Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *   CBIC issues draft rules for Customs valuation *  Top Headlines: Threshold for Benami deals, green bond investors, and more *  Govt aims 1-hour clearance for goods at all ports *  Exporters Allowed To Use RoDTEP, RoSCTL Scrips To Pay Customs Duty, Transfer Them; Rules Amended *  Millions of labourers to be affected by brick producers’ strike over hike in GST, coal rates *  Inauguration of ‘kendriya GST parisar’ *  Transporter can seek Release of Conveyance alone, not Goods under GST Act: Madras HC *  GST: Quoting of DIN Mandatory for Responding to Notice, Govt Modifies Portal *  Firms can soon file claims for GST credits of ?400 cr *  CBIC issues modalities for filing transitional credit under GST. *  Mumbai: Man creates 36 fake GST firms, arrested for input tax credit fraud of Rs 23 cr *  Report to restructure Commerce Ministry under study; idea is to set up trade promotion body: Goyal *  Firms can soon file claims for GST credits of ?400 cr *  Gambling Alert! Govt May Levy Up To 28% GST; UP, Bengal Back Move *  EPFO backs raising retirement age to ease pressure on pension funds *  India Moving Up Power Scale, Set to Become Third Largest Economy By 2030 *  Airfares Get Expensive: What Changes for Flyers From Today? *  IRCTC Latest News: Passengers to Pay More For Cancelling Confirmed Rail Tickets Soon. *  IBC prevails over Customs Act, says Supreme Court. *  As GST enters sixth year, a time for evaluation and reassessment *  There’s GST on daily essentials as Centre needs money to buy MLAs: Arvind Kejriwal *  Now, GST on cancellation of confirmed train tickets, hotel bookings *  GST kitty for top States could rise 20% in FY23, says Crisil *  French customs officials seize another cargo vessel over Russia sanctions *  TradeLens builds on Asia momentum with Pakistan Customs deal *  Hike tax on tobacco, reduce affordability & increase revenue: Civil society organizations to GST council *  Bihar: ?10 crore tax evasion on tobacco products detected in raids *  Centre failed on GST, COVID; would it be anti-national? Rajan on Infosys row *  Service Tax not Chargeable on Income Tax TDS portion paid by recipient: CESTAT grants relief to TVS *  Foreign portfolio investors make net investment of Rs 7575cr in Sep so far
Subject News *  Run-up to Budget: Monetary threshold for GST offences may rise to Rs 25 cr *   GST (Tax) E-invoice Must For Businesses With Over Rs 5 Crore Annual Turnover *   Both Central GST and excise duty can be imposed on tobacco, rules Karnataka high court *   CBIC Issues Clarification On Extended Timelines For GST Compliance *   CBIC Issues Clarification On Extended Timelines For GST Compliance *  Budget 2023- 9.6 crore gas connections *  GST: Tamil Nadu Issues Instructions for Assessment and Adjudication Proceedings *  GST: CBIC Extends Last Date for filing of ITC *  GST collection in September surpasses Rs 1.4 lakh crore for straight seventh time *  Dollar smuggling case: Customs chargesheet names M Sivasankar as key conspirator. *  Hike in GST rates fuels inflation *  Assam: CBI arrests GST commissioner in Guwahati *  GST fraud worth ?824cr by 15 insurance Cos detected *  India proposes 15% customs duties on 22 items imported from UK *  Decriminalising certain offences under GST on cards *  Surge in GST collections more due to higher inflation: India Ratings *  MNRE Notifies BCD and Hike in GST Rates as ‘Change in Law’ Events But With a Condition | Mercom India *   Solar projects awarded before customs duty change allowed cost pass-through *  Rajasthan High Court Dismisses Writ Petitions Challenging Levy Of GST On Royalty *   GST revenue in September likely at Rs 1.45 lakh crore *  Govt working on decriminalising certain offences under GST, lower compounding charge *  Building an institution like GST Council takes time, trashing is easy: Sitharaman *  GST collections in Sept may touch ?1.5 lakh crore *  KTR asks Centre to withdraw GST on handlooms *  After Gameskraft, More Online Gaming Startups To Receive GST Tax Claims *  Madras HC: AAR Application Filed Under VAT Does Not Survive After GST Enactment *  Threshold for criminal offences under GST law may be raised *  Bengaluru: Gaming company faces biggest GST notice of Rs 21,000 crore *  CBIC clarifies Classification of Cranes for GST, Customs Duty *  Customs seize gold hidden in bicycle in Kerala airport  

