AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2022 (8) TMI 1446
X X X X Extracts X X X X
X X X X Extracts X X X X
....). Assessee is engaged in the business of providing telecommunication services. The assessee received charges from Tata Communication Limited (earlier known as VSNL). The assessee before the Assessing Officer submitted that in earlier year the receipts from Tata Communication Limited have been taxed as Royalty income, however, assessee contested the above issue in appeal and ITAT has decided the issue in favour of the assessee as not taxable as Royalty in the hands of the assessee. The Assessing Officer issued the show cause notice asking the assessee to file the submissions, how the facts of the assessee are different this year. Accordingly, assessee filed their submissions vide letter dated 11.02.2021, the same is reproduced below: - "1. Inmarsat is a company incorporated and registered under the laws of the United Kingdom (UK). Inmarsat is a tax resident of UK for the purpose of the Double Taxation Avoidance Agreement between India and UK ('India-UK Tax Treaty'). 1. In connection with the above, it is submitted that Inmarsat is engaged in the business of providing telecommunication services. Inmarsat has entered into an agreement with TCL for providing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the decision of the Hon'ble Karnataka High Court it is noted having been rendered on 9th June 2014 did not have the benefit of the view taken by the Hon'ble Delhi High Court in the order of the Coordinate Bench in Viacom 18 the benefit of the said decision was not available and in the said decisions relied upon by the Revenue, the similarity of the peculiar facts of AAR's ruling in ISRO as considered by the Hon'ble Delhi High Court was not considered. Thus the lone ITAT decision cited by the learned CIT-DR of the Mumbai Tribunal it has been noticed did not have the benefit of the decisions of the Hon'ble Delhi High Court and in fact relies on the order of the Special Bench of the ITAT and the position of law as was then available. Accordingly, in view of the preponderance of the consistent views of Coordinate Benches the appeals of the assessee are allowed." 1. Your goodself would observe that the Honourable ITAT has categorically held that the amounts received by Inmarsat from TCL are not taxable in India as Royalty. Copy of the said ITAT order is submitted to your goodself vide letter dated 18 November 2020. 1. While adjudicating the issue o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry evidences issued by Inmarsat to TCL for the same. In the past, we have repeatedly invited your goodself's attention to the fact that SSMS is no longer present in India. However, your goodself have ignored the said fact and held that SSMS constitute PE of Inmarsat in India. Accordingly, it is once again requested to your goodself to consider the fact that SSMS was not present in India during the previous year. Accordingly, the question for Inmarsat having a PE in India on account of the SSMS does not even arise during the captioned AY. It is also submitted that the SSMS was not used for the Land Earth Station Operator ("LESO") Agreement with TCL. In other words, SSMS was not used for the purpose of provision of telecommunication services (as per the LESO agreement) to TCL. The AO has also alleged that Inmarsat had a PE on account of the presence of its Liaison Office ('LO) in India. In this regard, it is submitted that all the activities of the LO are in accordance with the Reserve Bank of India's approval. However, it is submitted that during the year under consideration, the LO has not undertaken any activities in India. Additionally, it i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... with respect to taxability of transponder service has undergone severe changes over the years. The decisions relied upon by the Assessee are rooted in pre-amendment or years in which the scope of effect of retrospectiveness of such amendments are questioned. Further, In the A.Yrs. 2015-16 & 2016-17, The Hon'ble DRP1 has passed its direction u/s 144C(5) vide order dated 04.09.2018 & 23.08.2019 respectively and the confirmed the order of the A.O. The Department has not accepted the decision of the Hon'ble ITAT for A.Y. 2000-01 to A.Y. 2005-06 and A.Y. 2007-08 to 2012-13 and has filed appeal in High Court wherever the Tax Effect is more than the prescribed monetary limit, in view of Circular No. 3 of 2018 dated 11.07.2018, read with F.No. 279 /Misc.142/2007 ITJ(Pt) dated 20.08.2018 and Circular 17 of 2019 dated 08/08/2019. 7. Taxability as per IT Act. 1961: However, in the present year, the provisions are in place. As per Income Tax Act, 1961, Section 9(vi), clearly states that the services rendered by Assessee are taxable as royalty, which is reproduced as under: "income by way of royalty payable by- (a) the Government; or (b) a person who....
