VIACOM 18 MEDIA P. LTD, MUMBAI V. ADIT (IT) 2(2), MUMBAI

ITA 1585/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5857 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 27-08-2013
• Assessment Year: 2010-2011
• Appeal Filed On: 02-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JKTLP DH LS MS NEERAJA PRADHAN
• Assessee Lawyers: FUKKZFJRH DH LS SHRI F Y IRANI
• Keywords: Double taxation relief; Services rendered outside India; Retrospective amendment; Permanent establishment

Judgement Text

VIACOM 18 MEDIA PVT. LTD. 1 VK;DJ VIHYH; VF/KDJ.K ,Y U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI JH JH JH JH LAT; VJKSM+K LAT; VJKSM+K LAT; VJKSM+K LAT; VJKSM+K] ] ] ] YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ,OA JH ,OA JH ,OA JH ,OA JH FOT; IKY JKO]U;KF;D LNL; FOT; IKY JKO]U;KF;D LNL; FOT; IKY JKO]U;KF;D LNL; FOT; IKY JKO]U;KF;D LNL; DS LE{K DS LE{K DS LE{K DS LE{K SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO.1584/MUM/2010 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2009-10 VIACOM 18 MEDIA PVT. LTD. ZION BIZWORLD, SUBHASH ROAD A, NEAR GARWARE OFFICE, VILE PAREL (E) MUMBAI- 400057. VS. ASST. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-2(2), MUMBAI. PAN: - AAACM9164E APPELLANT RESPONDENT VK;DJ VIHY LA[;K /ITA NO.1585/MUM/2010 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2010-11 VIACOM 18 MEDIA PVT. LTD. ZION BIZWORLD, SUBHASH ROAD A, NEAR GARWARE OFFICE, VILE PAREL (E) MUMBAI- 400057. VS. ASST. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-2(2), MUMBAI. PAN: - AAACM9164E APPELLANT RESPONDENT VK;DJ VIHY LA[;K /ITA NO.1091/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2010-11 VIACOM 18 MEDIA PVT. LTD. B, DR. R.K. SHIRODKAR MARG, PAREL (E) MUMBAI 400012. VS. ASST. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-2(2), MUMBAI. PAN: - AAACM9164E APPELLANT RESPONDENT VIACOM 18 MEDIA PVT. LTD. 2 VK;DJ VIHY LA[;K /ITA NO.1092MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2011-12 VIACOM 18 MEDIA PVT. LTD. ZION BIZWORLD, SUBHASH ROAD A, NEAR GARWARE OFFICE, VILE PAREL (E) MUMBAI- 400057. VS. ASST. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-2(2), MUMBAI. PAN: - AAACM9164E APPELLANT RESPONDENT ASSESSEE BY/ FU/KKZFJRH DH VKSJ LS SHRI F.Y. IRANI REVENUE BY/ JKTLP DH VKSJ LS MS. NEERAJA PRADHAN ORDER PER VIJAY PAL RAO, THESE FOUR APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE COMPOSITE ORDER OF CIT(A) DATED 13.01.2009 ARISING FROM THE ORDER PASSED U/S 195(2) OF THE INCOME TAX ACT., FOR ASSESSMENT Y EAR 2009-10 TO 2011- 12 RESPECTIVELY. THE ASSESSEE RAISED COMMON GROUNDS IN ALL THE FOUR APPEALS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, , AND IN LAW, THE LEARNED COMMISSIOER OF INCOME TAX (APPEALS) -11, MUMBAI [C IT(A)] HAS ERRED IN HOLDING THAT THE TRANSPONDER FEES PAYABLE BY THE AP PELLANT TO INTELSAT CORPORATION ARE IN THE NATURE OF ROYALTY AS PER PROVISIONS OF THE INCOME TAX ACT, 1961 (THE ACT) AND THE INDIA-USA TAX TREATY (THE TREATY) AND IN CONSEQUENTLY UPHOLDING THE ORDER OF THE LEARNED ASS T. DIRECTOR OF INCOME TAX (INTL. TAX)-2(2) [ADIT] DIRECTING THE APPELLANT T O WITHHOLD TAX FROM SUCH PAYMENTS UNDER SECTION 195 OF THE ACT. DATE OF HEARING 03.02.2014 DATE OF PRONOUNCEMENT 28.03.2014 VIACOM 18 MEDIA PVT. LTD. 3 IT IS PRAYED THAT THE LD. ADIT BE DIRECTED TO CONSI DER THE TRANSPONDER FEES AS NOT SUBJECT TO TAX WITHHOLDING UNDER SECTION 195 OF THE ACT AND THAT CONSEQUENTLY, THE ORDER PASSED BY THE LEARNED ADIT UNDER SECTION 195 OF THE ACT BE QUASHED. 2. THE ASSESSEE IS A COMPANY INCORPORATED IN INDIA AND IS PRIMARILY ENGAGED IN BROADCASTING TELEVISION CHANNELS FROM IN DIA. IT IS ALSO ENGAGED IN MARKETING OF ADVERTISING AIRTIME ON THESE CHANNE LS, DISTRIBUTION OF THE CHANNELS, MARKETING AND DISTRIBUTION OF FILMS THROU GH ITS FILM DIVISION STUDIO 18 AND PRODUCTION OF PROGRAM CONTENT/TELE VISION SOFTWARE. THE ASSESSEE HAS BEEN PROVIDED WITH A 24 HOUR, SATELLITE SIGNAL RECEPTION AND RETRANSMISSION SERVICE (TRANSPONDER SERVICE) BY I NTELSAT CORPORATION (PREVIOUSLY KNOWN AS PANAMSAT CORPORATION), A USA CORPORATION. IN CONSIDERATION FOR TRANSPONDER SERVICE, THE ASSESSEE HAS TO PAY TRANSPONDER SERVICE FEE TO INTELSAT WHICH IS A TAX R ESIDENT OF USA UNDER ARTICLE 4 OF THE INDIA-USA TAX TREATY. THE ASSESSEE APPROACHED TO THE AO U/S 195(2) OF THE I.T. ACT REQUESTING FOR NIL WITHHO LDING TAX ORDER FOR PAYMENTS BY THE ASSESSSEE TO INTELSAT. IT WAS SUBMIT TED BEFORFE AO THAT THE PAYMENTS TO INTELSAT ARE NOT CHARGEABLE TO TAX UNDER THE INDIA-USA TAX TREATY AS ROYALTY OR FEES FOR INCLUDED SERVICES UNDER ARTICLE 12 AND HENCE THE PAYMENTS FOR TRANSPONDER SERVICE FEE BY T HE ASSESSEE TO INTELSAT ARE NOT TAXABLE IN INDIA IN THE ABSENCE OF PERMANENT ESTABLISHMENT (PE) OF INTELSAT IN INDIA. THE AO DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND PASSED ITS ORDER U/ S 195(2) HOLDING THAT THE TRANSPONDER FEE PAYABLE BY THE ASSESSEE TO INTE LSAT IS IN THE NATURE OF ROYALTY INCOME TAXABLE IN INDIA IN TERMS OF SECTIO N 9(1)(VI) OF THE ACT AND ALSO UNDER ARTICLE 12 OF THE INDIA-USA TAX TREATY. CONSEQUENTLY THE AO HELD THAT THE SUBJECT PAYMENTS ARE LIABLE TO TAX WIT HOLDING. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE FILED APPEAL BEFORE CI T(A). VIACOM 18 MEDIA PVT. LTD. 4 3. THE CIT(A) CONFIRMED THE ORDER OF THE AO BY FOLL OWING THE DECISION OF SEPECIAL BENCH OF THIS TRIBUNAL IN CASE OF NEW SKIES SATELLITE VS. ADIT (121 ITD 1). 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF NEW SKIES SATELLITE VS. ADIT (SUPRA), HAS BEEN REVERSED BY TH E HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD. REPORTED IN ( 332 ITR 340). HE HAS FURTHER CONTENDED THAT IN THE CASE OF PAYEE I.E. INTELSAT CORPORATION VS. ADIT, THE DELHI BENCH OF THIS TRIBUNAL BY FOLLOWING THE DECIS ION OF HONBLE HIGH COURT IN THE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD. (SUPRA) VIDE ITS ORDER DATED 4.03.2011 HELD THAT NO LIABILITY TO TAX CAN BE FASTENED ON THE ASSESSEE UNDER THE ACT. THE LD. AR THEN REFERRED THE DECISION OF THIS TRIBUNAL IN THE CASE OF TIMES GLOBAL DATED 13.01.2012 INVOLVING THE ISSUE OF PAYMENT FOR TRANSPONDER SERVICE BY THE SAM E PAYEE AS IN THE CASE OF THE ASSESSEE. THE TRIBUNAL IN THE CASE OF TIMES GLOBAL BROADCASTI NG CO. HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF HONBL E HIGH COURT IN THE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD. (SUPRA). THE LD. C OUNSEL HAS THEN REFERRED THE DECISION OF THIS TRIBUNAL IN THE CASE OF B4U INTERNATIONAL H OLDING LTD., DATED 28.05.2012 AND SUBMITTED THAT IN THE SAID CASE THE PAYEE IS AGAIN SAME AS IN THE CASE OF THE ASSESSEE AND THE TRIBUNAL HAS AGAIN DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD. (SUPRA). SIMILARLY IN THE CASE OF WNS NORTH AMERICA INC. (152 TTJ 145), THE TRIBUNAL HAS AGAIN CONSIDERED AN IDENTICAL ISSUE AND DECIDED THE SAME IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE RETROSPECTIVE AMENDMENT IN THE ACT WILL NOT AFFECT THE BENEFIT AVAILABLE UNDER THE DTAA. THE LD. COUNSEL THUS SUBMITTED THAT IN ALL THE DECISION OF THE TRIBUNAL WHERE THE PAYEE IS SAME IT HAS BEEN HELD THAT THE P AYMENT IN QUESTION FOR PROVIDING TRANSPONDER SERVICE IS NOT ROYALTY AND, THEREFORE, NOT TAXABLE IN INDIA IN THE ABSENCE OF PE OF THE PAYEE IN INDIA. THE LD. AR THEN REFERRED ART ICLE 12(3) OF INDIA-USA DOUBLE VIACOM 18 MEDIA PVT. LTD. 5 TAXATION AVOIDANCE AGREEMENT (DTAA) AND SUBMITTED T HAT THE TERM ROYALTY HAS BEEN DEFINED IN THE TREATY AND, THEREFORE, THE AMENDMENT IN THE DEFINITION OF THE ROYALTY IN THE ACT WOULD NOT AFFECT THE PROVISIONS OF DTAA. HE HAS POINTED OUT THAT THE DEFINITION UNDER ARTICLE 12(3) OF INDO-US TREATY AND PRE AMENDED DEF INITION OF ROYALTY U/S 9(1)(VI) ARE IDENTICAL AND, THEREFORE, THE SUBSEQUENT AMENDMENT IN THE ACT WOULD NOT TAKE AWAY THE BENEFIT UNDER THE TREATY. IN SUPPORT OF HIS CONTENT ION HE HAS RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SI EMENS AKTIENGESELLSCHAFT (310 ITR 320) AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT AN UNILATERAL AMENDMENT IS NOT POSSIBLE FOR ONE NATION WHICH IS PARTY TO AN AG REEMENT TO TAX INCOME WHICH OTHERWISE WAS NOT SUBJECT TO TAX, ACCORDINGLY SUCH INCOME WOU LD NOT BE SUBJECTED TO TAX. THE PROVISIONS OF DTAA ARE MORE BENEFICIAL TO THE ASSES SEE AND THE PROVISIONS OF AGREEMENT PREVAIL OVER THE PROVISIONS OF THE INCOME-TAX ACT. 5. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE DECISION OF HONBLE HIGH COURT IN THE CASE OF ASIA SATELLITE COMMUNICATION C O. LTD. (SUPRA) WAS PASSED IN THE CONTEXT OF THE HONGKONG BASED ENTITY AND INDIA HAS NO TAX TREATY WITH HONKONG. THE PAYMENTS WERE MADE BY A NON-RESIDENT TO NON-RESIDE NT. THEREFORE, THE CASE OF THE ASSESSEE IS DISTINGUISHABLE FROM THE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD.(SUPRA) AS THE ASSESSEE IS A COMPANY INCORPORATED IN INDIA AND THE PAYMENT IS MADE BY A RESIDENT TO A NON-RESIDENT. SHE HAS FURTHER SUBMITTED THAT PAYME NT MADE IN THE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD. WAS (SUPRA) BY A FOREIGN CHA NNEL OWNER TO ASIA SAT HONGKONG BOTH NON-RESIDENTS FOR A FEED THAT IS MEANT TO BE VIEWED IN INDIA AND THE HONBLE HIGH COURT OF DELHI HAS HELD THAT ASIA SAT WAS NOT TAXAB LE IN INDIA BASED ON THE TERRITORIAL NEXUS BY OBSERVING THAT THERE IS NO USE OF PROCESS. THE L D. DR HAS SUBMITTED THAT IN VIEW OF THE AMENDMENT IN SECTION 9(1)(VI) WHEREBY EXPLANATION 6 HAS BEEN INSERTED TO CLARIFY THAT THE EXPRESSION PROCESS INCLUDES AND SHALL BE DEEMED T O HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE INCLUDING UP-LINKING, AMPLIFICATION, C ONVERSION