Comments

Print   |    |  Comment

PJ/CASE LAW/2015-16/2862

Whether allowing access of photographs on website classifiable under ‘Online information and data base access or retrieval service’?

Case:- PHOTOLIBRARY INDIA P. LTD. VERSUSCOMMISSIONER OF SERVICE TAX, MUMBAI

Citation:-2015 (39) S.T.R. 637 (Tri. - Mumbai)

Brief Facts:-The relevant facts that arise for consideration are the appellants have website where a number of photographs are available for a viewer to see and choose from the same after browsing. The viewer is allowed to view photographs free of cost. However, he can download the data only after he enters into an agreement with the appellant and agree with the terms and conditions as stipulated by appellant. It is also one of the conditions of the appellant that the viewer has to pay for the amount as quoted by the appellant and on such payment the link is provided to the viewer/client for downloading the image. Revenue authorities are of the view that the services provided by the appellant would be covered under the category of ‘Online information and data base access or retrieval service’ inasmuch as they are storing data on website charging and recovering fees for allowing downloading of data as the image of photo in electronic form through picture network. Accordingly, on a representation made by the appellant, the office of the Asst. Commissioner, Service tax, Div-II informed the appellant that the said service provided by the appellant would fall under taxable category. Unsatisfied with the clarification to the query by the adjudicating authority, the appellant preferred an appeal before the first appellate authority. The first appellate authority after following the due process of law upheld clarification issued by the adjudicating authority and held that the service provided by the appellant would fall under the ‘Online information and data base access or retrieval service’ as per Section 65(75) of the Finance Act, 1994.
 
Appellant contention:-  Ld. CA would submit that the categorization of the service under the taxable service is incorrect. He would submit the service is not falling under the said category as the appellant is restricting the client to the usage of the photographs which are downloaded by them. To substantiate his claim, he would draw our attention to the invoices raised by the appellant. He would submit that the invoice categorically indicates that the client who has downloaded the photograph is allowed to use the same for a limited purpose and limited period, for the purpose of AD insertion in magazine or purpose of enhancement of brand, etc. It is his submission that when there is a specific restriction from the appellant from downloading of the image or photograph, it would mean that the said services would not get categorised under ‘Online information and data base access or retrieval service.’ He would also submit that the appellant has got copyright over the photographs which are displayed in the website, hence charges an amount of copyright and during the relevant period said services were not covered under the service tax net. He would draw our attention to the decision of the Tribunal in Dewsoft Overseas P. Ltd. - 2008 (12)S.T.R. 730 (Tri.-Del.); and submits that in the said case law, Tribunal was considering the service tax liability under the head ‘Online information and data base access or retrieval service’ for accessing the online study material which was extended by the said Dewsoft Overseas for rendering services of commercial coaching or training. He would submit that the ratio of the said judgment would apply in this case also, as the client of the appellant is not in any way interacting, is only selecting an image or photograph for the purpose of downloading for his usage. He would also draw our attention to the judgment of the Tribunal in the case of GE India Technology Centre P. Ltd. - 2014 (36) S.T.R. 1109 (Tri.-Bang.) to canvas an argument that the service rendered by the appellant would not fall under the category of ‘Online information and data base access or retrieval service’.
 
Respondent contention:-Ld. Departmental Representative, on the other hand, would defend the impugned order by stating that the appellant is charging his client based upon the period of usage of the photograph which has been selected. It is his submission that the client of the appellant who has selected the photograph or image has access to the same only through the computer; hence it will fall under the category of ‘Online information and data base access or retrieval service’.
 
