India: Subscription to legal database (Lexis Nexis) does not amount to transfer of copyright: Delhi High Court

The Court made the observation while rejecting an argument by the Income Tax department that the subscription fees collected by the legal database platform, LexisNexis were taxable as “royalties.”


The Delhi High Court recently held that subscription to a legal database cannot be considered to be a transfer of copyright as there exists a clear distinction between such transfer and grant of right to use copyrighted material [The Commissioner Of Income Tax – International Taxation V. Relx Inc].

The division bench of Justice Yashwant Varma and Justice Purshaindra Kumar Kaurav made the observation while dealing with the Income Tax (IT) Department’s appeal in a case concerning subscription fees of the legal database, LexisNexis.

The IT Department had argued that such subscription fees could be viewed as “royalties” that could be taxed under a Double Taxation Avoidance Agreement (DTAA).

The Court, however, pointed out that if subscription fee has to be considered as “royalty”, IT Department would have to show that the subscription payments were consideration for the use of or the right to use any copyright or literary, artistic, or scientific work.

The Court went on to observe that granting access to a legal database would “clearly not amount to a transfer of a right to use a copyright” as the clear distinction between a transfer of copyright and the grant of a right to use copyrighted material must be recognized.

Neither the subscription agreement nor the advantages accorded to a subscriber can possibly be considered in law to be a transfer of a copyright,” the bench said.

Justices Yashwant Varma and Purushaindra Kumar Kaurav
Justices Yashwant Varma and Purushaindra Kumar Kaurav

By way of background, Relx Inc. (a foreign company), which owns LexisNexis, had declared ‘nil’ income for tax purposes in its income tax return on November 30, 2018.

However, the IT Department after a scrutiny assessment held that it had taxable income in the nature of income from a technical consultancy.

The matter then reached the Income Tax Appellate Tribunal (ITAT) which ruled in favour of Relx. This led to a challenge before the High Court.

The IT Department argued before the High Court that the ITAT had erred in holding that the subscription fee of Relx Inc-owned LexisNexis would not be taxable as “business income” since it has no “permanent establishment” in India.

The IT Department said that the fee for imparting technical training is taxable even under Article 12 (concerning royalties and fees for included services) of the India-USA DTAA, particularly sub-clause (4)(b) which concerns making available “technical knowledge, experience, skill, know-how,” etc.

The IT Department contended further that Relx Inc.’s income would be taxable in India according to Explanation 2 to Section 9(1)(vii) of the Income Tax Act as well, which concerns scenarios where income earned by a non-resident is made taxable in India.

However, the Court opined that mere access of a subscriber to a legal database would not fall within the ambit of Section 9(1)(vii) of the IT Act. The Court went on to opine that such services could not be viewed as technical consultancy services either.

All that the assessee [Relx] does is provide access to the database. It has not been shown to be providing any further managerial, technical or consultancy service to a subscriber,” the Court explained.

The Court then considered the position under Article 12 of DTAA (royalties) and came to the conclusion that granting access to the legal database of LexisNexis would not amount to a transfer of a right to use copyright material.

If the Department were to describe subscription fee as ‘royalty‘, they would necessarily have to establish that the payments so received by the assessee was consideration for the use of or the right to use any copyright or a literary, artistic or scientific work as defined by Article 12(3) of the DTAA,” the Court explained.

Thus, the Court concluded that the transaction between an Indian subscriber and LexisNexis neither comprised a transfer of copyright nor did it include a transfer of a right to apply technology and other related aspects which are spoken of in Article 12(4)(b) of the DTAA.

We thus find no justification to interfere with the view as expressed by the Tribunal. The appeal fails and shall consequently stand dismissed on the aforesaid terms,” it ordered.

Senior Standing Counsel Ruchir Bhatia with Advocates Deeksha Gupta and Pratyaksh Gupta represented the IT Department

Senior Advocate Ajay Vohra with Advocate Aditya Vohra represented Relx Inc.

[Read Judgment]