OR DOWN-LINKING OF ANY SIGNAL. THE DECISION F HONBLE OF DELHI HIGH COURT IS NO MO RE RELEVANT ON THIS POINT. SHE HAS ALSO REFERRED THE VARIOUS CLAUSES OF AGREEMENT BETWEEN I NTELSAT AND THE ASSESSEE AND SUBMITTED VIACOM 18 MEDIA PVT. LTD. 6 THAT THE USER OF A PARTICULAR TRANSPONDER CAPACITY IS PROVIDED TO THE ASSESSEE AND A TRANSMISSION PLAN IS DRAWN AND AGREED TO BY BOTH TH E PARTIES. THE ASSESSEE IS ABLE TO DECIDE THE CONTENT BEING UPLINKED, THE NUMBER OF TIMES OF SUCH UNPLINK OR THE TIME ZONE OF SUCH UPLINK TO THE TRANSPONDER LOCATED IN THE SATELLITE. THE CONTROL OF THE PROCESS, BY EITHER THE SATELLITE CO. OR THE TELECASTING CO, WILL BE THROUG H SOPHISTICATED INSTRUMENTS EITHER INSTALLED AT THE GROUND STATIONS OWNED BY THE SATELLITE COMP ANIES OR THROUGH THE INSTRUMENTS INSTALLED AT THE EARTH STATIONS OWNED AND OPERATED BY TELECASTING COMPANIES. THE TIME OF TELECAST AND THE NATURE OF PROGRAMME, ALL DEPENDS U PON THE TELECASTING COMPANIES, AND, THUS, THEY ARE USING THAT PROCESS. THUS THE LD. DR HAS SUBMITTED THAT THE TERMS OF AGREEMENT CLEARLY SHOW THAT THE USE OF PROCESS WAS PROVIDED BY THE SATELLITE COMPANIES TO THE TELECASTING COMPANIES WHEREBY THE TELECASTING C OMPANIES ARE ENABLED TO TELECAST THEIR PROGRAMMES BY UPLINKING AND DOWNLINKING THE SAME WI TH THE HELP OF THAT PROCESS. THE LD. DR HAS SUBMITTED THAT BOTH THE ACT AS WELL AS DTAA RECOGNIZES THE PAYMENT FOR USE OF PROCESS AS ROYALTY AND TAXABLE IN THE SOURCE COUN TRY. WHAT IS PROCESS IS EXPLAINED BY WAY OF EXPLANATION 6 TO SECTION 9(1)(VI) OF THE ACT . THE LD. DR THUS SUBMITTED THAT WHEN A TERM IS NOT DEFINED IN THE TREATY THEN BY VIRTUE OF ARTICLE 3(2) OF THE TREATY, THE MEANING OF THE SAME IS TO BE UNDERSTOOD AS GIVEN IN THE ACT . ALTERNATIVELY, THE LD. DR HAS SUBMITTED THAT USE OF TRANSPONDER FACILITY IS ALSO USE OF EQUIPMENT AND EQUIPMENT ROYALTY IS TAXABLE AS PER ACT AND THE TREATY. SHE HAS REFERRED EXPLANATION 5 TO SECTION 9(1)(VI) WHICH CLARIFIES THAT TERRITORIAL NEXUS IS NOT RELEVANT IN TAXING THE SATELLITE SERVICES/UTILIZATION OF SEGMENTED TRANSPONDER CAPACITY TO FALL IN THE TAX JURISDICTION OF THE SORUCE COUNTRY AS EQUIPMENT ROYALTY. THE LD. DR HAS PLACED STRONG REL IANCE ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VERIZON COMMUNICA TIONS SINGAPORE PTE. LTD. VS. INCOME TAX OFFICER (INTL. TAXATION) (361 ITR 575) A S WELL AS IN THE CASE OF ADIT (INTL. TAXATION) VS. POOMPUHAR SHIPPING CORPORATION LTD (630 ITR 257) AND SUBMITTED THAT THE HONBLE MADRAS HIGH COURT HAS DISCUSSED AND DIS TINGUISHED THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE COMM UNICATION CO. LTD (SUPRA) BY CONSIDERING THE AMENDED PROVISIONS OF SECTION 9(1)( VI) OF THE ACT. SINCE THESE DECISIONS ARE LATER DECISIONS AND PASSED AFTER CONSIDERING TH E EARLIER DECISION, THEREFORE, THE LD. DR VIACOM 18 MEDIA PVT. LTD. 7 HAS SUBMITTED THAT THE DECISION OF HONBLE MADRAS H IGH COURT SHOULD BE PREFERRED OVER THE EARLIER DECISIONS. IN SUPPORT OF HER CONTENTION SHE HAS RELIED UPON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TH ANA ELECTRICITY SUPPLY LTD. (206 ITR 727). 6. IN REBUTTAL, THE LD. COUNSEL FOR THE ASSESSEE HA S SUBMITTED THAT THE ROYALTY IS DEFINED IN THE TREATY WHICH IS IDENTICAL TO THE DEFINITION OF THE ACT PRIOR TO THE AMENDMENT, THEREFORE, THE DECISION IN THE CASE OF ASIA SATELLI TE COMMUNICATION CO. LTD. (SUPRA) IS APPLICABLE ON THIS ISSUE. HE HAS EMPHASIZED THE PRO VISIONS OF ARTICLE 3(2) OF THE INDO-US DTAA AND SUBMITTED THAT IT IS PROVIDED THAT ANY TER M NOT DEFINED IN THE TREATY THE MEANING IS GIVEN IN THE ACT WILL BE APPLIED. SINCE THE TERM ROYALTY HAS BEEN DEFINED UNDER ARTICLE 12(3) OF THE TREATY, THEREFORE, THE DEFINIT ION UNDER THE ACT IS NOT RELEVANT. THE LD. AR HAS THEN SUBMITTED THAT THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VERIZON COMMUNICATIONS SINGAPORE PTE. LTD. (SUPRA) AS WELL AS IN THE CASE OF POOMPUHAR SHIPPING CORPORATION LTD (SUPRA) ARE NOT APPLICABLE AS THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIEMENS A KTIENGESELLSCHAFT (SUPRA) HAS NOT BEEN CONSIDERED. HE HAS THUS SUBMITTED THAT THE DECISIO N OF HONBLE JURISDICTIONAL HIGH COURT IS BINDING ON THE TRIBUNAL. THE LD. COUNSEL FURTHER SUBMITTED THAT THE DECISION IN THE CASE OF POOMPUHAR SHIPPING CORPORATION LTD (SUPRA) IS NO T ON THE POINT OF TRANSPONDER SERVICE BUT IT IS ON THE POINT OF USE OF EQUIPMENT/PLANT. F URTHER IN THE CASE OF VERIZON COMMUNICATIONS SINGAPORE PTE. LTD. (SUPRA), THE HON BLE HIGH COURT HAS NOT GONE INTO THE APPLICABILITY OF EXTENDED DEFINITION OF THE ACT WHI CH IS CONTRARY TO THE DEFINITION OF ROYALTY UNDER THE DTAA. THE LD. COUNSEL HAS RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NOKIA NETWORKS OY, WHEREIN THE HIGH COURT HAS CONSIDERED THE ISSUE OF ROYALTY AS PER THE AMENDED DEFINITION OF THE ACT