ADIT, New Delhi V. M/s. Cincom Systems Inc., New Delhi

ITA 1274/DEL/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97557 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-10-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 02-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN; PARWINDER KAUR
• Assessee Lawyers: SSH VED JAI N; ASHISH CHADHA CAS
• Keywords: Double taxation relief; Retrospective amendment; Permanent establishment; Advance ruling

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SMT. DIVA SINGH , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 9 52 /DEL/ 2006 ASSESSMENT YEAR: 2002 - 03 CINCOM SYSTEM INC. VS. DDIT, CIRCLE - 1(1), C/O - CINCON SYSTEM INDIA INTL. TAXATION, NEW DELHI (P.) LTD., 1207, KAILASH BUILDING, K.G. MARG, NEW DELHI (PAN: ) (APPELLANT) (RESPONDENT) AND ITA NOS. 1271 TO 1274/DEL/2009 ASSESSMENT YEARS: 2003 - 04 TO 2006 - 07 ADIT, CIRCLE - 1(1), VS CINCOM SYSTEMS INC. INTL. TAXATION, NEW DELHI C/O - CINCOM SYSTEMS INDIA PVT. LTD., 1206, KAILASH BUILDING, 26, KASTURBA GANDHI MARG, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SH VED JAIN & ASHISH CHADHA, CAS DEPARTMENT BY : SH. RAVI JAIN, CIT(DR) & SH. PARWINDER KAUR, SR.DR DATE OF HEARING: 01.09.2015 DATE OF PRONOUNCEMENT: 30.09.2015 ORDER PER INTURI RAMA RAO, A.M. : THESE APPEALS INVOLVING COMMON ISSUE ARE FILED BY BOTH THE ASSESSEE AS WELL AS BY THE DEPARTMENT. APPEAL IN ITA NO. 952/DEL/2006 FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), DATED 27.01.2006 PASSED FOR THE 2 ASSESSMENT Y EAR 2002 - 03. APPEALS IN ITA NOS. 1271, 1272 &1273/DEL/2009 FILED BY THE REVENUE ARE DIRECTED AGAINST CONSOLIDATED ORDER OF CIT(A), DATED 11.12.2008 PASSED FOR THE ASSESSMENT YEARS 2003 - 04, 2004 - 05 AND 2005 - 06 RESPECTIVELY . ITA NO. 1274/DEL/2009 FILED BY TH E REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A), DATED 08.01.2009 PASSED FOR THE ASSESSMENT YEAR 2006 - 07. SINCE COMMON ISSUE IS INVOLVED IN ALL THESE APPEALS, WE PROCEED TO DISPOSE OF THE APPEALS BY ONE CONSOLIDATED ORDER. THE GROUNDS OF APPEAL RAISED IN ITA NO. ITA NO. 952/DEL/2006 I.E. THE ASSESSEE S APPEAL, ARE AS FOLLOWS: I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. II. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN HOLDING THAT COMMUNICATION CHARGES OF RS. 36,03,936/ - CHARGEABLE TO TAX IN INDIA. III. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE SERVICES PROVIDED BY THE APPELLANT FALLS IN THE DEFINITION OF ROYALTY UNDER INCOME TAX ACT AS WELL AS DTAA AND HENCE LIABLE TO BE TAXED IN INDIA. IV. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS & WAS TAXABLE IN INDIA UNDER ARTICLE 12(3)(A) OF THE INCOME TAX ACT. V. