TaxTMI 
TaxTMI 
2018 (1) TMI 1770
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....der facility is not chargeable to tax under the provisions of Section 195 of the Act. 3) The monies remitted to M/s Intelsat Corporation, USA for use of transponder facility is not chargeable to tax under Article 12 of the Double Taxation Avoidance Agreement (DTAA) between India and the USA. 4) It is contended that the monies remitted to M/s Intelsat Corporation, USA for use of transponder facility, not being royalty or fees for technical services under Article 12 of the DTAA between India and the USA, the provisions of Explanation 6 to Section 9(l) (vi) of the Act are not applicable at all. 5) The Commissioner (Appeals) has erred in applying the provisions of sub-Article (2) of Article 3 of the DTAA between India and the USA to the impugned sum remitted to M/s Intelsat Corporation, USA. 6) It is contended that in the absence of an amendment in the DTAA between India and the USA, the provisions of Explanation 6 to Section 9(1) (vi) of the Act cannot be applied to the monies remitted to M/s Intelsat Corporation, USA. 7) It is contended that the impugned sum of Rs. 24,91,560/- being business profits of M/s Intelsat Corporation, USA who doe....
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....y. The payer has entered into an agreement with Intelsat transponder Service order no. 26396 dt. 16.07.2013 and is mutually accepted by putting signatures by both parties and is about the use/accessibility of Payee's transponder for the business use of the payer company in India. 8. Therefore the payer company is hereby directed to withhold tax of 10% following the provisions of Double Taxation of Avoidance treaty with USA. Since the payment is net of taxes, the tax deduction rate will have to appropriately grossed up which comes to 11.74%." 5. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that Intelsat Corporation is a tax resident of US and has issued a confirmatory certificate stating that they do not have any fixed place of business or permanent establishment (PE) in India within the meaning of Article 5 of DTAA and the amount paid was not a royalty. The reliance was placed on the judgment of the Hon'ble Delhi High Court in the case of Asia Satellite Telecommunication Co. Ltd. Vs DIT reported at 332 ITR 340. 6. It was further submitted that M/s Intelsat Corporation has no role whatsoever to play either in the up-linking activ....
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....al. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that M/s Intelsat Corporation was not having any PE in India and the amount paid was not in the nature of the royalty. Therefore, the ld. CIT(A) was not justified in confirming the action of the AO. The reliance was placed on the following case laws: ⮚ United Home Entertainment Pvt. Ltd. Vs Addl. CIT in ITA Nos. 5171 to 5181/Mum/2013, order dated 28.11.2016 [TS-6867- ITAT-2016 (Mum)] ⮚ DIT Vs New Skies Satellite BV in ITA Nos. 473 & 474/2012 order dated 08.02.2016 of Hon'ble Delhi H.C. 9. In his rival submissions, the ld. CIT DR strongly supported the impugned order passed by the ld. CIT(A) and reiterated the observations made in the said order. 10. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is not in dispute that M/s Intelsat Corporation is a company incorporated under the laws of United States and is a tax resident of the United States. M/s Intelsat Corporation does not have a permanent establishment (PE) in India within ....
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....urt in the case of Asia Satellite Telecommunications Co. Ltd. Vs DIT (2011) 332 ITR 340 (Del.) has held as under: "that under the agreement with television channels, the role attributed to the assessee was as follows : (i) programmes were uplinked by the television channels (admittedly not from India); (ii) after receipt of the programmes at the satellite (at locations not situated in Indian airspace), these were amplified through complicated process; and (in) the programmes so amplified were relayed in the footprint area including India where the cable operators caught the waves and passed them over to the Indian population. The first two steps were not carried out in India. Merely because the footprint area included India and the programmers by ultimate consumers/viewers watched the programmes in India, even when they were uplinked and relayed outside India, that would not mean that the assessee was carrying out its business operations in India. The expressions "operations" and "carried out in India" occurring in Explanation 1 (a) to section 9(1)(i) signify that it was, necessary to establish that any part of the assesses's operations were carried out in Ind....
