TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1832
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.... 3. We have heard the rival submissions and produced the materials available on record. At the outset, the learned AR stated that the issue in dispute is squarely covered by the decision of this Tribunal in assessment year 2021-22, vide order dated 16-04-2025. He also stated that from assessment years 18-19 to 20-21, the issue is also covered by the decision of Hon'ble Jurisdictional High Court vide order dated 31-05-2024. He also stated that even the lower authorities had merely placed reliance on the orders passed by them in the earlier years. Hence, the facts being identical, it was submitted that the decision of this Tribunal for assessment year 2021- 22 may kindly be followed for the year under consideration. No serious objections were raised by the learned DR before us. It is also pertinent to note that the adjournment letter has been placed by the revenue before us, which had been rejected as the issue is apparently covered by the decision of this Tribunal and by the decision of the Hon'ble Delhi High Court in assessee's own case in the earlier years. 4. As stated supra, we find that the issue in dispute is squarely covered by the decision of this Tribunal in assessment y....
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....83/Del/2022 with ITA No. 731/Del/2023 and others. He drew our attention to series of orders passed by the Tribunal in case of Inmarsat Global Limited. Thus, he submitted that the addition made have to be deleted. Α.Υ.2018-19& for ITA No. 6. The Counsel for the assessee has relied upon following judicial decisions: 7. learned Departmental Representative fairly agreed that the issue is squarely covered by the decisions of the Tribunal in the assessee's own case in the assessment year 2018-19 as well as in case of IGL. He relied upon the orders of the lower authorities. 8. We have heard the rival submission and perused the materials on record. Considering the rival submission and material placed on record, we observed that similar issues were considered and adjudicated by the Coordinate Bench in assessee's own case for A.Y. 2019-20 & 2020-21 in ITAT No. 1883/ Del/2022 and ITA No. 731/Del/2023 and decided the issue in favour of the assessee. The relevant observations are as under: 7. We have perused the order of the co-ordinate bench of the Tribunal in assessee's group concern in the case of Inmarsat Global Ltd. Vs. DCIT in ITA. No.....
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....roduced 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 transmitted. This frequency is made available by a network which includes the following resources : - Satellite -7 Network Co-ordinating Station ("NCS ") Network Operation Centre ("NOC ") Satellite Control Centre Other infrastructure Inmarsat provides a telecommunication link between the user of mobile telephone system known as Mobile Earth Station ("MES ") and Land Earth Station ("LES "). MES is an equipment located on a ship, aircraft or vehicle or carried in hand held case. The users of the equipment are third parties who are not connected with Inmarsat. The LES is a fixed site (with large satellite dishes and related equipment), which is operated by a third party ie a Land Earth Service Operator ("LESO"). Inmarsat is engaged in rendering various telecommunication services including the following : Voice transmission services Fax transmissi....
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....llite Telecommunications Co. Ltd. (2011) 332 ITR 340(Del.). We note that no arguments have been advanced by the Revenue to rebut the assessee's arguments that facts as considered in ISRO Satellite Centre are identical in the present proceedings also. We have taken into consideration that the learned CIT-DR has placed reliance on the decisions of the Hon'ble Madras High Court in the case of Verizon I.T.A. No. 1717/Del/2022 29 Communications Singapore Pte Ltd. vs. Income Tax Officer (IT) (2014) 361 ITR 575 (Mad), the decision of the Karnataka High Court in the case of CIT vs. CGI Information Systems and Management Consultants (P) Ltd. and the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Siemens Aktiongeswellschaft (2009) 310 ITR 320 (Bom). Reliance has been placed on the order of the Mumbai Bench of the Tribunal in the case of Viacom 18 Media P. Ltd. vs. ADIT (International Taxation)-2(2), Mumbai(2014) 44 taxmann.com 1 (Mum- Trib) in support of the argument that this is the view taken by the Mumbai Bench of the Tribunal. Notwithstanding the fact that at that point of time the Coordinate Bench did not have the benefit of the orders of the Hon'bl....
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....e 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 be the law as applicable or as define when the Double Tax Avoidance Agreement was entered into. " 10 Inmarsat Global Ltd. ITA No. 8544/M/2010 & 5 ors. 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 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 ther....
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....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 interpretation of a Double Tax Avoidance Agreement. This Court rejected that any amendment could I.T.A. No. 1717/Del/2022 32 change the situation and render the service or activity taxable, in the following observations: "He, thus submitted that the question of "copyrighted article" or actual copyright does not arise in the context of software both in the DTAA and in the Income Tax Act since the right to use simpliciter of a software program itself is a part of the copyright in the software irrespective of whether or not a further right to make copies is granted. The decision of the Delhi Bench of the ITAT has dealt with this aspect in its judgment in Gracemac Co. Vs. ADIT 134 TTJ (Delhi) 257 pointing out that even software bought off the shelf, does not constitute a "copyrighted article" as sought to be made out by the Special Bench of the ITAT in t....