Reasoning of Judgment:-Tribunal have given anxious thoughts to the detailed submissions made by both sides and perused the records. The issue involved in this case is whether the services rendered by the appellant would fall under the category of ‘Online information and data base access or retrieval service’ under Section 65(75)(zh) or otherwise. In order to appreciate the correct position, we reproduce the said definition as also the taxable service.
“S. 65(75) “‘On-line information and database access or retrieval” means providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;
……
……
(zh) to any person, by any person, in relation to online information and database access or retrieval or both in electronic form through a computer network, in any manner”
It can be seen from the above reproduced definition of the services, that the online information means providing data or information which is retrieved or otherwise in electronic form through a computer network. It is an admitted fact in the case in hand, that the appellant’s client has an access to the image or photograph, which he want to download for the purposes either to place an AD or for research can be done so only through the computer network. Further, we find that the appellant’s website allows the access and retrieve the data or information contained therein which are free for the purpose of viewing on the monitor, but has to be paid for downloading in the for further commercial use. We find the claim made by the council that as to at the most the issue would be covered under the Copyright Act, which we feel is incorrect submission as the information or data contained in website may be having a copyright, but when this information is only available on the website for accessing and subsequent downloading, the copyright on the said images becomes incidental and the main activity so far as the appellant’s client is concerned is making information available for retrieval.
It is also to be noted that the database or the information which is accessed need not be only photograph, it can be strategic, legal and having data wherein graphics are displayed, books and other electronic publications, etc. The service as rendered by the appellant would be web-based service providing access or downloading of a digital content inasmuch as the images and photographs are nothing but a digital content stored in website.
The above view is supported by an unreported judgment of the Hon’ble High Court of Delhi in the case of ITA v. Alcatel Lucent Canada, decided on 27th February 2015. In the case Hon’ble High Court was considering an issue of whether consideration paid towards supply of software along with hardware - rather software embedded in hardware amounted to royalty. In the said judgment, Hon’ble High Court in para No. 5, quoting extensively from an earlier decision stated :-
“That a computer programme may be copyrightable as intellectual property, does not alter the fact that once in the form of floppy disc or other medium, the programme is tangible, movable, and available in the market place.”
The aforesaid observation of Hon’ble High Court can be applied to the case in hand as we find that large collection of photographs may be copyrightable but the access to said photograph and retrieval thereof by the client of appellant is on a consideration.
The reliance placed by the ld. counsel on the decision of the Tribunal in GE India Technology Centre P. Ltd. (supra) will not carry their case any further as in the said case the issue was of undertaking of scientific and research and technology analysis for their parent concern in USA and subsequent export of the same.
The reliance placed by the ld. counsel on the judgment of the Tribunal in Dewsoft Overseas P. Ltd. (supra) is also not applicable in the facts and circumstances of this case. In the said case, the appellant therein was rendering an online computer teaching through interactive website and was discharging the service tax liability under the category of ‘Commercial training and coaching classes’ while Revenue wanted to classify under ‘Online information and data base access or retrieval service’. There was a dispute about the classification of the service which was resolved by the Tribunal on the ground that the access to said computer education was a education which has been rendered and would be correctly classifiable under ‘Commercial training and coaching classes’ service and activity of providing of online licence to student is not access or retrieval of the data. In the case in hand, we find that the issue is totally different than the issue as was in Dewsoft Overseas P. Ltd.
In view of the above findings, the appeal filed by the appellant was rejected.
 
Decision:-  Appeal rejected.

Comment:-The substance of the case is that allowing access to photographs and allowing their downloading for a consideration was more appropriately classifiable under the service of ‘Online information and data base access or retrieval service’. It was held that although there is transfer of copyright of photographs but that is ancillary and incidental whereas the main service is online display of information and its retrieval.

Prepared By: Anash Kachaliya

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com