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2011 (1) TMI 1121 - AT - Income TaxBusiness connection - Royalty - location of assets and software in India (through the affiliates of the assessee) and rendering of services in India - Deemed to accrue or arise in India - Section 9(1) - held that:- In satellite transmission, a particular frequency is assigned to the customer and in cable transmission, the customer gets a dedicated bandwidth. This is different from the use of a standard facility like the telephone at our homes. A broadband can be divided into two major categories (i) shared; and (ii) dedicated. Shared internet connections include the popular DSL and Cable broadband connections. Dedicated connections are provided by T1, DS3, and Ethernet business services. The term "business" is to be noticed. Shared Internet services originated to make broadband affordable for residential and home office users. Medium to larger size business have always used dedicated connections for their voice and data circuits. In the bigger picture, the entire internet is a shared bandwidth resource. With a dedicated connection, one’s bandwidth is set aside by the service provider and always available for one’s use. Order of CIT(A) confirmed wherein it was held that, "to avoid tax liability, apparently, MCI has split the lease charges for the IPLC circuit into two non-existent half circuits. Thus, MCI is trying not to acknowledge its liability on the quantum of lease charges arising in India and received by it by resorting to subterfuges. It is a fact that MCI has provided the single, composite and indivisible circuit which constitutes ‘equipment’. It has merely taken VSNL as a "Provisioning Entity" for providing the local part of services in India. In the alternative, the payments made for IPLC service may also be held to be for the use of process and, hence, would amount to payment of Royalty. The order of the Assessing Officer that payments received by the appellant was royalty for use of equipment and related services is therefore, confirmed"
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