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

PJ/CASE LAW/2015-16/2862

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;
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(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

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PJ/CASE LAW/2015-16/2862

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