X X X X Extracts X X X X
X X X X Extracts X X X X
....)" Hence, as per the mere reading of the Act it is clear that the services rendered by Assessee clearly is hit by provisions of the Act. 8. Taxability as per the DTAA - The services rendered by the Assessee is also taxable as per the treaty for the following reasons: 1. Article 3(2) of both DTAAS state that in the course of application of the treaty, any term not defined in the treaty, shall, have the meaning which is imputed to it in the laws in force in that State relating to the taxes which are the subject of the Convention. 2. Royalty as per Article 13 of India UK is defined as under. "(a) Payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic or scientific work, including cinematography films or work on films, 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; and (b) Payments of any kind received as consideration for the use of, or the right to use, a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons Nos. 1 to 7 made by the assessee. Accordingly, Assessing Officer passed the final Assessment Order sustaining the additions made by the Assessing Officer in the draft Assessment Order. 6. Aggrieved assessee is in appeal before us raising following grounds in its appeal: - "On the facts and in the circumstances of the case and in law, the learned DRP and the learned AO has Ground number 1 erred in determining the total income of the Appellant at Rs 5,32,74,538 instead of 'Nil' income as declared by the appellant in the return of income; Ground number 2 erred in holding the amounts received by the Appellant from Tata Communications Limited (TCL) (earlier known as Videsh Sanchar Nigam Limited (VSNL)] to be 'Royalty as defined under Article 13(3)(a) of the Double Taxation Avoidance Agreement between India and United Kingdom ('India UK Tax Treaty'); Ground number 3 erred in not following the decision of the jurisdictional Mumbai Tribunal in the Appellant's own case for previous Assessment Years (AY) 2000-01 to AY 2005-06 and AY 2007-08 to AY 2012-13, AY 2013-14 to AY 2014-15, AY 2015-16 and AY ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct Ground number 12 The learned AO has erred in levying interest amounting to Rs.25,03,878 under section 234B of the Act. Ground number 13 The learned AO has erred in initiating penalty proceedings under Section 270A of the Act. The Appellant craves leave to add, alter, omit or substitute at any time before or at the time of the appeal, to enable accordance with law." 7. At the time of hearing, Ld. AR submitted a chart with the submissions that all the grounds raised by the assessee are covered in favour of the assessee. Further, he submitted that assessee has raised Ground No. 6 on the issue of Permanent Establishment. However, he submitted that the Assessing Officer has not given any finding with regard to this issue, however, Ld.DRP has given a finding in this regard. However, bench rejected the submissions of the assessee with regard to Ground No. 6. Since this issue is not coming out of the Assessment Order we cannot give any finding on this ground, accordingly, this ground is infructuous. Accordingly, Ground No. 6 is dismissed. 8. On the other hand, Ld. DR relied on the orders of the Ld. DRP. 9. We shall adjudicate with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see's own case in earlier years has granted relief to the assessee. We find the submissions of the Ld. AR are realistic and the Ld. AR also referred to the DTTA between India-UK Tax Treaty and decision of the Hon'ble Tribunal for the A.Y 2015-16, wherein this disputed issues have been dealt. The Hon'ble Tribunal in assessee's own case in ITA No. 7025/Mum/2018, for the A.Y 2015-16 dated 23.10.2020 has observed at page 31 to 41 para 8 to 11 of the order as under: "8. We shall first deal with the claim of the assessee that the amounts received from providing Satellite Telecommunication Services to TCL (earlier known as Vidhesh Sanchar Nigam Limited) (VSNL) were not to be treated as royalty under Sec.9(1)(vi) of the Act and Article 13 of the India-U.K. Tax Treaty. As observed by us hereinabove, it was the claim of the assessee before the lower authorities that the issue that the amounts received by it from TCL were not to be held as royalty was squarely covered by the order passed by the Tribunal in its own case for A.Y. 2000-01 to A.Y. 2005-06, vide its consolidated order dated 14.07.2017. In the course of the hearing of the appeal the ld. Authorized Representative (for short....