TMI Blog2016 (12) TMI 1338X X X X Extracts X X X X X X X X Extracts X X X X ..... that same payment would fall in the nature of ‘royalty’ and at same time would be reckoned as ‘FTS’ also. As regards the issue of business communication in India, simply because the transponders have been used in for business in India will tantamount to business connection of Intelsat in India and, accordingly, such an observation and finding of the CIT(A) is hereby rejected by us. - Decided in favour of assessee. Interest u/s 244A on refund of extra TDS deposited under section 195 - Held that:- Issue should be remanded back to the file of the Assessing Officer to decide the matter after considering the latest CBDT Circular No.11 of 2016 dated 26th April, 2016. We order accordingly - ITA No. : 2841,2842, 2843, 2844, 2845 2846, 2847, 2848, 2849, 2850, 2851, 2852, 2853, 2854, 2855, 2856/Mum/2012 - - - Dated:- 25-10-2016 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER For The Appellant : Shri Madhur Agrawal For The Respondent : Shri Dipak Ripote ORDER PER BENCH: The aforesaid appeals have been filed by the assessee against impugned order dated 31.01.2012, passed by Ld. CIT (Appeals)-11, Mumbai. All the appeals relates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in India and hence there cannot be any deduction of tax at source; Entitlement for interest under Section 244A of the Act 8. erred in not granting interest under section 244A of the Act on the taxes deposited, arising consequent to the above grounds. The above grounds of appeal are without prejudice to each other . 2. The core issue involved in these appeals is taxability of the payment made by the assessee to Intelsat Corporation US and Intelsat Global Sales and Marketing Limited, UK for availing transponder facility in pursuance of Service Agreement read with Service orders. Brief facts and background of the case are that, the assessee is an Indian Company which owns and operates a TV Channel Hungama , which is an entertainment channel for kids. The assessee has executed an agreement with Intelsat Corporation, a US corporation ( Intelsat US ) for provision for transponder services. The broad arrangements for provision of the Services were as under:- The appellant has been provided with the Service by Intelsat; The appellant needs to follow Intelsat s procedures for initiating or terminating transmission to the satellite; In case the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted in the technology used inside the transponder. Further, the payments to Intelsat are not taxable as fees for included services under the provisions of the Treaty since no technical knowledge / experience, etc was made available by Intelsat to the applicant while providing transponder services (judgment of the Delhi Tribunal in the case of Panamsat (Supra) relied upon). The payment to Intelsat cannot be regarded as payment for the use of equipment under the Act since the use of transponder Services do not constitute the use of equipment (judgment of the Delhi Tribunal in the case of Asia Satellite Telecommunications Co. Ltd. (85 ITD 478 relied upon). The Assessing Officer held that the applicant s contentions are not acceptable in view of the decision of the Delhi Tribunal in the case of New Skies Satellites BV, Shin Satellite Public Company Limited and Asia Satellite Telecommunications Limited (126 TTJ 1) which held that the services rendered through satellites for telecommunication / broadcasting, amounts to a 'process'. It was held that it is not necessary for the services rendered to be through a 'secret process' in order to constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for the assessee, Mr. Madhur Agarwal submitted that, this issue now stands squarely covered by the judgment of the Hon ble Delhi High Court in the case of Intelsat Corporation, that is, in the hands of the payee in Income-tax Appeal No.977 of 2011 and 530 and 545 of 2012. Once in case of the payee itself it has been held that the amount is not taxable in India either as royalty or as FTS , then assessee is not obliged to deduct TDS on such payments. He submitted that, though the said decision of Hon ble Delhi High Court in the case of the payee is for the earlier assessment years, however, the same ratio and principle will apply in the subsequent years as the judgment of the Hon ble High Court still holds the law qua the payee. Not only that, in the case of New Skies Satellite BV, in Income-tax Appeal No. 473 474, 500 of 2012 and 244 of 2014, the Hon ble Delhi High Court vide judgment dated 08.02.2016 have again held that, under the provisions of DTAA the said payment cannot be taxed as royalty . While coming to this conclusion, the Hon ble High court has also discussed and analyzed the amendments made in section 9(1)(vi) by the Finance Act, 2012 enlarging the scope of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2008- 09 The Delhi High Court following its ruing in ITA No.977/2011 (Sr. No.1 above) and held that Intelsat Corporation s receipts Are not taxable in India . The nature and terms of the arrangement between the Appellant and Intelsat UK are similar to those between the Appellant and Panamsat Corporation/ Intelsat Corporation 3. B4U International Holdings Ltd (52 SOT 545) pronounced 28 May 2012 Mumbai Tribunal 2002- 03 The Mumbai Tribunal held that the issue of whether payments made to Panamsat Limited, a US company and Advance Satellite, a UK company for Transponder services, were subject to withholding tax in India, was squarely covered by the Delhi High Court ruling in the case of Asia Satellite ( supra ). - Further, payments were also not taxable fees for technical services the make available Condition was not satisfied. As regards the Amendment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has leased its transponder capacity and bandwidth with various customers in India and outside India who used the transponders for their business in India, therefore, in the light of this fact taken note by the Hon ble High Court while deciding the issue in favour, the remark and conclusion drawn by the Ld. CIT(A) that because the transponder is used by customers in India and therefore there is business connection in India and hence will also constitute business income in India, is no longer relevant. 