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United Home Entertainment Private Limited Versus The Dy. Commissioner of Income Tax- (International taxation) - 4 (3) (1) , Mumbai And Vice-Versa

2018 (2) TMI 971 - ITAT MUMBAI

TDS u/s 195 - withholding of tax - nature of payments made to Intelsat Global Sales & Marketing Ltd., UK on account of Transponder fee in terms of an agreement dated 29/12/2010 - Held that:- Relying on the judgment in the case of one of the payee, i.e. Intelsat Corporation US [2012 (9) TMI 1081 - DELHI HIGH COURT] we conclude that the assessee is not obligated to deduct tax at source on payments made for transponder services. Thus, on this aspect assessee succeeds. - Allowability of interest .....

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upra) on this aspect and decide the matter afresh and as per law. Thus, on this aspect assessee succeeds for statistical purposes. - ITA No. 1289/MUM/2016, ITA Nos.1290 to 1302, 1303 to 1308/MUM/2016, ITA Nos. 7303 to 7306/MUM/2016, ITA Nos. 264,266,269,270,272&273/MUM/2017 And ITA Nos.262,263, 265,267,268&271/MUM/2017 - Dated:- 9-2-2018 - SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER For The Appellant : Shri Madhur Agarwal And Jeegar Modi For The Respondent : Shri M.V. .....

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years namely, assessment years 2013-14 to 2016-17 and the grievance is against the similarly worded multiple orders of the CIT(A), which in turn arise from the separate orders passed by the Assessing Officer under section 195(2) of the Income tax Act, 1961 ( the Act ) of different dates. In all the appeals, the sum and substance of the dispute relates to the nature of the payment made by the assessee to M/s.Intelsat Global Sales and Marketing Ltd., UK and/or to M/s. Intelsat Corporation, USA (I .....

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er-alia, engaged in the business of entertainment, inasmuch as, it owns and manages the TV channel Hungama . This channel is canvassed to be the first Indian Entertainment channel for kids in Hindi with multi-genre localized & acquired content. The assessee company entered into a Transponder Service Agreement with Intelsat Global Sales & Marketing Ltd., UK to avail the transponder service. When the assessee was required to make remittance of transponder fee to Intelsat, it approached the .....

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that the payment to Intelsat attracted tax @10% plus applicable surcharge as it was in the nature of royalty. The CIT(A) has since affirmed the action of the Assessing Officer, against which the assessee is in further appeal before us. 4. Before us, the Ld. Representative for the assessee pointed out that similar issue had come up on an earlier occasion before the Tribunal when assessee was to remit payments in the earlier period in pursuance to the same agreement with Intelsat, and the Tribunal .....

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that the entire matrix has been fully dealt with, and, therefore, canvassed that the issue in the captioned proceedings is fully covered by the said precedent. 5. The Ld. Departmental Representative, on the other hand, did not controvert the factual matrix brought out by the Ld. Representative for the assessee, but pointed out that the CIT(A) has decided the issue by referring to a contrary view of the Tribunal in the case of Viacom 18 Media Pvt. Ltd. vs. ADT, 153 ITD 384(Mum) and he relied on .....

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on was drawn to the following discussion in para 10 of the order dated 28/11/2006(supra) in this regard:- 10. It is noted from the above that the bench relied upon various judgments including the judgment of Taj TV Ltd wherein decision relied upon by the Ld. DR in the case of Viacom.18 has been considered in detail. Apart from that the main point to be noted here is that the bench took note of a vital fact that Hon ble Delhi High Court in the case of payee, viz. M/s Intelsat Corporation, USA has .....

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the Tribunal in assessee s own case and, therefore, the issue raised in the appeal before us stands allowed in terms of earlier order of the Tribunal which shall apply mutatis mutandis on the issue raised in this appeal before us. Accordingly we hold that the assessee was not liable to deduct tax at source. 7. Having heard the rival stands, we find that the short issue before us relates to the nature of payments made to Intelsat Global Sales & Marketing Ltd., UK on account of Transponder fee .....

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re us i.e. Intelsat Corporation US, vide order dated 19/08/2011 and again reaffirmed by the Hon ble High Court vide order dated 28/09/2012 in ITA No.530&545/2012 following an earlier judgment of the Hon ble Delhi High Court itself in the case of Asia Satellite Communication Ltd., in ITA No.131/2003 dated 31/01/2011. As per the Tribunal, once it has been held in the case of Intelsat Corporation US, the payee itself, that the payments are not taxable in India; therefore, payer of such income i .....

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oticed that, in the case of the payee, i.e., Intelsat Corporation US, the Hon ble Delhi High Court vide order dated 19.08.2011 and then again reaffirmed vide order dated 28.09.2012 in ITA No. 530 & 545/2012, following the order of its own court in Asia Satellite Communications Ltd (ITA 131/2003 decided on 31.01.2011), have categorically held that payment received by Intelsat is not taxable in India under the provisions of Indo-US-DTAA. Once in the case of the payee it has been categorically .....