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be not taxable in India; however, the Assessing Officer has taxed the same as Royalty under the Act as well as in terms of the IndiaUK Double Taxation Avoidance Agreement (in short "India-UK DTAA"). The stand of the assessee has been that its receipts from TCL are in the nature of "business profits" covered by Article 7 of the India-UK DTAA and, in the absence of any PE in India, the same are not taxable in India. It was a common ground between the parties that the manner in which the services have been rendered by the assessee in the instant year is similar to the manner in which the services have been rendered in the past years. Broadly speaking, the following fact-situation asserted by the assessee before the Assessing Officer brings out the mechanics of the manner in which the assessee is providing telecommunication services from outside India and deriving its earning from TCL, the same is reproduced below :- "2.1 Background Inmarsat is engaged in the business of providing telecommunication services from outside India. The aforesaid nature of services essentially involves making available a channel (frequency) in air through which the communication signals are transmi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sy, it has been pointed out before us that the Tribunal vide its order in ITA Nos. 5102/Mum/2004 & others dated 14.07.2017 in the context of Assessment Years 2000-01 to 2005-06 has evaluated the rival stands and have disagreed with the stand of the Revenue that the nature of receipt was Royalty. At the time of hearing, the learned representative for the assessee has taken us through the detailed decision made by the Tribunal in its order dated 14.07.2017 (supra), whose relevant portion we are tempted to reproduce as under :- "10. We have heard the rival submissions and perused the material available on record. We find that the material facts of the present case are largely identical to the facts as considered by AAR in the ruling in the case of ISRO Satellite Centre(2008) 307 ITR 59 (AAR). We note that the reasoning and conclusion on facts similar to the facts in the present proceedings with ISRO which has been followed after a detailed discussion and in fact extracted by the Hon'ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd. (2011) 332 ITR 340(Del.). We note that no arguments have been advanced by the Revenue to rebut the assessee's arg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the issue in no doubt about the view favoured. Accordingly we quote here the decision of the Hon'ble Delhi High Court in DIT vs. New Skies Satellite BV cited supra to support the conclusion why the consistent orders of the ITAT on the issue are being followed:- "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 expression "laws in force". ...... ....... While considering the Double Tax Avoidance Agreement the expression "laws in force" would not only include a tax already covered by the treaty but would also include any other tax as taxes of a substantially similar character subsequent to the date of the agreement as set out in article I(2). Considering the express language of article I(2) it is not possible to accept the broad proposition urged on behalf of the assessee that the law would....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h the petitioners and in the light of our preceding analyses, discern no textual, grammatical or syntactic ambiguity in Article 14(5), warranting an interpretive recourse. In the circumstances, invoking provisions of Article 3(2) by an artificial insemination of ambiguity (to accommodate an expanded meaning to the DTAA provision), would be contrary to good faith interpretation. A further problematic of contriving an ambiguity to unwarrantedly invite application of domestic law of a contracting State would be that while India would interpret an undefined DTAA provision according to the provisions of the Act, France could do so by reference to its tax code. As a consequence, the purpose of entering into a treaty with a view to avoiding double-taxation of cross-border transactions would be frustrated." 51. Pertinently, this Court in Director of Income Tax v Nokia Networks, 2013 (358) ITR 259 specifically dealt with the question of the effect of amendments to domestic law and the manner of their operation on parallel treaties. The Court delivered its judgment in the context of the very amendments that are in question today; the Explanations to Section 9(1)(vi) vis a vis the in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther words, are not empowered to legally strike down such action, as they cannot dictate the executive action of the State in the context of an international treaty, unless of course, the Constitution enables them to. That being said, the amendment to a treaty is not on the same footing. The Parliament is simply not equipped with the power to, through domestic law, change the terms of a treaty. A treaty to begin with, is not drafted by the Parliament; it is an act of the Executive. Logically therefore, the Executive cannot employ an amendment within the domestic laws of the State to imply an amendment within the treaty. Moreover, a treaty of this nature is a carefully negotiated economic bargain between two States. No one party to the treaty can ascribe to itself the power to unilaterally change the terms of the treaty and annul this economic bargain. It may decide to not follow the treaty, it may chose