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN RELYING UPON THE RULING DELIVERED BY AUTHORITY FOR ADVA NCE RULING IN P. NO. 30 OF 1999, 238 ITR 296, AS THE SAME IS CLEARLY DISTINGUISHABLE FROM THE CASE OF THE APPELLANT ON FACTS AND IGNORING THE JUDGMENTS CITED BY THE APPELLANT WHICH ARE APPLICABLE TO THE FACTS OF HIS CASE. VI. THAT THE APPELLANT CRAVES LEAVE T O ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS LEADING TO THE PRESENT APPEALS ARE AS FOLLOWS: 2.1 THE ASSSESSEE IS A FOREIGN COMPANY. IT IS ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE SOLUTION INCLUDING CREATING PERSONALIZED DO CUMENT, MANAGEMENT OF SOLUTIONS, MANAGING COMPLEX MANUFACTURING OPERATIONS AND 3 BUILDING AND MAINTAINING PERSONALIZED E - BUSINESS SOFTWARE, DEVELOPMENT AND SOLUTIONS. THE ASSESSEE COMPANY ENTERED WITH AN AGREEMENT CALLE D COMMUNICATION AGREEMENT WITH C INCOM S YSTEMS (INDIA) PVT. LTD. ON 10 TH APRIL, 2010. IN TERMS OF THIS AGREEMENT, IT WAS AGREED THAT THE ASSESSEE C OMPANY SHALL PROVIDE ACCESS TO C INCOM SYSTEMS (INDIA) PVT. LTD. TO INTERNET AND OTHER EMAIL AND NETWORKING FACILITIES ALONG WITH OTHER GROUP CONCERN. IN CONSIDERATION OF PROVIDING THESE SERVICE S , THE ASSESSEE COMPANY WAS PAID A SUM OF RS. 36,03,940/ - DURING THE PREVIOUS YEAR, RELEVANT TO THE ASSESSMENT YEAR 2002 - 03 AND SUM OF RS. 30,76,898/ - ; RS. 40,68,720/ - ; RS. 39,26,700/ - AND RS. 39,84,030/ - FOR THE ASSESSMENT YEARS 2003 - 04, 2004 - 05, 2005 - 06 AND 2006 - 07 RESPECTIVELY. FOR THE ASSESSMENT YEAR 2002 - 03, THE ASSESSEE COMPANY ITSELF OFFERED TAX AS FEES FOR INCLUDED SERVICES. HOWEVER, BEFORE THE CIT(A), IT WAS CONTENDED THAT THE AMOUNT WAS NOT TAXABLE IN IN DIA. ON APPEAL BEFORE THE CIT(A), THE CIT(A) HELD THAT THE PAYMENT IS NOT IN THE NATU RE OF FEE FOR INCLUDED SERVICES, H OWEVER, HELD THAT IT WAS IN THE NATURE OF ROYALTY , PLACING RELIANCE ON THE DECISION OF AUTHORITY FOR ADVANCE RULINGS, NEW DELHI, ADVANCE RULING, P.NO. 30 OF 1999, 238 ITR 296 . BEING AGGRIEVED BY THIS ORDER, THE ASSESSEE COMPANY IS BEFORE US IN ITA NO. 652/DEL/2006 FOR AY 2002 - 03. FOR THE ASSESSMENT YEARS 2003 - 04 TO 2006 - 07, THE ASSESSING OFFICER FOLLOWING THE ORDERS OF CIT(A) FOR THE ASSESS MENT YEAR 2003 - 04, HELD THE PAYMENT S WERE IN THE NATURE OF ROYALTY AND BROUGHT THE AMOUNT TO TAX. ON APPEAL BEFORE THE CIT(A), THE CIT(A) VIDE CONSOLIDATED ORDER DATED 11.12.2008 HELD THAT THE PAYMENT IS NOT IN THE NATURE OF ROYALTY AND 4 ALLOWED THE APPEAL. BEING AGGRIEVED BY THIS ORDER, THE REVENUE IS BEFORE US IN ITA NOS. 1271 TO 1274/DEL/2009 FOR THE ASSESSMENT YEARS 2003 - 04 TO 2006 - 07 . 2.2 THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE NATURE OF SERVICES RENDERED DOES NOT FALL WITHIN THE DEFINITION OF ROYALTY AND PLACED RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD. VS. DIRECTOR OF INCOME TAX, 332 ITR 340. HE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. DCIT VS. PANAMSAT INTER NATIONAL SYSTEMS INC., (2006) 9 SOT (DEL.) II. SOFTWARE TECHNOLOGY PARKS OF INDIA VS. ITO, (2005) 3 SOT 529 (BANG.) III. WIPRO LTD. VS. ITO, (2004) 1 SOT 758 (BANG. ) IV. B4U INTERNATIONAL HOLDINGS LTD. VS. DCIT, ITA NO. 880/MUM/2005, DT. 28.05.2012 V. SIEMENS AKTIENGESEL LSCHAFT VS. ITO, (1986) 22 ITR 87 VI. ADDL. DIT VS. TII TEAM TELECOM INTERNATIONAL (P.) LTD., (2011) 60 DTR 777 3. ON THE OTHER HAND, LEARNED SR. DR VEHEMENTLY ARGUED THAT THE SERVICES IN QUE STION FALL WITHIN THE DEFINITION OF ROYALTY AS DEFINED IN SECTION 9(1)(XI) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) . HE FURTHER ARGUED THAT