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....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 passes a law to such effect, which governs the relationship between the treaty terms and the other laws of the State. It then becomes part of the general conspectus of domestic law. Now, if an amendment were to be effected to the terms of such treaty, unless the existing operationalizing domestic law states that such amendments are to become automatically applicable, Parliament will have to by either a separate law, or through an amendment to the original law, make the amendment effective. Similarly, amendments to domestic law cannot be read into treaty provisions without amending the treaty itself. 53. Finally, States are expected to fulfill their obligations under a treaty in good faith. This includes the obligation to not defeat the purpose and object of the treaty. These obligations are rooted in ....
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....thstanding 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. In our opinion, international- taxation issues have to be decided keeping in mind the above broad principles. 5.1. It is found that all the issues raised by the DR, before us, have been dealt with by the Tribunal in the case of Antwerp Diamond(supra). We are reproducing the arguments of the representatives of both the sides and the relevant portion of that order and it reads as under: I. T.A. No. 1717/Del/2022 35 "2. At the outset, the Ld. Counsel, Mr K. K. Ved submitted that similar issue has been decided by the Tribunal in favour of the assessee in assessee's own case right from the assessment years 2004-05, 2005-06 and 2008-09. The second issue relating to disallowance of interest paid to the Head Office also has been decided in favour of the ....
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....e 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'ble High Court has approved the insertion of Explanation below section 9(2) inserted by the Finance Act 2007, thereby implying that the explanations inserted by FA 2007 could be read into modern DTAAs; iv) Mumbai Tribunal in the case of Viacom 18 Media (P.) Ltd. [2014] 162 TTJ 336 (Mum) has explained the import of Bombay High Court decision in right perspective in paras 16 and 17 of its order while rejecting the assessee's argument that the HC has held that amendments in the Act cannot be read into DTAAs; and v) The Bombay High Court has approved ambulatory approach (para 22) to interpretation of treaties against Static approach adopted by the Delhi High Court. So far as the interest paid by the Branch Office to....
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....e 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 for the use of the said resources which is being reimbursed by the Branch to the Head Office. It is not in dispute that the assessee has sought the benefit of treaty between India and Belgium and had specifically relied upon the definition of "royalty " as given in the Article 12. Clause (a) of Para-3 of Article-12, which defines the term "royalty" in the following manner:- 3(a) The term "royalties" as used in this article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industr....
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....ld 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 to the Head Office does not fall within the ambit of definition of "royalty" under Article 12(3)(a). 17. The learned Commissioner (Appeals) and the learned Senior Counsel have strongly relied upon the decision of the co- ordinate bench of the Tribunal in Kotak Mahindra Primus Ltd. (supra). On a perusal of the said decision, it is seen that the conclusion drawn by the Tribunal, is directly applicable to the facts of the assessee's case also, which is evident from the following observations and conclusions drawn by the Tribunal:- "11. The consideration of payment is only this data process work. No part of this payment can be said to be for the use of speciali....
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....es 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 right". It is contended that by making payment of US $ 60,000 per annum, the Indian company gets a valuable property and right as the payment cannot be said to have been made in vacuum and without any consideration. This plea also does not impress us. It is not every property or right which can be covered by these expressions appearing in the end of article 12(3)(a), because, following the principles of ejusdem generis meaning of the general words following the specific words have to take colour from the specific words preceding it. When that property or right, even if it so exists, is not of the nature of any of the specific categories set out in art....
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....alty" 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 Aktiongesellschaft (supra), the decision of Delhi High Court in Nokia Network (supra) and DIT v/s Ericson AB, [2012] 343 ITR 470. Even the decisions of Madras High Court as relied upon by the learned Departmental Representative is not applicable which is evident from the issue involved as is evident from the substantial question of law which were formulated by the High Court for adjudication. Hence, the said decisions are not applicable. 19. Thus, in view of the aforesaid reasons, we hold that the impugned payment made by the Branch to the H. O. towards reimbursement of cost of data processing cannot be held to be co....
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....e 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 I. T.A. No. 1717/Del/2022 43 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 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 exists no definition of a word in issue within the DTAA itself, regard is to be ....
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.... 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 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. " 8. Since the facts and circumstances in this year remain the same as in th....
