2012 (1) TMI 311 - AT - Income Tax

Royalty and Fees for Technical Services u/s 9 - Double Taxation Relief u/s 90 - Assessee has derived income from providing telecommunication services to various customers in India as well as outside India. The AO treated income from Indian customers as royalty and held that such payments are taxable. HELD THAT - Facts are similar in the own case of M/S INTELSAT CORPORATION C/O S.R. BATLIBOI CO. VERSUS ASSTT. DIRECTOR OF INCOME-TAX CIRCLE-1 (2) NEW DELHI 2011 (3) TMI 1707 - ITAT DELHI where it was held that assessee is a tax resident of USA and therefore the provisions contained in the DTAA are applicable. However there is no need to go into the provisions of the DTAA because of the provision contained in Section 90(2) of the Act. This provision provides that where the Central Government has entered into an agreement with the Government of any country outside India under sub-section (1) for granting relief of tax or as the case may be avoidance of double taxation then in relation to the assessee to whom such agreement applies the provisions of this Act shall applied to the extent they are more beneficial to that assessee. It has to be granted the benefit of the Act under which no liability to tax can be fastened on the assessee. This decision was further confirmed by Hon ble Delhi High Court in the case of DIT INTERNATIONAL TAXATION VERSUS INTELSAT CORPORATION 2011 (8) TMI 1248 - DELHI HIGH COURT . Thus income received from the activities undertaken by the respondent/assessee would not be exigible to tax in India - Decision in favour of Assessee.

Summary

Issues:
1. Taxability of payments received by the assessee company under Article 12 of the Double Taxation Avoidance Agreement between India and USA.

Analysis:
The appeal pertains to the tax treatment of payments received by the assessee company for providing telecommunication services during the Assessment Year 2006-07. The Assessing Officer treated these receipts as royalty under Section 9(1)(vi), 9(1)(vii) of the Income Tax Act and applied Article 12(7)(b) of the tax treaty, resulting in tax liability. The revenue from Indian and non-Indian customers was computed separately, attributing different percentages of revenue to India based on specific customers. The tax liability was calculated accordingly.

The CIT (A) examined the appeal and considered the similarity of facts with the Assessment Year 2007-08. Referring to a decision by the ITAT and the Delhi High Court in a related case, it was held that no income of the assessee was taxable in India concerning the payments received for satellite transmission services. The CIT (A) ruled in favor of the assessee based on the precedents and the application of relevant legal provisions.

Subsequently, the Tribunal reviewed the case, acknowledging the consistent decisions of the ITAT and the Delhi High Court in favor of the assessee. The Tribunal found the facts of the present case to be identical to those of the previous assessment year, leading to the dismissal of the departmental appeal. The Tribunal upheld the decisions of the lower authorities and ruled against the revenue, stating that there was no merit in the appeal.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the non-taxability of the assessee's income in India for providing satellite transmission services, as per the provisions of the tax treaty and relevant legal provisions. The consistent decisions by the ITAT and the Delhi High Court in related cases supported the assessee's position, leading to the dismissal of the departmental appeal.