Foreign data providers' income not taxable

NEW DELHI: Foreign data service providers��� earnings through subscription fees from an Indian company will not be taxed here, the Authority for Advance Rulings (I-T) has said.

However, the AAR has held that providing access to compact information through data retrieval software could be treated as service of a ���technical nature���. Such payments are taxable.

Data service providers, which have databases outside India but subscribers in India, are likely to gain from this ruling.

The AAR has given the ruling in the case of US-based financial data analytics firm FactSet Research Systems which provides financial and economic information to Indian customers by entering into licence agreements with them, granting them the right to use its database and software tools.

���Providing a client with the use of search and retrieval software and access to a database does not involve the exercise of special skill or knowledge when the software and database is delivered to the client,��� the ruling has said. Thus, payments by Indian companies cannot be seen as money spent on services of a ���technical nature.��� Under the income-tax laws in India, receipts in lieu of technical services are taxable.

While rulings by the AAR are case-specific, they have a persuasive impact on tax assessment in cases of other firms under similar circumstances. The I-T department had argued that the money received by FactSet Research was towards consideration of the transfer of copyright held by the company on its database.