Thicom Public Company Ltd., New Delhi V. DCIT, New Delhi

ITA 1062/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5407 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 23-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G K DHALL INT TAXATION
• Keywords: Double taxation relief; Retrospective amendment; Advance ruling; Question of law; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 244A; 234B; 260A; 147; 148

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NOS.1062 & 1063/DEL/2015 (ASSESSMENT YEARS: 2006-07 & 2011-12) THAICOM PUBLIC CO. LTD, (FORMERLY SHIN SATELLITE PUBLIC CO. LTD) C/O. MOHINDER PURI & CO., 1A-D, VANDANA, 11 TOLSTOY MARG, NEW DELHI PAN:AAGCS4481E VS. D C IT, INTERNATIONAL TAXATION, CIRCLE-3(1)(2), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JATINDER SINGH, CA REVENUE BY: SHRI G.K. DHALL, CIT(DR) (INT. TAXATION) O R D E R PER H.S. SIDHU, J.M. 1. THE ASSESSEE HAS FILED THESE APPEALS FOR THE ASSESS MENT YEAR 2006-07 & 2011-12 AGAINST THE RESPECTIVE ORDERS OF THE LD ASSESSING OFFICER PASSE D U/S 143(3) OF THE ACT READ WITH SECTION 144C(1) OF THE ACT ON THE SEPARATE DIRECTIONS OF LD . DISPUTE RESOLUTION PANEL-II, NEW DELHI. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE COMM ON AND IDENTICAL, HENCE, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE, BY DEALING WITH ITA NO. 1063/DEL/2015 (AY 2011-12) FIRST. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSE SSEE IN ITA NO. 1063/DEL/2015 (AY 2011-12):- 1. THE ORDER OF THE DY. COMMISSIONER OF INCOME-TAX , CIRCLE 2(2), INTERNATIONAL TAXATION, NEW DELHI (THE DCIT) READ WITH THE DIRECT IONS OF DRP ARE BAD IN LAW AND ON FACTS. 2. THE DCIT ERRED ON FACTS AND IN LAW, IN ASSESSING THE APPELLANT TO TAX IN RESPECT OF THE INCOME EARNED BY IT FROM PROVIDING TELECASTING SERV ICES. THE DDIT ERRED IN FOLLOWING, IN THIS REGARD, THE ASSESSMENT ORDERS PA SSED IN THE APPELLANTS CASE FOR EARLIER ASSESSMENT YEARS. 3. THE DCIT FAILED TO APPRECIATE THAT THE APPELLANT WAS NOT LIABLE TO INDIAN TAXATION AT ALL IN RESPECT OF THE INCOME EARNED BY IT FROM PROV IDING TELECASTING SERVICES. 4. THE DCIT ERRED, ON FACTS AND IN LAW, IN HOLDING THAT THE INCOME EARNED BY THE APPELLANT FROM PROVIDING TELECASTING SERVICES (THE AFORESAID INCOME) WAS TAXABLE IN INDIA: (I) UNDER THE PROVISIONS OF THE INDIAN INCOME-TAX ACT, 1961 (THE ACT), AND PAGE | 2 (II) UNDER THE PROVISIONS OF THE AGREEMENT FOR THE AVOIDANCE OF DOUBLE TAXATION BETWEEN INDIA AND THAILAND (THE DTA) 5.1. THE DCIT ERRED, ON FACTS AND IN LAW, IN ALLEGI NG THAT THE AFORESAID INCOME WAS RECEIVED BY THE APPELLANT FOR THE USE AS WELL AS RI GHT TO USE A PROCESS WITHIN EXPLANATION 2(III) TO SECTION 9(L)(VI) OF THE ACT, AND FOR THE RIGHT TO USE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT WITHIN EXPLANATI ON 2 (IVA) TO SECTION 9(1) (VI) OF THE ACT AND SUBSECTION (C) OF SECTION 9(L)(VI). 5.2 THE DCIT ERRED, ON FACTS AND IN LAW, IN HOLDIN G THAT THE AFORESAID INCOME WAS TAXABLE IN INDIA BY VIRTUE OF EXPLANATION 2(III) AN D (IVA) TO SECTION 9(1)(VI) OF THE ACT READ WITH EXPLANATION 5 AND EXPLANATION 6 AS RETRO SPECTIVELY INTRODUCED BY FINANCE ACT, 2012 UNDER SECTION 9(1)(VI). 5.3 THE LD. DCIT ERRED IN HOLDING THAT THE MEANING OF ROYALTY UNDER THE DTA GOT AMENDED BY THE AFORESAID EXPLANATION 5 AND 6 AS RET ROSPECTIVELY INTRODUCED BY FINANCE ACT, 2012. 6.1 THE LD. DCIT, ERRED ON FACTS AND IN LAW, IN HOL DING THAT THE AFORESAID INCOME WAS TAXABLE IN INDIA UNDER ARTICLE 12 OF THE DTA. 6.2 THE LD. DCIT ERRED IN PLACING RELIANCE ON ARTIC LE 3(2) OF THE DTA, THE PROVISIONS OF WHICH ARE NOT ATTRACTED ON THE FACTS. 6.3 THE LD. DCIT FAILED TO APPRECIATE THE FACT THA T THERE IS NO CHANGE IN THE DEFINITION OF ROYALTY UNDER THE DTA AND THAT THE RETROSPECTIVE AM ENDMENTS TO SECTION 9(1)(VI) BY FINANCE ACT, 2012 HAVE NOT BEARING IN THE ASSESSEE S CASE. 7. THE DCIT ERRED IN HOLDING THAT THE REVENUES EAR NED BY THE ASSESSEE FROM CONSULTANCY SERVICES WERE TAXABLE IN INDIA: (I) UNDER THE PROVISIONS OF THE ACT (II) UNDER THE PROVISIONS OF THE DTA 8. THE DCIT ERRED: (I) IN RELYING UPON JUDICIAL PRECEDENTS HAVING NO A PPLICATION TO THE ASSESSEES CASE; (II) IN ALLEGING THAT THE SATELLITES WERE OWNED BY THE APPELLANT; (III) IN ALLEGING THAT THE ALLEGED PROCESS OF PROVI DING TRANSPONDER SERVICES WAS SECRET; (IV) IN ALLEGING THAT THE AMOUNT RECEIVED BY THE AS SESSEE IS FOR USE AS WELL AS THE RIGHT TO USE A PROCESS AND NOT FOR PROVIDING SE RVICES; (VI) IN NOT FOLLOWING THE JUDGEMENT CITED BY THE APPELLANT INCLUDING THOSE PASSED IN ITS OWN CASE. 9. THE DCIT ERRED IN DIRECTING THE LEVY OF INTEREST UNDER SECTION 234B OF THE ACT. THE APPELLANT SAYS THAT THE LEVY OF SUCH INTEREST IS IL LEGAL AND WITHOUT JURISDICTION AND DENIES ITS LIABILITY TO SUCH INTEREST. 10. THAT WITHOUT PREJUDICE TO ABOVE, THE LD. DCIT ERRED IN MAKING ERRONOUES COMPATION OF TAX DEMAND. 11. THE LD. DCIT ERRED IN INITIATING PENALTY PROCEE DINGS UNDER SECTION 271 (1) (C) OF THE ACT THE ASSESSEE CRAVES LEAVE TO ADD, SUPPLEMENT, REVI SE AND DELETE GROUNDS OF APPEAL AS RAISED HEREINABOVE. 3. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN ITA NO . 1062/DEL/2015 (AY 2006-07):- PAGE | 3 1. THAT THE ORDER OF THE LEARNED DEPUTY COMMISSIONE R OF INCOME-TAX, CIRCLE 3(1)(2), INTERNATIONAL TAXATION, NEW DELHI ('DCIT') , AS PASSED UNDER SECTION 143(3)/148 READ WITH THE DIRECTIONS OF DISPUTE RESO LUTION PANEL ('DRP') UNDER SECTION 144C OF THE INCOME-TAX ACT, 1961 ('THE ACT' ), IS BAD BOTH IN LAW AND ON FACTS OF THE CASE. 2. THAT THE NOTICE UNDER SECTION 148 OF THE ACT, AS ISSUED BY THE LEARNED DCIT AFTER FOUR YEARS FROM THE END OF SUBJECT ASSESSMENT YEAR, IS ILLEGAL, WITHOUT JURISDICTION AND BARRED BY TIME AND AS SUCH IS VOID -AB-INITIO. 2.1 THAT THE REASSESSMENT UNDER SECTION 148 IS BAR RED BY TIME AS THE ASSESSEE HAS FULLY AND TRULY DISCLOSED ALL MATERIAL FACTS NECESS ARY FOR THE ASSESSMENT. 2.2 THAT THE REASSESSMENT FRAMED UNDER SECTION 147 IS ILLEGAL AS THE LEARNED DCIT HAD NO 'REASONS TO BELIEVE' THAT THE IMPUGNED INCOM E HAS ESCAPED ASSESSMENT FOR THE SUBJECT ASSESSMENT YEAR AS: (A) THE REASON RECORDED FOR REOPENING THE ASSESSM ENT THAT 'THE RECEIPTS OF THE ASSESSEE WERE EARNED THROUGH PE', IS FACTUALLY INCORRECT, CONTRARY. TO RECORDS AND REMAINED UNSUBSTANTIATED AND AS SUCH, ASSESSMENT FR AMED ON THIS BASIS AS PER SECTION 115A IS VITIATED IN LAW. (B) NO TANGIBLE MATERIAL HAS COME TO HIS POSSESSI ON ON THE BASIS OF WHICH THE ASSESSMENT OF THE ASSESSEE FOR SUBJECT ASSESSME NT YEAR CART BE OPENED. (C) THE NOTICE UNDER SECTION 148 WAS ISSUED ON BEHE ST OF THE AUDIT PARTY. 2.3 THAT THE ORDER PASSED BY THE LEARNED DCIT UNDER SECTION 147 IS WITHOUT JURISDICTION AS PER THIRD PROVISO TO SECTION 147 OF THE ACT, AS THE APPELLATE ORDER UNDER SECTION 250 HAS ALREADY BEEN PASSED ON THE SAME INC OME, DECIDING THE IMPUGNED RECEIPTS AS NON-TAXABLE AGAINST WHICH APPEAL BEFORE THE HON'BLE TRIBUNAL OF DELHI HAS BEEN FILED BY THE DEPARTMENT. 2.4 THAT THE JURISDICTION ASSUMED BY THE LEARNED DCIT UNDER SECTION 147 IS ILLEGAL AS SPECIFIC SATISFACTION OF THE LEARNED COMMISSIONE R/DIRECTOR OF INCOME-TAX, ON THE REASONS RECORDED BY LEARNED DCIT, THAT IT IS A FIT CASE FOR ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT, HAS NOT BEEN RECORDED. 2.5 THAT, WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL, THE LD. DCIT HAS ERRED IN ASSUMING JURISDICTION UNDER SECTION 147 OF THE ACT BASED ON CHANGE OF OPINION ON THE APPLICABLE TAX RATE, ON RECEIPTS FRO M INDIA WHICH WERE CONSIDERED AS TAXABLE IN ORIGINAL ASSESSMENT PROCEEDINGS AS AGAIN ST CLAIM FOR NON TAXABILITY MADE BY THE ASSESSEE. 3. THAT THE LEARNED DCIT HAS ERRED IN ASSESSING THE INCOME @20% UNDER SECTION 115A OF THE ACT, AS AGAINST CLAIM FOR NON-TAXABILIT Y MADE BY THE ASSESSEE. 3.1 THAT, WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL, THE LEARNED DCIT HAS ERRED IN ASSUMING JURISDICTION UNDER SECTION 147 OF THE ACT BASED ON 'CHANGE OF OPINION ON THE APPLICABLE TAX RATE, ON RECEIPTS FR OM INDIA WHICH WERE CONSIDERED AS TAXABLE IN ORIGINAL ASSESSMENT PROCEEDINGS AS AGAIN ST CLAIM FOR NON-TAXABILITY MADE BY THE ASSESSEE. 