TMI Blog2022 (8) TMI 1446X X X X Extracts X X X X X X X X Extracts X X X X ..... ny PE in India during the year under consideration. Non granting the TDS credit - Considering the overall merits on the submissions made by the assessee we are inclined to remit this issue back to the file of Assessing Officer with a direction to verify the records submitted by the assessee on merit and verify the same. It is needless to say that assessee may be given a proper opportunity of being heard. In the result the issue under consideration is remitted back to the file of Assessing Officer for statistical purpose - Shri Amit Shukla, Hon'ble Judicial Member And Shri S. Rifaur Rahman, Hon'ble Accountant Member For the Assessee : Ms. Aarati Sathe. For the Department : Ms. Bharati Singh. ORDER PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (DRP-1), Mumbai-1 [hereinafter in short Ld.DRP ] dated 24.01.2022 for the A.Y. 2018-19 passed u/s. 144C(5) of Income-tax Act, 1961 (in short Act ). 2. Brief facts of the case are, assessee filed its return of income for the A.Y. 2018-19 on 30.10.2018 declaring total income of ₹.Nil. The return was selected for scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3426/M/07, 2583/M/07 and 3213/M/08) vide order dated 14 July 2017, wherein, it has been held that, the consideration received by Inmarsat from TCL are not in the nature of 'Royalty under the provisions of the Act and DTAA. The relevant extract of the ITAT order is reproduced as under: 10. We have heard the rival submissions and perused the material available on record. We find that the material facts of the present case are largely identical to the facts as considered by AAR in the ruling in the case of ISRO Satellite Centre (2008) 307 ITR 59 (AAR). We note that the reasoning and conclusion on facts similar to the facts in the present proceedings with ISRO which has been followed after detailed discussion and in fact extracted by the Hon'ble Delhi High Court in the Asia Satellite Telecommunications Co. Ltd. (2011) 332 ITR 340 (Del). We note that no argument have been advanced by the Revenue to rebut the assessee's argument that facts as considered in ISRO Satellite Centre are identical in the present proceedings also, .. 10.2. In view of the above reasoning on facts and law we find that the judicial precedent as cited before us and as discussed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited 48 taxmann.com 264 (Karnataka High Court) CIT vs Siemens Aktiongeswellschaft 310 ITR 320 (Bombay High Court) Viacom 18 Media Private Limited vs ADIT (IT)-2(2) 44 taxmann.com 1 (Mumbai Tribunal) . Accordingly, in view of the above decision, the payment for lease of transponder capacity received from TCL by the Assessee, should neither be treated as 'royalty' under the India-UK DTAA nor under Act. 1. Inmarsat does not have a Permanent Establishment in India 1. 1.1. It is also submitted that Inmarsat does not have a PE in India. During the earlier years the AO has alleged that Inmarsat has a PE in India on account of the presence of Space Segment Monitoring System ('SSMS) in India. In this regard, we wish to inform your goodself that the SSMS had arrived in India in the year 1995. The purpose of the SSMS was to provide a degree of surveillance capability to the Inmarsat Network Operations Centre in the UK whereby Inmarsat can monitor the transmitted power levels of individual channels (both signalling and voice carriers) to and from satellites in the Indian Ocean region and the frequency deviations. Further, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny Limited vs ACIT (114 ITR 903) (Del) Western Union Financial Services Inc vs ADIT (291 ITR 176) (AT) (Del) NIKE Inc vs ACIT (122 TTJ 201) (Bang) IKEA Trading (Hong Kong) Limited vs DIT (308 ITR 422) (AAR) Nokia Networks OY (212 Taxman 68 (Del) (HC) Based on the above, Inmarsat submits that SSMS and the LO in India does not constitute a PE of Inmarsat in India. 1.1.1. It would be pertinent to note that the aforementioned AAR ruling in the case of ISRO has examined the aspect of PE and thereafter specifically held that Inmarsat does not have a PE India. In view of the above, the receipts from TCL can neither be characterised as 'Royalty nor the SSMS and the LO constitute PE of Inmarsat in India in absence of their presence and LO's activity in India during the year under consideration. 4. After considering the submissions of the assessee in detail, Assessing Officer rejected submissions made by the assessee and passed the draft Assessment Order with the following observations: - 6.2. Assessee in the year has relied on many judicial precedents in its favour on how the same is not royalty under the DTAA as retrospective pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property.... .. Explanation 4.