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TMI Blog2017 (10) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... artially and not apportioning receipts which were India specific. - Decided in favour of the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the above, on facts and circumstances of the case and in law, the Ld. AO has erred in arbitrarily attributing the entire receipts from the customers falling on the beam covering India either fully or partially and not apportioning receipts which were India specific. 3. The briefly stated facts of the case are that the assessee company was incorporated in the Netherlands and is a tax resident of that country. The assessee company is engaged in the services relating to transmission of voice, data and programmes by providing space segment capacity to customers on satellites under various contracts with the customers around the world. Before the lower authorities, the assessee submitted that the satellite is located in the space at the height of 36,000 kms above the Earth and, therefore, the satellites as well as operating facilities are maintained and controlled outside India and the customers have no control on physical possession over the satellite nor any rights to use the satellite, are granted to the customers. The customers use the uplink facilities to send the encoded signals to the satellite. The signals are then amplified by the transponder and down-linked over the are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard the rival submissions and perused the relevant material on record. We find that Hon'ble Delhi High Court in the case of assessee in ITA No. 473/2012 and 474/2012 for assessment year 2006- 07 and 2008-09, which is reported in 382 ITR 114, framed the question of law as under: (1) whether the receipts of the assessee earned from providing data transmission services, fall within the terms royalty under the Income Tax Act, 1961, and (2) if the answer to the first is in the affirmative, whether the assessee would be eligible for benefit under the relevant Double Tax Avoidance Agreements. 5.3 The Hon'ble Delhi High Court answered to the question of law against the Revenue with following finding: "60. Consequently, since we have held that the Finance Act, 2012 will not affect Article 12 of the DTAAs, it would follow that the first determinative interpretation given to the word "royalty" in Asia Satellite, when the definitions were in fact pari materia (in the absence of any contouring explanations), will continue to hold the field for the purpose of assessment years preceding the Finance Act, 2012 and in all cases which involve a Double Tax Avoidance Agreement, unless the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged by the Department before the Hon'ble Supreme Court. 6. We have heard the parties on this issue. We find the contention on behalf of the assessee to be correct. A copy of the Tribunal order in the assessee's case for assessment years 2000-01 to 2005-06 and 2007-08, passed on 11.3.2011, subsequent to the High Court order dated 17.2.2011, has been placed before us at APB 1 to 12. The relevant portion reads as follows:- "The Hon'ble High Court of Delhi in the above referred case of "Asia Satellite Telecommunications Co. Ltd." in ITA Nos. 131 to 134/2003, has held that receipts earned from providing data transmission services through provision of space segment capacity on satellites does not constitute royalty within the meaning of section 9(1) (vi) of the Act. In doing so, the Hon'ble High Court has conclusively held that while providing transmission services to its customers, the control of the satellite or the transponder always remains with the satellite operator and the customers are merely given access to the transponder capacity. Accordingly, since the customer does not utilize the process or equipment involved in its operations, the charges paid to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India under Article 12(4) read with Article 12(2) and 12(8) of India Netherlands DTAA. 6. That on the facts and in the circumstances of the case and in law, the ld. AO erred in not discharging the burden of proving that: i) The appellant's non-resident customers had a Permanent Establishment in India in connection with which the alleged Royalty was paid; and ii) The alleged Royalty payments were borne by such Permanent Establishment of the non-resident customers." 8. That without prejudice to the above, on facts and circumstances of the case and in law, the learned AO has erred in arbitrarily attributing the entire receipts from the customers falling on the beam covering India either fully or partially and not apportioning receipts which were India specific." 7.4 The Tribunal (supra) rejected the above grounds that in view of the grounds in respect of characterization of income as royalty or fee for technical services already decided in favour of the assessee and therefore ground Nos. 5, 6, and 8 no longer survived. 7.5 As above grounds raised in ITA No. 4176/Del/2011 are identical to the grounds No. 5, 6 and 8 respectively raised in the present appeal, respectfully, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al assessed income of the Appellant at USD 24,390,163/-. 6. Without prejudice to above, on facts and circumstances of the case and in law, the Ld. AO erred in not granting the entire credit of the taxes deducted at source as claimed in the return of income filed by the appellant. 7. The Ld. AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. Grounds raised in ITA No. 680/Del/2015 1. That on the facts and in the circumstances of the case and in law, the Ld. Dispute Resolution Panel ('the Panel') erred in not directing the Learned Assessing Officer ('Ld. AO') to pass appropriate orders holding that the Appellant is not liable to be assessed to tax in India. 