THE PAYMENT WAS NOT MADE FOR SIMPLE USE OF EQUIPMENT BUT FOR THE USE OF PROTECTED SOFTWARE AND PLACED RELIANCE ON THE RULING OF AUTHORITY FOR ADVANCE RULINGS, NEW DELHI, ADVANCE RULING, P.NO. 30 OF 1999, 238 ITR 296. HE FURTHER SUBMITTED THAT IN VIE W OF THE AMENDMENT INTRODUCED WI TH RETROSPECTIVE EFFECT FROM 01.04.1996 TO SECTION 9(1)(XI) OF THE ACT, THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD. VS. DIRECTOR OF INCOME TAX, 332 ITR 340 IS NO LONGER HOLDS WATER. HE FURTHER PLACED RELIANCE ON THE FOLLOWING DECISIONS: 5 I. REUTERS TRANSACTION SERVICES LTD. VS. DCIT (INTERNATIONAL TAXATION), (2014) 47 TAXMANN.COM 10 (MUM.) (TRIB.) IN MUMBAI BENCH L . II. VIACOM 18 MEDIA PVT. LTD. VS. ACIT (INTERNATIONAL TAXATION) - 2(2), MUMBAI [2004] 44 TAXMANN.COM 1 (MUM.) (TRIB.) IN ITAT, MUMBAI BENCH L III. CARGO COMMUNITY NETWORK (P.) LTD. , (2002) 159 TAXMANN.COM 243 (AAR - NEW DELHI) IV. [1999] 238 ITR 296 (AAR) [BEFORE THE AUTHORITY FOR ADVANCE RULINGS], P. NO. 30 OF 1999, IN RE. 4. WE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. FROM THE PERUSAL OF THE AGREEMENT ENTERE D BY THE ASSESSEE COMPANY WITH C INCOM SYSTEMS (INDIA) PVT. LTD., IT IS CLEAR THAT THE ASSESSEE PROVIDED THE ACCESS TO ITS INTERNET BY WHICH IT PROVIDE S A GATEWAY THAT WILL FACILITATE CALL CENTERS TO INCOMING AND OUTGOING CALLS FROM INDIA TO THE PEOPLE OF USA, REFERRED AS C INCOM GATEWAY. IN OTHER WORDS, THE ASSESSEE COMPANY MERELY PROVIDED FACILITY FOR A CONSIDERATION. THEN T HE QUESTION THAT COMES UP IS WHETHER THE CONSIDERATION PAID FOR THE USE OF SUCH FACILITY IS IN THE NATURE OF ROYALTY AS DEFINED UNDER THE DTA BETWEEN INDIA AND USA. UNDISPUTEDLY, THE IMPUGNED PAYMENT FALLS WITHIN THE DEFINITION OF ROYALTY AS DEFINED UNDER THE PROVISIONS OF 9(1)(VI) OF THE ACT. HOWEVER, SINCE THE ASSESSEE COMPANY IS A RESIDENT OF UNITED STATES OF AMERICA, IT IS ENTITLED TO BE GOVERNED BY THE PROVISIONS OF DTAA BETWEEN INDIA AND USA, THE TERM ROYALTY WAS DEFINED IN THE ARTICLE 12(3) OF THE DTAA AS UNDER: 3. THE TERM ROYALT Y S AS DEFINED IN THIS ARTICLE MEANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OR A LITERARY, ARTISTIC, OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH R ADIO OR TELEVISION BROADCASTING, 6 ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPE RTY WHICH ARE CONTINGENT ON THE PRODUCTIVITY, USE, OR DISPOSITION THEREOF; AND (B) PAYMENT OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL, OR SCIENTIFIC EQUIPMENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERP RISE DESCRIBED IN PARAGRAPH 1 OF ARTICLE 8 (SHIPPING AND AIR TRANSPORT FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2(C) OR 3 OF ARTICLE 8. 