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....alienation or the use of, or the right to use, any copyright of literary, artistic or scientific work (including cinematograph films, phonographic I.T.A. No.1717/Del/2022 46 records and films or tapes for radio or television broadcasting), any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience." (emphasis supplied) Article 12(4), Indo Netherlands Double Tax Avoidance Agreement ITA 473/2012, 474/2012, 500/2012 & 244/2014 Page 42 "4. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience." (emphasis supplied) Section 9(1)(vi), Explanation 2, Income Tax Act, 1961 (iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property; (....
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....Privy Council 69 AIR 1952 SC 369 AIR 1929 PC 38 AIR 1979 SC 564 ITA 473/2012, 474/2012, 500/2012 & 244/2014 Page 44 after "manufactures for sale" and "sells" and the absence of any comma after "stocks" was indicative of the fact "stocks" was to be read along with "for sale" and not in a manner so as to be divorced from it, an interpretation which would have been sound had there been a comma after the word "stocks". It was therefore held that only stocking for the purpose of sale would amount to an offence but not mere stocking. 57. However, the question, which then arises, is as follows. How is the court to decide whether a provision is carefully punctuated or not? The test- to decide whether a statute is carefully (read consciously) punctuated or not- would be to see what the consequence would be had the section been punctuated otherwise. Would there be any substantial difference in the import of the section if it were not punctuated the way it actually is? While this may not be conclusive evidence of a carefully punctuated provision, the repercussions go a long way to signify intent. If the inclusion or lack of a comma or a period gives rise to diametrically opposite con....
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....greements under which the satellite operator allows the customer to utilize the capacity of a satellite transponder to transmit over large geographical areas. Payments made by customers under typical transponder leasing I.T.A. No. 1717/Del/2022 49 agreements are made for the use of the transponder transmitting capacity and will not constitute royalties under the definition of paragraph 2; these payments are not made in consideration for the use of, or right to use, property, or for information, that is referred supra note 1 ITA 473/2012, 474/2012, 500/2012 & 244/2014 Page 46 to in the definition (they cannot be viewed, for instance, as payments for information or for the use of, or right to use, a secret process since the satellite technology is not transferred to the customer). As regards treaties that include the leasing of industrial, commercial or scientific (ICS) equipment in the definition of royalties, the characterization of the payment will depend to a large extent on the relevant contractual arrangements. Whilst the relevant contracts often refer to the lease of a transponder, in most cases the customer does not acquire the physical possession of the transponder but simpl....
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....the aforesaid commentary of OECD as well as Klaus Vogel only on the ground that it is not safe to rely upon the same. However, what is ignored is that when the technical terms used in the DTAA are the same which appear in Section 9(1)(vi), for better understanding all these very terms, OECD commentary can always be relied upon. The Apex Court has emphasized so in number of judgments clearly holding that the well-settled internationally accepted meaning and interpretation placed on identical or similar terms employed in various DTAAs should be followed by the Courts in India when it comes to construing similar terms occurring in the Indian Income Tax Act.... ***** 78. There are judgments of other High Courts also to the same effect. (a) Commissioner of Income Tax Vs. Ahmedabad Manufacturing and Calico Printing Co., [139 ITR 806 (Guj.)] at Pages 820-822. I.T.A. No. 1717/Del/2022 51 (b) Commissioner of Income Tax Vs. Vishakhapatnam Port Trust [(1983) 144 ITR 146 (AP)] at pages 156-157. ITA 473/2012, 474/2012, 500/2012 & 244/2014 Page 48 (c) N.V Philips Vs. Commissioner of Income Tax [172 ITR 521] at pages 527 & 538-539." 59. On a f....
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....cisions of the jurisdictional High Court referred to above, we hold that the amounts received by the assessee for the use of transponder of tele-communication service charges are not royalty under section 9(1)(vi) of the Act and also under Article 128) of Indo Netherland DTAA. 10. Ground Nos. 1 to 9 of the assessee are allowed. 9. Ld. AR of the assessee also submitted that appeals filed by the revenue have been dismissed by the Hon'ble Delhi High Court. In the appeals of The Commissioner of Income Tax - International Taxation -2 v. Inmatsat Solutions BV ITA No. 310/2024 and others appeals the Hon'ble Delhi High Court held as under: Having heard learned counsel for the appellant and on going through the judgment rendered by the Income Tax Appellate Tribunal ["Tribunal"], we find that the issues raised here stand concluded against the appellant in light of the decision rendered in Asia Satellite Telecommunications Co. Ltd. Vs. DIT [2011 SCC On Line Del507] as well as DIT vs. New Skies Satellite BV [2016 SCC On Line Del 796]. Consequently, and in view of the aforesaid, the appeals shall stand dismissed. 10. Since the issues are exactly similar and g....