TMI Blog2022 (2) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the treaty, even otherwise, because then, the meaning of word secret in treaty would become redundant. CIT (A) has also dealt with this argument of ld AO in his order and then order of ld CIT (A) worded identically in the issues decided by coordinate bench has been upheld. Therefore, this argument also deserves to be dismissed. - Decided against revenue. - ITA No : 1067/Mum/2021, 1087 to 1097/M/2021 & 1127 to 1138 / M/2021, 1098, 1099, 1162, & 1100 to 1117/M/2021, & 1118 to 1120/Mum/2021 & 1121 to 1126/Mum/2021, 1151 to 1153/Mum/2021 1154 to 1161/M/2021 - - - Dated:- 24-2-2022 - Shri Prashant Maharishi, AM And Shri Sandeep Singh Karhail, JM For the Assessee : Shri Nimesh Vora, AR For the Revenue : Shri Milind S. Chavan, SR DR ORDER PER BENCH 01. This is the bunch of 65 appeals heard in two batches on 31/1/2022 and 3/2/2022 involving identical issue, filed by the Asst Commissioner Of Income Tax (International Taxation) circle 4 (3) (1) Mumbai. 02. Issue involved is that whether the tax is required to be deducted u/s 195 of the income tax act on payment made for transponder charges constituting royalty u/s 9 (1) (vi) of the act or Under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above order and therefore has preferred all these appeals. 07. The Ld DR vehemently supported the order of the ld AO and submitted that tax is required to withhold on these payments, as those are chargeable to tax in India. To support his argument, he relied up on the decision of Commissioner of Income-tax Vs Siemens Aktiongesellschaft [2009] 177 Taxman 81 (Bombay)/ [2009] 310 ITR 320 (Bombay). He submitted that based on this decision ITAT in case of the assessee in [2014] 44 taxmann.com 1 (Mumbai)/ [2015] 153 ITD 384 (Mumbai) has decided that Transponder fee is chargeable to tax in India. He referred to the DTAA of India and Malaysia and referred to Article 12 of that agreement to state that such royalties may also be taxed in the Contracting State in which they arise, and according to the laws of that State. He further submitted the word process has been defined in Explanation [6] of section 9 Explanation 6.-For the removal of doubts, it is hereby clarified that the expression process includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any signal). The new explanation also states that 'process' (which includes transmission by satellite) shall be 'royalty' under the IT Act whether or not such process in secret. In light of the said explanation, it is held that payment of transponder service fees to Intelsat by Applicant is a 'process' and thus it is in the nature of royalty income taxable in India in terms of the provisions of Section 9(1)(vi) of the IT Act as well as treaty. The definition of Royalties as per Article 12 of the India - USA Tax Treaty includes the payment made for use of any 'process'. The terms 'process' is not defined in the India-USA Tax Treaty. Therefore, the definition of the term process has to be imposed from the Act. Thus, the payment made for transmission by satellite is a royalty even under the lax treaty. The reference to decision of the Hon'ble Delhi High Court made by the applicant has not been accepted by the department and the SLP has been preferred in this case. Also, the orders passed earlier, in the case of the applicant treating the transponder services fee as ' royalty income' has been upheld by the id. CIT(A) and IT AT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in deleting the addition of ₹ 5l44,17,143/- after considering the ex-post facto agreement between the assessee and (he Nimbus and not considering the main agreement dtd. 18.03.2006 between the assesses and the Nimbus? 2. in question (a) the revenue contends that the Satellite Space Fees and transponder charges paid by the assessee were in the nature of royalty payments. From the perusal of the impugned judgment of Income Tax Tribunal {'Tribunal' for short) we notice that the revenue's main thrust before the Tribunal was that the charges paid were capital expenditure and not revenue expenditure. However, in this context, the Tribunal did observe fleetingly on the question of charges being royalty payments. We have therefore heard the learned Counsel for the parties on merits on this issue raised by the revenue. 3. We notice that an identical issue came up for consideration before Delhi High Court in case of Asia Satellite Telecommunications Co. Ltd. Vs. DIT, reported in (2011) 332 ITR 340. It was the case in which the assessee a non-resident was engaged in safe/We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced here under: Indo-US DTAA ARTICLE 12 - Royalties and fees for included services 1. Royalties and fees for included arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other state. 2. However, such royalties and Fees for included services may also be taxed in the contracting state in which they arise and according to the laws of that state, but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State, the tax so charged shall not exceed: (a) in the case of royalties within paragraph 3(a) of this Articles, and fees for technical services within paragraphs 4(a) and (c) of this Article,- (i) during the first five years for which this Convention has effect; (aa) 15 per cent of the gross amount of such royalties or fees for technical services when the payer of the royalties or fees for technical services is the Government of the first mentioned Contracting State or a political sub-division of that State, and (bb) 20 per cent of the gross amount of such royalties or fees for technical services in alt other cases; and (ii) during subsequent years, 15 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 3(b) of this Article and fees for technical services defined in paragraph 4(b) of this Article, 10 per cent of the gross amount of such royalties and fees for technical services. 3. For the purposes of this Article, the term royalties 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 cinematography films or work on films, 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; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic. Indo-Malaysia DTAA ARTICLE 12 ROYALTIES 1 Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State 2. However, such royalties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. The definition of royalty in all three treaties is similar. In all the three treaties, following words were used: secret formula or process the assessing officer imported the definition of process from explanation to Section 9 (1) (vi). The honourable High Court after considering the same in the case of Intelsat and case referred above has held that the income of non-resident from transponder charges is not taxable in India. In view of the above discussion, I am of the opinion that the payment of transponder charges paid by the assessee to above referred to 3 entities was not taxable in India and therefore the assessee cannot be asked to withhold tax on the payments of transponder charges paid to these entities. 011. The coordinate bench upheld the decision of the ld CIT (A) holding as Under:- 9. We have heard the rival submissions of the parties on the issue in dispute and perused the relevant material on record. In the appeal for assessment year 2015-16, the Ld.CIT(A) has considered the facts of one of the parties in w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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