5. NOW, WE ARE REQUIRED WHETHER THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE COMPANY FALLS WITHIN THE DEFINITION OF ROYALTY AS DEFINED ABOVE. IN THE PRESENT CASE, IT IS A CASE OF USE OF EMBEDDED SECRET SOFTWARE OWNED BY THE ASSESSEE COMPANY FOR THE PURPOSE OF ENABLING THE CUSTOMER FROM INDIA TO CALL THE RESIDENTS OF USA OR VICE - VERSA. A CASE INVOLVING ALMOST IDENTICAL FACTS HAD COME UP BEFORE THE HON BLE AUTHORITY FOR ADVANCED RULING, REPORTED AT 238 ITR 296 , IN THIS CASE, COMPANY INCORPORATED IN THE USA BELONGED TO A GROUP OF COMPANIES ENGAGED IN WORLDWIDE CREDIT CARD AND TRAVEL BUSINESS. IT WAS ENGAGED IN PROVIDING I NTERNATIONAL CREDIT CARDS, TRAVELLER S CHEQUES AND OTHER TRAVEL RELATED SERVICES. THESE INSTRUMENTS ARE USED, DISCOUNTED AND ENCASHED ALL OVER THE WORLD BY TRAVELERS ON TOUR OR BUSINESS. TO KEEP TRACK OF THE EXPENSES INCURRED ON TRAVELLER S CREDIT CARD OR PURCHASE AND ENCASHMENT OF TRAVELLER S CHEQUES, ETC., THE USA COMPANY MAINTAINED A CENTRALIZED COMPUTER IN USA. THE CENTRALIZED COMPUTER OR CENTRAL PROCESSING UNIT (CPU) WAS A HUGE HIGH TECHNOLOGY COMPUTER COMPLEX HAVING 15 TO 20 MAIN FRAME IBM COMPUTERS A ND OTHER RELATED HARDWARE AND SOFTWARE FACILITIES INVOLVING SUBSTANTIAL INVESTMENT AND CAPABLE OF VERY HIGH VOLUME STORAGE AND HIGH SPEED PROCESSING OF DATA. THE 7 ABOVE CPU WAS ACCESSED AND USED BY VARIOUS GROUP ENTITIES LOCATED WORLDWIDE THROUGH A CONSOLI DATED DATA NETWORK MAINTAINED IN HONG KONG. THE TRANSACTIONS DONE BY A TRAVELER IN A PARTICULAR COUNTRY WERE REPORTED TO A CENTRALIZED COMPUTER IN THAT PARTICULAR COUNTRY. IN INDIA , THE CENTRALIZED COMPUTER WAS MAINTAINED BY AN INDIAN COMPANY LOCATED AT DE LHI. THIS COMPANY RECEIVED INFORMATION ON COMPUTE THROUGH TELEPHONIC OR MICROWAVE LINKS ABOUT THE USE OF CREDIT CARDS AND TRAVELLERS CHEQUES BY TRAVELERS ALL OVER THE COUNTRY. IT ALSO SERVICED THIRTEEN GROUP COMPANIES IN ASI A AND THE PACIFIC IN A SIMILAR MANNER. THE INFORMATION WAS THEN PASSED ON TO THE HONG KONG COMPUTER CENTRE OF THE AMERICAN COMPANY. FOR CARRYING OUT THIS OPERATION, THE INDIAN COMPANY OBTAINED LEASED LINES FROM VSNL. THE AMERICAN COMPANY CHARGED THE INDIAN COMPANY FOR THE USE OF ITS COM PUTERS IN HONG KONG AND USA. THE INDIAN COMPANY WAS A SUBSIDIARY OF THE AMERICAN COMPANY. THE ISSUE WHICH WAS PLACED BEFORE THE AAR, WAS WHETHER THE PAYMENT DUE TO THE AMERICAN COMPANY FROM THE INDIAN COMPANY WAS LIABLE TO TAX IN INDIA AND IF SO WHETHER IT WAS COVERED UNDER ARTICLE 12(3)(A) OR 12(3)(B) OF THE DTA BETWEEN INDIA AND THE USA. THE AAR RULED THAT THE DEFINITION OF THE EXPRESSION ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT READ WITH CLAUSE (VI) OF THE EXPLANATION INCLUDES RENDERING OF ANY SERVICE S IN CONNECTION WITH ANY ACTIVITIES FOR THE USE OF ANY PATENT, INVENTION, SECRET FORMULA OR PROCESS, ETC. IN THE INSTANT CASE, THE CONCEPT OF SOURCE AGAINST RESIDENCE BECOMES MORE SIGNIFICANT AS THE ISSUE RELATES TO CYBERSPACE ACTIVITIES. THE TRANSMISS ION OF INFORMATION IS THROUGH ENCRYPTION AS 8 THE DATA RELATES TO CLIENTS AND STRICT CONFIDENTIALITY IS OBSERVED. IT IS FOR THE DOWNLOADING OF THE SOFTWARE THAT THE ROYALTY IS PAID. IN THIS CONTEXT, THE SOURCE RULE BECOMES RELEVANT WHICH REQUIRES THAT ROYALT Y IS SOURCED IN THE STATE OF THE PAYER. ACCORDING TO THE AGREEMENT BETWEEN THE AMERICAN COMPANY AND THE INDIAN COMPANY, THE FACILITIES ARE TO BE ACCESSED ONLY BY THE INDIAN COM PANY. THE CONSIDERATION PAYABLE IS FOR THE SPECIFIC PROGRAMME THROUGH WHICH THE INDIAN COMPANY IS ABLE TO CATER TO THE NEEDS OF THE GROUP COMPANIES LOCATED IN