3.2 THAT THE LEARNED DCIT FAILED TO APPRECIATE THA T THE ASSESSEE WAS NOT LIABLE TO INDIAN TAXATION AT ALL IN RESPECT OF THE INCOME EAR NED BY IT FROM PROVIDING TRANSPONDER SERVICES, READ WITH ARTICLE 12 OF THE D TAA. 3.2 THAT THE LEARNED DCIT ERRED, ON FACTS AND IN L AW, IN HOLDING THAT THE INCOME EARNED BY THE ASSESSEE FROM PROVIDING TRANSPONDER S ERVICES TO RESIDENTS AS WELL AS PAGE | 4 NON-RESIDENTS WAS TAXABLE IN INDIA AS 'ROYALTY' AS DEFINED UNDER EXPLANATION 2 TO SECTION 9(I)(VII) OF THE ACT, WITHOUT APPRECIATING THE PROVISIONS OF THE DT AA. 3.3 THAT THE LEARNED DCIT ERRED, ON FACTS AND IN L AW, IN HOLDING THAT THE INCOME EARNED BY THE ASSESSEE FROM PROVIDING CONSULTANCY S ERVICES WAS TAXABLE IN INDIA: A) UNDER THE ACT B) UNDER THE DTAA 3.4 THAT, WITHOUT PREJUDICE TO THE GROUND NO.4, TH E LEARNED DCIT HAS ERRED IN NOT CONSIDERING THE PROVISIONS OF THE DTAA, PROVIDING T AX RATE OF 15% ON 'ROYALTY' RECEIPTS UNDER ARTICLE 12 OF THE DTAA, WHILE HOLDIN G THE RECEIPTS TAXABLE AS 'ROYALTY' UNDER SECTION IISA OF THE ACT. 3.5 THAT, WITHOUT PREJUDICE TO THE GROUND NO.4, TH E LEARNED DCIT HAS ERRED IN NOT APPLYING THE TAX RATE OF 10% UNDER SECTION 115A, ON THE RECEIPTS IN RESPECT OF WHICH THE AGREEMENT WAS MADE ON OR AFTER 1 ST JUNE, 2005, AS PER THE DIRECTIONS GIVEN BY THE DRP. 4. THAT THE LEARNED DCIT HAS FAILED TO NOTICE THE D ECISION OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF ASIA SATELLITE TELECOMMUNIC ATIONS CO. LTD V DIT 197 TAXMAN 263 (DELHI), AND DECISION OF HON'BLE ITAT, DELHI PA SSED IN ITS OWN CASE, SQUARELY COVERING THE ISSUE OF TAXABILITY OF RECEIPTS IN FAV OUR OF THE ASSESSEE. 5. THAT THE LEARNED DCIT HAS ERRED IN PLACING RELIA NCE ON THE DECISIONS DISTINGUISHABLE ON FACTS. 6. THAT THE LEARNED DCIT HAS ERRED IN IGNORING THE DECISIONS AS RELIED UPON BY THE ASSESSEE. 7. THAT THE LEARNED DCIT ERRED IN DIRECTING LEVY OF INTEREST UNDER SECTION 234B OF THE ACT, WHICH LEVY IS ILLEGAL. 8. THAT THE LEARNED DCIT ERRED IN DIRECTING WITHDR AWAL OF INTEREST UNDER SECTION 244A OF THE ACT. 9. THAT THE LEARNED DCIT ERRED IN MAKING ERRONEOUS COMPUTATION OF THE ASSESSED TAX LIABILITY. 10. THAT THE LEARNED DCIT ERRED IN INITIATING PENAL TY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, SUPPLEMENT , REVISE AND DELETE ALL OR ANY GROUNDS OF APPEAL AS RAISED HEREIN ABOVE. 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMP ANY FILED ITS RETURN OF INCOME ON 27.9.2011 DECLARING TOTAL INCOME AT NIL. THE ONLY ISSUE IN T HE APPEAL IS THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING DIGITAL BROADCAST SERVICES T HROUGH ITS TRANSPONDERS TO ITS CUSTOMERS BOTH IN INDIA AS WELL AS NON-RESIDENTS, THROUGH SATELLITE. THE ASSESSEE HAS RECEIVED FOLLOWING INCOME AS DISCLOSED IN ITS RETURN OF INCOME. S.NO. NAME OF THE CUSTOMER DATE OF AGREEMENT AMOUNT I N RS. AS PER RETURN 1. INDIASIGN PRIVATE LIMITED 01.03.2006 65,95,024 2. STV ENTERPRISES LTD. 15.07.2005 1,45,94,271 3. TATA COMMUNICATIONS LTD. 10.4.2002 1,98,75,881 TOTAL 4,10,65,176 PAGE | 5 4.1 THE COMMON ISSUE INVOLVED IN BOTH THE APPEALS IS WHETHER INCOME RECEIVED BY THE ASSESSEE IS CHARGEABLE TO TAX ACCORDING TO THE INDIAN INCOME TAX ACT AS ROYALTY U/S. 9(1)(VI) OF THE ACT AS WELL AS UNDER ARTICLE 12 OF THE DTAA BETWEEN IND IA AND THAILAND. ACCORDING TO ASSESSE THE SAME IS NOT CHARGEABLE TO TAX IN INDIA. HOWEVER , ACCORDING TO THE AO THE SAME IS TAXABLE AS ROYALTY AND THEREFORE, THE TOTAL SUM RECEIVED OF RS. 4,10,65,176/- WAS CONSIDERED AS ROYALTY AT APPROPRIATE RATE PROVIDED U/S. 115A WERE APPLIED AND TOTAL INCOME OF RS. 2,11,89,295/- WAS CHARGEABLE TO TAX AS ROYALTY INCO ME. CONSEQUENTLY, A DRAFT ASSESSMENT ORDER WAS PASSED ON 28.2.2014. THE LD. DISPUTE RES OLUTION PANEL (DRP) ON OBJECTION BEFORE THEM CONFIRMED THE FINDING OF THE ASSESSING OFFICER AND CONSEQUENTLY FINAL ASSESSMENT ORDER U/S. 143(3) READ WITH SECTION 144C (1) OF THE ACT WAS PASSED ON 22.12.2014. 4.2 THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT IDE NTICAL ISSUE IN THE CASE OF THE ASSESSEE FROM ASSESSMENT YEARS 2005-06 TO 2010-11 IS COVERED IN F AVOUR OF THE ASSESSEE BY THE ORDER OF THE COORDINATE BENCH DATED 16.10.2017. THE LD. AR FURN ISHED THE COPY OF THE DECISION AND SHOWED VARIOUS GROUNDS IN RESPECTIVE ORDERS WHICH ARE IDENTICAL WITH THE GROUNDS OF APPEAL BEFORE US. HE THEREFORE, SUBMITTED THAT THERE BEIN G NO CONTRARY DECISION IN ASSESSEES OWN CASE FOR EARLIER YEARS MAY BE FOLLOWED. WITH REFER ENCE TO INTEREST U/S. 234B OF THE ACT, IT WAS SUBMITTED THAT ONCE THE ADDITION DOES NOT REMAIN, THERE IS NO QUESTION OF CHARGING OF ANY INTEREST U/S. 234B OF THE ACT. 4.2 LD. CIT(DR) RELIED UPON THE ORDER OF THE ASSESS ING OFFICER. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS AND ALSO PERUSED THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE DATED 16.10 .2017 WHEREIN, THE SIMILAR ISSUE HAS BEEN DECIDED FOR ASSESSMENT YEAR 2005-06 TO 2010-11 . THE ABOVE DECISION HAS BEEN RENDERED BY THE COORDINATE BENCH FOLLOWING THE DECI SION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. NEW SKIES SATELLITE BV & ORS. I N ITA NO. 473/2012 DATED 8.12.20016. THE COORDINATE BENCH DECIDED THE ABOVE ISSUE VIDE P ARA NO. 10 & 11 OF THE ORDER AS UNDER:- 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ADMITTEDLY, THE HO N'BLE DELHI HIGH COURT VIDE ORDER DATED 80.02.2016 HAS CONSIDERED THE ABOV E ISSUE IN ITA NO. 500/2012 AY 2007-08 AND ITA NO. 244/2014 FOR AY 200 9-10 ON THE IDENTICAL FACTS AND CIRCUMSTANCES DECIDING THAT THE AMENDMENT MADE BY THE FINANCE ACT 2012 WILL NOT AFFECT ARTICLE 12 OF THE DTAA AND THEREFORE, THE INCOME EARNED BY THE ASSESSEE CANNOT BE HELD TO BE ROYALTY AND CONSEQUENTLY TO CHARGEABLE TO TAX IN INDIA. THE HON 'BLE DELHI HIGH COURT HELD IN 382 ITR 114 AS UNDER:- PAGE | 6 28. THE TWO CLAUSES AS APPLICABLE TO DATA TRANSMIS SION SERVICES HAVE BEEN THE SUBJECT OF DEBATE IN COURTS AS WELL A S BUSINESS CIRCLES. THE DEBATE WAS FINALLY SETTLED BY THE JUDG MENT DELIVERED IN ASIA SATELLITE. IN ASIA SATELLITE THIS COURT HELD T HAT INCOME FROM DATA TRANSMISSION SERVICES WOULD NOT QUALIFY AS ROY ALTY IN ORDER FOR IT TO BE TAXABLE UNDER THE ACT. THE COURT FIRST REC OGNIZED THAT THE DEFINITION OF ROYALTY IN THE SECTION IS WITH RESPEC T TO PERMISSION GRANTED TO USE THE RIGHT IN RESPECT OF THE PATENT, INVENTION, PROCESS, ETC., ALL ESSENTIALLY FORMS OF INTELLECTUAL PROPERT Y. THIS PERMISSION RESTRICTS ITSELF MERELY TO THE LETTING OF THE LICEN CED ASSET. THE PERMISSION DOES NOT GO SO FAR AS TO ALLOW ALIENATIO N OF THE ASSET ITSELF. THAT BEING SAID, IT IS NOT SO RESTRICTED AS TO QUALIFY AS A CASE WHERE THE LICENSOR USES THE ASSET HIMSELF, ALBEIT F OR THE PURPOSES OF HIS CUSTOMERS. THE COURT TOOK NOTE OF THE FEATURES OF THE AGREEMENTS BETWEEN THE ASSESSEE IN THAT CASE, WHICH WAS A FOREIGN COMPANY, INCORPORATED IN HONG KONG, AND ITS CUSTOME RS, WHICH WERE TELEVISION CHANNELS. THE AGREEMENT WAS ESSENTI ALLY ONE OF ALLOCATION OF THE TRANSPONDER CAPACITY AVAILABLE ON THE SATELLITE TO ENABLE THE CHANNELS TO RELAY THEIR SIGNALS. THE CUS TOMERS HAD THEIR OWN RELAYING FACILITIES. NO DIFFERENT FROM THE CASE AT HAND, THE TRANSPONDER RECEIVES THE SIGNAL, AMPLIFIES IT, AND DOWNLINKS IT TO FACILITATE TRANSMISSION OF THE SIGNALS. QUOTING THE JUDGMENT OF THE AUTHORITY FOR ADVANCE RULINGS IN ISRO SATELLITE CEN TRE [ISAC], IN RE [2008] 307 ITR 59 (AAR), THE COURT HELD THAT IT BECOMES CLEAR THAT ALL THE CUSTOMERS GET THROUGH THE AGREEMENT WI TH THE ASSESSEE IS MERE ACCESS TO A BROADBAND WIDTH AVAILABLE IN TH E TRANSPONDER. THE CONTROL OVER THE PARTS OF THE SATELLITE AND NAT URALLY THE TRANSPONDER REMAINS WITH THE ASSESSEE. AT NO POINT DOES THE ASSESSEE CEDE CONTROL OVER THE SATELLITE TO THE CUS TOMERS. LOGICALLY THEREFORE, SINCE THE TRANSPONDER IS A PART OF THE S ATELLITE THAT CANNOT BE SEVERED FROM IT, THERE CAN BE NO INDEPEND ENT CONTROL OF THE TRANSPONDER WITHOUT CONTROL OF THE SATELLITE IT SELF. THE AUTHORITY FOR ADVANCE RULINGS HAD SPECIFICALLY REJECTED THE R EVENUE'S CONTENTION THAT IN SUBSTANCE THERE IS USE OF EQUIPM ENT ; THAT BEING THE TRANSPONDER. THE FACT THAT THE TRANSPONDER AUTO MATICALLY RESPONDS TO THE DATA COMMANDS SENT FROM THE GROUND STATION NETWORK AND RETRANSMITS THE SAME DATA OVER A WIDER FOOTPRINT AREA DOES NOT MEAN THAT CONTROL AND OPERATION OF THE TRA NSPONDER IS WITH THE CUSTOMER. INTERESTINGLY, THIS HAS NOT ESCA PED THE NOTICE OF THE ASSESSING OFFICER, EXCEPT THAT THE ASSESSMENT O RDER CONVENIENTLY EMPLOYS THE IN-SEVERABILITY OF THE TRA NSPONDER FROM THE SATELLITE TO ASSERT THAT THAT THE TECHNOLOGY OF THE SATELLITE WOULD QUALIFY AS THE 'SECRET PROCESS' BUT CONVENIENTLY DI VORCES THE TRANSPONDER FROM THE SATELLITE WHILE TRYING TO PROV E THAT THERE IS USE OF THE TRANSPONDER AS AN EQUIPMENT. HOWEVER, EQ UIPMENT AS ENVISAGED IN THE SECTION MUST BE CAPABLE OF FUNCTIO NING INDEPENDENTLY, OR IN OTHER WORDS, MUST BE ABLE TO P ERFORM AN ACTIVITY BY ITSELF WITHOUT MATERIAL RELIANCE ON ANO THER. ESSENTIALLY THEREFORE, ASIA SATELLITE, HELD THAT THE PRESENCE O F CONTROL WAS A CRITICAL FACTOR IN ADJUDGING WHETHER THERE WAS 'USE ' OF A PARTICULAR PROCESS. ON THE QUESTION OF WHETHER THE 'PROCESS' S O USED MUST BE A SECRET PROCESS OR NOT, THE JUDGMENT DID NOT RETUR N ANY FINDING PAGE | 7 SPECIFICALLY, OTHER THAN QUOTING WITH APPROVAL THE OECD COMMENTARY WHICH ALLUDES TO THE INDISPENSABILITY OF THE SECRECY OF THE PROCESS. 