1.1.That on the facts and circumstances of the case and in law, the Panel erred in not directing the Ld. AO to follow the order passed by the Hon'ble Delhi High Court (in ITA 1167/2009 and ITA1122 to 1129/2011) and the Hon'ble Income Tax Appellate Tribunal, New Delhi ('the Tribunal') (in ITA nos. 5385-5387/Del/2004, 2623- 2624/Del/2008, 735-736/Del/2010, 5160/2010, 4176- 4177/Del/2011) in Appellant's own case holding that the Appellant is not liable to be assessed to tax in India, when ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r fully or partially and not apportioning receipts which were India specific. 6. That the Ld. AO erred in holding that the payments received by the appellant as consideration for data transmission services would also qualify as "fee for technical services" as defined under section 9(1 )(vii) of the Act as well as within the meaning of Article 12(5) of the India-Netherlands DTAA. 7. Without prejudice to above, while computing the tax payable, the Ld. AO erred in law in levying surcharge and education cess (including secondary and higher education cess) on the rate of tax as provided under the Article 12 of the India- Netherlands DTAA. 8. That the Ld. AO has erred in levying interest under section 234B of the Act, by not appreciating the fact that the Appellant is not under any obligation to pay advance tax since the entire revenues earned by the Appellant were subject to tax deduction at source under section 195 of the Act. The Ld. AO further erred in levying Interest u/s 234D of the Act. 9. Without prejudice to above, on facts and circumstances of the case and in law, the Ld. AO erred in not granting the credit of taxes deducted at source as claimed in the return of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for data transmission services would also qualify as "fee for technical services" as defined under section 9(1 )(vii) of the Act as well as within the meaning of Article 12(5) of the India-Netherlands DTAA. 5. That the Ld. AO has erred in levying interest under section 234B of the Act, by not appreciating the fact that the Appellant is not under any obligation to pay advance tax since the entire revenues earned by the Appellant were subject to tax deduction at source under section 195 of the Act. The Ld. AO erred in further levying Interest u/s 234D of the Act. 6. Without prejudice to above, while computing the tax payable, the Ld. AO erred in law in levying surcharge and education cess (including secondary and higher education cess) on the rate of tax as provided under the Article 12 of the India- Netherlands DTAA. 7. Without prejudice to above, on facts and circumstances of the case, the Ld. AO erred in not granting the entire credit of taxes deducted at source as claimed in the return of income filed by the Appellant. 8. The Ld. AO erred in initiating penalty proceedings under section 271(1 )(c) of the Act. Grounds raised in ITA No. 5840/Del/2016 1. That on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould also qualify as "fee for technical services" as defined under section 9(1 )(vii) of the Act as well as within the meaning of Article 12(5) of the India-Netherlands DTAA. 4. Without prejudice to above, on facts and circumstances of the case and in law, the Ld. AO erred in not granting the entire credit of taxes deducted at source as claimed in the return of income filed by the Appellant. 5. The Ld. AO erred in initiating penalty proceedings under section 271 (1 )(c) of the Act. 10. The Ld. counsel submitted that ground Nos. 1, 1.1 and 1.2 raised in all the four appeals having ITA No. 1061/Del/2014, 680/Del/2015 281/Del/2016 and ITA No. 5840/Del/2016 are general in nature and not required to be adjudicated upon specifically. In view of the submission of the learned counsel, we dismiss these grounds in all the four appeals holding as infructuous. 11. We find that Ground Nos. 2 & 3 in ITA No. 1061/Del/2014; Ground Nos. 2 & 3 of ITA No. 680/Del/2015; Ground Nos. 2 & 3 of ITA No. 281; and Ground Nos. 2, 2.1 and 2.2 of ITA No. 5840/Del/2016 are related to the issue of characterization of revenue earned by the assessee in the nature of royalties under the Act and India Nether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 and ground No. 5 of ITA No. 5840/Del/2016 relates to initiation of penalty under section 271(1)(c) of the Act. 15.1 We find that in the impugned orders, the Assessing Officer has only initiated the penalty under section 271(1)© of the Act and not levied the said penalty and therefore it is premature for the assessee to agitate the issue of levy of penalty under section 271(1)(c) of the Act in present appeals. Accordingly, we dismiss above grounds of respective appeals as infructuous. 16. Ground No. 9 of ITA No. 1061, ground No. 9 of ITA No. 680/Del/2015, ground No. 7 of ITA No. 281 /Del/2016 and ground No. 4 of ITA No. 5840/Del/2016 relate to not granting of credit of tax deducted at source, which is claimed in the returns of income of respective years filed by the assessee. 16.1 We have heard the rival parties on the issue in dispute and we are of the opinion that issue of allowing credit of tax deducted at source needs verification of the evidences of tax deducted and reconciliation with the database of the Income Tax Department, therefore, we feel it appropriate to restore this issue to the file of the Assessing Officer for verification and decide in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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