6. On the other hand, Ld. DR submitted that, even though the provisions of DTAA are applicable in the present case, however, amendment brought in section 9(1)(vi) by way of insertion of Explanation (vi) by the Finance Act, 2012 with retrospective effect will have to be read into the treaty. In support of his contention, he strongly relied upon the decision of Hon ble Bombay High Court in the case of Seimens AG, 310 ITR 320. He submitted that, the decision of the Hon ble Delhi High Court in the case of New Satellite BV ( supra ) and the decision of the ITAT Mumbai Bench in the case of Taj TV would not be applicable. Sum and substance of his reasons are as under:- i) The questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the rival submissions, perused the relevant finding given in the impugned orders as well as various decisions as relied upon by the parties before us. At the threshold it is noticed that, in the case of the payee, i.e., Intelsat Corporation US, the Hon ble Delhi High Court vide order dated 19.08.2011 and then again reaffirmed vide order dated 28.09.2012 in ITA No. 530 545/2012, following the order of its own court in Asia Satellite Communications Ltd (ITA 131/2003 decided on 31.01.2011), have categorically held that payment received by Intelsat is not taxable in India under the provisions of Indo-US-DTAA. Once in the case of the payee it has been categorically held that the said amount is not taxable, then assessee is not obliged to deduct TDS and, therefore, the impugned proceedings under section 195 deserves to be quashed. Otherwise also, this issue of payment of transponder charges made to Panamsat (later on name was changed to Intelsat Corporation) has been subject matter of issue before various Courts including that of the ITAT, Mumbai Bench in the case of Taj TV Ltd. In the said case, the Tribunal has observed and held as under:- 18. Now, coming to the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the said definition is to be read into DTAA also, that is, the definition of royalty has to be taken from the Domestic Law. In support, Ld. DR has strongly relied upon the decision of Madras High Court in the case of Verizon Communications Singapore Pte Ltd. (supra) and the ITAT decision in the case of Viacom 18 Media Pvt. Ltd. 19. First of all, let us examine the definition of royalty as been defined under Article 12 of the IndoUS-DTAA, which has been defined in the following manner: 3. The term royalties as used in this Article means: a) payments of any kind received as a consideration for the use of or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and b) payments of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra note 1, when the definitions were in fact pari material (in the absence of any contouring explanations), will continue to hold the filed for the purpose of assessment years preceding the Finance Act, 2012 and in all cases which involve a Double Tax Avoidance Agreement, unless the said DTAAs are amended jointly by both partners to incorporate income from data transmission services as partaking of the nature of royalty, or amend the definition in a manner so that such income automatically becomes royalty. It is reiterated that the Court has not returned a finding on whether the amendment is in fact retrospective and applicable to cases preceding the Finance Act of 2012 where there exists no Double Tax Avoidance Agreement . The aforesaid decision takes care of all the arguments relied upon by the ld. DR including that of the Verizon Communications Singapore Pte Ltd s. The Hon ble High Court has specifically clarified as to why the said decision of Madras High Court cannot be applied in such cases after observing as under:- 31. In a judgment by the Madras High Court in Verizon Communications Singapore Pte Ltd. V. The Income Tax Officer, International Taxation I, [201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oidance Agreement the expression laws in force would not only include a tax already covered by the treaty but would also include any other tax as taxes of a substantially similar character subsequent to the date of the agreement as set out in article I(2). Considering the express language of article I(2) it is not possible to accept the broad proposition urged on behalf of the assessee that the law would be the law as applicable or as define when the Double Tax Avoidance Agreement was entered into. 49. It is essential to note the context in which this judgment was delivered. There, the Court was confronted with a situation where the word royalty was not defined in the German DTAA. Following from our previous discussion on the bifurcation of terms within the treaty, in situations where words remain undefined, assistance is to be drawn from the definition and import of the words as they exist in the domestic laws in force . It was in this context that the Bombay High Court held that they were unable to accept the assessee s contention that the law applicable would be the law as it existed at the time the Double Tax Avoidance Agreement was entered into. This is the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able as enshrined in Article 12(3) in Indo-US-DTAA and thus, the said payment cannot be held to be taxable as being for technical services and secondly, on this ground also, the provision of TDS is not attracted. In any case Ld. CIT (A) cannot hold that same payment would fall in the nature of royalty and at same time would be reckoned as FTS also. Lastly, as regards the issue of business communication in India, as pointed by the Ld. Counsel, Shri Madhur Agarwal that Hon ble Delhi High Court in the case of Intelsat has taken note of this fact while deciding the issue of taxability of receipts in favour of Intelsat that, it has leased its transponder capacity and bandwidth to the various customers in India and outside India who have used the transponder for business in India. Thus, in the light of this observation and fact noted by the Hon ble Delhi High Court in the case of the payee and otherwise also we do not find any merits that, simply because the transponders have been used in for business in India will tantamount to business connection of Intelsat in India and, accordingly, such an observation and finding of the CIT(A) is hereby rejected by us. Thus, the issues raised b ..... 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