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TMI Blog2011 (1) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... edicated connection, one’s bandwidth is set aside by the service provider and always available for one’s use. Order of CIT(A) confirmed wherein it was held that, "to avoid tax liability, apparently, MCI has split the lease charges for the IPLC circuit into two non-existent half circuits. Thus, MCI is trying not to acknowledge its liability on the quantum of lease charges arising in India and received by it by resorting to subterfuges. It is a fact that MCI has provided the single, composite and indivisible circuit which constitutes ‘equipment’. It has merely taken VSNL as a "Provisioning Entity" for providing the local part of services in India. In the alternative, the payments made for IPLC service may also be held to be for the use of process and, hence, would amount to payment of Royalty. The order of the Assessing Officer that payments received by the appellant was royalty for use of equipment and related services is therefore, confirmed" - IT APPEAL NOS. 1311 (MAD.) OF 2006 AND 164 (MAD.) OF 2007 - - - Dated:- 7-1-2011 - HARI OM MARATHA, ABRAHAM P. GEORGE, JJ. V. Ramachandran for the Appellant. Subramanian for the Respondent. ORDER Hari Om Maratha, Judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is situated outside the territory of India in order to provide international connectivity services and do not either own or utilize any landing station in India for providing international half-circuit-services. It is stated that the landing station or gateway in India used in transmitting the traffic within India belongs to VSNL. This is used by VSNL for providing India end services pursuant to its contract with the customer. As per assessee, none of its equip- ments is installed within the territory of India in connection with the services rendered by MCI Singapore to Indian customers. MCI Singapore has a Service Agreement with its Indian associate enter- prise, namely, MCI Worldcom India (Pvt.) Ltd. (MCI India) as per the terms of which MCI will render the following services to MCI Singapore : "( i )Market Development services such as assist in the development of qualitative and quantitative market research, market plan and assist in the design of a communication strategy. ( ii )Liaisoning with customers for obtaining feedback on behalf of MCI Singapore on the quality and efficiency of the services provided by the MCI Singapore and compared to its competitors in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t annexed which details the service provided by MCI Worldcom Asia (Pte) Ltd. in India (directly or through their affiliates). The escalation list contains the names of the persons with phone numbers, whom the customers should contact for fault resolution service. The escalation list filed by the following companies are annexed to the assessment order and this forms part of the assessment order. ( i )HCL Infinet Ltd., New Delhi - letter dated 28-2-2005. ( ii )Daksh e-Services Pvt. Ltd., Gurgaon, Haryana - letter dated 15-3-2005, ( iii )Stingray Technologies Pvt. Ltd., Noida, New Delhi - letter dated 7-3-2005, ( iv )Birla Global Infotech Services Pvt. Ltd., Hyderabad - letter dated 24-2-2005, ( v )Jindal Transworld Pvt. Ltd., New Delhi - letter dated 25-2-2005 ( vi )Manipal Informatics, Manipal, Karnataka - letter dated 22-2-2005. ( vii )Infosys Technologies Ltd., Bangalore - letter dated 25-2-2005. ( viii )Foundations - Mega Channels Computers Ltd., Chennai - letter dated 17-10-2003. ( ix )Hexaware Technologies Ltd., Chennai ( x )Infotronics Pvt. Ltd., Chennai - letter dated 26-8-2003. 9. On a perusal of the various agreements entered into by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. In 12.9.6, it is stated that the title to the service equipment shall at all times belong and remain with Worldcom or the relevant Worldcom affiliate. In 12.9.8, it is stated that customer shall permit Worldcom to inspect or test the service equipment at all reasonable times. In 12.9.9, it is stated that upon termination of the service, customer shall allow Worldcom access to each customer site to remove the service equipment. 12. It is stated in clause 6 relating to fault resolution that Worldcom shall respond to notification of the fault from the company in a specified time frame and that Worldcom shall use all reasonable endeavours to correct any fault as quickly as possible. 13. It is stated in clause 25 that Worldcom shall be entitled at any time to use Worldcom affiliates to perform such obligations in the agreement. A copy of the Master Services Agreement entered into by Wipro with MCI Worldcom has been obtained. This is enclosed herewith. 14. On a perusal of the copies of various agreements (and the escalation clauses annexed thereto) entered into with customers in India it is seen that services are provided in India at various levels. 