Royalty under DTAA cannot be widened by domestic amendment, and satellite transponder receipts were not royalty.

Receipts for the use or right to use satellite transponders for telecommunication services were treated as not constituting royalty, following settled authority that such consideration falls outside that characterisation. The court also held that the Finance Act, 2012 amendment to the Income-tax Act could not expand the meaning of royalty under Article 13 of the India-UK DTAA, because the treaty definition continued to govern the tax treatment of the receipts. The Revenue's challenge therefore failed, and the receipts remained outside royalty taxation under the applicable treaty framework.

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Issues: (i) Whether receipts from the use or right to use satellite transponders for providing telecommunication services constitute royalty; (ii) Whether the definition of royalty under the Income-tax Act as amended by the Finance Act, 2012 expands the scope of royalty under Article 13 of the India-UK DTAA.

Issue (i): Whether receipts from the use or right to use satellite transponders for providing telecommunication services constitute royalty.

Analysis: The receipts were held to be covered by the settled line of authority that consideration for use or right to use satellite transponders for telecommunication or satellite services does not amount to royalty. The view taken by the Tribunal was consistent with prior decisions which had already negatived the Revenue's contention on the character of such receipts. No substantial question of law arose on this issue.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Issue (ii): Whether the definition of royalty under the Income-tax Act as amended by the Finance Act, 2012 expands the scope of royalty under Article 13 of the India-UK DTAA.

Analysis: The amended domestic definition could not enlarge the scope of the term royalty in the treaty. The treaty definition continued to govern the taxability of the receipt under Article 13, and the domestic amendment did not alter the meaning of royalty under the DTAA. No substantial question of law arose on this issue.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Final Conclusion: The Revenue's challenge failed because the disputed receipts were not royalty under the applicable treaty framework and the domestic amendment did not enlarge the treaty meaning of royalty.

Ratio Decidendi: For treaty-covered income, the meaning of royalty under a DTAA cannot be expanded by a later domestic amendment, and consideration for use or right to use satellite transponders for telecommunication services does not constitute royalty.

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