AND DECIDED THAT WHEN A PARTICULAR PAYMENT DOES NOT FALL WITHIN THE PURVIEW OF ROYALTY AS PER TREATY THE SAME CANNOT BE TAXED AS PER THE DEFINITION GIVEN IN THE ACT. THE LD. AR HAS ALSO RELIED UPON THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF M/ S SANOFI PASTEUR HOLDING SA, VS. DEPARTMENT OF REVENUE. TO COUNTER THE ARGUMENTS OF LD. DR, THE LD. AR HAS SUBMITTED VIACOM 18 MEDIA PVT. LTD. 8 THAT THE AO AND CIT(A) TREATED THE ASSESSEES CASE AS IDENTICAL TO ASIA SATELLITE COMMUNICATION CO. LTD (SUPRA) AND THE CIT(A) HAS FO LLOWED THE DECISION OF SPECIAL BENCH IN THE CASE OF NEW SKIES SATELLITE VS. ADIT (SUPRA) WHICH HAS BEEN REVERSED BY THE HONBLE HIGH COURT, THEREFORE, THE DEPARMENT CANNOT CHANGE ITS STAND BY SAYING THAT THE DECISION IN THE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD. (SUPRA) IS DIFFERENT FROM TH E ASSESSEES CASE. EVEN IN THE CASE WHERE TWO VIEWS ON A POINT EXIST, THE VIEW WHICH IS IN FAVOUR OF THE ASSESSEE SHOULD BE PREFERRED. IN SUPPORT OF HIS CONTENTION HE HAS RELI ED UPON THE FOLLOWING DECISIONS:- (I) DDIT VS. SOLID WORK CORPORATION (51 SOT 34) (II) ALLIANZ SE VS. ADIT (INTERNATIONAL TAXATION)(51 SOT 399) (III) ADIT (INTERNATIONAL TAXATION) VS. SIEMENS AKTIENGE SELLSCHAFT DATED 18 MAY2012. (IV) CONVERGYS CUSTOMER MANAGEMENT GROUP INC. VS. ADIT ( INTERNATIONAL TAXATION) (34 TAXMANN.COM 24) 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE QUESTION BEFORE US IS WHETHER THE FEE PAYABLE B Y THE ASSESSEE TO INTELSAT CORPORATION, A TAX RESIDENT OF USA IS IN THE NATURE OF ROYALTY I N THE LIGHT OF AMENDED PROVISIONS OF SECTION 9(1)(VI) AS WELL AS UNDER ARTICLE 12 OF IND O-US DTAA. THE LD. COUNSEL FOR THE ASSESSEE HAS GIVEN MUCH EMPHASIS ON THE SUBMISSION THAT ANY AMENDMENT IN THE ACT WOULD NOT AFFECT THE BENEFICIAL PROVISIONS OF DTAA AND CONSEQUENTLY THE PAYMENT BY THE ASSESSEE CANNOT BE TREATED AS ROYALTY BY UNILATERAL ACT OF AMENDMENT IN ACT. THERE IS NO QUARREL ON THIS POINT THAT AS PER SECTION 90(2) IN RELATION TO THE ASSESSEE TO WHOM DTAA APPLIES, THE PROVISIONS OF ACT SHALL APPLY TO THE E XTENT THEY ARE MORE BENEFICIAL TO THAT ASSESSEE. IN OTHER WORDS IF THE ASSESSEE IS COVERED BY DTAA AND THE PROVISIONS OF DTAA ARE NORE BENEFICIAL THEN THERE IS NO NEED TO GO INT O THE PROVISIONS OF THE ACT. THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SIEMENS AKTIENGESELLSCHAFT (SUPRA) AS WELL AS IN THE CASE OF DIT VS. INFRASOFT LTD. ARE RELEVANT ON THIS POINT. VIACOM 18 MEDIA PVT. LTD. 9 8. THE TERM ROYALTY HAS BEEN DEFINED IN DTAA AS W ELL AS IN THE ACT. AS PER ARTICLE 12(3) OF THE INDO-US DTAA, THE TERM ROYALTY IS DE FINED AS UNDER:- ARTICLE 12- ROYALTIES AND FEES FOR INCLUDED SERVIC ES. THE TERM ROYALTIES AS USED IN THIS ARTICLE MEANS : (A) PAYMENTS MADE OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC, OR SCIENTIFI C WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTIO N FOR USE IN CONNECTION WITH RADIO OR TELEVISION, BROADCASTING, ANY PATENT, TRADE MARK , DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING I NDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE INCLUDING GAINS DERIVED FROM THE ALIENAT ION OF ANY SUCH RIGHT OR PROPERTY WHICH ARE CONTINGENT ON THE PRODUCTIVITY, USE OF DI SPOSITION THEREOF; AND (B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OTH ER THAN PAYMENTS DERIVED BY AN ENTERPRISE DESCRIBED IN PARAGRAPH 1 OF ARTICLE 8(SH IPPING AND AIR TRANSPORT) FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2(C) OR 3 OF ARTI CLE 8. 9. THE DEFINITION OF ROYALTY UNDER THE ACT IS GIVEN IN EXPLANATION 2 OF SECTION 9(1)(VI) AS UNDER:- INCOME BY WAY OF ROYALTY PAYABLE BY- EXPLANATION 2.-FOR THE PURPOSES OF THIS CLAUSE, 'ROYALTY' MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS') FOR- (I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GR ANTING OF A (LICENCE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERT Y; (II) THE IMPARTING OF ANY INFORMATION CONCERNING THE WOR KING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESIGN, SE CRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, SE CRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TECHNIC AL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXP ERIENCE OR SKILL ; VIACOM 18 MEDIA PVT. LTD. 10 93[(IVA) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44BB;] (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GR ANTING OF A (LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, AR TISTIC OR SCIENTIFIC WORK INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONN ECTION WITH TELEVISION OR TAPES FOR USE IN CONNECTION WITH RADI O BROADCASTING, BUT NOT INCLUDING CONSIDERATION FOR THE SALE, DISTR IBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS; OR (V) THE RENDERING OF ANY SERVICES IN CONNECTION WITH TH E ACTIVITIES REFERRED TO IN SUB-CLAUSES (1) TO 93[(IV), (IVA) AND] (V). 