29. THE REVENUE ARGUES THAT CRITICAL ASPECTS OF THI S JUDGMENT, PRIMARILY THAT THE FUNCTION PERFORMED BY THE TRANSP ONDER COULD NOT BE CATEGORISED AS A 'PROCESS' AND THAT EVEN IN THE EVENT IT COULD BE, THERE WAS NO 'USE' OF THIS PROCESS SINCE THERE WAS NO CONTROL EXERCISED BY THE CUSTOMERS, IS NO LONGER GOOD LAW I N LIGHT OF THE INCLUSION OF EXPLANATIONS 4-6 BY THE FINANCE ACT, 2 012. IN OTHER WORDS THE REVENUE CONTENDS THAT A MERE READING OF E XPLANATIONS 4-6 WILL GO TO SHOW THAT THEY ARE CLARIFICATORY AND ARE THEREFORE AUTOMATICALLY RETROSPECTIVE. BY THIS REASON, AS CLA RIFICATORY AMENDMENTS DO, THESE EXPLANATIONS RELATE BACK TO TH E TIME WHEN THE MAIN PROVISION OF SECTION 9(1)(VI) FIRST CAME I NTO FORCE. BY LOGICAL EXTENSION, THE JUDGMENT IN ASIA SATELLITE W AS BASED ON A MISINTERPRETATION OF THE SECTION AND THUS NO LONGER HOLDS THE FIELD OR CORRESPONDS TO THE CORRECT INTERPRETATION OF THE DEFINITION OF ROYALTY. 30. UNDOUBTEDLY, THE LEGISLATURE IS COMPETENT TO AM END A PROVISION THAT OPERATES RETROSPECTIVELY OR PROSPECT IVELY. NONE THE LESS, WHEN DISPUTES AS TO THEIR APPLICABILITY ARISE IN COURT, IT IS THE ACTUAL SUBSTANCE OF THE AMENDMENT THAT DETERMINES I TS ULTIMATE OPERATION AND NOT THE BARE LANGUAGE IN WHICH SUCH A MENDMENT IS COUCHED. TWO JUDGMENTS OF NOTE HAVE SUCCEEDED THE F INANCE ACT, 2012 IN THIS CONTEXT. IN DIT V. TV TODAY NETWORK LT D. I. T. A. NO. 600 OF 2012 DECIDED ON NOVEMBER 12, 2013, A DIVISIO N BENCH OF THIS COURT WAS CONFRONTED WITH THE QUESTION OF TAXA BILITY OF INCOME FROM DATA TRANSMISSION SERVICES. ANSWERING THE QUES TION IN FAVOUR OF THE REVENUE, THE COURT HELD THAT AS FAR AS THE D OMESTIC TAXABILITY OF THE SAID INCOME IS CONCERNED, THE FINANCE ACT, 2 012 MANDATES IT TO BE AS SUCH. INTERESTINGLY HOWEVER, THE COURT DID NOT RULE OUT ANY RELIEF THAT THE ASSESSEES MAY BE ENTITLED TO BY VIR TUE OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND THE UNITED STATES FOR THE SIMPLE REASON THAT THE INCOME-TAX AP PELLATE TRIBUNAL HAD NOT RENDERED ANY FINDING IN THAT REGARD. RESULT ANTLY, THE COURT REMITTED THE MATTER TO THE INCOME-TAX APPELLATE TRI BUNAL TO DECIDE THAT QUESTION : 'IN AN APPEAL UNDER SECTION 260A OF THE ACT, WE ARE NOT REQUIRED TO CONSIDER THE CONSTITUTIONAL VALIDITY AND VIRES O F THE SAID AMENDMENTS BUT HAVE TO APPLY THE AMENDED PROVISION. IN VIEW OF THE SAID STATUTORY AMENDMENTS, THE REASONING GIVEN BY THE TRIBUNAL CANNOT BE SUS TAINED AND HAS TO BE REVERSE D. LEARNED COUNSEL FOR THE RESPONDENT-ASSESSEE HAS HOW EVER RIGHTLY DRAWN OUR ATTENTION TO THE ASSESSMENT ORDER IN WHICH THE ASSESSEE HAD ALSO PLEADED AND SUBMITTED THAT THE PA YMENTS MADE CANNOT BE CONSIDERED AS ROYALTY OR FEE FOR INC LUDED SERVICES AS DEFINED IN THE DOUBLE TAXATION AVOIDANC E AGREEMENT (DTAA) BETWEEN INDIA AND UNITED STATES OF AMERICA. IT IS SUBMITTED THAT THE PAYMENTS WERE BUSINESS PROFIT AN D PAGE | 8 ACCORDINGLY NOT TAXABLE OR CHARGEABLE TO TAX UNDER THE ACT . . . THE TRIBUNAL IN THE IMPUGNED ORDER HAS NOT REFERRED TO AND EXAMINED THE EFFECT OF THE DOUBLE TAXATION AVOIDANC E AGREE MENTS BETWEEN INDIA AND THE USA AND WHETHER THE ASS ESSEE IS ENTI TLED TO BENEFIT OR ADVANTAGE UNDER THE SAID AG REEMENT AND THEREFORE, PAYMENTS MADE WERE NOT TAXABLE IN INDIA IN THE HANDS OF THE RECIPI ENT. ACCORDINGLY WHILE ANSWERING THE QUESTION OF LAW IN FAVOUR OF THE REVENUE WE PASS AN ORDER OF RE MIT AND ASK THE TRIBUNAL TO DECIDE THE OTHER CONTENTION RAISED BY THE RESPONDENT ASSESSEE ; WHETHER THE PAYMENTS MADE NEV ERTHELESS REMAIN UNTAXABLE IN VIEW OF THE PROVI SIONS OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT.' 31. IN A JUDGMENT BY THE MADRAS HIGH COURT IN VERIZ ON COMMUNICATIONS SINGAPORE PTE. LTD. V. ITO (INTERNAT IONAL TAXATION) [2014] 361 ITR 575 (MAD), THE COURT HELD THE EXPLANATIONS TO BE APPLICABLE TO NOT ONLY THE DOMES TIC DEFINITION BUT ALSO CARRIED THEM TO INFLUENCE THE MEANING OF R OYALTY UNDER ARTICLE 12. NOTABLY, IN BOTH CASES, THE CLARIFICATO RY NATURE OF THE AMENDMENT WAS NOT QUESTIONED, BUT WAS INSTEAD APPLI ED SQUARELY TO ASSESSMENT YEARS PREDATING THE AMENDMENT. THE CR UCIAL DIFFERENCE BETWEEN THE JUDGMENTS HOWEVER LIES IN TH E APPLICATION OF THE AMENDMENTS TO THE DOUBLE TAXATION AVOIDANCE AGR EEMENT. WHILE TV TODAY (SUPRA) RECOGNISES THAT THE QUESTION WILL HAVE TO BE DECIDED AND THE SUBMISSION ARGUED, VERIZON CITES NO REASON FOR THE EXTENSION OF THE AMENDMENTS TO THE DOUBLE TAXAT ION AVOIDANCE AGREEMENT. 32. EXPLANATIONS 4-6 ARE DESIGNED AS CLARIFICATORY AMENDMENTS. UNARGUABLY THEY HAVE ALL THE APPARENT CHARACTERISTI CS OF ONE. THE WORDS 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLAR IFIED . . . INCLUDES AND HAS ALWAYS INCLUDED' QUALIFY THE INTERPRETATION IN EXPLANATION 5. IN EXPLANATION 6, THE SAME WORDS HAVE BEEN MODIF IED AND THEY STATE 'INCLUDES AND HAS ALWAYS DEEMED TO HAVE ALWAY S INCLUDED'. THIS IS THE STANDARD LANGUAGE USED TO COMMUNICATE A N INTENDED RETROSPECTIVE EFFECT. 33. THERE IS A GENERAL PRESUMPTION AGAINST RETROSPE CTIVITY OF AN AMENDMENT. THIS IS THE PRINCIPLE OF LEX PROSPICIT N ON RESPICIT WHICH IMPLIES THAT UNLESS EXPLICITLY STATED, A PIECE OF L EGISLATION IS PRESUMED NOT TO BE INTENDED TO HAVE RETROSPECTIVE O PERATION. 34. MOST RECENTLY IN CIT V. VATIKA TOWNSHIP P. LTD. [2014] 367 ITR 466 (SC) ; [2015] 1 SCC 1, THE CONSTITUTION BEN CH, WHILE QUOTING GOVINDDAS V. ITO [1976] 103 ITR 123 (SC) ; [1976] 1 SCC 906 AND CIT V. SCINDIA STEAM NAVIGATION COMPANY LTD. [1961] 42 ITR 589 (SC) ; [1962] 1 SCR 788 HELD AS F OLLOWS (PAGE 486 OF 367 ITR) : 'OF THE VARIOUS RULES GUIDING HOW A LEGISLATION HAS TO BE INTER PRETED, ONE ESTABLISHED RULE IS THAT UNLESS A CONTR ARY INTENTION APPEARS, A LEGISLATION IS PRESUMED NOT TO BE INTEND ED TO HAVE A RET ROSPECTIVE OPERATION. THE IDEA BEHIND THE RULE IS THAT A PAGE | 9 CURRENT LAW SHOULD GOVERN CURRENT ACTIVITIES. LAW P ASSED TODAY CANNOT APPLY TO THE EVENTS OF THE PAST. IF WE DO SO METHING TODAY, WE DO IT KEEPING IN VIEW THE LAW OF TODAY AND IN FO RCE AND NOT TOMORROW'S BACKWARD ADJUSTMENT OF IT. OUR BELIEF IN THE NATURE OF THE LAW IS FOUNDED ON THE BED ROCK THAT EVERY HU MAN BEING IS ENTITLED TO ARRANGE HIS AFFAIRS BY RELYING ON THE E XISTING LAW AND SHOULD NOT FIND THAT HIS PLANS HAVE BEEN RETROSPECT IVELY UPSET. THIS PRINCIPLE OF LAW IS KNOWN AS LEX PRO SPICIT NO N RESPICIT : LAW LOOKS FORWARD NOT BACKWARD. AS WAS OBSERVED IN PHIL LIPS V. EYRE (1870) LR 6 QB 1, A RETROSPECTIVE LEGISLATION IS CO N TRARY TO THE GENERAL PRINCIPLE THAT LEGISLATION BY WHICH THE CON DUCT OF MANKIND IS TO BE REGULATED WHEN INTRODUCED FOR THE FIRST TIME TO DEAL WITH FUTURE ACTS OUGHT NOT TO CHANGE THE CHARA CTER OF PAST TRANSACTIONS CARRIED ON UPON THE FAITH OF THE THEN EXISTING LAW.' 35. THIS PRESUMPTION AGAINST RETROSPECTIVITY STEMS FROM AN INDISPENSABLE NEED FOR EACH RULE OF LAW TO ANSWER T O THE PRINCIPLE OF FAIRNESS. L'OFFICE CHERIFIEN DES PHOSPHATES V. Y AMASHITA- SHINNIHON STEAMSHIP COMPANY LTD. [1994] 1 AC 486 (H L). THIS PRESUMPTION CAN BE DISPLACED IN EITHER OF TWO SITUA TIONS, (I) WHERE THE WORDS OF THE AMENDMENT SPECIFICALLY INDICATE TH E RETROACTIVITY OF THE LAW OR (II) IN THE CASE OF DECLARATORY OR CL ARIFICATORY AMENDMENTS. CLARIFICATORY AMENDMENTS ARE A SPECIAL CLASS OF AMENDMENTS THE OBJECT OF WHICH IS SELF-EVIDENT, THA T IS TO SAY, IT PURPORTS TO 'CLARIFY' LAW THAT HAS ALREADY BEEN LEG ISLATED, ESSENTIALLY AN ACT TO REMOVE DOUBTS EXISTING AS TO THE MEANING OR EFFECT OF A STATUTE. NATURALLY THEREFORE, THEY MUST BE READ AS INTRINSIC AND IMPLICIT, BUT OVERLOOKED ELEMENTS OF THE ORIGINAL SECTION ITSELF. THEY THUS DICTATE THE INTERPRETATIO N OF LAW SINCE THE TIME IT WAS FIRST DRAFTED OR BROUGHT INTO FORCE. HO WEVER, IN ORDER FOR SUCH CLARIFICATORY AMENDMENTS TO BE SUSTAINED A S RETROSPECTIVE, THEY MUST ANSWER TO THIS DESCRIPTION. 