TaxTMI 
TaxTMI 
2023 (11) TMI 1148
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the Hon'ble Commissioner of Income-tax (Appeal) erred in concluding that income is attributable to the Permanent Establishment without rebutting the fact that it has remunerated its agent at the arm's length price in respect of advertising revenue. Your appellants crave to leave, add, amend, alter, change or cancel any of the above grounds of appeal before or at the time of hearing." 3. While the Revenue has raised the following grounds in its appeal:- "1. On the facts and circumstance of the case and in law, the Ld CIT(A) erred in holding that Taj India does not constitute an agency PE of the assessee within the meaning of Article 5(4) of the India-Mauritius DTAA with regard to the distribution income received by it, 2. On the facts and circumstance of the case and in law, the Ld CIT(A) erred in holding that if the arm's length price of international transaction between the assessee and Taj India has been accepted by the TPO, no further profits can be attributed to the DAPE in India, without considering the fact that no such analysis of functions and risks undertaken by the PE on behalf of the assessee has been undertaken in the year und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f live programmes does not constitute Royalty as provided under Article 12 of DTAA between India and Mauritius? 8. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the income received from the assessee by M/s. Intelsat being in the nature of transponder charges have arisen in India and accordingly tax should have been deducted at source on this payment? 9. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the income received from the assessee by other non-residents being in the nature of up-linking charges have arisen in India and accordingly tax should have been deducted at source on this payment? 10. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in holding that section 40(a)(i) of the Act was not applicable on payments made to non-residents for programming rights, transponder charges and uplinking charges on the ground that these payments did not constitute royalty u/s 9(1)(vi) of the Act or under the respective DTAAS; 11. Whether on the facts and circumstances of the case and in law, L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed against the findings of the learned CIT(A) regarding the issue of the existence of Permanent Establishment ("P.E."). The assessee has challenged the conclusion of the learned CIT(A) that the assessee has a P.E. in India in respect of Advertisement revenue. While, the Revenue, inter-alia, has challenged the findings of the learned CIT(A) that the assessee does not have a P.E. in India in respect of Distribution revenue. 5. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is a foreign company, which is registered under the laws of Mauritius. The assessee is engaged in the business of telecasting its sports channel - "Ten Sports". The assessee is considered a "resident" in Mauritius for tax purposes, as it is registered in Mauritius. For the year under consideration, the assessee filed its return of income on 29/11/2013, declaring a total income of Rs.Nil. Report in Form no.3CEB was also filed by the assessee on 28/11/2013, as per the requirement of the provisions of section 92E of the Act. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers and the assessee, and Taj India does not have the authority to conclude contracts in the name of the assessee. It was further submitted that even after the addendum dated 27/04/2006, w.e.f. 01/04/2006, in line with the Advertising Code prescribed under the Cable Television Networks (Regulation) Act, 1995, whereby clause 5(a) of the agreement was entirely replaced, Taj India never exercised authority to conclude the contracts with the advertisers and the assessee continued to conclude the contracts. Further, with respect to the Distribution revenue, the assessee submitted that as per the Distribution Agreement, the assessee has given the right to Taj India to exclusively represent it with respect to licensing sports television channels known as "Ten Sports" / "Ten HD" / "Ten Golf" provided by the assessee in India directly or through one or more distributors to the cable system. The assessee further submitted that Taj India was appointed as its distributor and Taj India in turn appointed sub-distributors and cable operators to carry out the task deputed by the assessee in a better manner. In respect of the same, Taj India has compensated sub-distributors and cable operators out ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rising from Indian operations to the functions performed by the DAPE in India for the purpose of taxation, following the approach adopted in the earlier assessment years. 8. The learned CIT(A), following the order of its predecessor in assessee's own case for the assessment year 2012-13, wherein the decision of the coordinate bench of the Tribunal in assessee's own case was followed, held the assessee to not to have any P.E. with respect to its Distribution functions. Being aggrieved with the aforesaid findings, the Revenue is in appeal before us. While the assessee has challenged the conclusion of the learned CIT(A) that the assessee has a P.E. in India in respect of the Advertisement revenue. 9. During the hearing, the learned Authorised Representative ("learned AR") submitted that the issue of existence of assessee's P.E. in India in respect of Distribution income and Advertisement income has been decided in favour of the assessee by the coordinate bench of the Tribunal in assessee's own case. 10. On the other hand, the learned Department Representative ("learned DR") vehemently relied upon the findings in the assessment order. The written submission filed by the learne....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on its own behalf and in its own name. The aforesaid clause of the Distribution Agreement was replaced by the Addendum dated 28/12/2007 entered into between the assessee and Taj India. The amended clause 1.3 of the Distribution Agreement, reads as under:- "1.3 Taj-India shall have the distribution rights for distribution of the Service in India to Distributor and Permitted Systems and negotiate and procure cable distribution license Agreements with Permitted Systems for the Service consistent with the terms thereof. Taj-India shall have the authority to enter into Agreements with third parties on behalf of the Taj. Upon Taj's request, Taj-India shall inform Taj in advance and regularly update Taj regarding the negotiations of any proposed License Agreements with Permitted Systems." 