2023 (10) TMI 618 - ITAT DELHI

Characterization of income earned by the assessee - Income accrued in India - royalty receipt - assessee derived income from transmitting of satellite signals from ship to the customers and vice versa - For provision of such services assessee purchased airtime on the satellite from Inmarsat Global Ltd., which is the group concern of the assessee and owns the satellite and is based in UK. Assessee is a tax resident of Netherland and is eligible to claim treaty benefit as per Indo Netherland DTAA - assessee claimed that in the absence of a permanent establishment in India the income is not chargeable to tax in India

HELD THAT:- As decided in assessee own case [2018 (12) TMI 1321 - ITAT MUMBAI] Amounts received by the assessee for the use of transponder of tele-communication service charges are not royalty u/s 9(1)(vi) of the Act and also under Article 12(8) of Indo Netherland DTAA.

Scope of amendment - As decided in New Skies Satellite BV [2016 (2) TMI 415 - DELHI HIGH COURT] held that the Finance Act, 2012 will not affect Article 12 of the DTAAs, it would follow that the first determinative interpretation given to the word "royalty" in Asia Satellite [2011 (1) TMI 47 - DELHI HIGH COURT] when the definitions were in fact pari materia (in the absence of any contouring explanations), will continue to hold the field 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 parties to incorporate income from data transmission services as partaking of the nature of royalty, or amend the definition in a manner so supra note 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.