TaxTMI 
TaxTMI 
2025 (6) TMI 1534
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Panel and the Ld. AO erred in not following the orders passed by the Hon'ble High Court of Delhi for the Assessment years 2000-01 to 2014-15 and AY 2016-17 to AY 2018-19 and the Hon'ble Income Tax Appellate Tribunal for AY 2018- 19, AY 2020-21 and AY 2021- 22 in the Appellant's own case since there was no change in facts recorded for the present year. 1.2. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in not holding that the payments received by the Appellant from providing data transmission services via Space Segment Capacity are assessable as business profits in India and in the absence of a Permanent Establishment under Article 5 of the India Netherlands Double Taxation Avoidance Agreement between India and Netherlands ('the DTAA') the receipts earned by the Appellant are not taxable in India. 2. That on the facts and circumstances of the case and in law, the Ld. AO erred in holding that the payments received by the Appellant as consideration for data transmission services are in the nature of 'Royalty' as defined under section 9(1)(vi) of the Income Tax Act, 1961 ('the Act') and Article 12(4) of the DTAA. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is a company, incorporated under the laws of the Netherlands and is a tax resident of the Netherlands in terms of Article 4 of the Double taxation Avoidance Agreement ("DTAA") between India and Netherlands. The assessee provides transmission services of voice, data and programmes by provision of space segment capacity on Satellites to customers under various contracts with customers around the world for these services. The Assessing Officer proposed certain adjustments in the income of the assessee in respect of the amount received by the assessee treating it as royalty and alternatively as fee for technical services. 1.2 Aggrieved against this, the assessee filed objections before Learned Dispute Resolution Panel who following the order of the earlier years confirmed the adjustment. Thereafter, the AO vide impugned order in pursuance of the direction of Ld. DRP held that revenue earned by the assessee from the provisions of transmission services of voice, data and programmes of space segment capacity on Satellites to customers was in the nature of "Royalty" u/s 9(1)(vi) of the Income Tax Act, 1961 ("the Act") and Article 12(4) of the India-Netherland Double Taxation Avoid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that receipts of the assessee, earned from providing satellite transmission services do not fall within the term 'royalty' under the India-Netherlands DTAA even after insertion of Explanation 5 and 6 to section 9(1)(vi) of the Income Tax Act,1961 by Finance Act, 2012 and without considering the position of India on OECD commentary on this issue. 3. Admittedly, the question of law urged in the present appeal is covered by the decision of this Court in assessee's own case in Director of Income Tax vs. New Skies Satellite BV (2016) 382ITR 114. 4. Learned counsel for the Appellant states that the Revenue has not accepted the aforesaid decision and has preferred a Special Leave Petition against the same being Civil Appeal No.1380/2016. --- 7. Accordingly, no substantial question of law arises for consideration in the present appeal and the same is dismissed. 8. However, it is clarified that the order passed in the present appeal shall abide by the final decision of the Supreme Court in the aforesaid Civil Appeal." The relevant portion of the order of the Hon'ble High Court for AY 2017-18 in ITA 65/2022 is reprod....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o section 9(1)(vi) of the Income Tax Act, 1961 by Finance Act, 2012 and without considering the position of India on OECD commentary on this issue. 3. Admittedly, the question of law urged in the present appeal is covered by the decision of this Court in assessee's own case in Director of Income Tax vs. New Skies Satellite BV (2016) 382 1TR 114. 4. Learned counsel for the Appellant states that the Revenue has not accepted the aforesaid decision and has preferred a Special Leave Petition against the same being Civil Appeal No. 1380/2016.--7. Accordingly, no substantial question of law arises for consideration in the present appeal and the same is dismissed. However, it is clarified that the order passed in the present appeal shall abide by the final decision of the Supreme Court in the aforesaid Civil Appeal." The relevant portion of the order of the Hon'ble High Court for AY 2017-18 in 1TA 65/2022 is reproduced for reference: "The issue, which the Revenue seeks to adjudicate i.e. satellite transmission services are within the term 'royalty' under India-Nether lands DTAA, is covered by the Division Bench ruling in The Commissioner of Income Tax - ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....directions of DRP. Accordingly, the matter needs to be kept alive in view of its pendency before the Apex Court. The panel accordingly upholds the adjustment made by the A O in this matter. The objections are rejected." 