TMI Blog2011 (3) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant. Ashwani Mahajan for the Respondent. ORDER Bench. All these appeals are filed by the assessee. Appeals pertaining to the assessment years 1998-99, 1999-2000, 2000-01 and 2001-02 are directed against common order dated 22-3-2004 passed by the learned Commissioner of Income-tax (Appeals). Appeal for the assessment year 2002-03 filed by the assessee is directed against CIT(A)'s order dated 2-11-2005. Appeals for the assessment years 2003-04 and 2004-05 are directed against common order dated 28-3-2008 passed by the learned CIT(A). 2. In these appeals, a common and identical issue is involved as to whether the service charges received by the assessee from various T.V. Channels on account of providing facility of broadcasting their programmes through the transponders located in the satellites are taxable in India. 3. In the course of hearing of these appeals, the learned counsel for the assessee at the outset has submitted that the facts of the present case are quite identical and similar to that of Asia Satellite Telecommunications Co. Ltd. as so clearly and emphatically observed and stated by the revenue authorities below in their respective orders. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Delhi ITAT that payment for the use of transponder is covered under Explanation 2 to section 9(1)(vi) of the IT Act. The assessee was confronted to the fact that how his case is not covered by the judgment of the ITAT in the abovesaid case. The assessee has not furnished any facts, which distinguishes his case from the case of Asia Sat." The CIT(A)'s observations (page 8 and page 5 of the consolidated order of the CIT(A) for assessment years 1998-99 to 2001-02): "Therefore, the judgment of Asia Satellite Telecommunications Company Ltd., is fully applicable on the appellant and the Appellant's receipts from various channels is royalty under the Income-tax Act as well as under the DTAA." I have considered the submissions of the Appellant and the facts of the case carefully. I find that submissions given by the Appellant are not based on the correct legal interpretation. The above issue has been decided by the jurisdictional ITAT in the case of Asia Satellite Telecommunications Company Ltd. v. DCIT." 5. The above decision of the Hon'ble Delhi ITAT in the case of Asia Sat has been reversed by the Hon'ble Delhi High Court by its judgment dated 31st January, 2011, in IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of DTAA between India and Thailand by the Assessing Officer as well as by the learned CIT(A). The facts of the case have been narrated by the Assessing Officer in his order for the assessment year 1998-99 as under:- "The communication satellites are placed in an orbit approximately 36,000 kms above the earth. The satellite rotates in the same direction and at the same speed as that of the earth so that the satellite remains static in relation to a particular surface, where the footprint of the satellite is. The satellite houses and powers the microwave repeater and includes the solar panel, a battery system that stores the energy and powers the satellite during the period when the sunlight is blocked, gyros to stabilize the satellite to keep the footprint properly aligned on the ground. The repeater section consists of an antenna system (comprising of two reflectors one for receiving and other for transmitting) and microwave used to receive, modify in frequency, amplify, modify in polarization and retransmit the signals involved. The path of each channel from receiving antenna to the transmitting antenna is called a transponder. The signals uplinked by the tele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only. Hence it is not felt necessary to go into the fact as to whether the process used should be secret or not. However, the same has been considered in detail in the succeeding part of this order while examining the taxability of the receipts as royalty in terms of the provisions of the DTAA between India and Thailand. The telecasting companies have entered into agreement with the assessee in order to make sure that their programmes are downlinked from the satellite in a suitable form so that the cable operators can access the same and distribute it to the end user i.e., the public who view the programme. Thus, there is no doubt about the fact that the said companies are using the process in the transponders of assessee's satellite and the payment being made by them is precisely for the use of the said process only. Reliance is placed on the ruling of the Authority for Advance Ruling in the case of Y reported in 238 ITR 296. In the said case the American Company was operating a worldwide credit card system and the related travel business and was receiving payments for the same. The American Company was maintaining a main frame computer, which was connected to the database in Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court vide their Lordships order in Asia Satellite Telecommunications Co. Ltd. (supra). 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 Para 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 is also claimed that during the relevant previous assessment year, i.e., 1996-97, the assessee had no customers, who are residents of India. During the previous year, relevant to the assessment year under appeal, the appellant was the lessee of a satellite called Asia Sat I which was launched in April 1990 and was the owner of a satellite called Asia Sat 2 which was launched in November 1995. These satellites were launched by the appellant and were placed in a geostationary orbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessee was chargeable in India. The appellant was accordingly called upon to file its return. The assessee responded by the questioning the authority of the Assessing Officer and explaining as to why its income was not chargeable to tax in India. It also sought some time to file its return of income. Ultimately, the return was filed on 30-12-1999, reiterating that no income earned by the appellant was chargeable to tax in India. 9. The Assessing Officer, however, went ahead with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The result of the decision of the Hon'ble High Court is that the receipt received by the assessee is not taxable either under section 9(1)(vi) or section 9(1)(vii) of the Act. 10. As a result, the appeal preferred by the assessee before the Hon'ble High Court was allowed and the judgment of the Tribunal was set aside. 11. Therefore, in the light of the discussions made above and in the light of the fact that the facts of the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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