15. The assessee s contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the Office of MCI Worldcom India (Pvt.) Ltd., Chennai to ascertain the nature of service provided to the Indian customers. A statement has been recorded from Shri Mohan Ramaswami, a Telecom Engineer by profession and an employee of M/s. MCI Worldcom India (Pvt.) Ltd., Chennai (Head Quarters in New Delhi). A copy of the statement has been given to the assessee on request. Shri Mohan Ramaswami has stated that he along with his team of Service Engineers are attending to fault resolution service for various customers in India for which purpose they coordinate with VSNL and MCI, USA. He has also stated that as a head of the Operations Division he reports to MCI, USA, directly and is not reporting to any of the authorities of MCI India. It is therefore evident that the technical services are rendered to customers in India through employees of the associated concern of MCI Worldcom India Pvt. Ltd. 17. On a perusal of the agreements and from the enquiries made it is seen that the assessee has an enduring business connection in India under section 9(1) of the Income-tax Act as a result of the source of income in India and location of assets and software in India (through the affiliates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 12(2)( b ) of DTAA with Singapore." 5. In first appeal, the ld. CIT(A) has dismissed the entire claim of the assessee after making elaborate discussion and giving a finding that "to avoid tax liability, apparently, MCI has split the lease charges for the IPLC circuit into two non-existent half circuits. Thus, MCI is trying not to acknowledge its liability on the quantum of lease charges arising in India and received by it by resorting to subterfuges. It is a fact that MCI has provided the single, composite and indivisible circuit which constitutes equipment . It has merely taken VSNL as a "Provisioning Entity" for providing the local part of services in India. In the alternative, the payments made for IPLC service may also be held to be for the use of process and, hence, would amount to payment of Royalty. The order of the Assessing Officer that payments received by the appellant was royalty for use of equipment and related services is therefore, confirmed". 6. Now the assessee is aggrieved and has filed this appeal by taking the following grounds : "1.1 That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in this case, as explained with the help of diagrams, whether payments made to the non-resident satellite companies by the customers are liable to be taxed as royalty under the Income-tax Act and the provisions of the respective DTAA inasmuch as the payment was for use of the Process and it was not necessary that the processing should be a secret process. In other words, whether the services by the appellant company through sophisticated equipments including optical fibre under sea cables to the Indian customers would amount to royalty or not. In nut shell, the crux of the matter is whether payment made for the services so provided are subjected to Indian income-tax or not. The undisputed facts of this case are that Indian telecommunication Regulations permit only the licenced service provider to provide services in India. It is also a fact that the appellant is not to a licenced service provider in India and apparently it provides the services only outside India. The appellant is engaged in providing international connectivity services to customers in Asia Pacific region. For this year, NIL income was returned on the premise that the revenues earned by it are in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the equipment. 8. Thus, de facto owner of the equipment installed at the premises of VSNL was assessee company itself. 9. Both the representatives tried to explain their point of view even with the help of pictographs. Both sides have given the complete pictures and processes involved. To understand the exact working of the assessee company, we extract the following facts and figures, and diagrams from the papers filed before us and which are not disputed, so it would be easier to understand the real controversy : "Summary In the near term, networks with WDM point-to-point links and electronic regeneration at each node, such as Alcatel s ring network, are quite practical. However, electronic regeneration can be quite expensive, and in the longer term, the all-optical approach is likely to reduce the node cost significantly. As we have seen, the all-optical testbed demonstrations were mostly transmission oriented and concerned with the physical layer issues discussed in Chapter 5. They also focused on demonstrating the use of specific types of switches, mux/demuxes, filters, and amplifiers. This is where the major problems are today. These testbeds have sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. 1.1 Why Optical Networks? Since the fabrication of the first low-loss optical fiber by Corning Glass was done in 1970, a vision of a ubiquitous and universal all-optical communication network has intrigued researchers, service providers, and the general public. Beginning in the last decades of the 20th century, enormous quantities of optical fiber were deployed throughout the world. Initially, fiber was used in point-to-point transmission links as a direct substitute for copper, with the fibers terminating on electronic equipment. Glass fiber was and is the ideal medium because of its many superior properties : extraordinary bandwidth, low loss, low cost, light weight and compactness, strength and flexibility, immunity to noise and electromagnetic interference, security and privacy (it is difficult to tap them), and corrosion resistance. Although all of these qualities make the fiber a technological marvel, fibers do not become networks until they are interconnected in a properly