2015 (2) TMI 1282 - AT - Income Tax

Transponder fees payable by the appellant to Intelsat corporation - Whether in the nature of royalty as per provisions of the income tax Act 1961 and the India-USA Tax Treaty - Held that - The payments made for use/ right to use of process falls in the ambit of expression royalty as per DTAA as well as provisions of Income Tax Act.

Summary

Issues:

1. Taxability of transponder fees under the Income-tax Act and India-USA Tax Treaty.
2. Classification of transponder fees as royalty under Section 9(1)(vi) of the Act.
3. Classification of transponder fees as fees for technical services under Section 9(1)(vii) of the Act.
4. Determination of business connection of Intelsat Corporation, USA in India.
5. Taxability of transponder fees as royalty under Article 12(3)(b) of the India-USA Tax Treaty.

Analysis:

1. The appeals were filed against the order of the ld. CIT(A)-11, Mumbai regarding the taxability of transponder fees for the assessment years 2011-12 and 2012-13. Both years' grievances were heard together due to common issues. The primary contention was the taxability of transponder fees paid by the assessee to Intelsat Corporation, USA, under the Income-tax Act and the India-USA Tax Treaty.

2. The assessee contended that the transponder fees were not taxable as per the Act and the Treaty. However, the Tribunal, based on a previous decision in the assessee's case, held that the payments for the use/right to use of a process fell within the definition of royalty as per the DTAA and the Income Tax Act. The Tribunal, noting the absence of distinguishing facts, ruled against the assessee on the classification of transponder fees as royalty under Section 9(1)(vi) of the Act.

3. The Tribunal dismissed the assessee's appeal regarding the classification of transponder fees as fees for technical services under Section 9(1)(vii) of the Act. The Tribunal's decision was based on the previous finding that the payments made for the use/right to use of a process constituted royalty, aligning with the provisions of the DTAA and the Income Tax Act.

4. The issue of the earth station of the uplink service provider and cable/DTH operators forming a business connection of Intelsat Corporation, USA in India was raised by the assessee. However, the Tribunal did not delve into this issue, as the primary focus was on the taxability of transponder fees as royalty.

5. The Tribunal also did not separately address the taxability of transponder fees under Article 12(3)(b) of the India-USA Tax Treaty, as the previous decision regarding the classification of fees as royalty was upheld. Consequently, the appeals were dismissed concerning the taxability of transponder fees as royalty under the provisions of the Act and the Treaty.

In conclusion, the Tribunal's decision affirmed the taxability of transponder fees as royalty under the Income Tax Act and the India-USA Tax Treaty, based on the previous ruling in the assessee's case.