- For the removal of doubts, it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred. Explanation 5- For the removal of doubts, it is hereby clarified that the royalty includes and has always included consideration in respect of any right, property or information, whether or not- (a) the possession or control of such right, property or information is with the payer; (kb) such right, property or information is used directly by the payer; (c) the location of such right, property or information is in India. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 962 is invoked and the profit of the assessee company is estimated at 30% of the gross receipt of . 5,32,74,538 which comes to 1,59,82,361 based on the facts relied by the: AO year on year on the issue on a without prejudice basis. This part of the order will be operational if the assessee's income is held to be royalty, but business income by the appellate authorities during the course of appeals. Notice u/s 270A of the I.T. Act, 1961 is hereby initiated. 10. Subject to the above facts and discussions, the income of the assessee is assessed as under: Sr. No. Particulars Amount (in ₹.) 1. Gross Receipts from TCL treated as 'Royalty' 5,32,74,538 2. ASSESSED NET TOTAL INCOME 5,32,74,538 ASSESSED INCOME ROUNDED OFF TO 5,32,74,540 11. Assessed accordingly u/s 143(3) r.ws. 144C(1) of the Act. Tax. Credit of taxes paid and interest charged as applicable is annexed to this order and forms part of this order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia, without appreciating the fact the LO has in fact ceased to be the place of business of the Appellant in India: Ground number 7 The Hon'ble DRP has erred in concluding that the Land Earth Station (LES) constitutes a PE of the Appellant in India, without appreciating the fact that the said LES was owned and operated by TCL and not Appellant, thereby not appreciating the facts appropriately. Ground number 8 The Hon'ble DRP erred in relying on its earlier order for AY 2017-18, while adjudicating that there is a PE of the Appellant in India, without appreciating that the objection raised by the Appellant in the subject year is different as compared to AY 2017-18. Ground number 9 The Hon'ble DRP erred in not appreciating the objection raised by the Appellant that without prejudice to the contention of the learned AO that receipts of Inmarsat Global Limited are taxable as royalty , the learned AO has erred in considering the profitability on an adhoc basis at 30 percent of the gross receipts from TCL. by applying Rule 10 of the Income-tax Rules, 1962, without evaluating whether or not the Appellant has a Permanent Establishment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and material placed on record, we observed that similar issue was considered and adjudicated by the Coordinate Bench in assessee s own case for the A.Y. 2017-18 and decided the issue in favour of the assessee. While holding so the Coordinate Bench held as under: - 3. The short grievance articulated in the above grounds of appeal is that the authorities below holding that the amount of Rs. 5,82,70,600/- received by the assessee from Tata Communication Ltd. is taxable in its hands as royalty under the provisions of the India-UK Tax Treaty or under the provisions of the Income Tax Act. Learned representative fairly agree that this issue is squarely covered by a series of orders of the co-ordinate benches of this Tribunal in assessee s own cases for the preceding assessment years. While dealing with the appeal of the assessee in the immediately preceding assessment year vide order dated 24.03.2021 a coordinate bench has inter alia observed as follows:- 7. We heard the rival submissions and perused the material on record. The sole crux of disputed issue as envisaged by the Ld. AR that the A.O erred in treating the receipts from TCL as royalty and taxed under India-UK Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case for the preceding years. 10.We have given a thoughtful consideration to the aforesaid issue, and find, that the Tribunal while disposing off the assessee s appeals for A.Y. 2007-08 to A.Y. 2012-13, vide its consolidated order dated 12.12.2018, had held, that the amount received by the assessee company from providing Satellite Telecommunication Services to TCL was not to be treated as royalty. The Tribunal while dealing with the aforesaid issue had followed its earlier view that was taken while disposing off the assessee s appeals for A.Y. 2000-01 to A.Y. 2005-06, and vide its order dated 14.07.2017 had observed as under : 5. In order to appreciate the controversy, the following discussion is relevant. The appellant is a company incorporated in United Kingdom and is also a tax resident of United Kingdom. The appellant is engaged in the business of providing telecommunication services and for Assessment Year 2007-08, it filed its return of income declaring NIL income, inter-alia, contending that its