to renege from its obligations under it and exit it, but it cannot amend the treaty, especially by employing domestic law. The principle is reciprocal. Every treaty entered into be the Indian State, unless self-executory, becomes operative within the State once Parliament p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n by the Coordinate Benches and respectfully following the same conclude that the appeals of the assessee are to be allowed. For ready reference we extract from one of the decisions cited before us. We reproduce the relevant extract from the decision in the case of Alcatel Lucent USA Inc. being the most latest in point of time hereunder: - "5. We have heard the rival submissions and perused the material before us. We find that the basic issue to be decided is as to whether the payments received by the assessee from Reliance can be taxed as royalty in view of the amendment to section 9(1)of the Act. It is said that a DTAA is a result of negotiations between two countries as to the extent to which special concessional tax provisions can be made notwithstanding that there might be a loss of revenue. A plain reading of section 90(2) of the Act makes it clear that the provisions of the DTAA would prevail over the Act unless the Act is more beneficial to the assessee. Therefore, except to the extent a provision of the Act is more beneficial to it, the DTAA will override the Act. This is irrespective of whether the Act contains a provision that corresponds to the treaty provision....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by virtue of Article 3(12) of the modern treaties; v)Section 9(1)(vi) up to and including Explanation 2 are substantive provisions as inserted by Finance Act 1976 and thereafter, Explanation 3 to 6 are only clarificatory provisions inserted subsequently; and vi) It is not disputed by the revenue that the provisions of DTAA if beneficial to the assessee shall be preferred over the provisions of the Income-tax Act. He further submitted that, the Hon'ble Bombay High Court decision in the case of Siemens Aktiongesellschaft (supra) would reveal that, i) Nowhere in the said order, the High Court has held that Amendments/Explanations cannot be read into DTAA as it was not question before the Hon'ble High Court; ii) The natures of services rendered in the said case were found to be not Royalty under the DTAA though found to be Royalty under the Act. Those services were found to fall under the expression "commercial or industrial profits" as per the then DTAA (Old) and therefore could not be taxed in India in absence of PE. The provisions of DTAA being the beneficial to the assessee were preferred over the provisions of the Income-tax Act; iii) In paras 13, 22 and 28 of its order, the Hon'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the said software by making it assessable through servers located at Belgium. The Branch sends its data to the Belgium server from where the data gets processed as per the requirement of the banking operations. As per the terms of agreement between the Branch and the Head Office for the usage of software by the Branch, which has been incorporated above, it is evident that the Head Office only has the non-exclusive non- transferrable rights to use the computer software brought for personal use and clause 16 of the said agreement specifically provides that the Head Office does not have any right to assign, sub-license or otherwise transfer the license of this agreement. Thus, the payment by the Branch for use of computer software is not the right in the copy right but only for doing the work from the said software which subsist in the copy right of the software. The branch is using the computer software and the I.T. resources installed at Belgium for which the payment is made by the Head Office towards the use of such software license. Since the Branch is using the same software for the purpose of business operations, the Head Office allocates the said expenditure on a prorata basis ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent has to be made in consideration thereof. It is not the case of the Revenue that the Head Office has provided any copy right of software or any copyrighted article developed by the Head Office for the exclusive use of the assessee for, which the assessee is making the payment along with the mark-up exclusively for the purpose of royalty. If the payment for license for the software which is installed in the Head Office is being made by the Head Office, then any allocation of cost and reimbursement thereof by the Branch to the Head Office cannot be termed as independent payment for the purpose of royalty. To fall within the ambit of "royalty" under Article, the payment should be exclusively qua the use or the right to use the software exclusively by the Branch. The character of the payment under the royalty transactions depends upon the rights that the transferee acquires in relation to the use and exploitation of the software programme. Here, there