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2015 (9) TMI 1586 - AT - Income TaxTDS u/s 195 - deducting tax at source on the payments made to a Netherland Entity, M/s New Skies Satellites N.V. - royalty payment - Held that:- In view of the conclusion of fact and law in case of payee, we cannot reckon the payment as royalty in the hands of payee. Further it is also an admitted fact that the M/s New Skies Satellites NV does not have any PE in India and, therefore, even if it constitutes a business income in its hand, the same is not taxable in India under Article 7 of DTAA. Now that when this issue as of now has been settled in the case of the payee from the stage of the High Court that it does not constitute income in the hands of the payee, we accordingly, hold that assessee is not in default and was not liable to deduct TDS on such a payment u/s 195 and therefore, there is no liability of the assessee to deduct TDS on the payment made on account of purchase of satellite bandwidth capacity. So far as arguments raised by the Special Counsel of the revenue on the issue that subsequent amendment brought in statute with retrospective effect should be considered for deciding the issue that such a payment now amounts to “royalty” and same is to be viewed afresh despite the finality of the issue in the case of the payee from the stage of the High Court, we are of the considered opinion that, it will be purely an academic exercise only. The reason being that, the assessee has liability to deduct TDS u/s 195, only when the payment of the sum in the hands of the non-resident is chargeable to tax under the relevant provisions of the Income Tax Act. Here in this case, it has already been upheld that such a sum is not chargeable to tax in India in the hands of the non-resident, that is, M/s New Skies Satellites NV by the High Court, therefore, it wholly undesirable for us, to decide that payment made by the assessee constitutes income in the hands of the payee. Accordingly, the order of the CIT(A) that assessee is not required to deduct TDS on payment made to M/s New Skies Satellites NV is upheld and consequently grounds raised by the revenue are dismissed.
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