income was not taxable in India. So far as the income earned by the assessee in this year is concerned, the same stands on similar footing as in the past years, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E-mail transmission private/corporate networks, value added networks transmission Internet access-browsing e-mail Video conferencing-store and forward video, real time, etc. In this connection, we enclose herewith in Annexure 7, a diagrammatic representation which describes the above mentioned activities. The LESO in India is VSNL. Inmarsat has entered into a LESO Agreement with VSNL for providing satellite telecommunication services. We have enclosed herewith in Annexure 8 a copy of the LESO agreement dated 12 April 1999, entered into by Inmarsat with VSNL for provision of telecommunication services. The LES is linked on the ground to the local public telecommunication network. This system enables communication to take place between users of the MES equipment and either other users of similar equipment or users of the public telephone network. In each case, the communication passes via an Inmarsat satellite and is coordinated and connected by the LESO. 6. The Assessing Officer, however, took the stand, following the stand of the assessing authorities of the past years that the impugned receipts earned by the assessee from TCL are in the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tellite Communication Co. Ltd. We also note that consistently the Mumbai Bench of the Tribunal has taken into the consideration the distinction in facts, law and the issue which was posed before different forums for consideration and find that it has been consistently held relying upon the decisions of the Hon'ble Delhi High Court in the cases of New Skies Satellite(2016) 382 ITR 1, DIT vs. Nokia Networks OY (2013) 358 ITR 259 and Asia Satellite Communications Co. Ltd. (supra) in the decisions of Alcatel-Lucent USA Inc. dated 25.04.2007 in ITA Nos. 7299 7300/ Mum/2010 for A.Y. 2005- 06 and 2007-08, DDIT vs. Shell Information Technology International BV dated 15.03.2017 in ITA No. 5051/Mum/ 2009 Others for A.Y. 2006-07 to 2008-09 and ADIT vs. Taj TV Ltd. dated 05.07.2016 in ITA No. 4678/Mum2007 for A.Y. 2003-04 to 2005-06. We have also noted that reliance placed by the learned CITDR on the decision of the Hon'ble Jurisdictional High Court in Siemens Aktionges wellschaft (supra) supports its case is misplaced. Specific mention may be made to para 20 of the said decision. Reference therein has been made to a decision of the Canadian Court in the case of Her Majesty the Que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst, where there exists no definition of a word in issue within the DTAA itself, regard is to be had to the laws in force in the jurisdiction of the State called upon to interpret the word. The Bombay High Court seems to accept the ambulatory approach in such a situation, thus allowing for successive amendments into the realm of laws in force . We express no opinion in this regard since it is not in issue before this Court. This Court s finding is in the context of the second situation, where there does exist a definition of a term within the DTAA. When that is the case, there is no need to refer to the laws in force in the Contracting States, especially to deduce the meaning of the definition under the DTAA and the ultimate taxability of the income under the agreement. That is not to say that the Court may be inconsistent in its interpretation of similar definitions. What that does imply however, is that just because there is a domestic definition similar to the one under the DTAA, amendments to the domestic law, in an attempt to contour, restrict or expand the definition under its statute, cannot extend to the definition under the DTAA. In other words, the domestic law remains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Siemens Aktiongesellschaft, 310 ITR 320 (Bom) that the amendments cannot be read into the treaty. On the wording of the treaty, we have already held in Ericsson (supra) that a copyrighted article does not fall within the purview of Royalty. Therefore, we decide question of law no.1 2 in favour of the assessee and against the Revenue. 