36. A CLARIFICATORY AMENDMENT PRESUMES THE EXISTENC E OF A PROVISION THE LANGUAGE OF WHICH IS OBSCURE, AMBIGUO US, MAY HAVE MADE AN OBVIOUS OMISSION, OR IS CAPABLE OF MORE THA N ONE MEANING. IN SUCH CASE, A SUBSEQUENT PROVISION DEALI NG WITH THE SAME SUBJECT MAY THROW LIGHT UPON IT. YET, IT IS NO T EVERY TIME THAT THE LEGISLATURE CHARACTERISES AN AMENDMENT AS RETRO SPECTIVE THAT THE COURT WILL GIVE SUCH EFFECT TO IT. THIS IS NOT IN DEROGATION OF THE EXPRESS WORDS OF THE LAW IN QUESTION, (WHICH AS A M ATTER OF COURSE MUST BE THE FIRST TO BE GIVEN EFFECT TO), BUT BECAU SE THE LAW WHICH WAS INTENDED TO BE GIVEN RETROSPECTIVE EFFECT TO AS A CLARIFICATORY AMENDMENT, IS IN ITS TRUE NATURE ONE THAT EXPANDS T HE SCOPE OF THE SECTION IT SEEKS TO CLARIFY, AND RESULTANTLY INTROD UCES NEW PRINCIPLES, UPON WHICH LIABILITIES MIGHT ARISE. SUC H AMENDMENTS THOUGH FRAMED AS CLARIFICATORY, ARE IN FACT TRANSFO RMATIVE SUBSTANTIVE AMENDMENTS, AND INCAPABLE OF BEING GIVE N RETROSPECTIVE EFFECT. IN R. RAJAGOPAL REDDY V. PADM INI CHANDRASEKHARAN [1995] 213 ITR 340 (SC) ; [1995] 2 SCC 630, IT WAS HELD THAT THE USE OF THE WORDS 'IT IS DECLARED' IS NOT CONCLUSIVE THAT THE ACT IS DECLARATORY BECAUSE IT MAY BE USED TO INTRODUCE NEW RULES OF LAW. IF THE AMENDMENT CHANGES THE LAW IT I S NOT PRESUMED PAGE | 10 TO BE RETROSPECTIVE IRRESPECTIVE OF THE FACT THAT T HE PHRASE USED IS 'IT IS DECLARED' OR 'FOR THE REMOVAL OF DOUBTS'. IN DETERMINING, THEREFORE, THE NATURE OF THE ACT, REGARD MUST BE HA D TO THE SUBSTANCE RATHER THAN TO FORM. WHILE ADJUDGING WHET HER AN AMENDMENT WAS CLARIFICATORY OR SUBSTANTIVE IN NATUR E, AND WHETHER IT WILL HAVE RETROSPECTIVE EFFECT OR NOT, IT WAS HE LD IN CIT V. GOLD COIN HEALTH FOOD (P.) LTD. [2008] 304 ITR 308 (SC) ; [2008] 9 SCC 622 AND CIT V. PODAR CEMENT (P.) LTD. [1997] 22 6 ITR 625 (SC) ; [1997] 5 SCC 482 THAT, (I) THE CIRCUMSTANCES UNDER WHICH THE AMENDMENT WAS BROUGHT IN EXISTENCE, (II) THE CO NSEQUENCES OF THE AMENDMENT, AND (III) THE SCHEME OF THE STATUTE PRIOR AND SUBSEQUENT TO THE AMENDMENT WILL HAVE TO BE TAKEN N OTE OF. 37. AN IMPORTANT QUESTION, WHICH ARISES IN THIS CON TEXT, IS WHETHER A 'CLARIFICATORY' AMENDMENT REMAINS TRUE TO ITS NAT URE WHEN IT PURPORTS TO ANNUL, OR HAS THE UNDENIABLE EFFECT OF ANNULLING, AN INTERPRETATION GIVEN BY THE COURTS TO THE TERM SOUG HT TO BE CLARIFIED. IN OTHER WORDS, DOES THE RULE AGAINST CLARIFICATORY AMENDMENTS LAYING DOWN NEW PRINCIPLES OF LAW EXTEND TO SITUATI ONS WHERE LAW HAD BEEN JUDICIALLY INTERPRETED AND THE LEGISLATURE SEEKS TO OVERCOME IT BY DECLARING THAT THE LAW IN QUESTION W AS NEVER MEANT TO HAVE THE IMPORT GIVEN TO IT BY THE COURT ? THE G ENERAL POSITION OF THE COURTS IN THIS REGARD IS WHERE THE PURPOSE OF A SPECIAL INTERPRETIVE STATUTE IS TO CORRECT A JUDICIAL INTER PRETATION OF A PRIOR LAW, WHICH THE LEGISLATURE CONSIDERS INACCURATE, TH E EFFECT IS PROSPECTIVE. ANY OTHER RESULT WOULD MAKE THE LEGISL ATURE A COURT OF LAST RESORT. UNITED STATES V. GILMORE 8 WALL (75 US) 330, 19 L ED 396 (1869), PEONY PARK V. O'MALLEY 223 F.2D 668 (8TH CIR. 1955). IT DOES NOT MEAN THAT THE LEGISLATURE DOES N OT HAVE THE POWER TO OVERRIDE THE JUDICIAL DECISIONS WHICH IN I TS OPINION IT DEEMS AS INCORRECT, HOWEVER TO RESPECT THE SEPARATI ON OF LEGAL POWERS AND TO AVOID MAKING A LEGISLATURE A COURT OF LAST RESORT, THE AMENDMENTS CAN BE MADE PROSPECTIVE ONLY (REF. C OUNTY OF SACRAMENTO V. STATE OF CALIFORNIA 134 CAL. APP. 3D 428, IN RE, MARRIAGE OF DAVIES, IN RE 105 ILL APP 3D 661 [1982] ). 38. THE CIRCUMSTANCES IN THIS CASE COULD VERY WELL GO TO SHOW THAT THE AMENDMENT WAS NO MORE THAN AN EXERCISE IN UNDOI NG AN INTERPRETATION OF THE COURT WHICH REMOVED INCOME FR OM DATA TRANSMISSION SERVICES FROM TAXABILITY UNDER SECTION 9(1)(VI). IT WOULD ALSO BE DIFFICULT, IF NOT IMPOSSIBLE TO ARGUE , THAT INCLUSION OF A CERTAIN SPECIFIC CATEGORY OF SERVICES OR PAYMENTS WITHIN THE AMBIT OF A DEFINITION ALLUDES NOT TO AN ATTEMPT TO ILLUMINATE OR CLARIFY A PERCEIVED AMBIGUITY OR OBSCURITY AS TO IN TERPRETATION OF THE DEFINITION ITSELF, BUT TOWARDS ENLARGING ITS SC OPE. PREDICATED UPON THIS, THE RETROSPECTIVITY OF THE AMENDMENT COU LD WELL BE A CONTENTIOUS ISSUE. BE THAT AS IT MAY, THIS COURT IS DISINCLINED TO CONCLUSIVELY DETERMINE OR RECORD A FINDING AS TO WH ETHER THE AMENDMENT TO SECTION 9(1)(VI) IS INDEED MERELY CLAR IFICATORY AS THE REVENUE SUGGESTS IT IS, OR PROSPECTIVE, GIVEN WHAT ITS NATURE MAY TRULY BE. THE ISSUE OF TAXABILITY OF THE INCOME OF THE ASSESSEES IN THIS CASE MAY BE RESOLVED WITHOUT REDRESSAL OF THE ABOVE QUESTION PURELY BECAUSE THE ASSESSEE HAS NOT PRESSED THIS LI NE OF ARGUMENTS PAGE | 11 BEFORE THE COURT AND HAS INSTEAD STATED THAT EVEN I F IT WERE TO BE ASSUMED THAT THE CONTENTION OF THE REVENUE IS CORRE CT, THE ULTIMATE TAXABILITY OF THIS INCOME SHALL REST ON THE INTERPR ETATION OF THE TERMS OF THE DOUBLE TAXATION AVOIDANCE AGREEMENTS. LEARNED COUNSEL FOR THE ASSESSEE HAS THEREFORE CONTENDED TH AT EVEN IF THE FIRST QUESTION IS ANSWERED IN FAVOUR OF THE REVENUE , THE INCOME SHALL NEVERTHELESS ESCAPE THE ACT BY REASON OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT. THE COURT THEREFORE PROCEEDS W ITH THE ASSUMPTION THAT THE AMENDMENT IS RETROSPECTIVE AND THE INCOME IS TAXABLE UNDER THE ACT. 39. IT IS NOW ESSENTIAL TO DECIDE THE SECOND QUESTI ON, I.E., WHETHER THE ASSESSEES IN THE PRESENT CASE WILL OBTAIN ANY R ELIEF FROM THE PROVISIONS OF THE DOUBLE TAXATION AVOIDANCE AGREEME NT. UNDER ARTICLE 12 OF THE DOUBLE TAXATION AVOIDANCE AGREEME NT, THE GENERAL RULE STATES THAT WHEREAS THE STATE OF RESIDENCE SHA LL HAVE THE PRIMARY RIGHT TO TAX ROYALTIES, THE SOURCE STATE SH ALL CONCURRENTLY HAVE THE RIGHT TO TAX THE INCOME, TO THE EXTENT OF 15 PER CENT. OF THE TOTAL INCOME. BEFORE THE AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT OF 2012, THE DEFINITION OF ROYALTY UNDER THE AC T AND THE DOUBLE TAXATION AVOIDANCE AGREEMENT WERE TREATED AS PARI M ATERIA. THE DEFINITIONS ARE REPRODUCED BELOW : ARTICLE 12(3), INDO-THAI DOUBLE TAXATION AVOIDANCE AGREEMENT : '3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE ME ANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE ALIENA TION OR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITER ARY, ARTISTIC OR SCIENTIFIC WORK (INCLUDING CINEMATOGRAPH FILMS, PHO NOGRAPHIC RECORDS AND FILMS OR TAPES FOR RADIO OR TELEVISION BROADCASTING), ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECR ET FORMULA OR PROCESS, OR FOR THE USE OF, OR THE RIGHT TO USE IND USTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OR FOR INFORMAT ION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE.' ARTICLE 12(4), INDO-NETHERLANDS DOUBLE TAXATION AVO IDANCE AGREEMENT : '4. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE ME ANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF , OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIE NTIFIC WORK INCLUDING CINEMAT OGRAPH FILMS, ANY PATENT, TRADE M ARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR I NFORMATION CONCERNING INDUSTRIAL, COM MERCIAL OR SCIENTIFIC EX PERIENCE.' SECTION 9(1)(VI), EXPLANATION 2, INCOME-TAX ACT, 19 61 : '(III) THE USE OF ANY PATENT, INVENTION, MODEL, DES IGN, SECRET FOR MULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY.' 40. IN ASIA SATELLITE THE COURT, WHILE INTERPRETING THE DEFINITION OF ROYALTY UNDER THE ACT, PLACED RELIANCE ON THE DEFIN ITION IN THE PAGE | 12 OECD MODEL CONVENTION. SIMILAR CASES, BEFORE THE TA X TRIBUNALS THROUGH THE NATION, EVEN WHILE DISAGREEING ON THE U LTIMATE IMPORT OF THE DEFINITION OF THE WORD ROYALTY IN THE CONTEX T OF DATA TRANSMISSION SERVICES, SYSTEMATICALLY AND WITHOUT E XCEPTION, HAVE TREATED THE TWO DEFINITIONS AS PARI MATERIA. THIS C OURT CANNOT TAKE A DIFFERENT VIEW, NOR IS INCLINED TO DISAGREE WITH THIS APPROACH FOR IT IS IMPERATIVE THAT DEFINITIONS THAT ARE SIMILARL Y WORDED BE INTERPRETED SIMILARLY IN ORDER TO AVOID INCONGRUITY BETWEEN THE TWO. THIS IS, OF COURSE, UNLESS LAW MANDATES THAT T HEY BE TREATED DIFFERENTLY. THE FINANCE ACT OF 2012 HAS NOW, AS OB SERVED EARLIER, INTRODUCED EXPLANATIONS 4, 5, AND 6 TO THE SECTION 9(1)(VI). THE QUESTION IS THEREFORE, WHETHER IN AN ATTEMPT TO INT ERPRET THE TWO DEFINITIONS UNIFORMLY, I.E. THE DOMESTIC DEFINITION AND THE TREATY DEFINITION, THE AMENDMENTS WILL HAVE TO BE READ INT O THE TREATY AS WELL. IN ESSENCE, WILL THE INTERPRETATION GIVEN TO THE DOUBLE TAXATION AVOIDANCE AGREEMENT FLUCTUATE WITH SUCCESSIVE FINAN CE ACT AMENDMENTS, WHETHER RETROSPECTIVE OR PROSPECTIVE ? THE REVENUE ARGUES THAT IT MUST, WHILE THE ASSESSEES ARGUE TO T HE CONTRARY. THIS COURT IS INCLINED TO UPHOLD THE CONTENTION OF THE L ATTER. 41. THIS COURT IS OF THE VIEW THAT NO AMENDMENT TO THE ACT, WHETHER RETROSPECTIVE OR PROSPECTIVE CAN BE READ IN A MANNE R SO AS TO EXTEND IN OPERATION TO THE TERMS OF AN INTERNATIONA L TREATY. IN OTHER WORDS, A CLARIFICATORY OR DECLARATORY AMENDMENT, MU CH LESS ONE WHICH MAY SEEK TO OVERCOME AN UNWELCOME JUDICIAL IN TERPRETATION OF LAW, CANNOT BE ALLOWED TO HAVE THE SAME RETROACT IVE EFFECT ON AN INTERNATIONAL INSTRUMENT EFFECTED BETWEEN TWO SOVER EIGN STATES PRIOR TO SUCH AMENDMENT. IN THE CONTEXT OF INTERNAT IONAL LAW, WHILE NOT EVERY ATTEMPT TO SUBVERT THE OBLIGATIONS UNDER THE TREATY IS A BREACH, IT IS NEVERTHELESS A FAILURE TO GIVE EFFECT TO THE INTENDED TRAJECTORY OF THE TREATY. EMPLOYING INTERPRETIVE AM ENDMENTS IN DOMESTIC LAW AS A MEANS TO IMPLY CONTOURED EFFECTS IN THE ENFORCEMENT OF TREATIES IS ONE SUCH ATTEMPT, WHICH FALLS JUST SHORT OF A BREACH, BUT IS NEVERTHELESS, IN THE OPINION OF THIS COURT, INDEFENSIBLE. 