Independent News Service Pvt. Ltd., New Delhi V. ITO (International Taxation), New Delhi

ITA 1886/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3993 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 08-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G.K. DHALL
• Keywords: Double taxation relief; Retrospective amendment; Permanent establishment; TDS; Set aside
• Section: 195; 192; 43; 72; 13; 153; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. BEENA A. PILLAI , JM ITA NO. 1868/DEL/2016 : ASSTT. YEAR : 2014 - 15 ITA NOS. 1870 TO 1878/DEL/2016 : ASSTT. YEAR : 2014 - 15 ITA NOS. 1879 TO 1882 /DEL/2016 : ASSTT. YEAR : 2015 - 1 6 ITA NO. 1884/DEL/2016 : ASSTT. YEAR : 2014 - 15 ITA NO. 1886/DEL/2016 : ASSTT. YEAR : 2015 - 16 ITA NOS. 1888 TO 1890/DEL/2016 : ASSTT. YEAR : 2015 - 16 M/S INDEPENDENT NEWS SERVICE PVT. LT D., B - 39, OKHLA INDUSTRIAL AREA, 310, PHASE - I, NEW DELHI - 110020 VS INCOME TAX OFFICER (INTERNATIONAL TAXATION), WARD - 2(1)(2), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A ACI3024R ASSESSEE BY : SH. M. P. RASTOGI, ADV., SH. PARVEEN AGGARWAL, CA REVENUE BY : SH. G. K. DHALL, CIT DR DATE OF HEARING : 17 .01 .201 8 DATE OF PRONOUNCE MENT : 25 .01 .201 8 ORDER PER BENCH : THESE APPEALS BY THE ASSESSEE ARE DIR ECTED AGAINST THE SEPARATE ORDER S EACH DATED 29.01.2016 OF LD. CIT(A) - 43 , NEW DELHI 2 . AT THE FIRST INSTANCE, WE WILL DEAL WITH THE APPEAL IN ITA NO. 1882/DEL/2016 FOR THE ASSESSMENT YEAR 2015 - 16. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1) THE LOWER AUTHORITIES HAVE ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 195 OF THE INCOME - TAX ACT, 1961 (THE ACT) ARE APPLICABLE TO THE MONIES REMITTED BY THE APPELLANT TO THE NON RESIDENT PAYEE, VIZ. M/S INTELSAT CORPORATION, USA. ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 2 2) THE MONIES REMITTED TO M/S INTELSAT CORPORATION, USA FOR USE OF TRANSPONDER FACILITY IS NOT CHARGEABLE TO TAX UNDER THE PROVISIONS OF SECTION 195 OF THE ACT. 3) THE MONIES REMITTED TO M/S INTELSAT CORPORATION, USA FOR USE OF TRANSPONDER FACILITY IS NOT CHARGEABLE TO TAX UNDE R ARTICLE 12 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND THE USA. 4) IT IS CONTENDED THAT THE MONIES REMITTED TO M/S INTELSAT CORPORATION, USA FOR USE OF TRANSPONDER FACILITY, NOT BEING ROYALTY OR FEES FOR TECHNICAL SERVICES UNDER ARTICLE 12 OF THE DTAA BETWEEN INDIA AND THE USA, THE PROVISIONS OF EXPLANATION 6 TO SECTION 9(L)(VI) OF THE ACT ARE NOT APPLICABLE AT ALL. 5) THE COMMISSIONER (APPEALS) HAS ERRED IN APPLYING THE PROVISIONS OF SUB - ARTICLE (2) OF ARTICLE 3 OF THE DTAA BETW EEN INDIA AND THE USA TO THE IMPUGNED SUM REMITTED TO M/S INTELSAT CORPORATION, USA. 6) IT IS CONTENDED THAT IN THE ABSENCE OF AN AMENDMENT IN THE DTAA BETWEEN INDIA AND THE USA, THE PROVISIONS OF EXPLANATION 6 TO SECTION 9(1)(VI) OF THE ACT CANNOT BE AP PLIED TO THE MONIES REMITTED TO M/S INTELSAT CORPORATION, USA. 7) IT IS CONTENDED THAT THE IMPUGNED SUM OF RS. 24,91,560/ - BEING BUSINESS PROFITS OF M/S INTELSAT CORPORATION, USA WHO DOES NOT CARRY ON BUSINESS IN INDIA, IS NOT TAXABLE UNDER THE PROVISIONS OF SECTIONS 4 AND 5 OF THE ACT. 8) IT IS CONTENDED THAT THE IMPUGNED SUM OF RS. 24,91,560/ - BEING BUSINESS PROFITS OF M/S INTELSAT CORPORATION, USA WITHIN THE MEANING OF ARTICLE 7 OF THE DTAA BETWEEN INDIA AND THE USA NO PART OF THE SAME IS TAXABLE IN IN DIA. ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 3 9) THAT THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 3 . FROM THE ABOVE GROUNDS, IT IS GATHERED T HAT THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE APPLICATION OF PROVISIONS OF SECTION 195 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) TO THE MONIES REMITTED BY THE ASSESSEE TO THE NON - RESIDENT PAYEE FOR USE OF TRANSPONDER FACILITY . 