52. Thus, an interpretive exercise by the Parliament cannot be taken so far as to control the meaning of a word expressly defined in a treaty. Parliament, supreme as it may be, is not equipped, with the power to amend a treaty. It is certainly true that law laid down by the Parliament in our domestic context, even if it were in violation of treaty principles, is to be given effect to; but where the State unilaterally seeks to amend a treaty through its legislature, the situation becomes one quite different from when it breaches the treaty. In the latter case, while internationally condemnable, the State s power to breach very much exists; Courts in India have no jurisdiction in the matter, because in the absence of enactment through appropriate legislation in accordance with Article 253 of the Constitution, courts do not possess any power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to justify omission to perform a treaty); General rule of interpretation under Article 31 (1) (i.e that it shall be interpreted in good faith, in accordance with ordinary meaning to be given to the terms of a treaty) and Article 31 (4) (A special meaning shall be given to a term if it is established that the parties so intended). The expression process and treaty interpretation in this case. 10.1 The next decision also cited by the CIT-DR is the case of Formula One World Championship Ltd. vs. CIT (International Taxation) for the proposition that the decision of the Hon'ble Delhi High Court in the case of Asia Satellite Communication Co. Ltd. and New Skies Satellite is overruled. On a reading of the said decision we note that the reliance is misplaced. The issue for consideration before the Hon'ble Apex Court was on an entirely different set of facts and circumstances and an entirely different issue was being considered. The said decisions were neither cited before the Court nor referred to by it nor considered in the said judgement. Accordingly on a reading of the decisions rendered on peculiar facts of the present case which we have brought out in detail in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ataka High Court decisions in the case of:- i) CIT vs. Wipro Ltd., reported in 355 ITR 284; ii) CIT vs. CGI Information Systems Management Consultants (P) Ltd., 226 Taxman 319 The issue whether the amendment brought by Finance Act 2012 in Section 9(1)(vi) by way of Explanations inserted in the Incometax Act with retrospective effect can be read into DTAA or not has to be seen in the light of the decision of Hon ble Bombay High Court in the case of CIT v Siemens Aktiongesellschaft, reported in 310 ITR 320 (Bom HC) accordingly, he submitted that other decisions rendered by the Delhi High Court and the Tribunal may not be applicable. While appreciating the Siemens AG (supra) he submitted that, it may kind be borne in mind that: i) The question of law before the Hon ble High Court was not that whether amendments in the Income-tax Act can be read into the DTAA or not; ii) In the said case, old DTAA (1960) between India and Germany was under consideration; iii) The said decision was rendered in 20008 when the only clarificatory provision by way of Explanation in section 9 was the Explanation below S.9(2) inserted by the Finance Act, 2007 doing with the requirement of PE for Royalty; iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Office. In support, he relied upon the decision of Oman International Bank AG on the admissibility of the belief, he relied upon the decision of Hon ble Supreme Court in the case of NTPC vs. CIT, reported in 229 ITR 383. 4. After considering the aforesaid submissions and on perusal of the impugned orders, we find that so far as the issue raised vide ground No.1 to 3 is concerned it is a recurring issue in the case of the assessee right from the earlier years. The Ld.CIT (A) too has followed the CIT(A) s orders for the assessment years 2003-04 to 2004-05, 2005-06 and 2008-09. The Tribunal in the assessment year 2004-05 in ITA No.7347/Mum/2007 on the issue of disallowance of Data Processing Cost has dealt and decided this issue in the following manner:- 15. Now, coming to the main issue i.e., whether the reimbursement of data processing cost of Rs.34,03,734, amounts to royalty or not, we find from the record that the assessee is engaged in the banking business and operates in India through branch in Mumbai. It has acquired banking application software named as Flexcube from an Indian software company which is exclusively used for the banking purpose by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive and, therefore, it has to be given the meaning as contained in the Article itself and no other meaning should be looked upon. If the assessee is claiming the application of the DTAA, then the definition and scope of royalty given in the domestic law, in the present case, section 9(1)(vi) should not be read into or looked upon. The character of payment towards royalty depends upon the independent use or the right to use of the computer software, which is a kind of copy right. In the present case, the payment made by the Branch is not for use of or right to use of software which is being exclusively done by the Head Office only, installed in Belgium. The Branch does not have any independent right to use or control over such main frame of the computer software installed in Belgium, but it simply sends the data to the Head Office for getting it processed. Insofar as the Branch is concerned, it is only reimbursing the cost of processing of such