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TMI Blog2022 (3) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore, the burden is first on the Revenue to show that the assessee had a taxable income under the DTAA, and then the burden is on the assessee to show that its income is exempt under DTAA. Similarly, was held by the Co-ordinate Bench of the Tribunal in ITO v. Right Florists (P) Ltd. [ 2013 (4) TMI 338 - ITAT KOLKATA] . In view of the above, Taj India cannot be held to be dependent agent P.E. of the assessee in India under Article 5(4)(i) of the India Mauritius DTAA with respect to the distribution revenue. Accordingly, to this extent order passed by the CIT(A) is upheld and the grounds raised by the Revenue are dismissed. P.E. in India in respect of advertisement revenue - Revenue has not been denied that Taj India was remunerated at arm‟s length price with respect to advertisement revenue and transfer pricing analysis was also accepted by the Transfer Pricing Office passed under section 92CA(3) - we accept the alternative plea of the assessee and held that as Taj India was remunerated at arm‟s length price in respect of advertisement revenue, no further profit needs to be attributed to same for the purpose of taxation in India. Further, as regards the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remunerated at arm's length price. 3. The brief facts of the case pertaining to the above issue as emanating from the record are: The assessee is a foreign company registered under the Mauritian Law and is engaged in the business of telecasting its sports channel Ten Sports . The assessee is considered as Resident for tax purpose in Mauritius as it is Registered in Mauritius. During the relevant assessment year, the assessee filed its return of income electronically on 29.11.2012, declaring total income of Rs.Nil. Along with its return of income, the assessee also filed report in Form no.3CEB as per the requirement of provisions of section 92E of the Act. 4. The assessee had appointed Taj Television (India) Pvt. Ltd. ( Taj India ) as an advertising sales agent vide agreement dated 08.05.2002, to sell commercial advertisement time to prospective advertisers and other parties in India in connection with business of programming and telecasting on Ten Sports / Ten HD / Ten Golf Channels and to collect advertisement charges from India exporters and advertisers on behalf of the assessee. As per the agreement, Taj India is entitled to a commission @ 10% to 12.5% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs for distribution of sports channels. Taj India was appointed by the assessee as its distributor and Taj India in turn appointed sub distributors and cable operators to carry out the task deputed by the assessee in better manner. Taj India had compensated sub distributors and cable operators out of its own share of 25%. Accordingly, the assessee submitted that Taj India had entered into agreement with distributors or cable operators on its own account as principal distributor and not on behalf of the assessee. Thus, in respect of distribution revenue arrangement, the relationship between the assessee and Taj India was on principal to principal basis. 8. The Assessing Officer, vide order dated 22.04.2016, passed under section 144C(3) r/w section 143(3) of the Act came to a conclusion that Taj India was acting wholly and exclusively for the assessee as a dependent agent and was regularly selling the advertisement spots on behalf of the assessee. Taj India was also functionally and economically dependent on the assessee and thus, is a dependent agent of the assessee within the meaning of Article 5 of India Mauritius DTAA. The Assessing Officer further held that as Taj India had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in assessee‟s own case for preceding assessment years. The learned Counsel fairly submitted that the issue of existence of assessee‟s P.E. with respect to advertisement revenue was left upon by the Tribunal in preceding assessment years and only with respect to distribution revenue, the assessee was held not to have a P.E. in India. The learned Counsel further submitted that the arm's length analysis conducted by the assessee in respect of advertisement revenue was also accepted by the Transfer Pricing Officer and thus no further profit needs to be attributed to the alleged P.E. of assessee in India. 11. On the other hand, Shri Milind S. Chavan, the learned Departmental Representative ( learned D.R. ) by referring to the addendum dated 27.04.2006, to Advertisement Sales Agency Agreement submitted that Taj India had the right and authority to assume or create an obligation of any kind in the name of and on behalf of the assessee and thus Taj India constitutes dependent agent P.E. of the assessee in India within the meaning of Article 5(4) of the India Mauritius DTAA. Further, by referring to addendum dated 28.12.2007 to distribution agreement, the learned D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aj India constitutes dependent agent P.E. of the assessee in India. In order to decide the issue whether the assessee has a P.E. in India with respect to the Distribution revenue under India Mauritius DTAA, it is relevant to analyse the provisions of Article 5(4) of the DTAA, which reads as under: 4. Notwithstanding the provisions of paragraphs (1) and (2) of this article, a person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State [other than an agent of an independent status to whom the provisions of paragraph (5) apply] shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if : (i) he has and habitually exercises in that first-mentioned State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise ; or (ii) he habitually maintains in that first-mentioned State a stock of goods or merchandise belonging to the enterprise from which he regularly fulfils orders on behalf of the enterprise. 