4.2 During DRP proceedings the AR of the assessee has submitted that on identical facts and issues for AY 2001-02 to 2014-15, 2016-17, 2017-18 & 2018-19, the matter has been decided in favour of the assessee by Hon'ble Delhi High Court. It is further submitted that the Department has preferred appeal for AY 2001-02 to 2014-15 before the Hon'ble Supreme Court while the AR has no information regarding filing of appeals against the order of Hon'ble Delhi High Court for AY 2016-17 to 2018-19. The AO is directed to verify if the decision of the Hon'ble Delhi High Court for AY 2016-17 to 2018-019 has been accepted by the Revenue and no further appeal has been filed on identical issues before the Hon'ble Supreme Court. If the decision of the Hon'ble Delhi High Court has been accepted by the Revenue, and no further appeal filed, the AO will follow the same. However if the same has been contested before the Hon'ble Supreme Court, the panel, in order to keep the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into a treaty' concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well. Any attempt short of this, even if it is evidence of the State's discomfort at letting data broadcast revenues slip by, will be insufficient to persuade this Court to hold that such amendments are applicable to the DTAAs. 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 Satellite59, when the definitions were in fact pari materia (in the absence of any contouring explanations....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ur of the Assessee." 3. On the other hand, the Ld. DR fairly submitted that the issue in appeal is decided in favour of the assessee and it is recurring issue from year to year where the Assessing Officer following the stand taken by the Revenue in earlier years the receipts by the assessee from providing data transmission service was held to be royalty. 4. Heard rival submissions, perused the orders of the authorities below. It is undisputed fact that the issue is recurring issue and the Assessing Officer following its earlier orders has been holding that the receipts from providing data transmission services was held to be royalty u/s 9(1)(vi) of the Act and Article 12(4) of the DTAA with Netherlands. We find that the issue is squarely covered by the various decisions of the Tribunal and also the High Court in assessee's own case for the assessment years 2006-07 to 2020-21. The latest order of the Tribunal for the AY 2021-22 in ITA No.2733/Del/2023 dated 07.06.2024 the Tribunal following earlier years order and also the decision of the Hon'ble High Court deleted the addition made observing as under: - "2. The assessee has raised the following Grounds of Appeal:- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e qua non for the payments to qualify as 'Royalty' under the India- Netherlands DTAA. 3. That the Ld. AO erred in holding that the payments received by the Appellant as consideration for data transmission services would also qualify as "fee for technical- services" as defined under section 9(1)(vii) of the Act as well as within the meaning of Article 12(5) of the India-Netherlands DTAA. 4. That the Ld. AO erred in initiating penalty proceedings under section 270A of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal." 3. Briefly stated, the assessee is a company, incorporated under the laws of the Netherlands and is a tax resident of the Netherlands in terms of Article 4 of the Double taxation Avoidance Agreement ("DTAA") between India and Netherlands. The assessee provides transmission services of voice, data and programmes by provision of space segment capacity on Satellites to customers under various contracts ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The panel notes that the issues and objections raised in Ground numbers 1 to 3 are interrelated and identical to those in case of the assessee for AY 2020-21 as well as AY 2017-18. On same objections filed by the assessee in the AY 2017-18, which was followed by the Panel in AY2020-21, the DRP had observed as under - 3.1 All the above grounds are related to the issue of amended definition of Royalty in the Income Tax Act and the definition taken in the DTAA when it was signed. The assessee operates satellites and derives income by leasing out its transponders for telecasts by various TV channels and Internet Service providers (clients). The clients enter agreements with the assessee directly or indirectly to avail of the services. The services are beamed in specific footprints of the satellite catchment area. The services availed by Indian Channels and payments made by such channels have been assessed by the AO as 'Royalty' in view of the amended definition of Royalty per section 9(1)(vi) read with explanations (expln 2 in particular). The assessee has challenged this contention by referring to the definition of Royalty in the relevant DTAA. The assessee has also submi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the first is in the affirmative, whether the assessees would be eligible for the benefit under the relevant Double Tax Avoidance Agreements." 7.2. The Jurisdictional Delhi High Court answered the aforesaid questions in favour of the assessee by observing as under:- 59. "On a final note, India's change in position to the OECD Commentary cannot be a fact that influences the interpretation of the words defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into a treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well. Any attempt short of this, even if it is evidence of the State's discomfort at letting data broadcast revenues sli....