2011 (1) TMI 47 - DELHI HIGH COURT

Royalty - Fee paid by Indian Broadcasters to foreign satellite service provider – Income deemed to accrue or arise in India - royalty under section 9(1)(vi) - footprint on various continents - process has taken place in India or not - Held that: - Accepted position is that the first two steps are not carried out in India and the entire thrust of the revenue is limited to the third step and the argument is that the relaying of the programmes in India amounted to the operations carried out in India. Whether this argument is sustainable? Answer is emphatic no ! Merely because the footprint area includes India and the programmers by ultimate consumers/viewers are watching the programmes in India, even when they are uplinked and relayed outside India, would not mean that the appellant is carrying out its business operations in India. - section 9(1)(i) is not attracted in the present case.

The terms “lease of transponder capacity”, “lessor”, “lessee” and “rental” used in the agreement would not be the determinative factors. It is the substance of the agreement which is to be seen. When we go through the various clauses of the said agreement, it becomes clear that the control always remained with the appellant and the appellant had merely given access to a broadband available with the transponder, to particular customers. -

The Tribunal has made an attempt to trace the fund flow and observed that since the end consumers, i.e., persons watching TV in India are paying the amounts to the cable operators who in turn are paying the same to the TV channels, the flow of fund is traced to India. That is a far-fetched ground to rope in the appellant in the taxation net. - it is difficult to accept such far-fetched reasoning with no causal connection. – Not liable to pay tax as royalty - Decided in favor of assesse.