data to the Head Office, which has been allocated on prorata basis. Such reimbursement of payment does not fall within the ambit of definition of royalty within the Article 12(3)(a). To fall within its ambit, the Branch should hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mainframe computer in Australia, with the help of the telecommunication link, and the output data, after due processing is transmitted back to the Indian company. There is no privilege or right granted to the Indian company by the Australian company. The control of the Indian company is only on the input transmission and the right is to get the output processed data back. The actual processing of data is the exclusive control of the Australian company and it is for this work that the Australian company gets paid. In our considered view, therefore, in essence the impugned payment is made to the Australian company inconsideration of its processing of data belonging to the Indian company. As far as the scope of article 12(3)(a) is concerned, we find that it covers only a payment for the use of, or the right to use of, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right. The case of the revenue is that the payment is made for the use of specialized software with the help of which data is processed. We are not persuaded. As we have concluded earlier in this order, on the facts of this case, the payment made by the Indian c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held to be payment for the use of, or the right to use, any industrial, commercial or scientific equipment . This condition can only be satisfied when it is established that the impugned payment is made for the use of, or right to use of, mainframe computer. The Indian company does not have any control over, or physical access to, the mainframe computer in Australia. There cannot, therefore, be any question of payment for use of the mainframe computer. It is indeed true that the use of mainframe computer is integral to the data processing but what is important to bear in mind is the fact that the payment is not for the use of mainframe computer per se, that the Indian company does not have any control over the mainframe computer or physical access to the mainframe computer, and that the payment is for act of specialized data processing by the Australian company. Use of mainframe computer in the course of processing of data is one of the important aspects of the whole activity but that is not the purpose of, and consideration for, the impugned payment being made to Australian company. The payment, as we have observed earlier, is for the activity of specialized data processing. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed . This decision of the Tribunal have been followed in the subsequent years by the Tribunal, i.e., in AY2006-07 and 2007-08. In the aforesaid decision of the Tribunal, the decision of Bombay High Court in the case of Siemens Aktiongesellschaft (supra) and Delhi High Court decision in the case of Nokia Network, reported in [2012] 253 CTR (De) 417 and DIT v Sony Ericson AB, reported in [2012] 343 ITR 470 have been taken note of. Thus, this issue has been decided in favour of the assessee after detail analysis and discussion. Moreover, we find that in the latest decision of Hon ble Delhi High Court in the case of DIT vs. News Sky Satellite BV passed in ITA 473/2012, order dated 8.02.2016 have explained the ratio and principle of Hon ble Bombay High Court in the case of Siemens Aktiongesellschaft (supra). The relevant observation of the Hon ble Delhi High Court in the said case reads as under:- 48 In Commissioner of Income Tax v. Seimens Aktiongessellschaft, [2009] 310 ITR 320 (Bom), the Bombay High Court citing R v. Melford Developments Inc. held that The ratio of the judgment, in our opinion, would mean that by a unilateral amendment it is not possible for one nation which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduce the meaning of the definition under the DTAA and the ultimate taxability of the income under the agreement. That is not to say that the Court may be inconsistent in its interpretation of similar definitions. What that does imply however, is that just because there is a domestic definition similar to the one under the DTAA, amendments to the domestic law, in an attempt to contour, restrict or expand the definition under its statute, cannot extend to the definition under the DTAA. In other words, the domestic law remains static for the purposes of the DTAA . 5. Thus, on the facts of the present case, we are bound to follow the judicial precedence in assessee s own case for the earlier years and in view of the finding given therein, we upheld the order of the CIT (A) and dismiss the grounds raised by the revenue. Accordingly, grounds no.1, 2 3 are dismissed. 