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Intelsat Global Sales And Marketing Ltd. Versus Income-Tax Officer, International Taxation (And Vice Versa)

2016 (8) TMI 553 - ITAT CHENNAI

Data/ signal transmission - receipt of signal/data which was retransmitted by the assessee-company in India - India-U. K. DTAA - P.E. in India - assessee engaged in providing satellite capacity through space segment and related services to the Indian customers - Held that:- The assessee is maintaining an equipment in India through its associated enterprise for the purpose of testing quality of signal retransmitted in India. Therefore, this Tribunal is of the considered opinion that so long as th .....

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then the recipient company may not accept the service as it was claimed before this Tribunal. Therefore, there is an obligation on the part of the assessee-company to maintain good quality of signal/data to be retransmitted so that Videsh Sanchar Nigam Ltd. or other companies which may redistribute the signal to their respective customers. Therefore, this Tribunal is of the considered opinion that it is obligation on the part of the assessee to maintain the quality of signal/data which was retra .....

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companies could receive signal/data without any intervention by the assessee-company in India. This fact was not examined by both the authorities below. Further, how the signals were received in India without intervention of the assessee-company needs to be examined. This Tribunal is of the considered opinion that the technical experts from Videsh Sanchar Nigam Ltd. or very any other companies which entered into agreement with the assessee- company needs to be examined about the mode of receipt .....

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afresh after examining the technical experts from Videsh Sanchar Nigam Ltd. who is responsible for maintaining the earth station in India or any other companies which has entered into similar agreement with the assessee and bring on record the actual services rendered by the assessee consequent to the agreement said to be entered into telecasting companies/telecom operators and, thereafter, decide the issue in accordance with law after giving a reasonable opportunity to the assessee. - Decided .....

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e assessee are directed against the respective orders of the Commissioner of Income- tax (Appeals)/Dispute Resolution Panel, Chennai, for the assessment years 2002-03 to 2012-13. Since common issue arises for consideration in all the appeals, we heard them together and disposing of the same by this common order. The Revenue has also filed appeals for the assessment years 2002-03, 2003-04 and 2005-06. 2. Let us first take the assessee's appeals. Shri Pawan Kumar, the learned representative fo .....

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lecom operators. According to the learned representative, the assessee- company entered into an agreement for providing transmission capacity so as to enable the telecasting companies/telecom operators from India to uplink and downlink the programmes which are to be telecasted. Referring to the copy of the agreement said to be entered into with Videsh Sanchar Nigam Ltd. (VSNL), the learned representative submitted that the assessee has no permanent establishment in India. The assessee is not pro .....

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e India-U. K. Double Taxation Avoidance Agreement, more particularly, article 5, the learned representative submitted that the assessee has no permanent establishment within the meaning of article 5 of the India-U. K. Double Taxation Avoidance Agreement. Merely because the Assessing Officer says that there was business connection in India that cannot lead to taxability of non-resident which is covered by the beneficial provisions of the Tax Treaty. Referring to the assessment order, more particu .....

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r 2004. Therefore, on and after 2004, the assessee-company or any of its group companies do not have any machinery installed in India. When the Assessing Officer found that there was a machinery to test the quality of signal received in India by one of the group companies, he failed to examine the taxability of the assessee-company with reference to the income attributable to the alleged operations in India. 3. Referring to the judgment of the apex court in CIT v. Toshoku Ltd. [1980] 125 ITR 525 .....

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shall not by itself constitute either a permanent establishment or otherwise. Therefore, merely because an associated enterprises existed in India, that cannot be a reason to conclude that the assessee has a permanent establishment in India. According to the learned representative, since the assessee has no permanent establishment is in India, no portion of the assessee's income can be attributable to the group company's equipment which was said to be installed at Chandigarh and Chennai .....

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n system monitoring equipment was owned by the assessee's associated enterprise, viz., Intelsat Global Service Corporation, USA, whereas the earth stations are owned, operated and maintained by Videsh Sanchar Nigam Ltd. The assessee has not owned any earth station in India. The basic function of communication system monitoring equipment or the earth station as the case may be, it should be owned by the assessee. According to the learned representative, the basic function of the communication .....

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e was providing satellite service through space capacity to its customers. Referring to the agreement said to be entered into between the assessee and Videsh Sanchar Nigam Ltd., the learned representative submitted that the trial and operations were solely undertaken by the assessee and it was not parted away at any point of time. The assessee merely receives data/signal which was uploaded by Videsh Sanchar Nigam Ltd and the same was processed through transponder which is situated in the satelli .....

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resentative submitted that the payment made by the assessee cannot be even construed as "royalty". The learned representative has also placed his reliance on the judgment of the Delhi High Court in the case of DIT v. New Skies Satellite BV [2016] 382 ITR 114 (Delhi) (I. T. A. Nos. 473 to 474/ 2012), the copy of which is available at page 1 of the paper book. According to the learned representative, the definition of the term "royalty" under the India-U. K. Double Taxation Avo .....

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he services rendered by the assessee-company is a standard service, therefore, it does not qualify as fee for technical services. The learned representative placed his reliance on the judgment of the Madras High Court in the case of Skycell Communications Ltd v. Deputy CIT [2001] 251 ITR 53 (Mad). Moreover, the technology was not made available to anyone by the assessee, therefore, the services rendered by the assessee even if it is considered to be a technical service, is not liable for taxatio .....

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only to India but also across the globe. Anyone in the earth, according to the learned representative, could receive the signal from satellite. On a query from the Bench when the agreement entered into between the assessee and Videsh Sanchar Nigam Ltd. specifically indicates Videsh Sanchar Nigam Ltd. as a distributor for receiving the signal from the assessee's satellite how anyone can receive the signal in India, the learned representative could not answer the question. According to the lea .....

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sion with regard to the business connection in India is only academic in nature. According to the learned representative, business connection involves a relation between the business carried on by a non-resident which earned profits and gains and some activity which contributes directly or indirectly for earning of such profit and gains. In this case, according to the learned representative, there is no business carried on by the non-resident Indian in India which yielded the profit. According t .....

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re was a business connection in India and a portion of the income was earned in India, then the income which is reasonably attributable to the functions performed by the assessee in India alone is liable for taxation. In fact, no such examination was made by both the authorities below. According to the learned representative, mere business connection is not sufficient to tax the income of the assessee in India. Apart from the business connection, some activities needs to be carried on by the ass .....

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distributors in accordance with the terms of the agreement. According to the learned representative, the agreement said to be entered into between the assessee and Videsh Sanchar Nigam Ltd. is available on record. Referring to clause (4) of the Agreement, the learned representative submitted that the assessee authorises the distributor on a non-exclusive basis, for so long as the agreement remains in effect, to procure from the company satellite capacity via the space segment and related service .....

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nchar Nigam Ltd. and the assessee, the learned. representative submitted that the contract between Videsh Sanchar Nigam Ltd. and the assessee is on principal-to-principal basis and the assessee is not privy to contractual terms between Videsh Sanchar Nigam Ltd. and its customers. According to the learned representative, it is for the Videsh Sanchar Nigam Ltd. to market their services via space segments and related services. Considering the nature of the contract and the services rendered by the .....

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e by the assessee cannot be construed as "royalty" or "fee for technical services". Therefore, the Commissioner of Income-tax (Appeals) is not justified in disallowing the claim of the assessee. 12. On the contrary, Dr. Milind Madhukar Bhusari, the learned Departmental representative, submitted that admittedly, the assessee-company engaged in providing satellite capacity through the space segment and related services to the Indian customers. The assessee-company is providing .....

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esh Sanchar Nigam Ltd and other telecom service providers for providing transponder capacity so as to enable them to uplink and downlink the programmes to be telecasted. For the purpose of maintaining the quality of the signal received in India, the assessee has maintained an equipment at Chandigarh and Chennai. The assessee now claims before this Tribunal that the equipment installed at Chandigarh and Chennai do not belong to it and in fact it was installed and maintained by an associated conce .....

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e, the assessee is having a permanent establishment in India. According to the learned Departmental representative, the equipment installed and maintained in India for the purpose of testing the quality of signal received in India has to be necessarily treated as an earth station. Merely because Videsh Sanchar Nigam Ltd. has separate earth station to downlink the programmes retransmitted by the assessee-company that does not mean that the equipment installed by the assessee-company though throug .....

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axed only in India. 13. Referring to the claim of the assessee that the equipment installed at Chandigarh and Chennai was dismantled from the assessment year 2004, the learned Departmental representative submitted that dismantling of the equipment installed at Chandigarh and Chennai is not brought to the notice of the authorities below. 14. Referring to the order of the Commissioner of Income-tax (Appeals), the learned Departmental representative submitted that the transmission service provided .....

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it has no permanent establishment in India and it is not doing any service in India. The claim of the assessee is that the signal/data downlinked by Videsh Sanchar Nigam Ltd. and other companies in India, namely, telecasting companies/telecom operators are received from the transponder maintained by the assessee's own satellite in the orbit. The signal/data upinked to the transponder was processed and it was transmitted/downlinked to the earth station. According to the assessee, earth stati .....

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t and Indian companies are uploading the signal/data which was received by the satellite and transmitted to India then the assessee may not be rendering any service in India. In this case, the admitted fact is that the assessee is maintaining equipment at Chandigarh and Chennai for the purpose of testing the quality of signal. The very object of the agreement between the assessee and Videsh Sanchar Nigam Ltd. is to uplink and downlink the signal and the assessee has to maintain proper quality of .....

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n India through its associated enterprise for the purpose of testing quality of signal retransmitted in India. Therefore, this Tribunal is of the considered opinion that so long as the assessee is maintaining any equipment in India, it has to be construed that the assessee is rendering services in India. Now, the assessee claims that the equipment installed at Chandigarh and Chennai was dismantled from the year 2004. However, dismantling of machinery/ equipment installed at Chandigarh and Chenna .....

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ose of uplinking and downlinking data/signal would ensure the assessee to maintain the good quality while it was being retransmitted. Therefore, the assessee has to maintain the quality of signal which was retransmitted. If the quality of the signal/data is very poor then the recipient company may not accept the service as it was claimed before this Tribunal. Therefore, there is an obligation on the part of the assessee-company to maintain good quality of signal/data to be retransmitted so that .....

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earth station maintained by Videsh Sanchar Nigam Ltd. and other companies in India may be downlinking the signal/data from the satellite. The question arises for consideration is whether the earth station said to be maintained by Videsh Sanchar Nigam Ltd. and other companies could receive signal/data without any intervention by the assessee-company in India. This fact was not examined by both the authorities below. Further, how the signals were received in India without intervention of the asses .....

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he assessee, the matter needs to be reexamined by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall reexamine the matter afresh after examining the technical experts from Videsh Sanchar Nigam Ltd. who is responsible for maintaining the earth station in India or any other companies which has entered into similar agreement with the assessee and bring on record .....

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he claim of the assessee is that interest under section 234B is not liable at all. Since the main issue in the assessee's appeal is remitted back to the file of the Assessing Officer, this Tribunal is of the considered opinion that the levy of interest under section 234B is also needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue of levy of interest under section 234B is remitted back to the file of the Assessing Off .....

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