TaxTMI 
TaxTMI 
2025 (6) TMI 562
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....A) has erred in not taking into account that the payments made by the assessee to Intelsat Global Sales and Marketing Limited for transponder charges are specifically covered by Explanation 6 to section 9(1)(vi) as being included in the expression 'process' and hence fall under definition of royalty as per Explanation 2 to section 9(1)(vi) of the Act?" 3. "Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in not taking into account that Explanation 6 to section 9(1)(vi) of the Act was inserted by the Legislature by way of Finance Act, 2012 as a declaratory and clarificatory amendment with retrospective effect from the day the source rule on royalty came into effect to specify the intent of the law as it was always meant and understood?" 4. "Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in not taking into account that the term 'process' is not defined in the relevant DTAA and hence its meaning has to be derived from the domestic law of India?" 2. During the course of hearing, the Ld. Sr. DR submitted that the assessee, part of the Walt Disney group is an Indian company engaged in broadcastin....
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....ocess was used by Intelsat while providing the services to the assessee [(judgment of the Delhi Tribunal in the case of Panamsat (103 TTJ 861) relied upon). iii. The payment to Intelsat cannot be regarded as fees for technical services under the Act since the use of transponder services are only for the purpose of transmitting the satellite signals and the assessee is not interested in the technology used inside the transponder. iv. Further, the payments to Intelsat are not taxable as fees for included services under the provisions of the Treaty since no technical knowledge/experience, etc. was made available by Intelsat to the assessee while providing transponder services [(judgment of the Delhi Tribunal in the case of Panamsat Supra) relied upon]. v. The payment to Intelsat cannot be regarded as payment for the use of equipment under the Act since the use of transponder Services do not constitute the use of equipment [(judgment of the Delhi Tribunal in the case of Asia Satellite Telecommunications Co. Ltd. (85 ITD 478 relied upon). 5. It was submitted that the said application was disposed off and the ACIT(IT)-4(3)(1), Mumbai (AO) passed an order u/s. 195(2) of the Income ....
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....ee is not liable to deduct tax at source u/s. 195 of the Act. Therefore, the appeal of the assessee was allowed for statistical purposes. 7. It was further submitted that even though the tax effect involved in the present appeal amounts to Rs. 59,693/-, which is below the prescribed threshold for filing the appeal, at the same time, the matter falls under one of the exceptions 3.1(l) of CBDT Circular dated 15-03-2024 which has been carved out by the CBDT as the dispute relates to determination of nature of transaction and the liability to deduct TDS u/s 195 read with section 9(1)(vi) and Article 13 of India -UK DTAA is under question. It was submitted that since the Revenue has not accepted the order so passed by the Tribunal for the earlier years, the present appeal has been preferred. 8. None appeared on behalf of the assessee nor was any adjournment application filed. 9. The relevant findings of the Ld. CIT(A) which are under challenge before us read as under: "The issue is deductibility of tax at source under Section 195(2) on payment made by appellant to M/s Intelsat Global Sales and Marketing Ltd. (UK). Before me detailed submission was made. There is Judicial precedent ....
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....at Corporation US, the Hon'ble Delhi High Court vide order dated 19.08.2011 and then again reaffirmed vide order dated 28.09.2012 in ITA No. 530 & 545/2012, following the order of its own court in Asia Satellite Communications Ltd (ITA 131/2003 decided on 31.01.2011),have categorically held that payment received by Intelsat is not taxable in India under the provisions of Indo-US-DTAA. Once in the case of the payee it has been categorically held that the said amount is not taxable, then assessee is not obliged to deduct TDS and, therefore, the impugned proceedings under section 195 deserves to be quashed. Otherwise also, this issue of payment of transponder charges made to Panamsat (later on name was changed to Intelsat Corporation) has been subject matter of issue before various Courts including that of the ITAT, Mumbai Bench in the case Taj TV Ltd. In the said case, the Tribunal has observed and held as under:- 18. Now, coming to the issue of disallowance of various expenses under section 40(a)(i) like,'transponder charges" and 'up linking charges' as raised in ground No.2(i) and 2 (ii), it is seen that these, payments has been paid to PanAmSat International Syst....
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....as strongly relied upon the decision of High Court in the case of Verizon Communications Singapore Pte Ltd. (supra) and the ITAT decision in the case of Viacom.18 Media Pvt Ltd. 19. First of all, let us examine the definition of "royalty" as been defined under Article 12 of the lndo- US-DTAA, which has been defined in the following manner: "3. The term "royalties" as used in this Article means: 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 cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and b) payments of any kind received as consideration for the use of or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragra....
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....essment years preceding (ne-Finance Act, 2012 and in all cases which involve a, Double Taxation Avoidance Agreement, unless the said DTAAs are amended jointly by both partners to incorporate income from data transmission services as partaking of the nature Of royalty, or amend the definition in a manner so that such income, automatically becomes royalty. It is reiterated that the Court has not returned a finding on whether the amendment is in fact retrospective and applicable to cases preceding the Finance Act of 20 12 where there exists no Double Tax Avoidance Agreement". The aforesaid decision takes care of all the arguments relied upon by the Ld. DR including that of the Verizon Communications Singapore Pte Ltd's. The Hon'ble High Court specifically clarified as to why the said decision Madras High Court cannot be applied in such case after observing as under.- 31. In a judgment by the Madras High Court in Verizon Communications Singapore Pte Ltd. V. The Income Tax Officer, International Taxation 1 [2014j 361 ITR 575 (Mad), the Court held the Explanations to be applicable to not only the domestic definition but also carried them to influence the meaning of royalty un....
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.... 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 royally 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 assessee's contention that the law applicable would be the law as it existed at the time the Double Tax Avoidance Agreement was entered into. This is the context in which the ambulatory approach to tax treaty interpretation was not rejected. The situation before this Court however is materially different as there is in fact a 'definition of the word royalty under Article 12 of both DTAA, thus dispensing with the need for recourse to Article 3. 50. There are therefore two sets of circumstances. First, where there ex....
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....39;FTS' also. Lastly, as regards the issue of business communication in India, as pointed by the Ld Counsel, Shri Madhur Agarwal that Hon'ble Delhi High Court in the case of Intelsat has taken note of this fact while deciding the issue of taxability of receipts in favour of Intelsat that, it has leased its transponder capacity and bandwidth to the various customers in India and outside India who have used the transponder for business in India. Thus, in the light of this observation and fact noted by the Hon'ble Delhi High Court in the case of the payee and otherwise also we do not find any merits that, simply because the transponders have been used in for business in India will tantamount to business connection of Intelsat in India and, accordingly, such an observation and finding of the CIT(A) is hereby rejected by us. Thus, the issues raised by the assessee in grounds No.1 to 7 are squarely covered by various decisions as discussed above and respectfully following the same we hold that assessee is not liable to deduct TDS." "10. It is noted from the above that the bench relied upon various judgments including the judgment of Taj TV Ltd wherein decision relied upon by the Ld....