10. SO FAR AS THE TERM ROYALTY DEFINED IN THE EXP LANATION 2 OF SECTION 9(1)(VI), THERE IS NO CHANGE OR AMENDMENT IN THE TERM ROYALTY AS SU CH. THEREFORE, THE DEFINITION OF TERM ROYALTY REMAINED UNCHANGED DESPITE INSERTION OF EX PLANATION 6 BY FINANCE ACT 2012. EVEN OTHERWISE THE TERM ROYALTY IS DEFINED IN THE DTAA , THEREFORE, ANY AMENDMENT IN THE DEFINITION OF ROYALTY AFFECTING ADVERSELY TO AN ASSESSEE COVERED BY THE DTAA WOULD BE INCONSEQUENTIAL DUE TO THE PROTECTION OF DTAA. THE CLAUSE (B) OF ARTICLE 12(3) OF DTAA AND CLAUSE (IVA) OF EXPLANATION 2 OF SECTION 9(1)(V I) ARE PARI MATERIA OF DTAA AND CLAUSE (I) TO (V) EXCEPT CLAUSE (IVA) ARE ALSO PARI MATERIAL. IT IS PERTINENT TO NOTE THAT THERE IS NO CHANGE IN THE DEFINITION OF TERM ROYALTY AS PROVI DED IN EXPLANATION 2 OF SECTION 9(1)(VI) OF THE ACT, BY VIRTUE OF THE RETROSPECTIVE AMENDMEN T INSERTING OF EXPLANATION 6 TO THIS CLAUSE OF SECTION 9(1)(VI). WE ARE CONCERNED WITH T HE DEFINITION OF ROYALTY WHICH IS COMMON UNDER THE DTAA AS WELL AS UNDER THE ACT TO T HE EXTENT - PAYMENT OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RI GHT TO USE ------------- ANY PROCESS, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT. THE TERM PROCESS, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT ARE NOT DEFINED IN DTAA. TH EREFORE, THE MEANING OF SUCH TERM UNDER THE ACT SHALL APPLY BY VIRTUE OF ARTICLE 3(2) OF INDO-US DTAA WHICH READS AS UNDER:- ARTICLE 3 - GENERAL DEFINITIONS AS REGARDS THE APPLICATION OF THE CONVENTION BY A CONTRACTING STATE ANY TERM NOT DEFINED THEREIN SHALL, UNLESS THE CONTEXT OTHERWISE REQUIRE S OR THE COMPETENT AUTHORITIES AGREE TO A COMMON MEANING PURSUANT TO THE PROVISION OF ARTICLE 27 (MUTUAL AGREEMENT PROCEDURE), VIACOM 18 MEDIA PVT. LTD. 11 HAVE THE MEANING WHICH IT HAS UNDER THE LAWS OF THA T STATE CONCERNING THE TAXES TO WHICH THE CONVENTION APPLIES 11. APART FROM THE ORDINARY CONTEXTUAL MEANING, TH E TERM PROCESS HAS BEEN DEFINED IN EXPLANATION 6 OF SECTION 9(1)(VI) OF THE ACT AS UND ER:- EXPLANATION 6.-FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIE D THAT THE EXPRESSION 'PROCESS' INCLUDES AND SHALL BE DEEM ED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE (INCLUDING UP-LI NKING, AMPLIFICA- TION, CONVERSION FOR DOWN-LINKING OF ANY SIGNAL), C ABLE, OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY, WHETHER OR NOT SUC H PROCESS IS SECRET;] 12. THE INTRODUCTION OF EXPLANATION 6 WITH RETROSPE CTIVE EFFECT W.E.F 1.6.1976 IS AN EXPRESSION AS INTENDED BY THE LEGISLATURE OF THE ME ANING OF TERM PROCESS IN THE CONTEXT OF TRANSMISSION BY SATELLITE IS CLARIFICATORY IN NATUR E AND, THEREFORE, IT DOES NOT AMEND THE DEFINITION OF ROYALTY PER SE .THERE IS NO QUARREL ON THE POINT THAT ANY PAYMENT FOR USE OR RIGHT TO USE OF PROCESS IS IN THE NATURE OF ROYALTY AS PER THE PROVISIONS OF ARTICLE 12(3) OF DTAA AS WELL AS THE EXPLANATION 2 OF SECTION 9(1)(V I) OF THE ACT. SINCE THE TERM PROCESS IS NOT DEFINED UNDER THE DTAA, THEREFORE, BY VIRTUE OF ARTICLE 3(2) OF THE INDO-US DTAA, THE MEANING OF TERM PROCESS AS DEFINED IN THE ACT W OULD APPLY FOR THIS PURPOSE. WE SAY SO AS A WORD PROCESS IS A TERM OF WIDE IMPORT AND, A CCORDINGLY, HAS TO BE CONSTRUED IN A GENERIC SENSE. THE SAME HAS IN FACT BEEN THE SUBJEC T MATTER OF ELUCIDATION BY THE HONBLE APEX COURT IN A NUMBER OF CASES, VIZ. CHILLIES EXPORTS LTD. V. CIT [1997] 225 ITR 814 (SC); UJAGAR PRINTS V. UNION OF INDIA [1989] 179 ITR 317 (SC); DY. CST, BOARD OF REVENUE (TAXES) V. PIO FOOD PACKERS [1980] 46 STC 63 (SC), EXPLAINING THE SAME IN THE CONTEXT OF PROCESSING OF GOODS, WHICH THOUGH WOULD APPLY AND HOLD. THERE IS NOTHING IN THE LANGUAGE OF THE RELEVANT PROVISION/S OF EITHER THE ACT OR OF THE DTAA CONSTRICTING OR RESTRICTING THE SCOPE OF THE TERM, WHICH HAS THUS T O BE EXAMINED AND CONSIDERED CONTEXTUALLY. AS SUCH, EVEN DE HORS EXPLANATION 6 TO SECTION 9(1)(VI), WHICH ONLY ABUNDANTLY CLARIFIES MATTERS, A PROCESS COULD ONLY REASONABLY BE REGARDED AS INCLUDING A PROCESS/ES AS SPECIFIED IN EXPLANATION 6 (SUPRA). T HE SAME MUST, THEREFORE, BE REGARDED AS VIACOM 18 MEDIA PVT. LTD. 12 WITHIN THE CONTEMPLATION OF THE SAID TERM AND, THUS , THE TERM ROYALTY AS DEFINED BY EXPLANATION 2 TO SECTION 9(1)(VI) AND ARTICLE 12(3) OF THE INDO-US DTAA. THE FOREGOING, HOWEVER, DOES NOT DETRACT FROM THE FACT THAT THE TE RM PROCESS BEING NOT DEFINED, THE EXTANT DEFINITION OF THE SAME, I.E. AS PER THE DOME STIC LAW, SHALL APPLY IN TERMS OF ARTICLE 3(2) OF THE SAID TREATY. THE HONBLE MADRAS HIGH C OURT IN THE CASE OF VERIZON COMMUNICATIONS SINGAPORE PTE. LTD (SUPRA) WHILE CON SIDERING AN IDENTICAL ISSUE HAS OBSERVED IN PARA 33 AS UNDER:- 33. FACED WITH THE DECISIONS OF THE AUTHORITY FOR ADVAN CE RULING, EXPLANATIONS 4 AND 5 WERE