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to the issue of disallowance of various expenses under section 40(a)(i) like, transponder charges and up linking charges as raised in ground No.2(i) and 2(ii), it is seen that these, payments has been paid to PanAmSat International Systems Inc. USA for providing facility of transponder for telecasting Ten Sports channel in various countries including India. The assessee entered into an agreement with PanAmSat to utilize the transponder facility providing by the said US based company for telecas .....

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under section 195, disallowance under section 40(a)(i) has been made. The assessee s case before us is that, firstly, PanAmSat is a USA based company, therefore, Indo-US DTAA is applicable and since it does not have any PE or business connection in India, therefore, the payment made to a non-resident outside India for availing service of equipment placed outside India cannot be taxed in India. In support of such a contention decision of Hon ble Bombay High Court in the case of DIT vs. Set Satel .....

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ticle 12(7) such a royalty cannot be taxed in India, because it is not borne by PE or fixed place of the US company in India. The Ld. DR has strongly relied upon amended definition of the royalty under the Act, wherein, the scope and definition of royalty has been enlarged by the newly inserted Explanation (vi) and (vi) by the Finance Act, 2012 with retrospective effect from 01.06.1976 and has contended that the said definition is to be read into DTAA also, that is, the definition of royalty has .....

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d as a consideration for the use of or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, 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, including gains derived from the alienation of any such right or property which are con .....

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n from the Article alone and no definition under the domestic Act or law is required to be considered or seen or any amendment made in such definition whether retrospective or prospective which can be read in a manner so as to extend any operation to the terms as defined or understood in the Treaty. The Legislature or Parliament while carrying out amendment to interpret or define a given provision under the Domestic Law of the country cannot supersede or control the meaning of the word which has .....

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to any patent or trademark, design, secret formula or process. It is also not use or right to use any industrial, commercial, or scientific equipment. There is no such kind of right to use which is given by Pan Am Sat to assessee. Thus, the said payment does not fall within the ambit of the terms used in para 3 of Article 12. So far as the reading of amended definition of royalty as given in section 9(1)(vi) into treaty, Hon ble Delhi High Court in its latest judgment in the case of DIT vs. New .....

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ct pari material (in the absence of any contouring explanations), will continue to hold the filed 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 partners to incorporate income from data transmission services as partaking of the nature of royalty, or amend the definition in a manner so that such income automatically becomes royalty. It is reiterated that the Cour .....

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In a judgment by the Madras High Court in Verizon Communications Singapore Pte Ltd. V. The Income Tax Officer, International Taxation I, [2014] 361 ITR 575 (Mad), the Court held the Explanations to be applicable to not only the domestic definition but also carried them to influence the meaning of royalty under Article 12. Notably, in both cases, the clarificatory nature of the amendment was not questioned, but was instead applied squarely to assessment years predating the amendment. The crucial .....

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in Article 12 of DTAA . In the aforesaid decision, the Tribunal has taken note of the ratio and law upheld by the Hon ble Delhi High Court in the latest case of New Skies Satellite (supra) and Asia Satellite Telecommunications and has held that the payment made for transponder charges will not fall in the nature of royalty and also the scope of enlarged definition of royalty given in section 9(1)(vi) will not apply in DTAA. 8. Before us Ld DR has heavily relied upon the decision of Bombay High .....

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ioner 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 is party to an agreement to tax income which otherwise was not subject to tax. Such income would not be subject to tax under the expression laws in force . ********** ********* ********* While considering the Double Tax Avoidan .....

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9. It is essential to note the context in which this judgment was delivered. There, the Court was confronted with a situation where the word royalty was not defined in the German DTAA. Following from our previous discussion on the bifurcation of terms within the treaty, in situations where words remain undefined, assistance is to be drawn from the definition and import of the words as they exist in the domestic laws in force . It was in this context that the Bombay High Court held that they were .....

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s of circumstances. First, 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 seco .....

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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. Thus the contention of the Ld. DR cannot be accepted in view of clarification given by the Hon ble Delhi High Court that where the definition has been given in the Treaty then there is no requirement to look into domestic law or any amendment .....

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of one of the payee, i.e. Intelsat Corporation US, we find no reason to distract from the same in the instant year, since the facts and circumstances remain identical. In so far as reliance placed by the Ld. Departmental Representative on the decision of the Tribunal in the case of Viacom 18 Media Pvt. Ltd. (supra), the same has been appropriately dealt with by our Co-ordinate Bench in the assessee s own case in its order dated 28/11/2016(supra) and, therefore, the said argument of the Ld. Depar .....

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