42. IT TAKES LITTLE IMAGINATION TO COMPREHEND THE E XTENT AND LENGTH OF NEGOTIATIONS THAT TAKE PLACE WHEN TWO NATIONS DE CIDE TO REGULATE THE REACH AND APPLICATION OF THEIR LEGITIMATE TAXIN G POWERS. IN UNION OF INDIA V. AZADI BACHAO ANDOLAN [2003] 263 I TR 706 (SC), WHERE THE INDO-MAURITIUS DOUBLE TAXATION AVOIDANCE CONVENTION WAS BEFORE THE SUPREME COURT, THE COURT SAID THE FO LLOWING OF THE ESSENTIAL NATURE OF THESE TREATIES (PAGE 751) : 'AN IMPORTANT PRINCIPLE WHICH NEEDS TO BE KEPT IN M IND IN THE INTERPRETATION OF THE PROVISIONS OF AN INTERNATIONA L TREATY, INCLUDING ONE FOR DOUBLE TAXATION RELIEF IS THAT TR EATIES ARE NEGOTIATED AND ENTERED INTO AT A POLITICAL LEVEL AN D HAVE SEVERAL CONSIDERATIONS AS THEIR BASES. COMMENTING ON THIS A SPECT OF THE MATTER, DAVID R. DAVIS IN PRINCIPLES OF INTERNATION AL DOUBLE TAXATION RELIEF, (SEE DAVID R. DAVIS, PRINCIPLES OF INTERNATIONAL DOUBLE TAXATION RELIEF, PG.4 (LON DON SWEET AND MAX WELL, 1985)) POINTS OUT THAT THE MAIN FUNCTION OF A DOUBL E TAXATION PAGE | 13 AVOIDANCE TREATY SHOULD BE SEEN IN THE CONTEXT OF A IDING COMMERCIAL RELATIONS BETWEEN TREATY PARTNERS AND AS BEING ESSENTIALLY A BARGAIN BETWEEN TWO TREATY COUNTRIES AS TO THE DIVISION OF TAX REVENUES BETWEEN THEM IN RESPECT OF INCOME FALLING TO BE TAXED IN BOTH JURISDICTIONS. IT IS OB SERVED (VIDE PARA. 1.06) : 'THE BENEFITS AND DETRIMENTS OF A DOUBLE TAXATION T REATY WILL PRO BABLY ONLY BE TRULY RECIPROCAL WHERE THE FLOW O F TRADE AND INVESTMENT BETWEEN TREATY PARTNERS IS GENERALLY IN BALANCE. WHERE THIS IS NOT THE CASE, THE BENEFITS OF THE TRE ATY MAY BE WEIGHTED MORE IN FAVOUR OF ONE TREATY PARTNER THAN THE OTHER, EVEN THOUGH THE PROVISIONS OF THE TREATY ARE EXPRES SED IN RECIPROCAL TERMS. THIS HAS BEEN IDENTIFIED AS OCCUR RING IN RELATION TO TAX TREATIES BETWEEN DEVELOPED AND DEVE LOPING COUNTRIES, WHERE THE FLOW OF TRADE AND INVESTMENT I S LARGELY ONE WAY. BECAUSE TREATY NEGOTIATIONS ARE LARGELY A BARGAININ G PROCESS WITH EACH SIDE SEEKING CONCESSIONS FROM THE OTHER, THE FINAL AGREEMENT WILL OFTEN REPRESENT A NUMBER OF COMPROMI SES, AND IT MAY BE UNCERTAIN AS TO WHETHER A FULL AND SUFFIC IENT QUID PRO QUO IS OBTAINED BY BOTH SIDES.' ' 43. THE VIENNA CONVENTION ON THE LAW OF TREATIES, 1 969 ('VCLT') IS UNIVERSALLY ACCEPTED AS AUTHORITATIVELY LAYING D OWN THE PRINCIPLES GOVERNING THE LAW OF TREATIES. ARTICLE 3 9 THEREIN STATES THE GENERAL RULE REGARDING THE AMENDMENT OF TREATIE S AND PROVIDES THAT A TREATY MAY BE AMENDED BY AGREEMENT BETWEEN T HE PARTIES. THE RULES LAID DOWN IN PART II OF THE VIENNA CONVEN TION ON THE LAW OF TREATIES APPLY TO SUCH AN AGREEMENT EXCEPT I N SO FAR AS THE TREATY MAY OTHERWISE PROVIDE. THIS PROVISION THEREF ORE CLEARLY STATES THAT AN AMENDMENT TO A TREATY MUST BE BROUGH T ABOUT BY AGREEMENT BETWEEN THE PARTIES. UNILATERAL AMENDMENT S TO TREATIES ARE THEREFORE CATEGORICALLY PROHIBITED. 44. WE DO NOT HOWEVER REST OUR DECISION ON THE PRIN CIPLES OF THE VIENNA CONVENTION ON THE LAW OF TREATIES, BUT ROOT IT IN THE INABILITY OF PARLIAMENT TO EFFECT AMENDMENTS TO INT ERNATIONAL INSTRUMENTS AND DIRECTLY AND LOGICALLY, THE ILLEGAL ITY OF ANY EXECUTIVE ACTION WHICH SEEKS TO APPLY DOMESTIC LAW AMENDMENTS TO THE TERMS OF THE TREATY, THEREBY INDIRECTLY, BUT EF FECTIVELY AMENDING THE TREATY UNILATERALLY. AS HELD IN AZADI BACHAO AN DOLAN [2003] 263 ITR 706 (SC) THESE TREATIES ARE CREATIONS OF A DIFFERENT PROCESS SUBJECT TO NEGOTIATIONS BY SOVEREIGN NATIONS. THE M ADRAS HIGH COURT, IN CIT V. VR. S.R.M. FIRM [1994] 208 ITR 400 (MAD) HELD THAT 'TAX TREATIES ARE . . . CONSIDERED TO BE MINI LEGISLATION CONTAINING IN THEMSELVES ALL THE RELEVANT ASPECTS O R FEATURES WHICH ARE AT VARIANCE WITH THE GENERAL TAXATION LAWS OF T HE RESPECTIVE COUNTRIES'. PAGE | 14 45. AT THE VERY OUTSET, IT SHOULD BE UNDERSTOOD THA T IT IS NOT AS IF THE DOUBLE TAXATION AVOIDANCE AGREEMENTS COMPLETELY PRO HIBIT RELIANCE ON DOMESTIC LAW. UNDER THESE, A REFERENCE IS MADE TO THE DOMESTIC LAW OF THE CONTRACTING STATES. ARTICLE 3(2 ) OF BOTH DOUBLE TAXATION AVOIDANCE AGREEMENTS STATE THAT IN THE COU RSE OF APPLICATION OF THE TREATY, ANY TERM NOT DEFINED IN THE TREATY, SHALL, HAVE THE MEANING WHICH IS IMPUTED TO IT IN THE LAWS IN FORCE IN THAT STATE RELATING TO THE TAXES WHICH ARE THE SUBJECT O F THE CONVENTION. 'INDO-THAILAND DOUBLE TAXATION AVOIDANCE AGREEMENTS ([1986] 161 ITR (ST.) 82, 83) : 'ARTICLE 3 : GENERAL DEFINITIONS 2. IN THE APPLICATION ON THE PROVISIONS OF THIS CON VENTION BY ONE OF THE CONTRACTING STATES, ANY TERM NOT DEFINED HER EIN SHALL, UNLESS THE CONTEXT OTHERWISE REQUIRES, HAVE THE MEA NING WHICH IT HAS FOR THE PURPOSES OF THE LAWS IN FORCE IN THAT S TATE RELATING TO THE TAXES WHICH ARE THE SUBJECT OF THIS CONVENTION. ' INDO-NETHERLANDS DOUBLE TAXATION AVOIDANCE AGREEMEN T (SEE [1989] 177 ITR (ST.) 72, 74) : 'ARTICLE 3 : GENERAL DEFINITIONS 2. AS REGARDS THE APPLICATION OF THE CONVENTION BY ONE OF THE STATES ANY TERM NOT DEFINED HEREIN SHALL, UNLESS TH E CONTEXT OTHERWISE REQUIRES, HAVE THE MEANING WHICH IT HAS U NDER THE LAW OF THAT STATE CONCERNING THE TAXES TO WHICH THE CON VENTION APPLIES.'' THE TREATIES THEREFORE, CREATE A BIFURCATION BETWEE N THOSE TERMS, WHICH HAVE BEEN DEFINED BY THEM (I.E THE CONCERNED TREATY), AND THOSE, WHICH REMAIN UNDEFINED. IT IS IN THE LATTER INSTANCE THAT DOMESTIC LAW SHALL MAN DATORILY SUPPLY THE IMPORT T O BE GIVEN TO THE WORD IN QUESTION. IN THE FORMER CASE HOWEVER, T HE WORDS IN THE TREATY WILL BE CONTROLLED BY THE DEFINITIONS OF THOSE WORDS IN THE TREATY IF THEY ARE SO PROVIDED. 46. THOUGH THIS HAS BEEN THE GENERAL RULE, MUCH DIS CUSSION HAS ALSO TAKEN PLACE ON WHETHER AN INTERPRETATION GIVEN TO A TREATY ALTERS WITH A TRANSFORMATION IN, OR AMENDMENTS IN, DOMESTIC LAW OF ONE OF THE STATE PARTIES. AT ANY GIVEN POINT, DOES A REFERENCE TO THE TREATY POINT TO THE LAW OF THE CONTRACTING STATES A T THE TIME THE TREATY WAS CONCLUDED, OR RELATE TO THE LAW OF THE S TATES AS EXISTING AT THE TIME OF THE REFERENCE TO THE TREATY ? THE FO RMER IS THE 'STATIC' APPROACH WHILE THE LATTER IS CALLED THE 'AMBULATORY ' APPROACH. ONE OPPORTUNITY FOR A STATE TO EASE ITS OBLIGATIONS UNDER A TAX CONVENTION COMES FROM THE AMBULATORY REFERENCE TO D OMESTIC LAW. STATES SEEKING TO FURTIVELY DODGE THE LIMITATIONS T HAT SUCH TREATIES IMPOSE, SOMETIMES, RESORT TO AMENDING THEIR DOMESTI C LAWS, ALL THE WHILE UNDER THE PROTECTION OF THE THEORY OF AMBULAT ORY REFERENCE. IT THEREBY ALLOWS ITSELF AN ADJUSTMENT TO BROADEN THE SCOPE OF PAGE | 15 CIRCUMSTANCES UNDER WHICH IT IS ALLOWED TO TAX UNDE R A TREATY. A CONVENIENT OPPORTUNITY SOMETIMES PRESENTS ITSELF IN THE FORM OF AMBIGUOUS TECHNICAL FORMULATIONS IN THE CONCERNED T REATY. STATES ATTEMPTING TO CLARIFY OR CONCRETISE ANY ONE OF THES E MEANINGS, (UNSURPRISINGLY THE ONE THAT BENEFITS IT) ENACT DOM ESTIC LEGISLATION WHICH SUBSERVES SUCH PURPOSE. 47. IN THIS CONTEXT, RECENTLY IN SANOFI PASTEUR HOL DING SA V. DEPARTMENT OF REVENUE [2013] 354 ITR 316 (AP), THE ANDHRA PRADESH HIGH COURT DISCUSSED AND SUBSCRIBED TO THE RATIO OF THE SUPREME COURT OF CANADA IN R. V. MELFORD DEVELOPMEN TS INC. 82 DTC 6281 (1982) WITH RESPECT TO THE APPLICABILITY O F DOMESTIC AMENDMENTS TO INTERNATIONAL INSTRUMENTS. IN R. V. M ELFORD DEVELOPMENTS INC. 82 DTC 6281 (1982), THE CANADIAN SUPREME COURT HELD THAT THE AMBULATORY APPROACH IS ANTITHET ICAL TO TREATY OBLIGATIONS : 'THERE ARE 26 CONCLUDED AND 10 PROPOSED TAX CONVENT IONS, TREATIES OR AGREEMENTS BETWEEN CANADA AND OTHER NAT IONS OF THE WORLD. IF THE SUBMISSION OF THE APPELLANT IS CORREC T, THESE AGREEMENTS ARE ALL PUT IN PERIL BY ANY LEGISLATIVE ACTION TAKEN BY PARLIAMENT WITH REFERENCE TO THE REVISION OF THE IN COME-TAX ACT. FOR THIS PRACTICAL REASON ONE FINDS IT DIFFICULT TO CONCLUDE THAT PARLIAMENT HAS LEFT ITS OWN HANDIWORK OF 1956 IN SU CH INADVERTENT JEOPARDY. THAT IS NOT TO SAY THAT BEFOR E THE 1956 ACT CAN BE AMENDED IN SUBSTANCE IT MUST BE DONE BY PARL IAMENT IN AN ACT ENTITLED 'AN ACT TO AMEND THE ACT OF 1956'. BUT NEITHER IS THE CONVERSE TRUE, THAT IS THAT EVERY TAX ENACTMENT ADOPTED FOR WHAT EVER PURPOSE, MIGHT HAVE THE EFFECT OF AMENDIN G ONE OR MORE BILATERAL OR MULTILATERAL TAX CONVENTIONS WITH OUT ANY AVOWED PURPOSE OR INTEN TION SO TO DO.' 48. IN CIT V. SIEMENS AKTIONGESELLSCHAFT [2009] 310 ITR 320 (BOM), THE BOMBAY HIGH COURT CITING R. V. MELFORD D EVELOPMENTS INC. HELD THAT (PAGE 333 OF 310 ITR) : 'THE RATIO OF THE JUDGMENT, IN OUR OPINION, WOULD M EAN THAT BY A UNILATERAL AMENDMENT IT IS NOT POSSIBLE FOR ONE NAT ION WHICH IS PARTY TO AN AGREEMENT TO TAX INCOME WHICH OTHERWISE WAS NOT SUBJECT TO TAX. SUCH INCOME WOULD NOT BE SUBJECT TO TAX UNDER THE EXPRESSION 'LAWS IN FORCE'. . . WHILE CONSIDERING THE DOUBLE TAX AVOIDANCE AGREEMEN T THE EXPRESSION 'LAWS IN FORCE' WOULD NOT ONLY INCLUDE A TAX ALREADY COVERED BY THE TREATY BUT WOULD ALSO INCLUDE ANY OT HER TAX AS TAXES OF A SUBSTANTIALLY SIMILAR CHARACTER SUBSEQUE NT TO THE DATE OF THE AGREE MENT AS SET OUT IN ARTICLE I(2). CONSI DERING THE EXPRESS LANGUAGE OF ARTICLE I(2) IT IS NOT POSSIBLE TO ACCEPT THE BROAD PROPOSITION URGED ON BEHALF OF THE ASSESSEE T HAT THE LAW WOULD BE THE LAW AS APPLICABLE OR AS DEFINE WHEN TH E DOUBLE TAXATION AVOIDANCE AGREEMENT WAS ENTERED INTO.' PAGE | 16 49. IT IS ESSENTIAL TO NOTE THE CONTEXT IN WHICH TH IS JUDGMENT WAS DELIVERED. THERE, THE COURT WAS CONFRONTED WITH A S ITUATION WHERE THE WORD ROYALTY WAS NOT DEFINED IN THE GERMAN DOUB LE TAXATION AVOIDANCE AGREEMENTS. FOLLOWING OUR PREVIOUS DISCUS SION ON THE BIFURCATION OF TERMS WITHIN THE TREATY, IN SITUATIO NS WHERE WORDS REMAIN UNDEFINED, ASSISTANCE IS TO BE DRAWN FROM TH E DEFINITION AND IMPORT OF THE WORDS AS THEY EXIST IN THE DOMEST IC 'LAWS IN FORCE'. IT WAS IN THIS CONTEXT THAT THE BOMBAY HIGH COURT HELD THAT THEY WERE UNABLE TO ACCEPT THE ASSESSEE'S CONTENTIO N THAT THE LAW APPLICABLE WOULD BE THE LAW AS IT EXISTED AT THE TI ME THE DOUBLE TAXATION AVOIDANCE AGREEMENT WAS ENTERED INTO. THIS IS THE CONTEXT IN WHICH THE AMBULATORY APPROACH TO TAX TREATY INTE RPRETATION WAS NOT REJECTED. THE SITUATION BEFORE THIS COURT HOWEV ER IS MATERIALLY DIFFERENT AS THERE IS IN FACT A DEFINITION OF THE W ORD ROYALTY UNDER ARTICLE 12 OF BOTH DOUBLE TAXATION AVOIDANCE AGREEM ENTS, THUS DISPENSING WITH THE NEED FOR RECOURSE TO ARTICLE 3. 