Transponder service receipts were not royalty under the treaty, and retrospective domestic amendments could not override it.

Receipts from transponder services were held not to constitute royalty under Article 12 of the India-Thailand DTAA because the customer did not obtain control or possession of the satellite equipment or any secret process. The domestic retrospective Explanations to section 9(1)(vi) could broaden taxability under the Income-tax Act, but they could not unilaterally alter an already existing treaty definition of royalty. The treaty text therefore continued to govern, and the receipts were not taxable in India on that basis.

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Issues: Whether receipts from transponder services were chargeable to tax in India as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-Thailand Double Taxation Avoidance Agreement, and whether the retrospective amendments to section 9(1)(vi) altered the treaty position.

Analysis: The receipts were examined in the light of earlier binding judicial interpretation that transponder capacity payments did not amount to royalty because the customer did not obtain control or possession of the satellite equipment or any secret process. The subsequent Explanations introduced to section 9(1)(vi) by the Finance Act, 2012 could enlarge domestic taxability, but they could not be read into a pre-existing treaty term so as to amend the treaty unilaterally. The definitions of royalty in the Act and the treaty were treated as pari materia only up to the point where the treaty text itself remained unamended; once the treaty expressly defined royalty, domestic amendments could not control that definition.

Conclusion: The receipts from transponder services were not royalty under Article 12 of the India-Thailand Double Taxation Avoidance Agreement and were not taxable in India on that basis. The retrospective amendment to section 9(1)(vi) did not alter the treaty position.

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