contended by the assessee that merely providing support for business operations involving sales, audit, or finance cannot be treated as managerial services. Accordingly, the Tribunal allowed the appeal made by the assessee. The counsel, Advocate, Ruchir Bhatia appeared for the Appellant. The counsel, Advocate, Himanshu Sinha represented the respondent.