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2018 (2) TMI 971

ying 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 u/s 244A on refund arising due to extra deposit of TDS u/s 195 - Held that:- It was a common point between the parties that the said issue was also before the Tribunal in the past, and vide order [2016 (12) TMI 1338 - ITAT MUMBAI], the same has been sent back to the file of Assessing Officer to decide in the light of the CBDT Circular No.11 of 2016 dated 26/04/2016. Following the aforesaid precedent, in this year too, we direct the Assessing Officer to follow the earlier order of the Tribunal(supra) 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 - 9-2-2018 - SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDI .....

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ment dated 29/10/2010 was in the nature of royalty as per the provisions of the Act as well as under the India-UK Double Taxation Avoidance Agreement (DTAA). Accordingly, the Assessing Officer held 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 vide order in ITA No.2841/Mum/2012& others for assessment year2011-12 dated 25/10/2016 upheld the assessee s point of view that the fee for transponder service paid by the assessee to Intelsat was not in the nature of royalty and that the same was not taxable in India, and thus the remittance did not warrant any deduction of tax at source. At the time of hearing, the Ld. Representative for the assessee has taken us through the decision of the Tribunal dated 25/10/2016(supra) and pointed out t .....

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e of payments made to Intelsat Global Sales & Marketing Ltd., UK on account of Transponder fee in terms of an agreement dated 29/12/2010. The Tribunal vide its order dated 25/10/2016(supra)has perused and enumerated the terms and conditions of the service agreement dated 29/12/2010, and has considered its nature in the context of the provisions of the Act as well as the India-UK DTAA and has concluded that the payments are not in the nature of royalty. In coming to such decision, reliance has been placed mainly on the judgment of the Hon ble Delhi High Court in the case of the payee before 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.e. assessee before us, was not obligated to deduct tax at source. For the said reason, the Tribunal q .....

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nder 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 Satellite (supra) has been relied upon. In any case, it has been submitted that, even otherwise also the definition of royalty under Article 12(3) of Indo-US-DTAA is also not applicable, because transponder charges is only use of facility and it is not an equipment and does not amount to use of any copyright effecting work, secret formula, process etc or any other term described in para 3 of Article 12. The Ld. CIT(A) has held that it is not a royalty and secondly, even otherwise also by virtue of Article 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 .....

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t of transponder charges to PanAmSat and up linking charges cannot be treated as a consideration for use or right to use any copyright of various terms used in para 3(a) like 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 or in any manner relates 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 Skies Satellite(supra), wherein it has considered Hon ble Madras High Court decision in the case of Verizon Communications Singapore Pte Ltd. (supra) also, have discussed the issue threadbare and came to the conclusion in the following manner:- 60. Consequently, since we have held that the Finance Act .....

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ellite 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 Court in the Siemens AG to contend that nowhere the Court has laid down that amendment in the Domestic Law cannot be read into Treaty rather it is otherwise. We find that in the latest decision the Hon ble Delhi High Court in the case of DIT vs. News Sky Satellite BV (Supra) 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 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 .....

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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. 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 made therein. In view of the aforesaid decisions, we hold that the payment made by the assessee to Intelsat is not taxable as royalty in India and, therefore, assessee was not required to deduct TDS or withhold any tax on such payments. This proposition has been upheld by Hon ble Supreme Court in the case of GE Technology Centre, 327 ITR 456 Following the aforesaid precedent and considering that the same has been rendered after relying on the judgment of the Hon ble Delhi High Court in the case of .....

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