13. As per the assessee, despite the grant of authority to the Taj India to enter into agreements with third parties on behalf of the assessee, no such agreement was entered, and therefore, the twin conditions as laid down in Article 5(4)(i) of the India-Mauritius DTAA are not satisfied in the present case. We find that the coordinate bench of the Tribunal in assessee's own case in Taj TV Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he contract and (b) person habitually exercise the authority to conclude the contract, need to be satisfied. However, in the present case, the Revenue, except merely referring to the aforesaid clause of the Addendum, has neither established nor brought anything on record, either at the assessment stage or before us, that Taj India had habitually exercised the authority to conclude the contract on behalf of the assessee. Thus, the Revenue has failed to discharge the burden casted on it to prove that the twin conditions provided in Article 5(4)(i) of the DTAA are satisfied in the facts of the present case. As held by the Special Bench of the Tribunal in the case of Motorola Inc. v. Dy. CIT: [2005] 95 ITD 269 that DTAA is only an alternative tax regime and not an exemption regime and therefore, the burden is first on the Revenue to show that the assessee had a taxable income under the DTAA, and then the burden is on the assessee to show that its income is exempt under DTAA. Similarly, was held by the Co-ordinate Bench of the Tribunal in ITO v. Right Florists (P) Ltd. [2013] 143 ITD 445 (Kol-Trib.). In view of the above, Taj India cannot be held to be dependent agent P.E. of the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the Services to be provided by Taj-India hereunder (including, without limitation, arranging and facilitating the sale of Advertising Time) shall at all times be subject to prior approval by Taj in its absolute discretion, such approval to be granted or withheld by Taj in accordance with the procedure specified herein." 16. Subsequently, in order to ensure that the advertisements procured meet the requirements as laid down under the Advertising Code prescribed under the Cable Television Networks (Regulation) Act, 1995, the aforesaid clause of the Advertising Sales Agency Agreement was replaced by the Addendum dated 27/04/2006, entered into between the assessee and Taj India. The amended clause 5(a) of the Advertising Sales Agency Agreement, reads as under:- "3. Clause 5(a) of the Agreement will be entirely replaced as follows: In providing the services pursuant to this Agreement, Taj-India shall have the right and authority to assume or create, in writing or otherwise, an obligation of any kind, express or implied, in the name of and on behalf of Taj, relating to activities undertaken in India, subject to exercising due diligence and care and pursuant to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee is not taxable in India as the assessee does not have any P.E. in India. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as under:- "75. Ground number 2 of the appeal is with respect to the taxing advertisement and subscription income of Rs. 1,020,335,861. The fact shows that the assessee's businesses of telecasting of sports channels are carried out from outside India. The assessee has received services from Taj India in respect of advertisement and distribution as well as for play out services from Zee entertainment Enterprises Ltd. As we have already held that assessee does not have a permanent establishment in India, the article 7 of the treaty will trigger only if such profits are attributable to a permanent establishment in India. This issue has already been decided by the Hon'ble Bombay High Court in assessee's own case for assessment years 2004-05 and 2005-06 in TajTV Ltd.'s case (supra). Further starting from assessment years 2003-04 till 2016-17 this issue has been decided in favour of the assessee. We do not find any reason to hold that about decisions are obtained by any misrepresentation of fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ying any business activities in India and does not have any business connection in India as per section 9(1)(i) of the Act. Accordingly, the assessee submitted that these payments are not taxable in India. The AO vide assessment order passed under section 143(3) of the Act did not agree with the submissions of the assessee and held that the assessee was required to withhold taxes on the aforesaid payment, as these payments are in the nature of Royalty and accordingly disallowed the same while computing the income of the assessee under section 40(a)(i) of the Act. 24. The learned CIT(A), vide impugned order, allowed the appeal filed by the assessee on this issue and held that the payment disallowed under section 40(a)(i) of the Act is not Royalty. Being aggrieved, the Revenue is in appeal before us. 25. We have considered the submissions of both sides and perused the material available on record. We find that the coordinate bench of the Tribunal in assessee's own case vide order dated 05/07/2016, passed in ADIT v/s Taj TV Ltd., [2016] 161 ITD 339, for assessment years 2003-04 to 2005-06, while deciding the similar issue in favour of the assessee observed as under:- "1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is also not use or right to use any industrial, commercial, or scientific equipment. There is no such kind of right to use which is given by Pan Am Sat to assessee. Thus, the said payment does not fall within the ambit of the terms used in para 3 of Article 12. So far as the reading of amended definition of 'royalty' as given in section 9(1)(vi) into treaty, Hon'ble Delhi High Court in its latest judgment in the case of New Skies Satellite BV (supra), wherein it has considered Hon'ble Madras High Court decision in the case of Verizon Communications Singapore Pte Ltd. (supra) also, have discussed the issue threadbare and came to the conclusion in the following manner:- "60. Consequently, since we have held that the Finance Act, 2012 will not affect Article 12 of the DTAAs, it would follow that the first determinative interpretation given to the word "royalty" in Asia Satellite, supra note 1, when the definitions were in fact pari materia (in the absence of any contouring explanations), will continue to hold the filed for the purpose of assessment years preceding the Finance Act, 2012 and in all cases which involve a Double Tax Avoidance Agreement, unless the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Singapore Pte Ltd. (supra) on the ground that, the programming cost is paid to the assessee to various non-resident outside India for acquiring right brought on sports events taking place outside India. Thus, such programming cost cannot be deemed to arise in India as liability to pay programming cost as assumed by the assessee company outside India and it cannot be held to be borne by any PE in India. Thus, ground No.4 is also dismissed." 26. Therefore, in the aforesaid decision, the coordinate bench of the Tribunal after taking into consideration the decision of the Hon'ble Delhi High Court in CIT v/s New Skies Satellite BV [2016] 382 ITR 114 (Del.) held that the definition of the term "Royalty" as enlarged by the Finance Act, 2012 will not have any effect on Article 12 of the DTAA. We further find that in another decision rendered in assessee's own case for the assessment year 2017-18 in ITA No. 821/Mum./2021 cited supra, the coordinate bench of the Tribunal deleted the disallowance made in respect of payment of programming costs, transponder fees, and uplinking charges. Further as regards the reliance placed by the Revenue on Article 3(2) of the India USA DTAA, we find tha....