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TMI Blog2015 (9) TMI 1586X X X X Extracts X X X X X X X X Extracts X X X X ..... r deciding the issue that such a payment now amounts to “royalty” and same is to be viewed afresh despite the finality of the issue in the case of the payee from the stage of the High Court, we are of the considered opinion that, it will be purely an academic exercise only. The reason being that, the assessee has liability to deduct TDS u/s 195, only when the payment of the sum in the hands of the non-resident is chargeable to tax under the relevant provisions of the Income Tax Act. Here in this case, it has already been upheld that such a sum is not chargeable to tax in India in the hands of the non-resident, that is, M/s New Skies Satellites NV by the High Court, therefore, it wholly undesirable for us, to decide that payment made by the assessee constitutes income in the hands of the payee. Accordingly, the order of the CIT(A) that assessee is not required to deduct TDS on payment made to M/s New Skies Satellites NV is upheld and consequently grounds raised by the revenue are dismissed. - ITA No. 5374/Mum/2007, ITA No. 6093/Mum/2008 - - - Dated:- 7-9-2015 - Amit Shukla (Judicial Member) And Gopal Kedia (Accountant Member) For the Appellant : Parag Vyas For the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dwidth capacity available for their purchases and, at their sole discretion, they can resell the same or permit third parties to avail of the entire capacity of any portion of the capacity. c. In event of NSS process to remove NSS-703 satellite from commercial operation, it can provide the above bandwidth via replacement satellite with specifications identical to the NSS-703 satellite. d. The above agreement is for a period of three years from 6th January, 2003 to 5th January, 2006, which term the applicant can extend for an additional period of two years by simply giving written notice to NSS . According to the assessee, the satellite bandwidth capacity sold by M/s New Skies Satellites constitute sale of product to the assessee and the said capacity purchased by the assessee could either be used by it for providing telecommunication services to its customers or could be sold to the third parties as per the requirements of its business. Therefore, the payment made to M/s New Skies Satellites constitutes business profit in the hands of the said company and since it is a tax resident of Netherlands and does not have a PE in India therefore, the said amount is not ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n he strongly relied upon the decision of the Madras High Court in Verizon Communications Singapore Pte. Ltd. vs ITO (Int. Taxation) reported in [2012] 361 ITR 575. This decision of the Madras High Court has been followed by ITAT Mumbai Bench in the case of Viacom 18 Media Pvt Ltd, reported in [2014] 162 TTJ (Mum) 336. Thus, he finally contended that the said payment constitutes a royalty in view of the retrospective amendment brought by the Finance Act, 2012 therefore, the assessee was liable to deduct taxes at sources because here it cannot be doubted that it falls within the ambit and meaning of process . 7. On the other hand Ld. Senior Counsel, Shri J D Mistry, submitted that here in this case, first of all, now there is no requirement to go into the merits of the issue, whether such a payment constitutes a royalty or not, because the payment made to New Sky Satellite has been held to be not taxable either as a royalty or as a business profit in the case of the said foreign entity by the Tribunal itself, which finding and conclusion now stands upheld by the Delhi High Court. Thus, when the payment made by the assessee to the payee itself has been held to be not taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the appellant, he held that eighty per cent. thereof was apportioned to India as most of the channels were India specific and their advertisement revenue was from India. Order of the Commissioner of Income-tax (Appeals) 10. Being aggrieved by the order of the Assessing Officer, the appellant preferred an appeal to the Commissioner of Incometax (Appeals). Various grounds were urged challenging the liability to pay tax in India as well as the manner in which the Assessing Officer had computed the appellant's income chargeable to tax. 11. The Commissioner of Income-tax (Appeals) disposed of the appeal by an order dated December 4, 2000. He noted that there was no dispute that the appellant had not received any income in India. The only dispute, according to the Commissioner of Income-tax (Appeals), was as to whether any income could be deemed to have accrued to the appellant in India within the meaning of section 9 of the Act. He held that although it could be said that there was some kind of territorial nexus of the beam which was downlinked from the appellant's satellite with India, the proprietary rights in the nature of