structured architecture. For our purposes, an optical network is a telecommunications network with transmission links that are optical fibers, and with an architecture that is designed to exploit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommunity has now shifted to organization, control, manageability, survivability, standardization, and cost-effectiveness, a trend that reflects the maturing of the optical technology as well as the recognition that the optical network is the only way of supporting current and future demand. These networks have played a critical role in reducing communications costs, promoting competition among carriers and service providers, and thereby increasing the demand for new services. In addition to the technology push and demand pull, a number of other recent developments are contributing to the expansion and effectiveness of optical networks. One is the accelerating removal of the bottleneck in the "last mile" - the distribution network that is the bridge between the high-speed fiber core network and the end users. Until the last decade of the 20th century, this distribution network - composed of twisted pairs of copper wires connecting each residential subscriber to the local telephone Central Office - was specifically engineered to a limited bandwidth of 3000 Hz. As a result, the user bit rates were restricted to a tiny trickle. This lowspeed access link separated the various high-spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, with long-haul carriers, local carriers, Internet service providers (ISPs), and cable operators poaching on each other s domains and using optical fiber capacity to do so. Bandwidth trading has been introduced as a way of improving the utilization of fibers and thereby optimizing profits. A carrier with idle capacity sells it to another carrier with excess demand. This type of exchange requires sophisticated control and management tools for network reconfiguration. More generally, any large network requires complex control and management systems and intelligent network elements for performance monitoring, network reconfiguration, and fault recovery. The systems, protocols, and equipment for performing these functions in traditional telephone and data networks were built over many years by the public carriers and equipment manufacturers. The new optical networks require similar tools, and this is especially important in multivendor environments. These are now making their appearance in the form of a proposed control plane for optical networks and protocols for systems management in these networks. As more sophisticated control and management functions are incorporated into op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he world s installed communication capacity, the early data networks were constructed as overlays on these networks, running on lines leased from the public carriers mainly AT T in the United States and the Government administrations in Europe. The traffic flow in the early data networks was minute compared to voice traffic essentially confined to businesses, universities, and research laboratories. For this reason, the main players in data networking were originally government, research, business, and educational organizations and dataprocessing equipment manufacturers. As optical fiber became the dominant transmission medium, various standards for exploitation of Fiber were developed, including the Synchronous Optical Network (SONET) standard in the United States and a similar Synchronous Digital Hierarchy (SDH) standard in Europe. The SONET/SDH Transmission, multiplexing and switching equipment, adapted primarily to circuit-switched Applications, were soon augmented by Asynchronous Transfer Mode (ATM) switches and Internet Protocol (IP) routers (cell-switched and packet-switched, respectively) to handle a wide variety of data and multimedia services. By the late 1990s, the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recovery, and availability in the face of equipment and line failures, natural disasters, or malicious attacks. Transmission quality is secondary. Similar requirements hold to a lesser degree for financial services (e.g., banks and brokerage houses). In public safety and financial service applications, cost is not the primordial issue. To ensure satisfactory service, large users of network services (e.g., enterprises operating VPNs) enter into Service-Level Agreements (SLAs) with the service providers. For example, the SLA might specify a level of availability, network delay, packet loss, and other features. These represent promises from the provider to the user, and as such, they must be backed up by suitable controls within the underlying network to achieve the performance stated in the SLA. These controls are enforced within a large network by identifying differentiated services, that is, traffic flows that are singled out to be provided with a predictable Quality Of Service (QoS) (e.g., limits on packet loss and delay). Traffic routed through a large network can be tagged to recognize its class of service (CoS), thereby facilitating the satisfaction of service requirements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contains several LNs; some are stacked in a client-server relationship, and others are independent of each other, offering specialized features to the service layer. Stacked logical layers; e.g., IP