5.2. As far as filing of writ petition to be filed before the Hon ble High court is concerned if would be sufficient to mention that nothing was brought on record to prove that writ had been filed and heard. Had the final hearing taken place, it would have been a different situation. So, in anticipation of fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sought to be made by the DRP in the impugned order regarding the inapplicability of the ratio of the decision of the AAR in the case of ISRO Satellite Centre reported in 307 ITR 59 (AAR). In this context, we find that this aspect of the controversy has been expressly considered by our coordinate Bench while rendering its decision dated 14.07.2017 (supra). Therefore, we find no reason to uphold the stand of the Revenue in this year following the precedent in the assessee s own case. Therefore, so far as Ground of appeal nos. 2 3 are concerned, the same are allowed, as above. 4. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench as is evident from the observations made by the learned DRP in paragraph 6.3 (Page no 26-27) of the DRP s order. Respectfully following the same we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition of Rs. 5,82,70,600/-. As we do so we may also note that the learned DRP has decided the matter against the assessee only to keep the issue alive. 14. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, in view of the preponderance of the consistent views of Coordinate Benches the appeals of the assessee are allowed. 19. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee s own case for the A.Y. 2005-06, we allow the ground raised by the assessee. Ground raised by the assessee is allowed. 20. With regard to Ground No. 5, Ld. Counsel for the assessee submitted that without prejudice to the contention of the Assessing Officer that receipts of Inmarsat Global Limited are taxable as 'royalty', the Assessing Officer has erred in computing the profitability on an ad-hoc basis at 30 percent of the gross receipts from TCL by applying Rule 10 of the Incometax Rules, 1962. We observe that this issue is academic in nature, accordingly, the same is not adjudicated at this stage. 21. With regard to Ground Nos. 7, 8 and 9 of grounds of appeal, Ld.AR of the assessee submitted that Ld.DRP has erred in concluding that the Land Earth Station ('LES') constitutes a PE of the assessee in India, without appreciating the fact that the said LES was owned and operated by TCL and not ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in India, it could therefore not be treated as the assessee s PE in India. The ld. A.R submitted that the factual position qua the issue as to whether the assessee had a PE in India on both of the aforesaid counts had been looked into by the Tribunal while disposing off the appeals of the assessee for the preceding years i.e A.Y. 2007-08 to A.Y. 2012- 13, vide its order dated 12.12.2018. The ld. A.R taking us through the aforesaid order of the Tribunal in context of the issue under consideration submitted, that as the factual matrix during the year under consideration remained the same as was there before the Tribunal in the aforementioned preceding years, hence, the view therein taken by the Tribunal that the assessee did not have a PE in India would equally apply for adjudicating the said issue for the year under consideration. 13. Per contra, the ld. D.R relied on the orders of the lower authorities. However, the ld. D.R could not controvert the claim of the assessee s counsel that the issue herein involved was squarely covered by the orders passed by the Tribunal in the assessee s own case for the preceding years. 14. We find that the lower authorities had conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous services to the assesseecompany in connection with the contract with VSNL. Therefore, the Assessing Officer concluded that the location of SSMS equipment in India and the presence of the liaison office in India constituted a PE of the assessee in India and, therefore, the payment received by the assessee from VSNL was attributable to the assessee s PE in India. Thus, notwithstanding his stand that the receipts from VSNL were in the nature of Royalty, the Assessing Officer held that even going by Article 7 of the India-UK DTAA (by which such receipts are treated as business profits), because of the presence of a PE in India, income arising from receipts from VSNL was attributable to a business connection in India. Therefore, he applied Rule 10 of the Income Tax Rules, 1962 and estimated the profit of the PE at 30% of the gross receipts. The aforesaid addition proposed by the Assessing Officer was objected to by the assessee before the DRP by raising various objections. The DRP, however, affirmed the ultimate conclusion of the Assessing Officer to the effect that assessee has a PE in India. In coming to such a decision, the DRP has confined its observation to the presence of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.04.2005 is placed which is addressed to VSNL whereby it is informed that the facility of SSMS equipment would not be used for providing services w.e.f. 17.06.2005. It has been pointed out that such change was on account of an operational requirement as assessee has launched its 4th generation satellite which was thereafter used to provide the services which were earlier being provided by the use of SSMS equipment. \ 13. It was, therefore, contended that it is wholly erroneous on the part of the lower authorities to hold that the liaison office and SSMS equipment constituted a PE of the assessee in India. 