50. THERE ARE THEREFORE TWO SETS OF CIRCUMSTANCES. FIRST, WHERE THERE EXISTS NO DEFINITION OF A WORD IN ISSUE WITHI N THE DOUBLE TAXATION AVOIDANCE AGREEMENTS ITSELF, REGARD IS TO BE HAD TO THE LAWS IN FORCE IN THE JURISDICTION OF THE STATE CALL ED UPON TO INTERPRET THE WORD. THE BOMBAY HIGH COURT SEEMS TO ACCEPT THE AMBULATORY APPROACH IN SUCH A SITUATION, THUS ALLOWING FOR SUC CESSIVE AMENDMENTS INTO THE REALM OF 'LAWS IN FORCE'. WE EX PRESS NO OPINION IN THIS REGARD SINCE IT IS NOT IN ISSUE BEF ORE THIS COURT. THIS COURT'S FINDING IS IN THE CONTEXT OF THE SECOND SIT UATION, WHERE THERE DOES EXIST A DEFINITION OF A TERM WITHIN THE DOUBLE TAXATION AVOIDANCE AGREEMENTS. WHEN THAT IS THE CASE, THERE IS NO NEED TO REFER TO THE LAWS IN FORCE IN THE CONTRACTING STATE S, ESPECIALLY TO DEDUCE THE MEANING OF THE DEFINITION UNDER THE DOUB LE TAXATION AVOIDANCE AGREEMENTS AND THE ULTIMATE TAXABILITY OF THE INCOME UNDER THE AGREEMENT. THAT IS NOT TO SAY THAT THE CO URT MAY BE INCONSISTENT IN ITS INTERPRETATION OF SIMILAR DEFIN ITIONS. WHAT THAT DOES IMPLY HOWEVER, IS THAT JUST BECAUSE THERE IS A DOMESTIC DEFINITION SIMILAR TO THE ONE UNDER THE DOUBLE TAXA TION AVOIDANCE AGREEMENT, AMENDMENTS TO THE DOMESTIC LAW, IN AN AT TEMPT TO CONTOUR, RESTRICT OR EXPAND THE DEFINITION UNDER IT S STATUTE, CANNOT EXTEND TO THE DEFINITION UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT. IN OTHER WORDS, THE DOMESTIC LAW REMAINS STATIC FOR THE PURPOSES OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT . THE COURT IN SANOFI (SUPRA) HAD ALSO HELD SIMILARLY (PAGE 442 OF 354 ITR) : 'WE ARE IN AGREEMENT WITH THE PETITIONERS AND IN TH E LIGHT OF OUR PRECEDING ANALYSES, DISCERN NO TEXTUAL, GRAMMATICAL OR SYNTACTIC AMBI GUITY IN ARTICLE 14(5), WARRANTING AN INTERPRE TIVE RECOURSE. IN THE CIR CUMSTANCES, INVOKING THE PROVISIONS OF A RTICLE 3(2) BY AN ARTIFICIAL INSEMINATION OF AMBIGUITY (TO ACCOMMO DATE AN EXPANDED MEANING TO THE DOUBLE TAX AVOIDANCE AGREEM ENT PROVISION), WOULD BE CONTRARY TO GOOD FAITH INTERPR ETATION. A FURTHER PROBLEMATIC OF CONTRIVING AN AMBIGUITY TO U NWARRANTEDLY INVITE APPLICATION OF DOMESTIC LAW OF A CONTRACTING STATE WOULD BE THAT WHILE INDIA WOULD INTERPRET AN UNDE FINED D OUBLE TAXATION AVOIDANCE AGREEMENT PROVISION ACCORDING TO THE PAGE | 17 PROVISIONS OF THE ACT, FRANCE COULD DO SO BY REFERE NCE TO ITS TAX CODE. AS A CONSEQUENCE, THE PURPOSE OF ENTERING INT O A TREATY WITH A VIEW TO AVOIDING DOUBLE TAXATION OF CROSS-BO RDER TRANSACTIONS WOULD BE FRUS TRATED.' 51. PERTINENTLY, THIS COURT IN DIT V. NOKIA NETWORK S OY [2013] 358 ITR 259 (DELHI) SPECIFICALLY DEALT WITH THE QUE STION OF THE EFFECT OF AMENDMENTS TO DOMESTIC LAW AND THE MANNER OF THEIR OPERATION ON PARALLEL TREATIES. THE COURT DELIVERED ITS JUDGMENT IN THE CONTEXT OF THE VERY AMENDMENTS THAT ARE IN QUES TION TODAY ; THE EXPLANATIONS TO SECTION 9(1)(VI) VIS A VIS THE INTE RPRETATION OF A DOUBLE TAXATION AVOIDANCE AGREEMENT. THIS COURT REJ ECTED THAT ANY AMENDMENT COULD CHANGE THE SITUATION AND RENDER THE SERVICE OR ACTIVITY TAXABLE, IN THE FOLLOWING OBSERVATIONS (PA GE 281 ITR 358 ITR) : 'HE, THUS SUBMITTED THAT THE QUESTION OF 'COPYRIGHT ED ARTICLE' OR ACTUAL COPYRIGHT DOES NOT ARISE IN THE CONTEXT OF S OFTWARE BOTH IN THE DOUBLE TAXATION AVOIDANCE AGREEMENT AND IN THE INCOME-TAX ACT SINCE THE RIGHT TO USE SIMPLICITER OF A SOFTWAR E PROGRAM ITSELF IS A PART OF THE COPYRIGHT IN THE SOFTWARE IRRESPEC TIVE OF WHETHER OR NOT A FURTHER RIGHT TO MAKE COPIES IS GRANTED. T HE DECISION OF THE DELHI BENCH OF THE INCOME-TAX APPELLATE TRIBUNA L HAS DEALT WITH THIS ASPECT IN ITS JUDG MENT IN GRACEMAC CORPO RATION V. ASST. DIT [2010] 134 TTJ (DELHI) 257; [2011] 8 ITR (TRIB) 522 (DELHI) POINTING OUT THAT EVEN SOFTWARE BOUGHT OFF THE SHELF, DOES NOT CONSTITUTE A 'COPYRIGHTED ARTICLE' AS SOUGHT TO BE MADE OUT BY THE SPECIAL BENCH OF THE INCOME-TAX APPEL LATE TRIB UNAL IN THE PRESENT CASE. HOWEVER, THE ABOVE ARGUMENT MISSES TH E VITAL POINT NAMELY THE ASSESSEE HAS OPTED TO BE GOVERNED BY THE TREATY AND THE LANGUAGE OF THE SAID TREATY DIFFERS FROM TH E AMENDED SECTION 9 OF THE ACT. IT IS CATEGORICALLY HELD IN C IT V. SIE MENS AKTIONGESELLSCHAFT [2009] 310 ITR 320 (BOM) THAT TH E AMEND MENTS CANNOT BE READ INTO THE TREATY. ON THE WORDIN G OF THE TREATY, WE HAVE ALREADY HELD IN ERICSSON A. B. [201 2] 343 ITR 470 (DELHI) THAT A COPYRIGHTED ARTICLE DOES NOT FAL L WITHIN THE PURVIEW OF ROYALTY. THEREFORE, WE DECIDE QUESTION O F LAW NOS. 1 AND 2 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REV ENUE.' 52. THUS, AN INTERPRETIVE EXERCISE BY PARLIAMENT CA NNOT BE TAKEN SO FAR AS TO CONTROL THE MEANING OF A WORD EXPRESSL Y DEFINED IN A TREATY. PARLIAMENT, SUPREME AS IT MAY BE, IS NOT EQ UIPPED, WITH THE POWER TO AMEND A TREATY. IT IS CERTAINLY TRUE THAT LAW LAID DOWN BY PARLIAMENT IN OUR DOMESTIC CONTEXT, EVEN IF IT WERE IN VIOLATION OF TREATY PRINCIPLES, IS TO BE GIVEN EFFECT TO ; BUT W HERE THE STATE UNILATERALLY SEEKS TO AMEND A TREATY THROUGH ITS LE GISLATURE, THE SITUATION BECOMES ONE QUITE DIFFERENT FROM WHEN IT BREACHES THE TREATY. IN THE LATTER CASE, WHILE INTERNATIONALLY C ONDEMNABLE, THE STATE'S POWER TO BREACH VERY MUCH EXISTS ; COURTS I N INDIA HAVE NO JURISDICTION IN THE MATTER, BECAUSE IN THE ABSENCE OF ENACTMENT THROUGH APPROPRIATE LEGISLATION IN ACCORDANCE WITH ARTICLE 253 OF THE CONSTITUTION, COURTS DO NOT POSSESS ANY POWER T O PRONOUNCE ON THE POWER OF THE STATE TO ENACT A LAW CONTRARY TO I TS TREATY PAGE | 18 OBLIGATIONS. THE DOMESTIC COURTS, IN OTHER WORDS, A RE NOT EMPOWERED TO LEGALLY STRIKE DOWN SUCH ACTION, AS TH EY CANNOT DICTATE THE EXECUTIVE ACTION OF THE STATE IN THE CO NTEXT OF AN INTERNATIONAL TREATY, UNLESS OF COURSE, THE CONSTIT UTION ENABLES THEM TO. THAT BEING SAID, THE AMENDMENT TO A TREATY IS NOT ON THE SAME FOOTING. PARLIAMENT IS SIMPLY NOT EQUIPPED WIT H THE POWER TO, THROUGH DOMESTIC LAW, CHANGE THE TERMS OF A TREATY. A TREATY TO BEGIN WITH, IS NOT DRAFTED BY PARLIAMENT ; IT IS AN ACT OF THE EXECUTIVE. LOGICALLY THEREFORE, THE EXECUTIVE CANNO T EMPLOY AN AMENDMENT WITHIN THE DOMESTIC LAWS OF THE STATE TO IMPLY AN AMENDMENT WITHIN THE TREATY. MOREOVER, A TREATY OF THIS NATURE IS A CAREFULLY NEGOTIATED ECONOMIC BARGAIN BETWEEN TWO S TATES. NO ONE PARTY TO THE TREATY CAN ASCRIBE TO ITSELF THE POWER TO UNILATERALLY CHANGE THE TERMS OF THE TREATY AND ANNUL THIS ECONO MIC BARGAIN. IT MAY DECIDE TO NOT FOLLOW THE TREATY, IT MAY CHOSE T O RENEGE FROM ITS OBLIGATIONS UNDER IT AND EXIT IT, BUT IT CANNOT AME ND THE TREATY, ESPECIALLY BY EMPLOYING DOMESTIC LAW. THE PRINCIPLE IS RECIPROCAL. EVERY TREATY ENTERED INTO BE THE INDIAN STATE, UNLE SS SELF-EXECUTORY, BECOMES OPERATIVE WITHIN THE STATE ONCE PARLIAMENT PASSES A LAW TO SUCH EFFECT, WHICH GOVERNS THE RELATIONSHIP BETW EEN THE TREATY TERMS AND THE OTHER LAWS OF THE STATE. IT THEN BECO MES PART OF THE GENERAL CONSPECTUS OF DOMESTIC LAW. NOW, IF AN AMEN DMENT WERE TO BE EFFECTED TO THE TERMS OF SUCH TREATY, UNLESS THE EXISTING OPERATIONALISING DOMESTIC LAW STATES THAT SUCH AMEN DMENTS ARE TO BECOME AUTOMATICALLY APPLICABLE, PARLIAMENT WILL HA VE TO BY EITHER A SEPARATE LAW, OR THROUGH AN AMENDMENT TO THE ORIG INAL LAW, MAKE THE AMENDMENT EFFECTIVE. SIMILARLY, AMENDMENTS TO DOMESTIC LAW CANNOT BE READ INTO TREATY PROVISIONS WITHOUT A MENDING THE TREATY ITSELF. 