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TMI Blog2025 (5) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the appeals and the corresponding assessment years are as under: - Sr. nos. ITXA A.Y. 1. 1378/2018 2013-2014 2. 725/2015 2011-2012 3. 763/2015 2012-2013 4. 797/2015 2012-2013 5. 800/2015 2013-2014 6. 1661/2014 2009-2010 7. 1662/2014 2010-2011 8. 1658/2014 2011-2012 3. On 29 January 2025, this Court admitted ITXA appeal No.1378 of 2018 on the following substantial questions of law: i. Whether on the facts and in the circumstances of the case and in law, the consideration paid for transponder services is assessable as "royalty" under Section 9 (1) (vi) of the Act and/or Article 12 of the India-USA DTAA? ii. Whether on facts and in the circumstances of the case and in law, the retrospective amendment in the Act by way of Explanations5/6 to Section 9 (1) (vi) of the Act can be read into the DTAA? iii. Whether on the facts and in the circumstances of the case and in law, the Appellant (payer) is required to deduct TDS under Section 195 of the Act from payment of transponder fees made to Intelsat Corp. even though the said payment is held to be not taxable in the hands of the payee (Intelsat Corp)? Brief facts: 4. On 25 July 2012, the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act as well as under the Treaty. 8. On 27 February 2015, the Commissioner of Income Tax (Appeal) disposed of the aforesaid appeal by upholding the order passed under Section 195 (2) of the Act. The Commissioner (Appeal) followed the order of the Tribunal in the Appellant's own case for AY 2009-10. 9. Being aggrieved by the order described above, the Appellant preferred an appeal to the Income Tax Appellate Tribunal on 18 June 2015. The said appeal was numbered as ITA 3776/M/2015. On 7 August 2017, the Tribunal dismissed the Appellant's appeal by relying upon its own order for earlier years and the decision of the Madras High Court in the case of Verizon Communications Singapore Pte Ltd. Vs Income Tax Officer, International Taxation-I (2013) 39 taxmann.com 70 (Madras). The Tribunal followed the decision of the Madras High Court and not the Delhi High Court in the case of Director of Income-tax Vs New Skies Satellite BV (2016) 68 taxmann.com 8 (Delhi). 10. It was against the above backdrop that the present appeal was instituted by the appellant, and it was admitted on 29 January 2025 on the substantial questions of law referred to above. Submissions of the Appellant-As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. ITXA 1655 OF 2018, 576 OF 2017, 591 OF 2017 AND 2129 OF 2011. 13. Mr. Agrawal, learned counsel for the Appellant in rejoinder submitted that for AY 2008-09, 2009-10 and 2010-11, there was 'Transponder Service Agreement' and based on such agreement and a copy of the order which is placed with the appeal memo, the application under Section 195 was processed. He, however, fairly admits that 'Transponder Service Agreement' is not annexed to the appeal memo. He, however, contended that nobody has disputed the nature of services and therefore there is no question of any remand to give the Revenue a second inning to improvise the impugned order. 14. Mr Agarwal, in the rejoinder, further submitted that even assuming the provisions of the Domestic Tax Law applies, then by virtue of Section 90 (2), since Explanation 6 cannot be made applicable in cases of withholding tax retrospectively, the Appellant-Assessee cannot be made liable for withholding tax. He further in rejoinder, relied upon the decisions cited above and strongly objected to the submission of the Respondent-Revenue on the matter being remanded for giving a factual finding on the nature of service and its ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Vs ITO (2014) 360 ITR 257. 19. Mr. Subir Kumar relied upon the written submissions in support of his arguments and submitted that the payments would constitute 'royalty' under the domestic law as well as under the treaty. In any case, in the alternative, he submitted that the matter be remanded back for factual determination of the nature of services rendered under the agreement which were prevailing for each of these years and its applicability to the meaning of the term 'royalty', since there is no factual determination by any of the authorities or the analysis of the agreement prevailing in the relevant assessment of by any of the authorities. Analysis & Conclusion:- 20. We have heard learned counsel for the Appellant and the Respondent and with their assistance have perused the documents brought to our notice. 21. Mr. Agrawal relying upon the Tribunal's order in the Appellant-Assessee's own case for AY 2015-2016 which is a subject matter of ITXA No. 1415 of 2019 submitted that since the Tribunal for that year has concluded that Intelsat Corporation was not liable to pay tax, there is no question of the Appellant-Assessee being fastened with withhol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reunder: Section 90. Agreement with foreign countries or specified territories. (1) ....... (2) Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, 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 apply to the extent they are more beneficial to that Assessee. Section 9. Income deemed to accrue or arise in India. (1) The following incomes shall be ........... (i) to (v) ................ (vi) income by way of royalty payable .............. Explanation 2-For the purpose of this clause, 'royalty' means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head 'capital gain') for- i. the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property ; ii. the imparting of any informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contingent on the productivity, use or disposition thereof; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8. 25. For the assessment year under consideration, AY 2013-14, the Appellant-Assessee entered into an agreement on 19 August 2011 with Intelsat Corporation. The agreement provides for the provision of 24 hour fixed-term preemptible satellite signal reception and re-transmission service by Intelsat to the Appellant-Assessee. This service was to be supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any analysis or discussion on the nature of services specified in the agreement and its applicability to the definition of 'royalty' under the Act and Article 12 (3) of the Treaty. 28. In our view, the present appeal is under Section 260A of the Act on substantial questions of law. It was incumbent upon the three authorities, i.e. the original authority and the appellate authorities, to have examined and analysed the nature of services as agreed upon by the parties in the agreement. It was also incumbent upon these authorities to thereafter give a finding of fact on this issue and then apply the definition of 'royalty' under the Act or under Article 12 (3) of the Treaty. How these services are covered by the Act or the Article 12 (3) is not discussed. There is an absence of foundational facts in the orders of all the three authorities on this issue. The orders are non-speaking orders. 29. This Court under Section 260A of the Act cannot take upon itself the factual determination of the nature of service. Any exercise by this Court on the factual determination, in the absence of the said exercise being carried out by three authorities below, would set a wrong precedent an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitute 'royalty' under the Treaty. 34. It was the claim of the Appellant-Assessee that they do not fall within the definition of 'royalty' under the Treaty, and in the absence of any permanent establishment of Intelsat in India, there is no liability to withhold tax. In our view, this issue is required to be answered by the authorities since the claim of the Appellant-Assessee is based on this submission, which has not been done by any of the authorities by analysing the agreement and ascertaining its applicability to the definition of 'royalty' under the Act or the Treaty. There is no finding by the authorities that Intelsat does not have a P. E. in India. 35. Therefore, in our view, it would be in the interest of justice, the issue whether the payments made for services rendered by Intelsat to the Appellant-Assessee under the agreement constitutes 'royalty' under the Act or the Treaty is remanded back to the CIT(A) to give finding on whether the services are in the nature of that specified in the Act or Article 12 (3) and whether Intelsat has a permanent establishment in India. The appellate authority is directed to examine the agreement and the definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars 2008-2009, 2009-2010, and 2010-2011. However, Mr Agrawal attempted to justify the retrospective operation of 2011 agreement. 39. Mr. Agrawal in response to the above issue submitted that for the years prior to 2012-2013, there was a transponder service agreement and the customers order which is annexed to the appeal for the years prior to A.Y. 2012-2013 and which was the basis for making application under Section 195 (2) of the Act. He, however, fairly admits that the transponder service agreement for the assessment years prior to 2012-2013 is not annexed to the appeal memo. In our view, if the case of the Appellant-Assessee is that the payments made under such transponder service agreement is not a 'royalty', then it would be necessary that such an agreement ought to have been annexed to the appeal memo. We also observe that the original authority and the appellate authorities have not examined this transponder service agreement to conclude that the payments constitute 'royalty' either under the domestic law or under the Treaty. Since we are remanding the matter back as observed above, we direct the authorities to examine this agreement and give a factual find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he file of the CIT(A). Both the parties would be entitled to rely upon the case laws and any other material in support of their submissions before the CIT(A). Since we are not adjudicating the issue on merits, we refrain from dealing with the precedents and the commentaries relied upon by both parties. 44. The CIT(A) is requested to dispose of the appeals as expeditiously as possible and in any case on or before 31 December 2025. We make it clear that we have not expressed any opinion on the merits of the case and on the applicability of Article 12 (3) to the nature of services under consideration is concerned. It would be open to the Appellant-Assessee and the revenue to raise all the contentions on the taxability under the Act and the Treaty. None of our observations in the present order should be considered as our views or findings on the adjudication under the Act or Article 12 (3) of the Treaty on merits. 45. In view of the above, we remand the appeals back to the file of the CIT(A) with the following directions:- (i) If the Appellant-Assessee is able to show that there is a final determination of no taxability in the hands of Intelsat Corporation on payments made by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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