over ATM over SONET over WDM, have both advantages and disadvantages. For example, different services (e.g., POTS and VPNs) require channels running at different bit rates. The SONET layer supports these different speeds and in addition provides a grooming function, packing the diverse channels onto a common optical wavelength, using time division multiplexing. This "fills up" the wavelength channel for efficient utilization. However, stacked layers mean additional equipment, which is costly, introduces delays and potential points of failure, and is difficult to manage. Therefore, it is desirable to reduce superfluous layers wherever possible. For example, the IP equipment manufacturers pro- pose to provide IP over WDM, short-circuiting the commonly used configurations involving stacked intermediate layers. Another view of an optical network is the physical picture of Figure 1.2, showing the network elements in the layers of Figure 1.1. Here the physical layer is portrayed for simplic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der equipment or user equipment (end systems), as in the case where the LSNs are IP routers connecting ISP servers to customer PCs, or they may be higher layer switching nodes in a client network, as in the case of SONET DCSs serving ATM switches serving IP routers. Although the focus of this book is the physical layer and its optical components, the logical layers are an integral part of the overall network architectures we discuss here. Therefore, our MWNA includes the logical layers and their electronic components. An understanding of the design and operation of multi wavelength optical networks requires an awareness of the close coupling between the physical layer and the logical layers it serves. The networks we examine will generally be designed to serve large, heterogeneous, geographically dispersed user populations. Given this fact, and the various service requirements discussed, we can infer a list of general design and operating objectives : uConnectivity -Support a very large number of end systems -Support a very large number of concurrent connections, including multiple connections per station and per end system -Support multicast connections efficiently u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of getting the light into the fibers (with lasers) and getting it out (with photodetectors). When the signals are in optical form, photonic technology is well suited to certain simple signal-routing and switching functions within the nodes. With static photonic devices, it is fairly easy to perform functions such as optical power combining, splitting, filtering, and wavelength multiplexing, demultiplexing, and routing. By adding suitable control, the static devices can be controlled dynamically (switched) at slow to fast speeds (milliseconds in the case of mechanical or thermal control and microseconds or nanoseconds in the case of electronic control). The enormous usable bandwidth of a single fiber (tens of terahertz) is at the same time a great asset and a great challenge. It is technologically impossible to exploit all of that bandwidth using a single high-capacity channel. Thus, to make efficient use of the fiber, it is essential to channelize its bandwidth. This is most easily accomplished by superimposing many concurrent signals on a single fiber, each on a different wavelength; that is, by using WDM. Thus, this book focuses on multiwavelength or WDM network architectures. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work, making fault management a more complex issue than in nontransparent net- works. Similarly, impairments such as switch cross-talk, noise, fiber dispersion, and nonlinear effects accumulate over long paths, limiting the geographic "reach" of an optical connection. Second, by definition, in-band information ( e.g., control information carried in packet headers, such as source and destination address, sequence number, channel number, and parity check bits) cannot be used while the signal is in optical form. Because of this, a transparent physical layer cannot perform the various processing functions required in packet switching. It is important to note that the in-band control information carried with the data in IP (packet-based) or ATM (cell-based) networks is the key to achieving a high degree of virtual connectivity in these networks. Typically, many virtual connections are multiplexed on each network link and sorted (switched) on a packet/cell basis at each IP router or ATM switch using information contained in the packet or cell headers. Maintaining transparency in the physical layer eliminates the intelligence necessary to process this information and, therefore, tends ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... layer) and electronics (in the logical layers); that is, the network has as its physical foundation a multiwavelength purely optical network. Superimposed on the physical layer are one or more LNs, each of which is designed to serve some subset of user requirements and is implemented as an electronic overlay superimposed on the physical layer. Just as a transparent optical network has a physical topology composed of ONNs and fiber links, a logical network has a logical topology composed of LSNs and logical links. A logical link is an electronic transmission channel joining two LSNs. It is carried on an optical path provided by the