Taxability of Online Market Research Reports under DTAA: IQVIA AG vs DCIT

Overview

International taxation India has become increasingly complex with the growth of digital businesses and online data-based services. One recurring issue is whether payments made to foreign companies for access to online databases or reports should be treated as business income, royalty, or fees for technical services (FTS) in India.

This case study analyses a landmark decision involving IQVIA AG and the Indian tax authorities, where the core dispute was the taxability of subscription fees received from Indian customers for online pharmaceutical market research reports under the India Switzerland DTAA (also referred to as the Indo Swiss tax treaty).

The ruling provides important clarity on DTAA royalty taxation, Business income vs royalty and how the DTAA override Income Tax Act principle works in practice.

Facts of the Case

IQVIA AG is a company incorporated in Switzerland and is a tax resident of Switzerland. Its entire management and control are located outside India. The company is engaged in providing online market research reports related to the pharmaceutical and healthcare industry to customers across the world.

Nature of Business Activity

IQVIA AG collects data from multiple sources such as doctors, stockists, dealers and publicly available industry sources. This data is:

• Compiled
• Processed
• Analysed statistically

The final output is presented in the form of standardised online reports, which customers can access through an online platform on payment of a subscription fee.

Indian customers were given non-exclusive and non-transferable access to these reports. The customers were not allowed to copy, reproduce, distribute, or commercially exploit the content. No ownership or copyright was transferred.

For Assessment Years 2020-21 and 2021-22, IQVIA AG received substantial subscription income from Indian customers for access to these online reports.

The company claimed that:

• The income was business income
• It had no Permanent Establishment (PE) in India
• Therefore, the income was not taxable in India under Article 7 of the Indo Swiss tax treaty

Assessment Proceedings and Tax Authority’s View

During scrutiny assessment, the Assessing Officer (AO) took a different view. According to the tax department:

1. The subscription fees were not simple business income

2. The payments constituted: 

• Royalty under Section 9(1)(vi) Income Tax Act

• Alternatively, Fees for Technical Services under Section 9(1)(vii) Income Tax Act

3. The income was taxable in India under Article 12 DTAA royalty provisions

The AO argued that:

• Indian customers were receiving specialised commercial and scientific information

• The reports involved expertise and analysis

• The India Switzerland DTAA does not contain a “make available” clause

Based on this reasoning, the AO treated the subscription income as taxable royalty / FTS and proposed tax at treaty rates.

The Dispute Resolution Panel (DRP) upheld the AO’s position mainly to keep the issue “legally alive”, even though earlier ITAT decisions were already in favour of the assessee.

Key Legal Issues Involved

The Tribunal examined the following crucial questions:

1. Whether subscription fees for online market research reports amount to “royalty”

2. Whether such income can be classified as Fees for Technical Services

3. Whether DTAA provisions override domestic tax law

4. Whether mere access to data equals use of copyright

5. Taxability of foreign companies in India without a PE

These issues are central to international taxation India, especially for digital and data-driven businesses.

Arguments by IQVIA AG

IQVIA AG made the following submissions:

The reports are standardised products, similar to books or magazines

• Customers only receive access, not ownership or copyright
• There is no transfer of intellectual property
• No technical services are rendered to customers
• The activity does not fall under:
  • Section 9(1)(vi) Income Tax Act (Royalty)
  • Section 9(1)(vii) Income Tax Act (FTS)
• Under the Indo Swiss tax treaty, such income is business income
• In absence of a Permanent Establishment in India, the income is not taxable

IQVIA AG also relied heavily on its own earlier ITAT rulings, where identical issues were decided in its favour.

Tribunal’s Analysis and Findings

The Income Tax Appellate Tribunal (ITAT), Mumbai carefully examined the facts, contractual terms and earlier judicial precedents.

Subscription Fees Are Not Royalty

The Tribunal held that:

• Royalty under Article 12 DTAA royalty and Section 9(1)(vi) requires:
  • Transfer of copyright, or
  • Right to use copyright, or
  • Use of secret processes or industrial experience

In this case:

• No copyright was transferred

• No right to reproduce or commercially exploit was granted Therefore, DTAA royalty taxation was not applicable.

Not Fees for Technical Services

The Tribunal rejected the FTS argument and observed: 

• No technical or consultancy services were rendered
• The reports were pre-prepared and standard
• Customers did not receive customised technical advice
• Mere use of expertise in preparing reports does not mean technical services are provided to customers

Thus, Section 9(1)(vii) Income Tax Act was also not applicable.

Business Income vs Royalty

The Tribunal clearly distinguished Business income vs royalty and held that:

• Subscription fees were business receipts
• Income arose from sale of information products
• Such income falls under Article 7 (Business Profits) of the DTAA

Since IQVIA AG had no Permanent Establishment in India, the income could not be taxed in India.

DTAA Overrides Income Tax Act

Applying Section 90(2), the Tribunal reaffirmed the principle that:

DTAA override Income Tax Act where treaty provisions are more beneficial to the taxpayer

Even if domestic law attempts to tax the income, treaty protection prevails.

Consistency with Earlier Decisions