copyright, etc. in the downli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness connection in India. After referring to certain decisions of the Supreme Court, he concluded that the appellant did not have any agreement with any Indian company and was not rendering any service to any Indian company and, therefore, it could not be said that the appellant had a business connection in India. He also held that the appellant was not carrying out any operations in India as the only operations that were carried out by the appellant were in the satellite which was located outside India. The mere fact that the appellant had put in place a satellite in a manner that downlinked signals could be received in Indian territory also did not result in an inference that any part of the appellant's business operations were carried out in India. As per him, the position may have been different if it had been shown that the satellite company, the television channels and the cable operators were interconnected or that the transactions among them were not carried out at arm's length. But as there was no evidence or mention of any of these factors, he held that no income could be said to be deemed to accrue or arise in India in terms of section 9(1)(i). 13. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be apparent that the television channels would be making the payment by way of royalty in respect of a right or information used or services utilized for the purpose of a business carried on by them in India. The television channels which made programmes predominantly meant for Indian persons were utilizing the processing facilities of the appellant for the business carried on by them in India and hence the appellant was chargeable to tax in India. 14. Having regard to the view that he took, viz., that the income was chargeable to tax in terms of section 9(1)(vi), he felt that it was not necessary to consider the question of deductibility of the expenses. Nevertheless, he thought it fit to dispose of all the grounds that were raised and were filed before him. In so far as the claim for lease rentals is concerned, he held that 50 per cent. of the lease rentals payable for AsiaSat 1 ought to be allowed as a deduction. Similarly, the expenditure on maintenance and satellite operations was also allowed to the extent of 50 per cent. in so far as AsiaSat 1 was concerned and 75 per cent. in so far as AsiaSat 2 was concerned. As regards the claim for depreciation, he accepted the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n merits, he submitted that, first of all, the assessee has relied upon the DTAA wherein no such amendment has been brought. Therefore, the amendment made in the Domestic Law i.e. in the Indian Income Tax Act will not have any relevance or bearing or interpreting the scope of Royalty as defined in the treaty. In support, he strongly relied upon the decision of Hon ble Bombay High Court in the case of CIT vs Siemens (Atkongesells) Shaft, reported in 310 ITR 320 and also decision of ITAT Mumbai Bench in the case of Channel Guide India Ltd vs ACIT [2012] 139 ITD 49. 10. We have heard the rival submissions and also perused the material referred to before us. Here the main issue pertains to, whether the payment made by the assessee to M/s New Skies Satellites NV for the purchase of satellite bandwidth capacity in terms of agreement dated 12./18.12.2012 should be made without deduction of tax at source or not. The Assessing Officer in the application filed by assessee u/s 195(2), has held that such a payment amounts to royalty in the hands of M/s New Skies Satellites NV, therefore, assessee was required to deduct tax at source. It has been now brought on record by the Ld. Senior Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is not required to deduct TDS on payment made to M/s New Skies Satellites NV is upheld and consequently grounds raised by the revenue are dismissed. 12. ITA 6093/Mum/2007 : In the impugned appeal, following grounds has been raised by the revenue :- 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the payment of certain telecommunication Satellite Band Width Capacity(Software) amounts to business receipts and in the absence of any Permanent Establishment in India, the business profit arising in the transaction is not taxable in India. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) failed to appreciate that the payment for the purchase of software is in the nature of Royalty which is liable for taxation in India . 13. Since similar issue is involved in this appeal has deliberated and decided above in the departmental appeal (ITA No. 5374 of 2007), therefore, the aforesaid finding will apply mutatis mutandis here in this appeal also. Accordingly, we hold that assessee is not liable to deduct TDS on payments made to M/s New Skies Satellites as it neither amounts to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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