JAPAN AND OTHER PLACES. THE TRANSACTION WOULD BE RELATED TO A SCIENTIFIC WORK AND WOULD PARTAKE OF THE CHARACTER OF INTELLECTUAL PROPERTY. THE PAYMENTS RECEIVED IN SUCH TRANSA CTIONS ARE FOR THE USE OF INTELLECTUAL PROPERTY AND PARTAKE OF THE CHARACTER OF ROYALTY. THE SOFTWARE IS CUSTOMIZED AND SECRET. FROM THE FACILITIES PROVIDED BY THE AMERICAN COMPANY TO THE INDIAN COMPANY, WHICH ARE OF THE NATURE OF ONLINE, ANALYTICAL DATA P ROCESSION, IT WOULD BE CLEAR THAT THE PAYMENT IS RECEIVED A S CONSIDERATION FOR THE USE OF , OR THE RIGHT TO USE DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS . THE USE BY THE INDIAN COMPANY OF THE CPU AND THE CONSOLIDATED DATE NETWORK OF THE AMERICAN CO MPANY IS NOT MERELY USE OF OR THE RIGHT TO USE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT AS ENVISAGED IN ARTICLE 12(3)(B) OF THE DTA BUT MORE THAN THAT. IT IS THE USE OF EMBEDDED SECRET SOFTWARE (AN ENCRYPTION PRODUCT) DEVELOPED BY THE AMERICAN COMPANY FOR THE PURPOSE OF PROCESSING RAW DATA TRANSMITTED BY THE INDIAN COMPANY, WHICH WOULD ALSO CLEARLY FALL WITH IN THE AMBIT OF ARTICLE 12(3)(A) OF THE DTA BETWEEN INDIA AND THE USA. 9 ARTICLE 12(B) OF THE DTA BETWEEN INDIA AND THE USA PROVIDES THAT THE MAIN PROVISION FOR TAXATION OF ROYALTIES AND FEES FOR INCLUDED (TECHNICAL) SERVICES SHALL NOT APPLY IF THE BENEFICIAL OWNER OF THE ROYALTIES FOR FEES FOR INCLUDED SERVICES, BEING A RESIDENT OF A CONTRACTING STATE CARRIED ON BUSINESS IN THE OTHER CONTRACTIN G STATE IN WHICH THE ROYALTIES OR FEES FOR INCLUDED SERVICES ARISE, THROUGH A PE SITUATED THEREIN, OR PERFORMS IN THAT OTHER STATE INDEPENDENT PERSONAL SERVICES FROM A FIXED BASE SITUATED THEREIN, AND THE ROYALTIES OR FEES FOR INCLUDED SERVICES ARE ATTRIBU TABLE TO SUCH PERMANENT ESTABLISHMENT OR FIXED BASE. IN SUCH A CASE THE PROVISIONS OF ARTICLE 7 (BUSINESS PROFITS) OR ARTICLE 15 (INDEPENDENT PERSONAL SERVICES) AS THE CASE MAY BE SHALL APPLY. THE RATIO LAID DOWN IN THIS CASE SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. 6. THE RELIANCE PLACED BY THE LEARNED COUNSEL ON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD. VS. DIT [2011] 332 ITR 340 IS TOTALLY MISPLACED . IN THIS CASE, USE OF TRANSPONDER IS INVOLVED WHICH IS NOT A SELF CONTAINED OPERATING UNIT . IT IS IN ORBIT WITH FOOTPRINTS ALL OVER THE WORLD SO THAT ITS LOCATION CANNOT BE ATTRIBUTED WITH REFERENCE TO LOCATION OF ITS CUSTOMERS. IN OUR CONSIDERED OPINION, THE RATIO OF THE RULING OF AUTHORITY FOR ADVANCED RULING, REPORTED IN 238 ITR 296 IS SQUARELY APPLICABLE AND THE CONSIDERATION PAID IS IN THE NATURE OF ROYALTY WITHIN THE MEANING ARTICLE 12(3) OF DTA BETWEEN INDIA AND USA . 10 6. IN THE RESULT, THE APPEAL I.E. ITA NO. 652/DEL/2006 FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2002 - 03 IS DISMISSED AND THE APPEALS FILED BY THE REVENUE FOR THE ASSESSMENT YEARS 2003 - 04 TO 2006 - 07 ARE ALLOWED . THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 3 0 T H SEPTEMBER , 2015. S D / - S D / - ( DIVA SINGH ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 T H SEPTEMBER , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI