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TMI Blog2011 (3) TMI 1707X X X X Extracts X X X X X X X X Extracts X X X X ..... ). 3. That on the facts and circumstances of the case, and in law, the learned Assessing Officer erred in holding that the receipts earned by the appellant are in the nature of royalty as defined in clause (iva) of Explanation 2 to section 9(1)(vi) of the Act and Article 12(3)(b) of the DTAA representing consideration for the right to use an industrial, commercial or scientific equipment. 4. That on the facts and circumstances of the case, and in law, the learned Assessing Officer erred in holding that the receipts earned by the appellant are in the nature of royalty as defined in clause (iii) of Explanation 2 to section 9 (1)(vi) of the Act and Article 12(3)(a) of the DTAA representing consideration for use process. 5. That on the facts and in the circumstances of the case and in law, the learned Assessing Officer has erred in holding that the payments by non-resident customers of the appellant are also chargeable to tax in India as per the provisions of section 9(1)(vi)(c) of the Act and Article 12(7) of the DTAA. 6. Without prejudice to the above, the learned Assessing Officer has erred in categorizing the payments received by the appellant from its non-resident customer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into by the competent authorities of the USA and India, which was made applicable to these years. As per the resolution, the revenue considered for taxation consisted of two components - (i) 100% of the revenue received from Residents Indian Customers; - (ii) 5% of revenue received from non resident customers. This formula was applied while computing the revenue for assessment year 2005-06. The aggregate of the revenue was taxed at the rate of 10% considering them to be "royalty" as use of or a right to use any industrial, commercial or scientific equipment. The assessment for assessment year 2006-07 was completed by computing 10% of the revenues received from identified customers. Again the revenues were taxed @10%. 2.1 Coming to the facts of this year, it is mentioned that the assessee is a tax resident company of the USA, with its registered office located in Washington DC. Therefore, the tax treaty between India and USA (DTAA) is applicable to it. The assessee is owner and operator of global network of telecommunication satellites located in outer space. It is engaged in the business of transmitting telecommunication signals to and fro from the earth station(s). Its cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the assessee produced the assessment order, which clearly demonstrates that the expenditure shown by the assessee from the time, when it was on ongoing project, was examined and accepted by the Assessing Officer. In these circumstances, we answer the question formulated above in favour of the assessee and against the Revenue. AS a consequence, this appeal is dismissed being devoid of any merits." 3. Before us, the case of the learned counsel is that ground Nos.1 to 5 stand covered by the decision of Hon'ble Delhi High Court in the case of Asia Satellite Communication Company Ltd. Vs. DIT and Vice versa in I.T.A. No. 131 of 2003; CM No.2865/2009 and I.T.A. No.134 of 2003 dated 31.01.2011, a copy of which has been placed in the paper book on page Nos.18 to 91. He drew our attention to page nos. 19 & 20 of the paper book, which narrate the substantial question of law admitted by the Hon'ble Court on the appeal of the assessee and the appeal of the revenue. Following grounds were admitted in respect of the appeal of the assessee in I.T.A. No.131 of 2003:- "(i) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the judgment. In paragraph No.72, it is mentioned that the Tribunal has made an attempt to trace the fund flow and observed that since the end customers being persons watching televisions in India are paying the amounts to cable operators who in turn are paying the same to TV Channels, the flow of fund is traced to India. This is a far-fetched ground to rope in payment received by the appellant in the taxation net. The Tribunal has glossed over an important fact that the money, which is received from the cable operators by the telecast operators, is treated as income by the telecast operators, which has accrued in India, and they have offered and paid tax. Thus, the income, which is generated in India, has been subjected to tax. It is the payment, which is made by the telecast operators who are situated abroad to the appellant, which is also a non-resident, i.e., sought to be brought within the tax net. It is concluded that it is difficult to accept such far-fetched reasoning with no causal connection. It may be mentioned here that the assessee has received revenues from Indian residents also, as can be seen from the table mentioned in the assessment order and reproduced by us w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not go into the provisions of the DTAA because of the provision contained in Section 90(2) of the Act. This provision provides that where the Central Government has entered into an agreement with the Government of any country outside India under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall applied to the extent they are more beneficial to that assessee. The assessee is found to have incurred no liability to tax under the Act. Therefore, even if the provisions of the treaty go against the assessee, it has to be granted the benefit of the Act under which no liability to tax can be fastened on the assessee. Accordingly, ground Nos. 1 to 5 are allowed. 5. In the light of aforesaid finding, ground Nos. 6,7,8, 9 & 10 become infructuous. They are treated as dismissed. 6. Ground No.11 against charging of interest u/s 234B also becomes infructuous in view of our finding in the matter of non-taxability of the assessee in India. 7. In pursuance of ground No.12, the Assessing Officer is directed to verify the amount of tax deducted at source ..... X X X X Extracts X X X X X X X X Extracts X X X X
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