14. As per the provisions of Article 5(4)(i) of the DTAA, it is only when the person in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008-09, observed as under: 9 ..Thus, if admittedly Taj India is being remunerated at arm's length, then, no further income/profit can be said to be attributable to the assessee in India from PE. It is an undisputed fact that the TPO has accepted the transaction between the assessee and Taj India at an arm's length price. Hence, respectfully following the law laid down by the Hon'ble Apex Court and followed by the Hon'ble jurisdictional High Court, we also hold that if the arm's length price of the transaction has been accepted, between the assessee and Taj India, then nothing further should be attributable to the assessee which is to be taxed in India. Thus, on this reasoning we allow the assessee's ground No.1. The legal principle followed by the Co-ordinate Bench of Tribunal is equally applicable to the facts of the present case. Thus, respectfully following the decision of the Co ordinate Bench rendered in assessee‟s own case cited supra, we accept the alternative plea of the assessee and held that as Taj India was remunerated at arm‟s length price in respect of advertisement revenue, no further profit needs to be attributed to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. Further, the Assessing Officer held that the payment of uplinking and transponder fees is also taxable in India as Royalty as per Article 12 r/w Article 3(2) of India USA DTAA. Accordingly, the Assessing Officer disallowed the aforesaid payments under section 40(a)(i) of the Act for non deduction of TDS. 18. In appeal, the CIT(A) following the decision of the Co ordinate Bench of the Tribunal rendered in assessee‟s own case for the assessment years 2006 07 to 2011 12, inter-alia, deleted the addition made by the Assessing Officer in respect of transponder fees and uplinking charges. Being aggrieved, the Revenue is in appeal before us. 19. During the course of hearing, the learned D.R. by referring to Article 3(2) of India USA DTAA submitted that the law in force in India should be applied and the impugned payments should be treated as royalty within the meaning of section 9(1)(vi) of the Act r/w Article 12 and Article 3(2) of India USA DTAA. The learned D.R. in support of his submissions placed reliance on the decision of the Hon'ble Jurisdictional High Court in CIT v/s Siemens Aktiongesellschaft, 177 Taxman 81. 20. On the other hand, the learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Treaty negotiated between executives of two sovereign nations. The payment of transponder charges to PanAmSat and uplinking charges cannot be treated as a consideration for 'use' or 'right to use' any copyright of various terms used in para 3(a) like copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting or in any manner relates to any patent or trademark, design, secret formula or process. It is also not use or right to use any industrial, commercial, or scientific equipment. There is no such kind of right to use which is given by Pan Am Sat to assessee. Thus, the said payment does not fall within the ambit of the terms used in para 3 of Article 12. So far as the reading of amended definition of 'royalty' as given in section 9(1)(vi) into treaty, Hon'ble Delhi High Court in its latest judgment in the case of New Skies Satellite BV (supra), wherein it has considered Hon'ble Madras High Court decision in the case of Verizon Communications Singapore Pte Ltd. (supra) also, have discussed the issue threadbare a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trite position that, at the time of making the payment when there is no amendment in the statute, then assessee cannot be expected to withhold the tax, especially when under the old provision or by virtue of any judicial precedent such payment does not fall or has been held to be not falling within the ambit and scope of 'royalty'. In these kinds of cases there were various decisions including that of the Hon'ble Bombay High Court in the case of Set Satellite (Singapore) Pte Ltd. that payment made to the non-resident outside India for rendering the services of equipment outside India is not taxable in India. Hon'ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd. v. DIT [2011] 332 ITR 340/197 Taxman 263/9 taxmann.com 168 later on reiterated that there is no royalty payment in such cases under the domestic law, that is, section 9(1)(vi), prior to amendment. Thus judicial precedents supported the case of the assessee. Here, the maxim of lex non cogit ad impossplia, that is, the law of the possibly compelling a person to do something which is impossible, that is, when there is no provision for taxing an amount in India then how it can be e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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