14. On the other hand, the ld. DR appearing for the Revenue defended the stand of the lower authorities by placing reliance on the respective orders. Further, insofar as the assessment years 2010-11 to 2012-13 is concerned, the ld. DR raised a further point based on the observation of the DRP. In the aforesaid three years, the Assessing Officer held the existence of a PE in India on the basis of the existence of the liaison office and location of SSMS equipment. On the other hand, the DRP in Assessment Years 2007-08 to 2009-10 concluded the existence of a PE on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of business or commerce, then, the onus was on him to establish so. Another notable feature is that the liaison office of the assessee has been in existence since 1999 and, even in the past assessment years when the Assessing Officer disagreed with the assessee on the nature of the receipts from VSNL/TCL, there was no adverse conclusion with regard to the nature of activities being carried out by the liaison office. The Hon'ble Delhi High Court in the case of Mitsui Co. Ltd. (supra) noted that in a case where assessee was found adhering to the conditions imposed by the RBI for running of a liaison office, it increases the burden of the Revenue to show that notwithstanding the subsisting RBI permission, the liaison office can be construed as a PE in India. In our view, the factual matrix in the instant case clearly attracts the legal position enunciated by the Hon'ble Delhi High Court in the case of Mitsui Co. Ltd. (supra) and, therefore, we proceed further to examine as to whether the Revenue has discharged its burden on this aspect in the present case. In this context, we have perused the discussion made by the Assessing Officer, wherein he has concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he LO interacts with the Indian Government to get information and coordinates with the regulatory authorities in connection with the use of Inmarsat s services in India. The LO s activities do not play any role in the rendering of telecommunication services to VSNL. 4.3 Based on the above, Inmarsat submits that the presence of the SSMS and the LO in India does not constitute a PE of Inmarsat in India. 16. The aforesaid fact-situation asserted by the assessee has not been countered by the DRP in any manner. In fact, the learned representative for the assessee has pointed out that with regard to the discontinuation of the use of SSMS equipment, communication to VSNL dated 28.04.2005 (copy placed at page 64 of the Paper Book) was also furnished, which clearly establishes that the same was not used in rendering services during the period under consideration. 17. Thus, we find that the assertions of the assessee qua the activity of the assessee and liaison office as well as the significance of the use of SSMS equipment located in India qua the services provided to VSNL clearly establishes that the same could not be construed to constitute a PE in India. The DRP, in ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the matter than the view so taken by the coordinate bench as is evident from the observations made by the learned DRP in paragraph 6.3 (Page no 26-27) of the DRP s order. Respectfully following the same we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition of Rs. 5,82,70,600/-. As we do so we may also note that the learned DRP has decided the matter against the assessee only to keep the issue alive. 9. Ground no 5 to 7 are thus allowed in the terms indicated above. 24. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee s own case for the A.Y. 2017-18, we allow the grounds raised by the assessee in this regard. Accordingly, Ground Nos. 7, 8 and 9 raised by the assessee is allowed. 25. Coming to Ground No. 10 which is in respect of not granting the TDS credit claimed by the assessee of ₹.40,90,845/-. Ld. Counsel for the assessee submitted that assessee has claimed TDS in the return of income and the same is also appearing in respect of Form 26AS and prayed that the direction be given for granting of TDS credit. Ld. AR vide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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