INSERTED UNDER FINANCE ACT, 2012, WITH EFFECT FROM 01.06.1976. UNDER EXPLANATION 5, THE LEGISLATURE SOUGHT TO CLARIFY THE DEFINITION OF 'ROYALTY' TO INCLUDE THE CONSIDERATION IN RESPECT OF ANY RIGHT, PROPERTY OR INFORMATION WHETH ER OR NOT POSSESSION OR CONTROL OF SUCH RIGHT, PROPERTY OR INFORMATION IS WITH THE PAYER; S UCH RIGHT, PROPERTY OR INFORMATION IS USED DIRECTLY BY THE PAYER; THE LOCATION OF SUCH RIGHT, PROPERTY OR INFORMATION IS IN INDIA. EXPLANATION 6 FURTHER CLARIFIES THAT THE EXPRESSION 'PROCESS' INCLUDED TRANSMISSION BY SATELLITE (INCLUDING UP-LINKING, AMPLIFICATION, CON VERSION FOR DOWN-LINKING OF ANY SIGNAL), CABLE, OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLO GY, WHETHER OR NOT SUCH PROCESS IS SECRET. THUS, AFTER THE AMENDMENT INTRODUCED IN THE YEAR 20 12, WITH EFFECT FROM 01.06.1976, IRRESPECTIVE OF POSSESSION, CONTROL WITH THE PAYER OR USE BY THE PAYER OR THE LOCATION IN INDIA, THE CONSIDERATION WOULD NEVERTHELESS BE TREA TED AS 'ROYALTY'. THE DECISIONS CITED, HENCE, CANNOT BE PRESSED INTO SERVICE TO UNDERSTAND THE SCOPE OF THE EXPRESSION 'ROYALTY'. 13. THE EXPRESSION PROCESS HAS BEEN UNDERSTOOD BY T HE HONBLE HIGH COURT IN THE LIGHT OF EXPLANATION 6 INSERTED BY THE FINANCE ACT 2012 W.E. F 1.6.1976 AND IT WAS OBSERVED THAT THE DECISION RELIED UPON BY THE ASSESSEE CANNOT BE PRES SED INTO SERVICE TO UNDERSTAND THE SCOPE OF EXPRESSION ROYALTY WHILE DISTINGUISHING THE DECISIO N OF HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD (SUPRA), THE H ONBLE MADRAS HIGH COURT IN PARA 42 AND 43 HAS HELD AS UNDER:- 42. THE DECISION RELIED ON BY THE ASSESSEE, PARTICULAR LY WITH REFERENCE TO THE DELHI HIGH COURT REPORTED IN 332 ITR 340 (ASIA SATELLITE V. DI T) IS ALSO DISTINGUISHABLE. THIS RELATES TO A CASE OF AN ASSESSEE/LESSEE OF A SATELLITE CALL ED ASIASAT 1 WHICH WAS LAUNCHED IN APRIL 1990 AND WAS THE OWNER OF A SATELLITE CALLED ASIASA T 2 WHICH WAS LAUNCHED IN NOVEMBER 1995. THESE SATELLITES WERE LAUNCHED BY THE APPELLA NT AND WERE PLACED IN A GEOSTATIONARY ORBIT IN ORBITAL SLOTS, WHICH INITIALLY WERE ALLOTT ED BY THE INTERNATIONAL TELECOMMUNICATION UNION TO UK, AND SUBSEQUENTLY HANDED OVER TO CHINA. THESE SATELLITES NEITHER USE INDIAN ORBITAL SLOTS NOR ARE THEY POSITIONED OVER INDIAN A IRSPACE. THE FOOTPRINTS OF ASIASAT 1 AND VIACOM 18 MEDIA PVT. LTD. 13 ASIASAT 2 EXTEND OVER FOUR CONTINENTS, VIZ., ASIA, AUSTRALIA, EASTERN EUROPE AND NORTHERN AFRICA. IT ENTERS INTO AN AGREEMENT WITH TV CHANNEL S, COMMUNICATION COMPANIES OR OTHER COMPANIES WHO DESIRE TO UTILIZE THE TRANSPONDER CAP ACITY AVAILABLE ON THE APPELLANT'S SATELLITE TO RELAY THEIR SIGNALS. THE CUSTOMERS HAV E THEIR OWN RELAYING FACILITIES, WHICH ARE NOT SITUATED IN INDIA. FROM THESE FACILITIES, THE S IGNALS ARE BEAMED IN SPACE WHERE THEY ARE RECEIVED BY A TRANSPONDER LOCATED IN THE APPELLANT' S SATELLITE. THE TRANSPONDER RECEIVES THE SIGNALS AND ON ACCOUNT OF THE DISTANCE THE SIGNALS HAVE TRAVELLED, THEY ARE REQUIRED TO BE AMPLIFIED. THE AMPLIFICATION IS A SIMPLE ELECTRICAL OPERATION. THEREAFTER, THE FREQUENCY ON WHICH THE SIGNALS ARE TO BE DOWNLINKED IS CHANGED O NLY IN ORDER TO FACILITATE THE TRANSMISSION OF SIGNALS SO THAT, THERE IS NO DISTOR TION BETWEEN THE SIGNALS THAT ARE BEING RECEIVED AND THE SIGNALS THAT ARE BEING RELAYED FRO M THE TRANSPONDER. THE TRANSPONDER OPERATIONS ARE COMMONLY KNOWN, WHICH ARE CARRIED OU T NOT ONLY IN SATELLITE TRANSMISSION BUT ALSO IN THE CASE OF TERRESTRIAL TRANSMISSION. T HERE IS NO CHANGE IN THE CONTENT OF THE SIGNALS WHATSOEVER THAT IS CARRIED OUT BY THE APPEL LANT IN THE TRANSPONDER. THEREAFTER, THE SIGNALS LEAVE THE TRANSPONDER AND ARE RELAYED OVER THE ENTIRE FOOTPRINT AREA WHERE THEY CAN BE RECEIVED BY THE FACILITIES OF THE APPELLANT' S CUSTOMERS OR THEIR CUSTOMERS. ITS ROLE IS CONFINED IN SPACE WHERE THE TRANSPONDER WHICH IT MA KES AVAILABLE TO ITS CUSTOMERS PERFORMS A FUNCTION WHICH IT IS DESIGNED TO PERFORM . IT IS CLAIMED BY THE APPELLANT THAT NO PART OF THE INCOME GENERATED BY IT FROM THE CUSTOME RS TO WHOM THE AFORESAID SERVICES ARE PROVIDED WAS CHARGEABLE TO TAX IN INDIA AND FOR THI S REASON NO RETURN INCOME WAS FILED IN INDIA. THE TRIBUNAL FOUND THAT THE TRANSPONDER WAS NOT EQUIPMENT AND HENCE THE PAYMENT MADE BY THE TV CHANNELS TO THE APPELLANT COULD NOT BE REGARDED AS ONE FOR USE OF EQUIPMENT. THE TRIBUNAL HELD THAT THE APPELLANT HAD NOT LEASED OUT ANY EQUIPMENT BUT HAD ONLY MADE AVAILABLE THE PROCESS THAT WAS CARRIED OU T IN THE TRANSPONDER TO ITS CUSTOMERS. INSOFAR AS INCOME EARNED BY THE APPELLANT FROM ITS CUSTOMERS IN INDIA IS CONCERNED, THE TRIBUNAL HELD THAT THIS WOULD QUALIFY AS 'ROYALTY' AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT. 43. THEREFORE, ISSUES WHICH AROSE FOR CONSIDERATION IN THE APPEAL BEFORE THE DELHI HIGH COURT RELATED TO