underlying physical layer. Each LN organizes the connections it offers to its clients in a specific way, with its own layered architecture. Different LNs may be managed independently or in coordination with others. Typically, an LN will provide services to end systems in the form of virtual connections traversing paths in the logical topology. In MWNAs involving stacked LNs a logical layer acting as a server for a client logical layer ( e.g., the ATM layer serving the IP layer in Figure 1.1) will offer its services to the client layer in the form of vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown in a more formal view, reduced to its constituent layers, each one providing support for the layer above it, and using the services of the layer below it - a natural extension of the idea of layered architectures to optical networks. The layering formalism is introduced here to partition a complex set of interactions among network components into a small number of more manageable pieces. The characteristics of the logical layers (LLs) depend on the architectures of the various LN overlays. The physical layer, representing a purely optical network, is now shown divided into an optical layer and a fiber layer. The former contains the optical connections supported by the fibers, and the latter embodies the layout of the physical infrastructure itself : the fibers, switches, and optical transceivers. In Chapter 2 the layered view of optical networks is expanded into a complete multiwavelength network architecture. Why is a hybrid approach required for optical networks? Although some early structures proposed for Local Area Networks (LANs) and metropolitan area networks (MANs) were purely optical, the current state of the art suggests that neither optics nor electronics alone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, and they must be flexible in meeting changing demands and unforeseen circumstances such as equipment and link failures. Consider a WAN serving as a backbone that interconnects a large number of users. To reduce access costs, the traffic from small users should be aggregated before it enters the WAN, through the intermediary of an access network a high-speed LAN, a fiber access network, or an electronic switch ( e.g., an IP router owned by an ISP). Each of these represents a gateway to the WAN, and there might be 10,000 of these in a network of global scale, each one serving hundreds of active users. The aggregate traffic in and out of each gateway might require connectivity to perhaps 1000 other gateways on the network at anyone time, and the total traffic injected into the network might be of the order of tens of terabits per second. (This example corresponds in orders of magnitude to present-day numbers on the Internet.) Let us examine the optical, electronic, and hybrid alternatives for supporting these users. Consider first a network supporting gateway interconnection, using purely optical switching. It would resemble a modified version of Figure 1.2, with the access gate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s carrying aggregated traffic on logical links between the IP router ports. This example illustrates the fact that the test of a good lightwave network is whether it can achieve both high throughput and high connectivity at a reasonable cost. Another advantage of the hybrid approach is the versatility achieved by combining optical and electronic technology. This is especially important from the point of view of reconfigurability. For example, frequent changes in fine granularity traffic routing due to changes in customer demand are most easily accommodated by switching in the logical layers; i.e., by using the intelligence built into the IP routers. However, rerouting of masses of coarse granularity traffic due to equipment or link faults is more quickly and efficiently handled in the physical layer by resetting the optical paths through the ONNs using automatic fault recovery mechanisms. Without a reconfigurable layer underneath them, the logical inks between the IP routers are fixed. We have an IP. network whose logical topology is written in stone. Conversely, without an intelligent logical layer above it, the physical layer cannot manipulate the fine-granularity traffic flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latively few optical links and ONNs (the clear circles in Figure 1.5), but they must support high throughput with carefully controlled signal quality and high reliability. For example, transmission on long-haul links is cost-effective when a large amount of capacity is packed into each fiber. This means using large numbers of closely spaced wavelengths; i.e., DWDM with sub nanometer wavelength separations and high bit rates (10 Gbps or higher) on each wavelength. Achieving these numbers over distances of thousands of kilometers is not a trivial feat and requires costly transmitting, amplifying, and receiving equipment. The MAN must meet criteria somewhere in between these two extremes. For example, a standard called coarse wavelength division multiplexing (CWDM) is adapted to MANs and uses spacings of the order of20 nm. This wide spacing combined with fairly short transmission distances means that relatively inexpensive transmission equipment can be used in these applications. In addition to the cost-performance issues in the various levels of a hierarchy, there are