Transponder charges are not royalty where the DTAA is unamended, so withholding tax is not required on satellite facility payments.

Transponder charges paid to non-resident satellite operators were treated as not constituting royalty under section 9(1)(vi) and the applicable DTAA, so tax was not required to be withheld under section 195. The analysis followed binding precedent that payments for satellite transponder facilities do not fall within royalty, and that a domestic-law amendment cannot expand an unamended treaty definition unless the treaty itself is revised. On that basis, the existing appellate relief in favour of the assessee was maintained and the Revenue's challenge failed.

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Issues: Whether transponder charges paid to non-resident satellite operators constituted royalty under section 9(1)(vi) of the Income-tax Act, 1961 and the relevant DTAA, so as to require deduction of tax at source under section 195(2).

Analysis: The issue was covered by binding precedent holding that payments for transponder facility do not amount to royalty. The Court noted that the jurisdictional High Court had already applied the Delhi High Court decisions in Asia Satellite and New Skies Satellite and had held that transponder charges are not taxable as royalty, even after the insertion of Explanation 6 to section 9(1)(vi). It was further accepted that domestic-law amendments cannot be read into an existing treaty so as to enlarge the treaty definition of royalty unless the treaty itself is amended. In view of the binding decisions and the identical nature of the payments, no interference was called for with the appellate orders.

Conclusion: The payments for transponder services were not royalty, and the assessee was not liable to deduct tax at source on such payments.

Final Conclusion: The Revenue's appeals failed and the appellate relief in favour of the assessee was sustained on the question of withholding tax on transponder charges.

Ratio Decidendi: A domestic amendment expanding the meaning of royalty under the Income-tax Act, 1961 cannot enlarge an unamended DTAA definition, and transponder charges for satellite facility do not constitute royalty absent treaty coverage.

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