TMI Blog2011 (3) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... eep Singh, Arvind Rajan and Abhimanyu for the Appellant. Ashwani Mahajan for the Respondent. ORDER Per Bench. ‑ In all these appeals filed by the assessee pertaining to the assessment years 2000-01 to 2005-06 and 2007-08, a common and identical issue is involved revolving around the following issues raised by the assessee:- "1. That the Ld. CIT(A) erred both on facts and in law in coming to the conclusion that the income of the appellant from providing services was income chargeable to tax in India. 2. That the Ld. CIT(A) erred on facts and in law in coming to the conclusion that the income of the appellant was in the nature of 'royalty' as per the provisions of section 9(1)(vi) of the Act. 3. That the Ld. CIT(A) erred in law in coming to the conclusion that the appellant's activities were in the nature of "process" and as such payments for the same were covered within the meaning of the term 'royalty' as defined under section 9(1)(vi) of the Act. 4. That the Ld. CIT(A) gravely erred in law while concluding that for a payment to qualify as 'royalty' under the provisions of section 9(1)(vi) of the Act it was not necessary that the 'pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was paid by the telecasting companies to relay their programmes in India through the satellite. He, therefore, state that exploitation territory was India and as process has taken place in the satellite, the payments by the telecasting companies to the assessee company for beaming its programmes in India were covered under Explanation 2 to section 9(1)(vi) of the Act. The AO therefore, concluded that the payment received by the assessee company is squarely covered under the term 'royalty'. The AO also held that from the point of provisions contained in DTAA between India and Netherlands, the receipts are covered under Article 1 and hence liable to be taxed in India. In Para 4.4 of the assessment order, the AO summarized the entire process and has referred to the decision of Delhi Bench of ITAT in the case of Asia Satellite Telecommunications Co. Ltd. v. Dy. CIT [2003] 85 ITD 478 by observing that word 'secret' in Explanation 2 to section 9(1)(vi) does not qualify the word 'process' and is restricted to 'formula' only. In Para 6.3 of the assessment order, the AO further relied upon the finding of the ITAT, Delhi Bench in the case of Asia Satellite Telecommunications Co. Ltd. (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... munications Co. Ltd. (supra). 7. We have heard both the parties and have perused the material on record. 8. After hearing both the parties and considering the facts of the case, it is beyond doubt that the facts of the present case are identical to the case of Asia Satellite Telecommunications Co. Ltd. (supra). It is now clear that the decision of Delhi Bench of Tribunal in the case of Asia Satellite Telecommunications Co. Ltd. (supra) has been reversed by the Hon'ble Delhi High Court vide their Lordships order dated 31st January, 2011 in ITA Nos. 131 134 of 2003. The statement of facts has been narrated by the Hon'ble Delhi High Court in Para 5 of their order. The activity of that assessee, namely, Asia Satellite Telecommunications Co. Ltd. (supra) has been discussed by the Hon'ble Delhi High Court in Paras 5 to 9 of their order as under:- "5. The appellant/assessee, viz., Asia Satellite Telecommunications Co. Ltd., is a company incorporated in Hong Kong and carries on business of private satellite communications and broadcasting facilities. This company was formed in 1988 and it claims that it had no office in India. Appeals pertains to the assessment year 1997-98 and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and are relayed over the entire footprint area where they can be received by the facilities of the appellant's customers or their customers. 7. It is the case of the assessee that it has no role whatsoever to play either in the uplinking activity or in the receiving activity. Its role is confined in space where the transponder which it makes available to its customers performs a function which it is designed to perform. The only activity that is performed by the appellant on earth is the telemetry, tracking and control of the satellite. This is carried out from a control centre at Hong Kong. 8. For this reason, it is claimed by the appellant that no part of the income generated by it from the customers to whom the aforesaid services are provided was chargeable to tax in India and for this reason no return income was filed in India. However, Deputy Commissioner of Income-tax (Non-resident Circle), New Delhi as Assessing Officer issued a letter notice, dated 20-10-1999 under section 142(1) stating that the assessee had entered into agreements with various companies for lease of transponders for downlinking programmes to various countries including India and therefore, income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of space segment capacity on satellites does not constitute royalty within the meaning of section 9(1)(vi) of the Act. In doing so, the Hon'ble High Court has conclusively held that while providing transmission services to its customers, the control of the satellite or the transponder always remains with the satellite operator and the customers are merely given access to the transponder capacity. Accordingly, since the customer does not utilize the process or equipment involved in its operations, the charges paid to the satellite operators are not covered within the meaning of royalty as provided under Explanation 2 to section 9(1)(vi) and therefore, the same cannot be treated as royalty. In this case, the revenue also raised the question regarding applicability of section 9(1)(vii) for the first time before the Tribunal. Although, this ground was admitted, it was not decided as the receipt was held to be assessable under section 9(1)(vi) of the Act by the Tribunal. No argument was advanced by the learned counsel for the revenue before the Hon'ble High Court in this matter. Therefore, the submission of the revenue regarding applicability of section 9(1)(vii) was not accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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