is no such right which has been acquired by the Branch in relation to the usage of software, because the Head Office alone has the exclusive right of the license to use the software. Thus, the reimbursement of the data processing cost ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....data processing. Be that as it may, even if stand of the revenue is to be upheld and it is to be concluded that the payment is made for software per se, that does not lead to taxability of receipt in the hands of the Australian company either. It is also by now settled that the payment for software is for a copyrighted article and not copyright per se, and, therefore, is not covered by the scope of payment for copyright. The authority for this proposition is contained in Special Bench decision in the case of Motorola Inc. v. Dy. CIT (2005) 95 ITD 269 (Del)(SB), Samsung Electronics Company Ltd. v. ITO (2005) 94 ITD 91 (Bang), and Lucent Technologies Hindustan Ltd. v. ITO (2005) 92 ITD 366 (Bang). It is not even the revenues case that the payment in question is not (sic) for the use of, or right to use of, patent, design or model, plan, secret formula or process, or trade mark. In any event, having perused these classifications and having considered the facts before us, we are of the considered view that the payment does not fit into any of these classifications. It is, however, contended that the impugned payment is covered by the residuary clause, i.e., "other like property or righ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he segment of this economic activity and consider that amount in isolation, for the purpose of deciding character of that amount. Therefore, neither the impugned payment can be said to be towards use of, or right to use of, the mainframe computer, nor is it permissible to allocate apart of the impugned payment, as attributable to use of, or right to use of, mainframe computer. Accordingly, the provisions of article 12(3)(b) cannot have any application in the matter." 18. Insofar as the reliance placed by the learned Departmental Representative on the decisions of the Madras High Court and also the scope of "royalty" as given in Explanation 4 and 5 to section 9(1)(vi) brought in statute by the Finance Act, 2012 are concerned, we find that the same is not tenable for the reason that once the assessee has opted for the benefit of the DTAA, then there is no requirement for resorting to the definition and the scope of "royalty" as given in section 9(1)(vi).The said amendment cannot be read into the treaty and will not influence the definition of "royalty", as given in Article 12(3). This proposition is squarely covered by the decision of the Bombay High Court in Siemens Aktiong....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to tax. Such income would not be subject to tax under the expression "laws in force". While considering the Double Tax Avoidance Agreement the expression "laws in force" would not only include a tax already covered by the treaty but would also include any other tax as taxes of a substantially similar character subsequent to the date of the agreement as set out in article 1(2). Considering the express language of article 1(2) it is not possible to accept the broad proposition urged on behalf of the assessee that the law would be the law as applicable or as define when the Double Tax Avoidance Agreement was entered into." 49. It is essential to note the context in which this judgment was delivered. There, the Court was confronted with a situation where the word royalty was not defined in the German DTAA. Following from our previous discussion on the bifurcation of terms within the treaty, in situations where words remain undefined, assistance is to be drawn from the definition and import of the words as they exist in the domestic "laws in force". It was in this context that the Bombay High Court held that they were unable to accept the assesse's contention that the law appl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....decision especially when same is covered by the orders for the earlier years. Considering the above and respectfully following the orders of the Tribunal in the cases of Antwerp Diamond Bank NV Engineering Centre (supra) and Antwerp Diamond Bank NV(supra), we decide the effective ground of appeal in favour of the assessee. 10.2 In view of the above reasoning on facts and law we find that the judicial precedent as cited before us and as discussed and considered at length by the Hon'ble Delhi High Court in facts as upheld in the ruling of AAR in the case of ISRO (supra) is also found supported by the Hon'ble Jurisdictional High Court supports the view taken and the decision of the Hon'ble Madras High Court stands considered and the decision of the Hon'ble Karnataka High Court it is noted having been rendered on 9th June, 2014 did not have the benefit of the view taken by the Hon'ble Delhi High Court in the order of the Coordinate Bench in Viacom 18 the benefit of the said decisions was not available and in the said decisions relied upon by the Revenue, the similarity of the peculiar facts with the facts of AAR's ruling in ISRO as considered by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....case for the A.Y. 2017-18, we allow the ground raised by the assessee in this regard. 