2011 (8) TMI 1248 - HC - Income Tax

Taxability in India - income received from the activities undertaken by the respondent/assessee would not be exigible to tax in India.

Summary

Issues:
Assessment of tax liability on income from satellite transmission services provided by a tax resident company of the United States of America in India.

Analysis:
The respondent, a tax resident company of the United States of America, engaged in providing satellite transmission services globally, including in India. The company contended that no income accrued or was attributable to India, thus not liable for taxation in India. However, the Assessing Officer (A.O.) held that a percentage of the income was taxable in India based on past assessments. The Disputes Resolution Panel (DRP) upheld the A.O.'s decision, leading to the taxation of revenue receipts as royalty income. The A.O. passed assessment orders taxing the income related to satellite transmission services, which was challenged before the ITAT.

The ITAT allowed the assessee's appeal, relying on the judgment in Asia Satellite Communication Company Ltd. v. DIT. The ITAT disagreed with the taxation of income as royalty, emphasizing that the income generated in India had already been taxed. The Tribunal also rejected the application of section 9(1)(vii) as the income was held not taxable under section 9(1)(vi) of the Income-Tax Act. The Tribunal's decision was based on the causal connection between the payments received and the income generated in India.

The judgment of the High Court affirmed the ITAT's decision, dismissing the appeal and upholding that the income from the activities undertaken by the respondent would not be subject to taxation in India. The High Court referenced the earlier judgment in Asia Satellite Telecommunications Ltd. v. Commissioner of Income Tax, which established that the income received from such activities would not be taxable in India. Therefore, the High Court concluded that the revenue received by the assessee was not taxable under section 9(1)(vi) or section 9(1)(vii) of the Income-Tax Act, aligning with the precedent set by the Asia Satellite case.