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.... the assessee to its customers were executed abroad. The transponder was in orbit. Merely because it had its footprint on various continents that would not mean that the process had taken place in India." 12. Similarly, the ITAT Mumbai Bench =L, Mumbai in the case of ADDIT(IT)-2(2)(1) Vs Taj TV Ltd. reported at (2016) 72 Taxmann.com 143 held as under: "17. We have carefully considered the entire gamut of facts as discussed in the impugned orders, rival submissions made before us, materials relied upon and the decisions relied upon. The assessee-company is incorporated and registered under the Mauritius Law and is also the Tax Resident of Mauritius, therefore, qua its various streams of income, India-Mauritius DTAA has to be seen. The assessee is engaged in the business of telecasting sports channel called "Ten Sports" and for generating revenue, it has been collecting advertisement revenue and distribution of channel in India. It has appointed Taj India as its advertising sales agent to sell commercial slot/spot to the prospective advertisers and other parties in India in connection with the business of programming and telecasting of 'Ten Sports' Channel. As per....
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....erson acting in a Contracting State for or on behalf of an enterprise of the other Contracting State (other than an agent of an independent status to whom the provisions of paragraph 5 apply) shall be deemed to be a permanent establishment of that enterprise in the first- mentioned State if: i. he has and habitually exercises in that first mentioned State, an authority to conclude contracts in the name of the enterprise unless his activities are limited to the purchase of goods or merchandise for the enterprise; or ii. he habitually maintains in that first-mentioned State a stock of goods or merchandise belonging to the enterprise from which he regularly fulfils orders on behalf of the enterprise. 5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted exclusively or almost exclusively on behalf of that enterprise, h....
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.... for providing facility of transponder for telecasting 'Ten Sports' channel in various countries including India. The assessee entered into an agreement with PanAmSat to utilize the transponder facility providing by the said US based company for telecasting its sports channel which are on the footprint of transponder of PanAmSat. The Revenue's case before us is that, firstly, it is taxable under section 9(1)(vi) as 'royalty' and also under Article 12(3)(b) of Indo-US-DTAA. Similarly, the uplinking charges paid for uplinking the channels to PanAmSat Satellite for delay in transmission and for uplinking signals for live events from the venue of the events to the satellite have been treated to be 'royalty'. Since, the assessee had not deducted TDS under section 195, disallowance under section 40(a)(i) has been made. The assessee's case before us is that, firstly, PanAmSat is a USA based company, therefore, Indo-US DTAA is applicable and since it does not have any PE or business connection in India, therefore, the payment made to a non-resident outside India for availing service of equipment placed outside India cannot be taxed in India. In support of su....
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....ayments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8.' The article gives exhaustive definition of the term 'royalty' and therefore, the definition and scope of 'royalty' is to be seen from the Article alone and no definition under the domestic Act or law is required to be considered or seen or any amendment made in such definition whether retrospective or prospective which can be read in a manner so as to extend any operation to the terms as defined or understood in the Treaty. The Legislature or Parliament while carrying out amendment to interpret or define a given provision under the Domestic Law of the country cannot supersede or control the meaning of the word which has been expressly defined in a Treaty negotiated between executives of two sovereign nations. The payment of transponder charges to PanAmSat and uplinking charges cannot be treated as a consideration for 'use' or 'right to use' any copyright of various terms used in para 3(a) like copyright of a literary, artistic, or scientific work, including cinematograph films....
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....e to not only the domestic definition but also carried them to influence the meaning of royalty under Article 12. Notably, in both cases, the clarificatory nature of the amendment was not questioned, but was instead applied squarely to assessment years predating the amendment. The crucial difference between the judgments however lies in the application of the amendments to the DTAA. While TV Today, supra note 22 recognizes that the question will have to be decided and the submission argued, Verizon, supra note 23 cites no reason for the extension of the amendments to the DTAA." Thus, respectfully following the ratio laid down by the Hon'ble Delhi High Court, we hold that, the definition of royalty as enlarged by Finance Act, 2012 with retrospective effect will not have any affect in Article 12 of DTAA." 20. Otherwise also, now it is quite trite position that, at the time of making the payment when there is no amendment in the statute, then assessee cannot be expected to withhold the tax, especially when under the old provision or by virtue of any judicial precedent such payment does not fall or has been held to be not falling within the ambit and scope of '....