important control and management issues. The complexity of control and management in a large network grows rapi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the late 1980s, with bit rates as high as 8 Gbps over distances of 100 km achieved in the mid-1980s (Miller+88). The first optical- fiber transatlantic cable (using electronic repeaters) was laid in 1988. The distance limitations due to fiber attenuation disappeared in the late 1980s, almost overnight, with the emergence of the erbium-doped fiber amplifier (EDFA) (Desurvire+87, Mears+86, Mears+87). Over the ensuing years interest in long-distance optical transmission using EDFAs grew rapidly (Saito+90). In laboratory experiments, in which long distances are simulated using closed loops with amplification, and in which fiber dispersion effects are eliminated using solitons, transmission distances have been extended essentially without limit. For example, (Nakazawa+93) reported a 10-Gbps soliton system operating over a total distance of 106 km. During the late 1970s to the middle 1990s, fiber transmission capacity on a single wavelength roughly doubled each year. Afterward, the focus was on multiwavelength transmission, resulting in a significant jump in aggregate transmission bit rates to the terabits-per-second range in the late 1990s using WDM. A recent example of high-capacity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring, and its driving force was the computer community. In a competing development, the International Standards Organization (ISO) Open Systems Interconnection (OSI) Reference Model was created in the 1980s as an attempt by international organizations to produce a common standard that would move data communications out of the proprietary networking world, making multivendor networks feasible. However, at the same time that the OSI model was being promoted worldwide by international standards bodies, the Internet was quietly and spontaneously spreading throughout the world. Proprietary networking protocols, which had previously become de facto standards were displaced by 1P, the language of the Internet. ISPs became key players in the networking community, and the World Wide Web, invented in 1989, provided the impetus for a flood of new services requiring a high-capacity, high-connectivity infrastructure, and high-speed user access. The new multimedia applications necessitated broadband access, and, as mentioned in section 1.1, the telephone and cable carriers responded, respectively, with DSL and cable access. Going beyond these copper-based systems there has been considerable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity without requiring expensive, tunable optical transceivers. Multihop networks were early examples of the hybrid approach described in Section 1.4 [Acampora 87, Mukherjee 92( b )], relieving the connectivity bottleneck at the optical level by adding packet or cell switches in an electronic LN overlay. From the late 1980s to the present, activity intensified in optoelectronic and photonic technology in the demonstration and deployment of new network architectures and, most recently, in optical network standardization, control, and management. Some of the important recent technological advances occurred in fiber technology and amplification, extending the usable optical fiber spectrum over a contiguous window from 1200 to 1600 nm. Other advances occurred in Micro Electro Mechanical Systems (MEMS). These devices were the basis of new high port-count optical switches, tunable filters, and related devices. A wide variety of high-performance devices for WDM based on guided-wave technology were also developed, including tunable lasers, filters, integrated switch fabrics, and optoelectronic subsystems such as integrated optical receivers. As the fundamental multiwavelength techno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost has also produced a concentration on bread - and-butter issues such as economic designs in MANs, in contrast to the "hero experiments" in the 1980s, where the objective was to break records for long-haul transmission - at any cost. Focus on manageability has resulted in solid advances in control and management, including taking control techniques designed for the logical layers of the network and adapting them to the physical layer. As an example, the control protocol known as Generalized Multiprotocol Label Switching (GMPLS) has been proposed for application to control functions in the physical layer. As its name implies, GMPLS is a generalization of Multi Protocol Label Switching (MPLS), which was designed as an improvement over the packet-forwarding techniques used in IP networks. This recent activity provides the context for this book : an advancing and maturing technology base, a steady increase in demand for network capacity and performance, and an industrial base that has positioned itself to meet these demands. 