IN RE: THOUGHT BUZZ (P.) LTD. Vs. STATE

JUDGEMENT

(1.) THE applicant claims to be a tax resident of Singapore. It is engaged in providing social media monitoring service for a company, brand or product. It is a platform for users to hear and engage with their customers, brand ambassadors etc. across the internet. The applicant offered service on charging a subscription. The clients who subscribed can login to its website to do a search on what is being spoken about various brands and so on. The system operated by the applicant generates a report with analytics with an inputs provided by the clients. The information for generation of report is obtained from blogs and forum, social networking sites, review sites, question and answers sites and twitter. The applicant does not depend on third party application programme Interface feeds for data collection and has its own crawlers (computer programme that gathers and categorizes information on the internet) for data extraction. The applicant also maps blog, forums, facebook posts and twitter users country wise to provide social media analytics for different markets. The applicant is wholly controlled and managed from Singapore where the company was incorporated. It was not having a permanent establishment in India. All its directors are non -residents. The subscription received from the provision of service is taxable as business income in Singapore. The applicant argues that subscription fee received from the customers for providing social media monitoring services is not royalty within the meaning of Section 9(1)(vi) of the Income -tax Act and Article 12 of the DTAC between India and Singapore since no exclusive right or copyright is made over to the customer. What is passed on to the customer did not amount to information concerning the applicant's own knowledge, experience or skill in commercial and financial matters. The income is taxable only in Singapore in terms of Article 7 of the DTAC since the applicant has no permanent establishment in India. Secondly, there is no obligation to withhold tax on the payments made to the applicant by its Indian subscribers. The Revenue not having raised any objection to the allowing of the application under section 245R(2) of the Act, the application was allowed for rendering a ruling on the following questions:

(2.) ON behalf of the Revenue, it was pleaded on merits that what was received by the applicant from the subscribers was royalty as defined in the Act and in the DTAC between India and Singapore. It is pointed out that the clients of the applicant can avail the services through the payment of a subscription fee. The basic mechanism of providing the services is tracking internet messages and feed back through a computer programme 'Crawler' which is owned by the applicant. The subscription fee paid to the applicant by the subscriber cannot be disassociated from the user of the computer system. Subscription enables the client to access data through this sophisticated system maintained by the applicant. Subscription fee paid is not only for the use of an equipment but it is also paid for the imparting of information concerning technical, industrial, commercial or scientific knowledge, experience or skill. Hence it was royalty as defined in the Act and in the DTAC.

(3.) AT the hearing, in addition to reiterating what is set out in the application and the subsequent written submission, it was pointed out on behalf of the applicant that the applicant was only providing information over the web, and the applicant has no intellectual property right over it. Its role was only to gather and put the information together and give it to the subscriber.