53. FINALLY, STATES ARE EXPECTED TO FULFIL THEIR OB LIGATIONS UNDER A TREATY IN GOOD FAITH. THIS INCLUDES THE OBLIGATION TO NOT DEFEAT THE PURPOSE AND OBJECT OF THE TREATY. THESE OBLIGATIONS ARE ROOTED IN CUSTOMARY INTERNATIONAL LAW, CODIFIED BY THE VIENNA CONVENTION ON THE LAW OF TREATIES, ESPECIALLY ARTICLE 26 (BINDING NATURE OF TREATIES AND THE OBLIGATION TO PERFORM THEM IN GOOD FAITH) ; ARTICLE 27 (INTERNAL LAW AND OBSERVANCE OF TREATIES, I.E., PROVISIONS OF INTERNAL OR MUNICIPAL LAW OF A NATION CANNOT BE USE D TO JUSTIFY OMISSION TO PERFORM A TREATY) ; GENERAL RULE OF INT ERPRETATION UNDER ARTICLE 31(1) (I.E., THAT IT SHALL BE INTERPR ETED IN GOOD FAITH, IN ACCORDANCE WITH ORDINARY MEANING TO BE GIVEN TO THE TERMS OF A TREATY) AND ARTICLE 31(4) (A SPECIAL MEANING SHALL BE GIVEN TO A TERM IF IT IS ESTABLISHED THAT THE PARTIES SO INTEN DED). THE EXPRESSION 'PROCESS' AND TREATY INTERPRETATION IN THIS CASE 54. NEITHER CAN AN ACT OF PARLIAMENT SUPPLY OR ALTE R THE BOUNDARIES OF THE DEFINITION UNDER ARTICLE 12 OF TH E DOUBLE TAXATION AVOIDANCE AGREEMENT BY SUPPLYING REDUNDANC Y TO ANY PART OF IT. THIS BECOMES ESPECIALLY IMPORTANT IN TH E CONTEXT OF EXPLANATION 6, WHICH STATES THAT WHETHER THE 'PROCE SS' IS SECRET OR NOT IS IMMATERIAL, THE INCOME FROM THE USE OF SUCH PROCESS IS TAXABLE, NONE THE LESS. EXPLANATION 6 PRECIPITATED FROM CONFUSION PAGE | 19 ON THE QUESTION OF WHETHER IT WAS VITAL THAT THE 'P ROCESS' USED MUST BE SECRET OR NOT. THIS CONFUSION WAS BROUGHT ABOUT BY A DIFFERENCE IN THE PUNCTUATION OF THE DEFINITIONS IN THE DOUBLE TAXATION AVOIDANCE AGREEMENTS AND THE DOMESTIC DEFINITION. F OR GREATER CLARITY AND TO ILLUSTRATE THIS DIFFERENCE, WE REPRO DUCE THE DEFINITIONS OF ROYALTY ACROSS BOTH DOUBLE TAXATION AVOIDANCE AGREEMENTS AND CLAUSE (III) TO EXPLANATION 2 TO 9(1 )(VI). ARTICLE 12(3), INDO-THAI DOUBLE TAXATION AVOIDANCE AGREEMENT : '3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE ME ANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE ALIENA TION OR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITER ARY, ARTISTIC OR SCIENTIFIC WORK (INCLUDING CINEMATOGRAPH FILMS, PHO NOGRAPHIC RECORDS AND FILMS OR TAPES FOR RADIO OR TELEVISION BROADCASTING), ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECR ET FORMULA OR PROCESS, OR FOR THE USE OF, OR THE RIGHT TO USE IND USTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OR FOR INFORMAT ION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERI ENCE.' (EMPHASIS SUPPLIED) ARTICLE 12(4), INDO-NETHERLANDS DOUBLE TAXATION AVO IDANCE AGREE MENT : '4. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE ME ANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF , OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIE NTIFIC WORK INCLUDING CINEMA TOGRAPH FILMS, ANY PATENT, TRADE M ARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR I NFORMATION CONCERNING INDUSTRIAL, COMMER CIAL OR SCIENTIFIC EX PERIENCE.' (EMPHASIS1 SUPPLIED) SECTION 9(1)(VI), EXPLANATION 2, INCOME-TAX ACT, 19 61 '(III) THE USE OF ANY PATENT, INVENTION, MODEL, DES IGN, SECRET FOR MULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; ' (EMPHASIS1 SUP PLIED) 55. THE SLIGHT BUT APPARENTLY VITAL DIFFERENCE BETW EEN THE DEFINITIONS UNDER THE DOUBLE TAXATION AVOIDANCE AGR EEMENTS AND THE DOMESTIC DEFINITION IS THE PRESENCE OF A COMMA FOLLOWING THE WORD PROCESS IN THE FORMER. IN THE INITIAL DETERMIN ATIONS BEFORE VARIOUS INCOME-TAX APPELLATE TRIBUNALS ACROSS THE C OUNTRY, MUCH DISCUSSION TOOK PLACE ON THE IMPLICATIONS OF THE PR ESENCE OR ABSENCE OF THE 'COMMA'. A LOT HAS BEEN SAID ABOUT T HE RELEVANCE OR OTHERWISE OF PUNCTUATION IN THE CONTEXT OF STATU TORY CONSTRUCTION. IN SPOKEN ENGLISH, IT WOULD BE UNWISE TO ARGUE AGAINST THE IMPORTANCE OF PUNCTUATION, WHERE THE PL ACEMENT OF COMMAS IS NOTORIOUS FOR DIAMETRICALLY OPPOSITE IMPL ICATIONS. HOWEVER IN THE REALM OF STATUTORY INTERPRETATION, C OURTS ARE CIRCUMSPECT IN ALLOWING PUNCTUATION TO DICTATE THE MEANING OF THE PROVISIONS. JUDGE CALDWELL ONCE FAMOUSLY SAID 'THE WORDS CONTROL PAGE | 20 THE PUNCTUATION MARKS, AND NOT THE PUNCTUATION MARK S THE WORDS.' HOLMES V. PHEONIX INSURANCE CO. 98 F 240 (1899). IT HAS BEEN HELD IN CGT V. BUDUR THIPPAIAH [1976] 103 ITR 189 ( AP) AND HINDUSTAN CONSTRUCTION CO. LTD. V. CIT [1994] 208 I TR 291 (BOM) THAT WHILE PUNCTUATION MAY ASSIST IN ARRIVING AT TH E CORRECT CONSTRUCTION, YET IT CANNOT CONTROL THE CLEAR MEANI NG OF A STATUTORY PROVISION. IT IS BUT, A MINOR ELEMENT IN THE CONSTR UCTION OF A STATUTE, HINDUSTAN CONSTRUCTION CO. LTD. 56. THE COURTS HAVE HOWEVER CREATED AN EXCEPTION TO THE GENERAL RULE THAT PUNCTUATION IS NOT TO BE LOOKED AT TO ASC ERTAIN MEANING. THAT EXCEPTION OPERATES WHEREVER A STATUTE IS CAREF ULLY PUNCTUATED. ONLY THEN SHOULD WEIGHT UNDOUBTEDLY BE GIVEN TO PUN CTUATION ; CIT V. LOYAL TEXTILE LTD. [1998] 231 ITR 573 (MAD) ; SA MA ALANA ABDULLA V. STATE OF GUJARAT, AIR 1996 SC 569 ; MOHD . SHABBIR V. STATE OF MAHARASHTRA, AIR 1979 SC 564 ; LEWIS PUGH EVANS PUGH V. ASHUTOSH SEN, AIR 1929 PC 69 ; ASWINI KUMAR GHOS E V. ARBINDA BOSE, AIR 1952 SC 369 ; POPE ALLIANCE CORPO RATION V. SPANISH RIVER PULP AND PAPER MILLS LTD., AIR 1929 P C 38. AN ILLUSTRATION OF THE AID DERIVED FROM PUNCTUATION MA Y BE FURNISHED FROM THE CASE OF MOHD. SHABBIR V. STATE OF MAHARASH TRA, AIR 1979 SC 564 WHERE SECTION 27 OF THE DRUGS AND COSMETICS ACT, 1940 CAME UP FOR CONSIDERATION. BY THIS SECTION WHOEVER 'MANUFACTURES FOR SALE, SELLS, STOCKS OR EXHIBITS FOR SALE OR DIS TRIBUTES' A DRUG WITHOUT A LICENCE IS LIABLE FOR PUNISHMENT. IN HOLD ING THAT MERE STOCKING SHALL NOT AMOUNT TO AN OFFENCE UNDER THE S ECTION, THE SUPREME COURT POINTED OUT THE PRESENCE OF COMMA AFT ER 'MANUFACTURES FOR SALE' AND 'SELLS' AND THE ABSENCE OF ANY COMMA AFTER 'STOCKS' WAS INDICATIVE OF THE FACT 'STOCKS' WAS TO BE READ ALONG WITH 'FOR SALE' AND NOT IN A MANNER SO AS TO BE DIVORCED FROM IT, AN INTERPRETATION WHICH WOULD HAVE BEEN SO UND HAD THERE BEEN A COMMA AFTER THE WORD 'STOCKS'. IT WAS THEREF ORE HELD THAT ONLY STOCKING FOR THE PURPOSE OF SALE WOULD AMOUNT TO AN OFFENCE BUT NOT MERE STOCKING. 57. HOWEVER, THE QUESTION, WHICH THEN ARISES, IS AS FOLLOWS. HOW IS THE COURT TO DECIDE WHETHER A PROVISION IS CAREFULL Y PUNCTUATED OR NOT ? THE TEST TO DECIDE WHETHER A STATUTE IS CAREF ULLY (READ CONSCIOUSLY) PUNCTUATED OR NOT- WOULD BE TO SEE WHA T THE CONSEQUENCE WOULD BE, HAD THE SECTION BEEN PUNCTUAT ED OTHERWISE. WOULD THERE BE ANY SUBSTANTIAL DIFFERENCE IN THE IM PORT OF THE SECTION IF IT WERE NOT PUNCTUATED THE WAY IT ACTUAL LY IS ? WHILE THIS MAY NOT BE CONCLUSIVE EVIDENCE OF A CAREFULLY PUNCT UATED PROVISION, THE REPERCUSSIONS GO A LONG WAY TO SIGNI FY INTENT. IF THE INCLUSION OR LACK OF A COMMA OR A PERIOD GIVES RISE TO DIAMETRICALLY OPPOSITE CONSEQUENCES OR LARGE VARIAT IONS IN TAXING POWERS, AS IS IN THE PRESENT CASE, THEN THE ASSUMPT ION MUST BE THAT IT WAS PUNCTUATED WITH A PARTICULAR END IN MIND. TH E TEST THEREFORE IS NOT TO SEE IF IT MAKES 'GRAMMATICAL SENSE' BUT T O SEE IF IT TAKES ON ANY 'LEGAL CONSEQUENCES'. 58. NEVERTHELESS, WHETHER OR NOT PUNCTUATION PLAYS AN IMPORTANT PART IN THE STATUTE INTERPRETATION, THE CONSTRUCTIO N PARLIAMENT GIVES PAGE | 21 TO SUCH PUNCTUATION, OR IN THIS CASE, THE IRRELEVAN CY THAT IT IMPUTES TO IT, CANNOT BE CARRIED OVER TO AN INTERNATIONAL I NSTRUMENT WHERE SUCH COMMA MAY OR MAY NOT HAVE BEEN EVIDENCE OF A D ELIBERATE INCLUSION TO INFLUENCE THE READING OF THE SECTION. THERE IS SUFFICIENT EVIDENCE FOR US TO CONCLUDE THAT THE PROCESS REFERR ED TO IN ARTICLE 12 MUST IN FACT BE A SECRET PROCESS AND WAS ALWAYS MEANT TO BE SUCH. IN ANY EVENT, THE PRECINCTS OF INDIAN LAW MAY NOT DICTATE SUCH CONCLUSION. THAT CONCLUSION MUST BE THE RESULT OF A N INTERPRETATION OF THE WORDS EMPLOYED IN THE LAW AND THE TREATISES, AND DISCUSSIONS THAT ARE APPLICABLE AND SPECIALLY FORMULATED FOR TH E PURPOSE OF THAT DEFINITION. THE FOLLOWING EXTRACT FROM ASIA SATELLI TE TAKES NOTE OF THE OECD COMMENTARY AND KLAUS VOGEL ON DOUBLE TAXAT ION CONVENTIONS, TO SHOW THAT THE PROCESS MUST IN FACT BE SECRET AND THAT SPECIFICALLY, INCOME FROM DATA TRANSMISSION SE RVICES DO NOT PARTAKE OF THE NATURE OF ROYALTY (PAGE 391 OF 332 I TR) : 'EVEN WHEN WE LOOK INTO THE MATTER FROM THE STANDPO INT OF DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA), THE CAS E OF THE APPELLANT GETS BOOST. THE ORGANISATION OF ECONOMIC CO- OPERATION AND DEVELOPMENT (OECD) HAS FRAMED A MODEL OF DOUBLE TAXATION AVOIDANCE AGREE MENT (DTAA) ENTERED INTO BY INDIA ARE BASED. ARTICLE 12 OF THE SAID MODEL DOUBL E TAXATION AVOIDANCE AGREEMENT CONTAINS A DEFINITION OF ROYALT Y WHICH IS IN ALL MATERIAL RESPECTS VIRTUALLY THE SAME AS THE DEF I NITION OF 'ROYALTY' CONTAINED IN CLAUSE (III) OF EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT. THIS FACT IS ALSO NOT IN DISPU TE. THE LEARNED COUNSEL FOR THE APPELLANT HAD RELIED UPON THE COMME NTARY ISSUED BY THE OECD ON THE AFORESAID MODEL DOUBLE TAXATION AVOIDANCE AGREEMENTS AND PARTICULARLY, REFERRED TO THE FOLLOW ING AMENDMENT PROPOSED BY THE OECD TO ITS COMMENTARY ON ARTICLE 12, WHICH READS AS UNDER : '9.1 SATELLITE OPERATORS AND THEIR CUSTOMERS (INCLU DING BROADCAST ING AND TELECOMMUNICATION ENTERPRISES) FR EQUENTLY ENTER INTO TRANS PONDER LEASING AGREEMENTS UNDER WH ICH THE SATELLITE