15. Ground No.3 is general in nature, accordingly, the same is dismissed. 16. Coming to Ground No. 4, Ld. Counsel for the assessee submitted that Assessing Officer and the ld. DRP erred in holding that a unilateral amendment of the term 'process' under the Act would get imported into the definition of 'royalty' given under Article 13 of India-UK tax treaty. Ld.AR brought to our notice that similar ground which assessee has raised before the Coordinate Bench in ITA.No. 3213/Mum/2008 for the A.Y.2005-06 and the Coordinate Bench has considered and adjudicated the issue in favour of the assessee and she brought to our notice Para No. 10.2 of the order. 17. Ld. DR fairly agreed that the issue is covered in favour of the assessee. 18. Considered the rival submissions and material placed on record, we observed that similar issue was considered and adjudicated by the Coordinate Bench in assessee's own case for the A.Y. 2005-06 and decided the issue in favour of the assessee and observed as under: - "10.2 In view of the above reasoning on facts and law we find that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appropriately. Ld. Counsel for the assessee brought to our notice that similar grounds which assessee has raised before the Coordinate Bench in ITA.No. 1031/Mum/2021 for the immediately preceding assessment year i.e. A.Y.2017-18 and the Coordinate Bench has considered and adjudicated the issue in favour of the assessee and he brought to our notice Para No. 7 to 9 of the order. Copy of the order is placed on record. 22. Ld. DR fairly agreed that the issue is covered in favour of the assessee. 23. Considered the rival submissions and material placed on record, we observed that similar issue was considered and adjudicated by the Coordinate Bench in assessee's own case for the A.Y. 2017-18 and decided the issue in favour of the assessee. While holding so the Coordinate Bench held as under: - "7. We find that these issues are also covered in favour of the assessee by orders of the coordinate benches in assessee's own case in the preceding years. We may in this regard referred to the following observation made by the co-ordinate bench vide order dated 23.10.2020 in the order for the assessment year 2015-16. 11. As the facts and the issue involved in the case before u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a PE in India on two grounds, viz. (i) that the Liaison Office (LO) of the assessee constituted its PE in India; and (ii) that the Land Earth Stations (LES) constituted a PE of the assessee in India. We find that the factual position pertaining to the aforesaid two aspects on the basis of which a view had been taken by the lower authorities that the assessee had a PE in India remains the same as was there in the preceding years, and had been looked into by the Tribunal at length while disposing off the appeals of the assessee for the said respective years. In fact, a perusal of the order of the DRP reveals that the view taken by the A.O that the assessee had a PE in India was endorsed by the DRP, for the reason, that its predecessor panel had while disposing off the assessee's objections for A.Y. 2014-15 upheld the AO's order. In the backdrop of the aforesaid facts, we are of the considered view that the basis and the facts therein involved for concluding that the assessee had a PE in India during the year under consideration had not witnessed any change as in comparison to the facts which were there in its case for the preceding years. On a perusal of the order of the Tribunal for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee in India and not given any finding on the aspect of location of SSMS equipment. As per the DRP, the activities of the liaison office could not be "considered to be preparatory and ancillary, as the basic job of the office to act as a fixed place with respect to the final agreements being entered into by the clients like ISRO, VSNL with the assessee". For the said reason, the DRP affirmed the stand of the Assessing Officer that there existed a PE of the assessee in India. 11. Against the aforesaid, the learned representative for the assessee vehemently pointed out that since beginning and upto the Assessment Year 2006-07, there has been no finding by the income-tax authorities that either the liaison office or the SSMS equipment constituted a PE in India although the arrangement with VSNL/TCL was the same as in the instant years. On the point of law, the learned representative for the assessee relied on the judgment of the Hon'ble Delhi High Court in the case of DIT vs Mitsui & Co. Ltd., [2017] 84 taxmann.com 3 (Delhi) to point out that the onus was on the Revenue to show that any activity in the nature of business or trading was carried out in the liaison of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stence of liaison office whereas for Assessment Years 2010-11 to 2012-13, the DRP has based its decision on the existence of liaison office as well as the use of LES by the assessee for providing services. In this manner, the ld. DR has defended the stand of the lower authorities. 