1.7 Overview and Road Map Lightwave networks can be characterized broadly in terms of three basic features : (1) physical (fiber) topology, (2) functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basic features. In a field of engineering where the technology is mature ( e.g., in digital electronics), systems can be understood, analyzed, and designed with only a limited understanding of the physical principles involved. (A designer of a personal computer is not particularly concerned with electromagnetic theory.) However, when the enabling technology is rapidly evolving, as in the case of optical networks, a more thorough understanding of technology and its relation to system performance is required. Thus, a good grasp of optical networks requires an understanding of the interrelations between two bodies of knowledge that traditionally have been treated separately : the physics of the underlying devices and the mathematical methodology required to analyze, design, and control systems incorporating these devices. The emphasis of this book is on methodology rather than devices. However, we weave the physical and mathematical sides of networking into an integrated whole by linking physical constraints with performance analysis and design concepts whenever possible. In addition, we attempt to integrate current practice, generic models, and futuristic concepts. By emphasizi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the first part of the chapter (through Section 4.9) focuses mainly on fundamentals and generic concepts. The latter part of the chapter is devoted to current technology with a focus on physical and technological constraints that limit network performance. These include limits on WDM channelpacking density, optical receiver performance, geographic reach of optical connections, and technological limitations imposed on optical switches. The chapter concludes with methodologies for performance evaluation. ****** The remaining chapters are more specialized. Chapters 5 through 7 present a thorough treatment of the generic multiwavelength optical network.10 Static networks based on shared optical media are covered in Chapter 5. The chapter discusses multiplexing and multiple-access techniques, traffic flow constraints, capacity assignment, packet switching in the optical layer, and access network applications of passive optical networks. Wavelength-routed and linear lightwave networks are examined in Chapter 6, with discussions of routing and channel assignment, as well as the relationship between optical switch functionality and network performance. Chapter 7 deals with logicall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e latter part of the chapter. In Chapter 7, most of the material on point-to-point logically routed networks will be of interest to all readers, whereas sections 7.4 and 7.5 on hypernets are more futuristic in nature than the rest of the chapter. The latter sections of Chapter 8, on optical layer protection in mesh topologies, are currently important open research areas, and the same can be said of all of Chapter 10. Readers involved in research on next-generation networks would normally focus on the complement of the subject-matter of interest to the novice. Thus, for example, rings, which are "old hat" to the researcher, could be skimmed in favour of more advanced topics; for example, optimization and LLNs in Chapter 6. Researchers might also focus on hypernets in Chapter 7, general optical layer protection in Chapter 8, and the full range of optical packet-switching issues in Chapter 10. In summary, the reader is invited to customize an itinerary suited to his or her interests in exploring the fascinating world of optical networking. We hope you enjoy the journey. Bibliography (Acampora 87) A. S. Acampora. A multichannelmultihop local lightwave network. In Proceedings o/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk, partially replacing the functions of a reconfigurable physical layer. (9)Early demonstrations of fiber access date back to 1981 with FTTH by Northern Telecom and 1989 with passive optical access networks by British Telecom. (10)The necessary background in graph theory, Markov chains, and queuing theory is included in Appendices A and C, and some algorithms for special aspects of network switching, provisioning, and control appear in Appendices B, D, E, and G. 10. Having understood the real functioning of the assessee s activities, we would like to further elaborate that the provisions of IPLC services by the assessee are diagrammatically listed in Annexure 1 of its paper book. We extract the same hereinbelow : ****** 11. As per the assessee, the international leg of the service which is provided outside India and referred to as overseas leg is provided by the assessee. The vehement argument of the ld. AR is that the assessee does not and cannot provide service in India insofar as service within India can be provided only by a licenced service provider. So the Indian leg of the services is provided by VSNL, a public sector undertaking. The ld. AR has argued that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has neither knowledge nor is he a party to the interconnect agreements entered into by the assessee with other international telecom operators. In a way, there is not even an identification of the equipment as far as the customer is concerned. The ld. AR has referred to the settled position of law that there must be a consensus ad idem between the contracting parties on the subject-matter of the contract that is conspicuous by its absence in the present transactions. With reference to the agreement between the assessee and its customers, it was stated that it is clearly for the provision of services and not for granting any right whatsoever in the network of the assessee. The ld. AR has also tried to explain the principles for drawing a distinction