Reuters Transaction Services Ltd vs. DDIT (ITAT Mumbai)

Fee received for “foreign exchange deal matching system services” constitutes “royalty” under Article 12 of India-UK DTAA & s. 9(1)(vi)

The Tribunal had to consider whether the consideration for services offered by the assessee of “foreign exchange deal matching system” was assessable as “royalty” under Article 12(3) of the India-USA DTAA. The “foreign exchange deal matching system” facilitates the Indian subscribers i.e. Banks to deal in the foreign exchange with the other counterparts who are ready for the transaction of purchase and sale of foreign currency. The role of the deal matching system is to provide a platform where both purchaser and seller find the respective match for the intended transaction of purchase and sale. HELD by the Tribunal:

The assessee is facilitating its clients to use its system and application programming interface which is subscriber interface for use with the related services including Auto quote service. The assessee is also providing the equipment with pre-loaded software to its subscribers and network used for provision of the services. The assessee grants subscribers limited license of software to install and use at the site. The said license can be sub-licensed by the subscriber. The subscriber/user can also view, manipulate and create the derived data from information for their individual use. Further the subscriber can Store information, manipulate information for its use and also distribute or redistribute information and Drive Data to anyone to a limited extent so far as it is not done in a systematic manner. The subscribers are allowed to use the information and even to manipulate and Drive the Data to anyone for their individual use. Thus it is clear that it is subscribers who are using the information and system of the assessee for their commercial/business purposes. The information is made available by the assessee through its system and other equipments installed at the site of the subscriber to facilitate the connectivity with the assessee’s system/reuter located in Geneva. The platform of transacting the purchase and sale is commercial equipment allowed to be used by clients/ subscribers for commercial purposes. The nature of service rendered by the assessee includes the information concerning commercial use by the subscriber. Further the entire system of the assessee including the equipments and connectivity facility is provided at the site of the subscriber. Therefore, the assessee is providing the service in the form of information and solution to the need of the subscribers by providing the matching party. Also, the Indian subscribers have been granted a license to use the software for their internal business, which can be sub-licensed by them. The Indian clients are paying for use and right to use of equipment (scientific, commercial) along with software for which license was granted by assessee. It is not a case of simplicitor payment for access to the portal by use of normal computer and internal facility but the access is given only by use of computer system and software system provided by the Assessee under license. Accordingly, by allowing the use of software and computer system to have access to the portal of the assessee for finding relevant information and matching their request for purchase and sale of foreign exchange amount to imparting of information concerning technical, industrial, commercial or scientific equipment work and payment made in this respect constitutes royalty (Asia Satellite Telecommunications Co. Ltd 332 ITR 340 (Del) distinguished)