OPERATOR ALLOWS THE CUSTOMER TO UTILIZE T HE CAPACITY OF A SATELLITE TRANSPONDER TO TRANS MIT OVER LARGE GEO GRAPHICAL AREAS. PAYMENTS MADE BY CUSTOMERS UNDER TYPICAL TRANSPONDER LEASING AGREEMENTS ARE MADE FOR THE USE OF THE TRANSPONDER TRANSMITTING CAPACITY AND WILL NOT CONS TITUTE ROYALTIES UNDER THE DEFINITION OF PARAGRAPH 2 ; THE SE PAYMENTS ARE NOT MADE IN CONSIDERATION FOR THE USE OF, OR RI GHT TO USE, PROPERTY, OR FOR INFOR MATION, THAT IS REFERRED TO IN THE DEFINITION (THEY CANNOT BE VIEWED, FOR INSTANCE, AS PAYMENTS FOR INFORMATION OR FOR THE USE OF, OR RIGHT TO USE, A SECRET PROCESS SINCE THE SATELLITE TECHNOLOGY IS NOT TRANS FERRED TO THE CUSTOMER). AS REGARDS TREATIES THAT INCLUDE THE LEA SING OF INDUSTRIAL, COMMERCIAL OR SCIENTIFIC (ICS) EQUIPMEN T IN THE DEFINITION OF ROYALTIES, THE CHARACTERIZATION OF TH E PAYMENT WILL DEPEND TO A LARGE EXTENT ON THE RELEVANT CONTRACTUA L ARRANGEMENTS. WHILST THE RELEVANT CONTRACTS OFTEN R EFER TO THE LEASE OF A TRANSPONDER, IN MOST CASES THE CUSTOMER DOES NOT PAGE | 22 ACQUIRE THE PHYSICAL POSSESSION OF THE TRANSPONDER BUT SIM PLY ITS TRANSMISSION CAPACITY : THE SATELLITE IS OPERAT ED BY THE LESSOR AND THE LESSEE HAS NO ACCESS TO THE TRANSPON DER THAT HAS BEEN ASSIGNED TO IT. IN SUCH CASES, THE PAYMENTS MA DE BY THE CUSTOMERS WOULD THEREFORE BE IN THE NATURE OF PAYME NTS FOR SERVICES, TO WHICH ARTICLE 7 APPLIES, RATHER THAN P AYMENTS FOR THE USE, OR RIGHT TO USE, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT. A DIFFERENT, BUT MUCH LESS FREQUENT, TRA NSACTION WOULD BE WHERE THE OWNER OF THE SATELLITE LEASES IT TO ANOTHER PARTY SO THAT THE LATTER MAY OPERATE IT AND EITHER USE IT FOR ITS OWN PURPOSES OR OFFER ITS DATA TRANSMISSION CAPACIT Y TO THIRD PARTIES. IN SUCH A CASE, THE PAYMENT MADE BY THE SA TELLITE OPER ATOR TO THE SATELLITE OWNER COULD WELL BE CONSIDERE D AS A PAYMENT FOR THE LEASING OF INDUSTRIAL, COMMERCIAL O R SCIENTIFIC EQUIPMENT. SIMILAR CONSIDERATIONS APPLY TO PAYMENTS MADE TO LEASE OR PURCHASE THE CAPACITY OF CABLES FOR THE TR ANSMISSION OF ELECTRICAL POWER OR COMMU NITIES (E.G., THROUGH A CONTRACT GRANTING AN INDEFEASIBLE RIGHT OF USE OF SUCH CAPAC ITY) OR PIPELINES (E.G. FOR THE TRANSPORTATION OF GAS OR OI L).' MUCH RELIANCE WAS PLACED UPON THE COMMENTARY WRITTE N BY KLAUS VOGEL ON DOUBLE TAXATION CONVENTIONS (3RD EDI TION)'. IT IS RECORDED THEREIN : 'THE USE OF A SATELLITE IS A SERVICE, NOT A RENTAL (THUS CORRECTLY, RABE, A., 38 RIW 135 (1992), ON GERMANY'S DOUBLE TA XATION CON VENTION WITH LUXEMBOURG) ; THIS WOULD NOT BE TH E CASE ONLY IN THE EVENT THE ENTIRE DIRECTION AND CONTROL OVER THE SATELLITE, SUCH AS ITS PILOTING OR STEERING, ETC. W ERE TRANSFERRED TO THE USER.' KLAUS VOGEL HAS ALSO MADE A DISTINCTION BETWEEN LET TING AN ASSET AND USE OF THE ASSET BY THE OWNER FOR PROVIDING SER VICES AS BELOW : 'ON THE OTHER HAND, ANOTHER DISTINCTION TO BE MADE IS LETTING THE PROPRIETARY RIGHT, EXPERIENCE, ETC., ON THE ONE HAND AND USE OF IT BY THE LICENSOR HIMSELF, E.G., WITHIN THE FRAMEWORK OF AN ADVISORY ACTIVITY. WITHIN THE RANGE FROM SERVICE S', VIZ. OUTRIGHT TRANSFER OF THE ASSET INVOLVED (RIGHT, ETC .) TO THE PAYER OF THE ROYALTY. THE OTHER, JUST AS CLEAR- CUT EXTRE ME IS THE EXERCISE BY THE PAYEE OF ACTIVITIES IN THE SERVICE OF THE PAYER, ACTIVITIES FOR WHICH THE PAYEE USES HIS OWN PROPRIE TARY RIGHTS, KNOW-HOW, ETC., WHILE NOT LETTING OR TRANSFERRING T HEM TO THE PAYER.' THE TRIBUNAL HAS DISCARDED THE AFORESAID COMMENTARY OF OECD AS WELL AS KLAUS VOGEL ONLY ON THE GROUND THAT IT I S NOT SAFE TO RELY UPON THE SAME. HOWEVER, WHAT IS IGNORED IS THA T WHEN THE TECHNICAL TERMS USED IN THE DOUBLE TAX AVOIDANCE AG REEMENTS ARE THE SAME WHICH APPEAR IN SECTION 9(1)(VI), FOR BETT ER PAGE | 23 UNDERSTANDING ALL THESE VERY TERMS, OECD COMMENTARY CAN ALWAYS BE RELIED UPON. THE APEX COURT HAS EMPHASIZE D SO IN NUMBER OF JUDGMENTS CLEARLY HOLDING THAT THE WELL-S ETTLED INTERNATIONALLY ACCEPTED MEANING AND INTERPRETATION PLACED ON IDENTICAL OR SIMILAR TERMS EMPLOYED IN VARIOUS DOUB LE TAX ATION AVOIDANCE AGREEMENT SHOULD BE FOLLOWED BY THE COURT S IN INDIA WHEN IT COMES TO CONSTRUING SIMILAR TERMS OCCURRING IN THE INDIAN INCOME-TAX ACT . . . THERE ARE JUDGMENTS OF OTHER HIGH COURTS ALSO TO TH E SAME EFFECT. (A) CIT V. AHMEDABAD MANUFACTURING AND CALICO PRINT ING CO. [1983] 139 ITR 806 (GUJ) AT PAGES 820-822. (B) CIT V. VISAKHAPATNAM PORT TRUST [1983] 144 ITR 146 (AP) AT PAGES 156-157. (C) N. V. PHILIPS V. CIT (NO. 1) [1988] 172 ITR 521 (CAL) AT PAGES 527 AND 538-539.' 59. ON A FINAL NOTE, INDIA'S CHANGE IN POSITION TO THE OECD COMMENTARY CANNOT BE A FACT THAT INFLUENCES THE INT ERPRETATION OF THE WORDS DEFINING ROYALTY AS THEY STAND TODAY. THE ONLY MANNER IN WHICH SUCH CHANGE IN POSITION CAN BE RELEVANT IS IF SUCH CHANGE IS INCORPORATED INTO THE AGREEMENT ITSELF AND NOT OTHE RWISE. A CHANGE IN EXECUTIVE POSITION CANNOT BRING ABOUT A UNILATER AL LEGISLATIVE AMENDMENT INTO A TREATY CONCLUDED BETWEEN TWO SOVER EIGN STATES. IT IS FALLACIOUS TO ASSUME THAT ANY CHANGE MADE TO DOMESTIC LAW TO RECTIFY A SITUATION OF MISTAKEN INTERPRETATION CAN SPONTANEOUSLY FURTHER THEIR CASE IN AN INTERNATIONAL TREATY. THER EFORE, MERE AMENDMENT TO SECTION 9(1)(VI) CANNOT RESULT IN A CH ANGE. IT IS IMPERATIVE THAT SUCH AMENDMENT IS BROUGHT ABOUT IN THE AGREEMENT AS WELL. ANY ATTEMPT SHORT OF THIS, EVEN IF IT IS E VIDENCE OF THE STATE'S DISCOMFORT AT LETTING DATA BROADCAST REVENU ES SLIP BY, WILL BE INSUFFICIENT TO PERSUADE THIS COURT TO HOLD THAT SUCH AMENDMENTS ARE APPLICABLE TO THE DOUBLE TAXATION AVOIDANCE AGR EEMENT. PAGE | 24 60. CONSEQUENTLY, SINCE WE HAVE HELD THAT THE FINAN CE ACT, 2012 WILL NOT AFFECT ARTICLE 12 OF THE DOUBLE TAXATION A VOIDANCE AGREEMENT, IT WOULD FOLLOW THAT THE FIRST DETERMINA TIVE INTERPRETATION GIVEN TO THE WORD 'ROYALTY' IN ASIA SATELLITE, WHEN THE DEFINITIONS WERE IN FACT PARI MATERIA (IN THE A BSENCE OF ANY CONTOURING EXPLANATIONS), WILL CONTINUE TO HOLD THE FIELD FOR THE PURPOSE OF ASSESSMENT YEARS PRECEDING THE FINANCE A CT, 2012 AND IN ALL CASES WHICH INVOLVE A DOUBLE TAXATION AVOIDA NCE AGREEMENT, UNLESS THE SAID DOUBLE TAXATION AVOIDANCE AGREEMENT ARE AMENDED JOINTLY BY BOTH PARTIES TO INCORPORATE INCOME FROM DATA TRANSMISSION SERVICES AS PARTAKING OF THE NATURE OF ROYALTY, OR AMEND THE DEFINITION IN A MANNER SO THAT SUCH INCOM E AUTOMATICALLY BECOMES ROYALTY. IT IS REITERATED THA T THE COURT HAS NOT RETURNED A FINDING ON WHETHER THE AMENDMENT IS IN FACT RETROSPECTIVE AND APPLICABLE TO CASES PRECEDING THE FINANCE ACT OF 2012 WHERE THERE EXISTS NO DOUBLE TAXATION AVOIDANC E AGREEMENT. 11. IN VIEW OF THE ABOVE DECISION OF THE HON'BLE DELHI HIGH COURT IN CASE OF THE ASSESSEE, RESPECTFULLY FOLLOWING, WE ALSO HOLD THAT THE RECEIPT BY THE ASSESSEE IS NOT ROYALTY UNDER ARTICLE 12 OF TH E DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND THAILAND , HENCE , SAME IS NOT CHARGEABLE TO TAX IN INDIA DESPITE THE AMENDMENT I N THE INCOME TAX ACT WITH RETROSPECTIVE EFFECT BY THE FINANCE ACT 2012. 5.1 IN THE ABSENCE OF ANY CONTRARY DECISION CITED BY LD. DR AS WELL AS THE BINDING PRECEDENT OF THE ORDER OF THE COORDINATE BENCH IN ASSESSEES OWN CAS E, WE RESPECTFULLY FOLLOWING THE SAME AND HELD THAT INCOME RECEIVED BY THE ASSESSEE IS NOT A ROYALTY AS PER ARTICLE 12 OF THE DTAA BETWEEN INDIA AND THAILAND, THEREFORE, THE SAME IS NOT CHARGEABLE TO TAX, DESPITE THE AMENDMENT PAGE | 25 IN THE INCOME TAX ACT WITH RETROSPECTIVE EFFECT BY FINANCE ACT, 2012. IN THE RESULT, THE COMMON GROUND RAISED IN BOTH THE APPEALS I.E. WHETHER INC OME RECEIVED BY THE ASSESSEE IS CHARGEABLE TO TAX ACCORDING TO THE INDIAN INCOME TAX ACT AS ROYAL TY U/S. 9(1)(VI) OF THE ACT AS WELL AS UNDER ARTICLE 12 OF THE DTAA BETWEEN INDIA AND THAILAND A RE ALLOWED. 6. AS REGARDS COMMON GROUNDS INVOLVED IN BOTH THE A PPEALS RELATING TO CHARGING OF INTEREST U/S. 234B OF THE ACT AND LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT ARE CONCERNED, THE SAME ARE PREMATURE AND HENCE, DISMISSED AS SUCH. 7. AS REGARDS ITA NO. 1062/DEL/2015 (AY 2006-07) WHEREIN THE ISSUE OF REASSESSMENT UNDER SECTION 147/143(3)/144C FOR TAXING THE RECEIPTS FRO M TRANSPONDERS SERVICES AT 20% AS AGAINST 10% (15% IN SOME CASES WHERE DTAA RATE WAS MORE BENEFIC IAL) APPLIED IN THE ORIGINAL ASSESSMENT ORDER, IGNORING THAT THE RECEIPTS ARE NOT TAXABLE WAS RA ISED, SINCE WE HAVE ALREADY HELD THAT INCOME RECEIVED BY THE ASSESSEE IS NOT A ROYALTY AS PER AR TICLE 12 OF THE DTAA BETWEEN INDIA AND THAILAND AND THEREFORE, THE SAME IS NOT CHARGEABLE TO TAX, T HE GROUND RAISED IN THIS APPEAL HAS BECOME INFRUCTUOUS AND DISMISSED AS SUCH. 8. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLOW ED. ORDER PRONOUNCED ON 26/04/2018. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 26/04/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BEN CHES