between the transactions for the use of equipment and, thus, for the rendering of services. In the backdrop of the above, it was stated that the customers do not even know what is the equipment because it is not identified and also that the customers do not have the physical possession of the telecom network infrastructure/equipment. According to the ld. AR, the customers do not hold/possess own, operate, maintain or control the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Indian customers is in a way also for the use of the process and would ultimately amount to payment of royalty. In this case, the decision of Special Bench, New Delhi in the case of New Skies Satellites N.V. v. Asstt. DIT [2009] 319 ITR AT 2692, on which Department has relied is very much relevant on the subject. We are in agreement with the Assessing Officer that the agree- ment entered into with VSNL for split billing is only to overcome the telecom regulatory regime prevailing in India. In this regard, the decision of ITAT Delhi in the case of Asstt. CIT v. Grandprix Fab (P.) Ltd. [2010] 128 TTJ (Delhi) 60 , and that of the Hon ble Madras High Court in the case of Ansaldo Energia SPA v. ITAT [2009] 310 ITR 237 3, support our view. The decision of Hon ble Supreme Court in the case of BSNL v. Union of India [2006] 282 ITR 2734, relied on by the ld. AR is entirely on different facts because that relates to use of ordinary telephone subscribers. A perusal of service agreement shows that the same is with Indian customers on a standard format. It is clear that VSNL is not an affiliate of MCI. It is only a sub-contractor of it. In other words, VSNL is a " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments made for hiring bandwidth by the customer would correspond to the rental value. The ld. DR has relied on the aforementioned decisions in detail in his written submission and we are in agreement with that submission in toto . In any case, the payment made by the Indian customer to Singapore company is not Royalty for the use of equipment, it is the Royalty for the use of process . The dispute as to whether such process should be a secret process or not has been resolved by the decision of the ITAT, Special Bench in the case of New Skies Satellites N.V ( supra ) in which it has been held as under : "On facts, it is held that a process is involved in the transponder through which the telecasting companies are able to uplink the desired images/data and downlink the same in the desired are which inter alia covers Indian territory. For the purpose of falling within the scope of royalty, it is not necessary that the process which has been used and in respect of which the consideration is paid should be a secret process. Even consideration paid in respect of simple process shall be covered by the scope of royalty. The scope of "royalty" has not been restricted either by the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er a distance and have to be amplified at periodical intervals or points of distance. The contention at page 24 of the written submission of assessee-company dated 15-9-2010 is that the decision in the case of Asstt. CIT v. Sanskar Info TV (P) Ltd. [2004] 24 SOT 87 (Mum.), would not apply to the assessee s case just because the assessee provides the services through cable network is a distinction without a difference. The argument of the assessee s counsel that agreement with VSNL for split billing is not correct in view of the decision of the ITAT, New Delhi rendered in the case of Grandprix Fab (P.) Ltd. ( supra ), wherein it has been held that merely because the assessee had bifurcated the payment into two groups that by itself was not sufficient to say that there were two independent and distinct contracts entered into by the assessee with the contractor is not a correct contention. In the case of Sanskar Info TV (P.) Ltd. ( supra ), it has been held by the ITAT, Mumbai, that fees paid for use of a transponder and up-linking facility on the satellite is towards use of a process and for rendering services in connection with such process. Such payments are taxable in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, was a company incorporated under Iaws of United States and was tax resident of USA - It had a wholly owned subsidiary company, namely, eFunds India, operating in India - Assessee entered into contract with its clients for providing certain IT enabled services and then, the same contract was either assigned or sub-contracted to eFunds India for execution; therefore, both assessee and eFunds India came under legal obligation to provide services to clients of assessee - From Function performed, Assets used and Risks assumed (FAR analysis) by assessees and eFunds India, it was clear that eFunds India was not having requisite software and database needed for providing IT enabled services independently; therefore, to that extent they were made available by assessee to eFunds India free of any charges - Further, eFunds India did not bear any significant risk as ultimate responsibility lay with assessee - It was also noted that sales team of assessee undertook marketing efforts for its affiliates including eFunds India - Whether, on facts, it could be concluded that assessee had business connection in India - Held, yes - Whether in view of aforesaid and further having regard to ..... 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