CLAUSES (I), (VI) AND (VII) OF SUB -SECTION (1) OF THE SECTION 9 OF THE ACT. THE HIGH COURT HELD THAT EVEN WHEN THE APPELLANT HAD BU SINESS CONNECTION IN INDIA, NO PART OF THE APPELLANT'S INCOME WAS CHARGEABLE TO TAX IN IND IA IN TERMS OF SECTION 9 (1)(I), AS NO OPERATIONS TO EARN THE INCOME WERE CARRIED ON IN IN DIA. THE DELHI HIGH COURT HELD THAT CARRYING OUT THE OPERATIONS IN INDIA, WHOLLY OR AT LEAST PARTLY, IS SINE QUA NON FOR THE APPLICATION OF CLAUSE (I) OF SUB-SECTION (1) OF SEC TION 9 OF THE ACT. MERELY BECAUSE THE FOOTPRINT AREA INCLUDED INDIA AND ULTIMATE CONSUMER S/VIEWERS ARE WATCHING THE PROGRAMMES IN INDIA, EVEN WHEN THEY ARE UPLINKED AN D RELAYED OUTSIDE INDIA, WOULD NOT MEAN THAT THE APPELLANT IS CARRYING OUT ITS BUSINES S OPERATIONS IN INDIA. NO MACHINERY OR COMPUTER, ETC. IS INSTALLED BY THE APPELLANT IN IND IA THROUGH WHICH THE PROGRAMMES ARE REACHING INDIA. THE PROCESS OF AMPLIFYING AND RELAY ING THE PROGRAMMES IS PERFORMED IN THE SATELLITE WHICH IS NOT SITUATED IN THE INDIAN A IRSPACE. THE TRANSPONDER FUNCTIONED ON ITS OWN. THE HIGH COURT HELD THAT THE TERMS 'LEASE OF T RANSPONDER CAPACITY', 'LESSOR', 'LESSEE' AND 'RENTAL' USED IN THE AGREEMENT WOULD NOT BE THE DETERMINATIVE FACTORS. IT IS THE SUBSTANCE OF THE AGREEMENT WHICH IS TO BE SEEN. THE HIGH COURT WENT THROUGH THE VARIOUS CLAUSES OF THE SAID AGREEMENT AND HELD THAT THE CON TROL ALWAYS REMAINED WITH THE APPELLANT VIACOM 18 MEDIA PVT. LTD. 14 AND THE APPELLANT HAD MERELY GIVEN ACCESS TO A BROA DBAND AVAILABLE WITH THE TRANSPONDER, TO PARTICULAR CUSTOMERS. MERELY BECAUSE THE TRANSPO NDER HAS ITS FOOTPRINT ON VARIOUS CONTINENTS, IT WOULD NOT MEAN THAT THE PROCESS HAS TAKEN PLACE IN INDIA. THUS THE DELHI HIGH COURT FOLLOWED THE DECISION OF THE APEX COURT REPORTED IN [2007] 288 ITR 408 (ISHIKAWAJAMA-HARIMA HEAVY INDUSTRIES LTD. V. DIREC TOR OF INCOME TAX) AND HELD THAT SERVICES RENDERED OUTSIDE INDIA WOULD HAVE NOTHING TO DO WITH THE PERMANENT ESTABLISHMENT IN INDIA AND HENCE THERE WAS NO PROCE SS CARRIED OUT IN INDIA OR WAS THERE ANY BUSINESS IN INDIA WHICH COULD BE ATTRIBUTED TO THE INDIAN TERRITORY. THUS THE HIGH COURT HELD THAT THE INCOME EARNED BY THE ASSESEE WO ULD NOT QUALIFY AS 'ROYALTY', AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VI) OF THE INCOME TAX ACT. AS SEEN FROM THE FACTS, THE SAID JUDGMENT WAS RENDERED IN THE YEAR 2011, MUCH BEFORE THE AMENDMENT UNDER FINANCE ACT, 2012. FURTHER AFTER THE DECISION REPORTED IN [2007] 288 ITR 408 (ISHIKAWAJAMA-HARIMA HEAVY INDUSTRIES LTD. V.. DIRECTOR OF INCOME TAX) A N EXPLANATION WAS INSERTED BELOW SUB- SECTION 2 OF SECTION 9, WITH EFFECT FROM 01.06.1976 UNDER FINANCE ACT, 2007 TO GET OVER THE DECISION OF THE SUPREME COURT. HENCE THIS DECISION OF THE DELHI HIGH COURT IS DISTINGUISHABLE AND HAS NO RELEVANCE TO THE CASE ON HAND WHICH HAS TO BE CONSIDERED ON THE STRENGTH OF THE LAW PREVAILING NOW. 14. AFTER CONSIDERING THE DEFINITION OF ROYALTY UND ER ARTICLE 12 OF THE DTAA AS WELL AS U/S 9(1)(VI), THE HONBLE HIGH COURT HAD HELD THAT THE DEFINITION OF ROYALTY UNDER DTAA AND INDIAN INCOME TAX ACT ARE PARI MATERIA IN PARA 100 AS UNDER:- 100. THE DEFINITION OF 'ROYALTY' UNDER DTAA AND THE INDI AN INCOME TAX ACT ARE IN PARIMATERIA. AS RIGHTLY POINTED OUT BY THE REVENUE, EXPLANATION 6 DEFINES 'PROCESS' TO MEAN AND INCLUDE TRANSMISSION BY SATELLITE (INCLUDI NG UPLINKING, AMPLIFICATION, CONVERSION FOR DOWNLINKING OF ANY SIGNAL) CABLE, OPTIC FIBRE, OR BY ANY OTHER SIMILAR TECHNOLOGY, WHETHER OR NOT SUCH PROCESS IS SECRET. THUS, APART FROM THE RELEVANCE AND APPLICABILITY OF CLAUSE (IVA) THAT THE PAYMENT IS FOR THE USE OR RIG HT TO USE OF THE EQUIPMENT, THE TRIBUNAL HELD THAT PAYMENT FOR THE BANDWIDTH AMOUNTS TO ROYA LTY FOR THE USE OF THE PROCESS. THE TRIBUNAL ALSO POINTED OUT THAT OUT BY REASON OF THE LONG DISTANCE, TO MAINTAIN THE REQUIRED SPEED, BOOSTERS ARE KEPT AT PERIODICAL INTERVALS. G OING BY THIS TOO, IN ANY EVENT, THE PAYMENT RECEIVED BY THE ASSESSEE WAS RIGHTLY ASSESS ED AS 'ROYALTY' AND WOULD CONSTITUTE SO FOR THE PURPOSES OF DTAA. 15. TURNING TO THE FACTS OF THE ASSESSEES CASE THE UNDISPUTED FACTS ARE THAT THE PAYMENTS IN QUESTION WAS PAYABLE TO THE INTELSAT IS FOR USER OF TRANSPONDER CAPACITY BY THE ASSESSEE FOR TELECASTING/BROADCASTING OF ITS VARIOUS PROGRAM MES ON TELEVISION CHANNELS INCLUDING MARKETING AND ADVERTISING AIRTIME ETC. THE HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD (SUPRA) OUSTED THE APPLICATION OF THE TERM ROYALTY TO THE VIACOM 18 MEDIA PVT. LTD. 15 SAID TRANSACTION ON THE PREMISE OF TERRITORIAL JURI SDICTION IN-AS-MUCH AS THE SAID PROCESS WAS NOT BEING USED IN INDIA. HOWEVER, THE SAID DECI SION ENDORSES THE CONCEPTUAL UNDERSTANDING OF TERM PROCESS, I.E., AS EXPLAINED BY US AT PARA 12 OF THIS ORDER. EVEN, THE SAME, IF AT ALL, IMPINGES