15. We have carefully considered the rival submissions. Factually speaking, it is seen that the assessee has a liaison office in India which has been initially permitted by the RBI under the relevant provisions of Foreign Exchange Regulation Act, 1973. In fact, initially the permission to set-up a liaison office was granted on 20.10.1999 for a period of three years, subject to certain terms and conditions. One of the specific condition was that the liaison office shall only undertake liaison activities, i.e. to act as a communication channel between the Head office and the parties in India. The condition imposed by the RBI specifically prohibited the liaison office from undertaking any other activity of trading, commercial or industrial nature. The liaison office was also, inter-alia, prohibited from entering into any business contract in its own name. It further prescribed that the liaison offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stence of a PE in para 11.1 of his order based on the existence of liaison office and the location of SSMS equipment owned by the assessee. We find that apart from making bald assertions that the activity of the liaison office cannot be "mere liasioning", no other specific point has been made out by the Assessing Officer. The Assessing Officer also notes that the liaison office "is performing functions which are much more than liasioning nature", so however, we do not find even an iota of evidence referred to by the Assessing Officer in this regard. In fact, in the course of hearing, a question was put across to the parties as to whether during the assessment proceedings this aspect was specifically show caused to the assessee or not? The learned representative for the assessee submitted that after receipt of the draft assessment order, assessee had raised objections before the DRP in the following manner: 4.1 The Assessee has a SSMS located in India at VSNL's Land Earth Station ("LES") at Arvi. The purpose of the SSMS is to provide a degree of surveillance capability to the Inmarsat Network Operations Centre in the UK whereby the Assessee can monitor the transmitted power....
X X X X Extracts X X X X
X X X X Extracts X X X X
....P, in our view, has also not referred to any specific instances in the functioning of the liaison office to point out that it was rendering services which could be construed as being a PE in India. Considering the orders of the authorities below as well as the material led by the assessee before the lower authorities, in the present case, it is safe to deduce that the Revenue has failed to discharge its burden of proving that the activities of the liaison office were such as to construe it to be a PE in India. 18. On the aspect of use of SSMS equipment also, we find that there is no reason to hold that it could be construed as a PE in India. So far as the reference to the LES made by the DRP in Assessment Years 2010-11 to 2012- 13 is concerned, the same, in our view, is quite misplaced. The DRP itself notes that the LES is owned by the LESO, i.e. VSNL. It is also a feature of assessee's agreement for providing services that it is the LESO, i.e. VSNL, who has the full right and responsibility with regard to the LES. In any case, it is undeniable that the LES is not owned by the assessee, an aspect which the DRP itself has noted in its order. Therefore, considering the matte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edit. Ld. AR vide letter dated 30.03.2022 submitted as under: - "1.1 Inmarsat had claimed credit of TDS to the tune of Rs. 40,90,845 in its return of income (ROI) (copy of the acknowledgement of filing the ROI is enclosed as Annexure 2). However, as per the computation sheet annexed to the assessment order, no TDS credit has been granted to the Assessee, resulting in short grant of credit of TDS of Rs.40,90,845. 1.2 Out of the total TDS amount of Rs. 40,00,664 as appearing in Form 26AS for AY 2018-19 of Inmarsat, TDS credit of Rs. 5,96,168 has been claimed by Inmarsat in AY 2017-18 as the same pertains to the invoices raised in AY 2017-18. In this regard, it is respectfully submitted to your goodself that the TDS credit of Rs. 5,96,168 has been granted to Inmarsat. Copy of the assessment order of AY 2017- 18 is attached herewith as Annexure 3. As can be seen from the assessment order, entire TDS credit (including TDS credit of Rs. 5,96,168) claimed by Inmarsat for the said year has been granted to it. Copy of the acknowledgment of return of income for AY 2017-18 reflecting the amount of TDS credit claimed by Inmarsat is attached herewith as Annexure 4. 1.....