ON EXPLANATION 5 TO SECTI ON 9(1)(VI), HAS NOTHING TO DO WITH EXPLANATION 6 THERETO. IN FACT, TO OUR MIND, IT IS NOT THE SITUS OF THE PROPERTY OR THE PROCESS, BUT OF THE RIGHTS THEREIN, THAT IS RELEVANT. WITHOU T DOUBT, THE RIGHTS IN OR FOR THE USE OF THE PROCESS VESTING IN THE ASSESSEE ARE, THUS, LOCATED IN INDIA, WHEREAT THE SIGNALS ARE DOWN- LINKED AS ALSO UPLINKED FROM. AGAIN, THE SAME HAS T O BE READ IN CONJUNCTION WITH EXPLANATION BELOW SECTION 9(2), INSERTED ON THE STA TUTE BY FINANCE ACT, 2007 W.R.E.F 01.06.1976.THE DECISION IN THE CASE OF ASIA SATELLI TE COMMUNICATION CO. LTD (SUPRA) IS THUS COMPLETELY INAPPLICABLE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, EVEN AS CLARIFIED BY THE HONBLE MADRAS HIGH COURT IN THE C ASE OF VERIZON COMMUNICATIONS SINGAPORE PTE. LTD (SUPRA). THE USE OF TRANSPONDER BY THE ASSESSEE FOR TELECASTING/BROADCASTING THE PROGRAMME INVOLVES THE TRANSMISSION BY THE SATELLITE INCLUDING UPLINKING, AMPLIFICATION, CONVERSION FOR DOWNLINKIN G OF SIGNALS WHICH FALLS IN THE EXPRESSION PROCESS AS PER EXPLANATION 6 OF SECTIO N 9(1)(VI). HENCE THE PAYMENTS MADE FOR USE/ RIGHT TO USE OF PROCESS FALLS IN THE AMBIT OF EXPRESSION ROYALTY AS PER DTAA AS WELL AS PROVISIONS OF INCOME TAX ACT. 16. IN THE CASE OF CIT VS. SIEMENS AKTIENGESELLSCH AFT (SUPRA) THE QUESTION BEFORE THE HONBLE HIGH COURT WAS THAT WHEN THE PAYMENT DOES N OT FALL UNDER THE TERM OF ROYALTY AS PER THE PROVISIONS OF DTAA, THE SAME CAN BE TAXED A S ROYALTY IN TERMS OF THE DEFINITION IN THE ACT. THUS IT IS CLEAR THAT THE PAYMENT IN THE S AID CASE WAS NOT FOUND AS ROYALTY IN TERMS OF DTAA BETWEEN INDIA AND GERMANY. HOWEVER IT WAS T AXED BY THE REVENUE AUTHORITIES ON THE BASIS OF THE DEFINITION OF ROYALTY AS PER THE I NCOME TAX ACT. THE HONBLE HIGH COURT HAS HELD IN PARA 40 AND 41 AS UNDER:- VIACOM 18 MEDIA PVT. LTD. 16 40 IN OUR OPINION, EVEN IN THE ABSENCE OF ROYALTY BEING DEFINED UNDER THE CLAUSES OF THE AGREEMENT, IF IT AMOUNTS TO ANY INDUSTRIAL O R COMMERCIAL PROFIT IT WOULD BE TAXABLE UNDER CLAUSE III PROVIDED THERE IS A PE IN INDIA UNLESS WE HOLD THAT CONSIDERING THE EXPLANATION TO SECTION 9 BROUGHT BY THE FINANCE ACT, 2007 THE REQUIREMENT OF PE IS NOW OF NO CONSEQUENCE. 41 WHILE CONSIDERING THE DTAA THE EXPRESSION 'LAW IN FORCE' WOULD NOT ONLY INCLUDE A TAX ALREADY COVERED BY THE TREATY BUT WOU LD ALSO INCLUDE ANY OTHER TAX AS TAXES OF A SUBSTANTIALLY SIMILAR CHARACTER SUBSEQUE NT TO THE DATE OF THE AGREEMENT AS SET OUT IN ARTICLE I(2). CONSIDERING THE EXPRESS LANGUAGE OF ARTICLE I(2) IT IS NOT POSSIBLE TO ACCEPT THE BROAD PROPOSITION URGED ON B EHALF OF THE ASSESSEE THAT THE LAW WOULD BE THE LAW AS WAS APPLICABLE OR AS DEFINE D WHEN THE DTAA WAS ENTERED INTO. THE QUESTION HOWEVER, WOULD STILL REMAIN, WHE THER THE INCOME BY WAY OF ROYALTIES OTHER THAN THOSE INCLUDED IN ARTICLE III( 3) ARE SUBJECT TO TAX IN INDIA CONSIDERING THE DTAA WHEN THERE IS NO PE. 17. THUS IT IS CLEAR THAT IN THE CASE OF SIEMENS A KTIENGESELLSCHAFT (SUPRA) IT WAS FOUND THAT THE PAYMENT WAS NOT ROYALTY AS DEFINED IN THE CLAUSES OF AGREEMENT AND, THEREFORE, IT COULD NOT BE TAXED AS ROYALTY AS PER THE PROVISIONS OF THE ACT. THE HONBLE HIGH COURT THOUGH WAS OF THE VIEW THAT IF ANY TERM IS NOT AT A LL DEFINED IN THE TREATY THEN CONSIDERING THE EXPRESS LANGUAGE OF ARTICLE 1(2) OF THE INDO-GE RMAN DTAA, THE TERM DEFINED IN THE ACT EVEN BY SUBSEQUENT TO THE DATE OF AGREEMENT WOULD B E APPLICABLE AS SET OUT IN THE ARTICLE 1(2) OF THE TREATY. THEREFORE, THE SAID DECISION WI LL NOT HELP THE CASE OF THE ASSESSEE BEFORE US BECAUSE THE EXPLANATION 6 DEFINES THE TERM PROCE SS AND NOT ROYALTY AND FURTHER THERE IS NO CHANGE IN THE DEFINITION OF ROYALTY BY VIRTUE OF EXPLANATION 6. THE OTHER DECISIONS RELIED UPON BY THE ASSESSEE ARE BASED ON THE DECISION OF H ONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD (SUPRA) WHICH WAS PRIOR TO THE AMENDMENT AND WITHOUT CONSIDERING THE EXPLANATION 6 AS WELL AS EX PLANATION BELOW SUB-SECTION (2) OF SECTION 9. FURTHER THE BENEFIT OF THE DECISION OF H ONBLE MADRAS HIGH COURT IN THE CASE OF VERIZON COMMUNICATIONS SINGAPORE PTE. LTD (SUPRA) W AS NOT AVAILABLE AT THE TIME OF THOSE DECISIONS, THEREFORE, THE SAME ARE NOT APPLICABLE I N THE FACTS OF THE ASSESSEES CASE. IN FACT, THE SAID DECISION, BASED ON THE SITUS OF THE PROCESS ITSELF SUPPORTS THE REVENUES CASE OF THE SAME BEING A PROCESS AS CONTEMPLATED UNDER EXPLANAT ION 2 TO S. 9(1))(VI). VIACOM 18 MEDIA PVT. LTD. 17 18. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF AUTHORITIES BELOW. 19. IN THE RESULT APPEAL OF THE ASSESSEE IS DIMISSE D . ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 28-0 3-2014 SD/- SD/- ( SANJAY ARORA ) ( VIJAY PAL RAO ) ( ACCOUNTANT MEMBER / YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 28 -03-2014