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF BROADCASTING OF NEWS CHANNEL THROUGH THE MEDIUM OF TELEVISION . THE NEWS CHANNEL IS KNOWN BY THE NAME OF INDIA TV . THE ASSESSEE APPLIED FOR A CERTIFICATE U/S 195 OF THE ACT FOR AUTHORIZATION TO MAKE REMITTANCE TO THE PAYEE M/S INTELSAT CORPORATION, USA WITHOUT MAKING TDS ON IT. THE ASSESSEE PAID TRANSPONDER CHARGES FOR SATELLITE FACILITIES PROVIDED BY M/S INTELSAT CORPORATION, USA. THE PAYMENTS WERE TO BE MADE MONTHLY. TH E ASSESSEE CONTENDED BEFORE THE AO THAT THE FEES PAID FOR USE OF TRANSPONDER FACILITY WAS NEITHER ROYALTY NOR FEE S FOR TECHNICAL SERVICES UNDER THE PROVISIONS OF ARTICLE 12 OF DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED BETWEEN INDIA AND USA. THE AO, HOWEV ER, HELD THAT THE PAYMENT MADE BY THE ASSESSEE CONSTITUTED A ROYALTY AND TDS WAS TO BE DEDUCTED BY OBSERVING AS UNDER: 7. IN VIEW OF THE ABOVE FACTUAL POSITION AND EXPLANATION 6 TO SECTION 9(1)(VI) OF THE ACT, THE SERVICES WHICH THE PAYEE WILL OFFER TO TH E PAYER ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 4 INCLUDES UNLINKING, AMPLIFICATION, CONVERSION FOR DOWN - LINKING OF SIGNALS WHICH CERTAINLY MAKE USE OF SCIENTIFIC EQUIPMENTS, ENABLING THE PAYER TO ACCESS ITS SATELLITE FOR UPLOADING VIDEO AND AUDIO SIGNALS ELECTRONICALLY, FOR ITS TRANSMISSION IN A LARGE REGION INCLUDING INDIA. FOLLOWING THE PROVISION OF ARTICLE 12(3)(B) OF INDO - USA DTAA AND IN VIEW OF THE INSERTED EXPLANATION 6 TO SECTION 9(1)(VI) OF THE INCOME TAX ACT IT CAN BE SAID THAT THE PAYMENT UNDER CONSIDERATION CONSTITUTE ROYALTY. THE PAYER HAS ENTERED INTO AN AGREEMENT WITH INTELSAT TRANSPONDER SERVICE ORDER NO. 26396 DT. 16.07.2013 AND IS MUTUALLY ACCEPTED BY PUTTING SIGNATURES BY BOTH PARTIES AND IS ABOUT THE USE/ACCESSIBILITY OF PAYEE'S TRANSPONDER FOR THE BUSINESS USE OF THE PAYER COMPA NY IN INDIA. 8. THEREFORE THE PAYER COMPANY IS HEREBY DIRECTED TO WITHHOLD TAX OF 10% FOLLOWING THE PROVISIONS OF DOUBLE TAXATION OF AVOIDANCE TREATY WITH USA. SINCE THE PAYMENT IS NET OF TAXES, THE TAX DEDUCTION RATE WILL HAVE TO APPROPRIATELY GROSSED UP WHICH COMES TO 11.74%. 5 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT INTELSAT CORPO RATION IS A TAX RESIDENT OF US AND HAS ISSUED A CONFIRMATORY CERTIFICATE STATING THAT T HEY DO NOT HAVE ANY FIXED PLACE OF BUSIN ESS OR PERMANENT ESTABLISHMENT (PE) IN INDIA WITHIN THE MEANING OF ARTICLE 5 OF DTAA AND THE AMOUNT PAID WAS NOT A ROYALTY. THE RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD. VS DIT REPORTED AT 332 ITR 340. 6. IT WAS FURTHER SUBMITTED THAT M/S INTELSAT CORPORATION HAS NO ROLE WHATSOEVER TO PLAY EITHER IN THE UP - LINKING ACTIVITY OR IN THE ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 5 RECEIVING ACTIVITY, ITS ROLE IS CONFINED IN SPACE WHERE THE TRANSPONDER WHICH IT MAKE S AVAIL ABLE TO THE ASSESSEE PERFORMS A FUNCTION WHICH IT IS ASSIGNED TO PERFORM. IT WAS STATED THAT THE ONLY ACTIVITY WHICH IS PERFORMED BY INTELSAT CORPORATION ON ACTS IS TELEMETRY, TRACKING AND CONTROL OF THE SATELLITE, WHICH IS CARRIED OUT FROM A CONTROL CENTR E AT USA. THUS, M/S INTELSAT CORPORATION DOES NOT CARRY OUT ANY BUSINESS OPERATIONS IN INDIA, NO PART OF ITS ACTIVITIES IS CONDUCTED IN THE TERRITORY OF INDIA AND NO MACHINERY, EQUIPMENT ETC. ARE INSTALLED BY INTELSAT CORPORATION IN INDIA. IT WAS FURTHER S TATED THAT THE ENTIRE TECHNICAL ACTIVITIES, FUNCTIONS ETC. RELATING TO TRANSMISSION TAKE PLACE IN THE TRANSPONDER WHICH IS LINKED IN SPACE IN THE SKY AND THE MINIMAL TECHNICAL OPERATIONS IS CARRIED OUT AT THE CONTROL SECTOR IN USA. IT WAS FURTHER SUBMITTED THAT THE TRANSFORMER CHARGES RECEIVED WERE NOT FOR ANY EQUIPMENT OR PROCESS AND THAT M/S INTELSAT CORPORATION RENDERED SERVICES TO THE ASSESSEE BY OPERATING AND USING THE TRANSPONDER ON THE SATELLITE . IT WAS ALSO STATED THAT THE ASSESSEE HAD NO CONTROL OV ER THE SATELLITE AND THAT THE SUM PAID BY THE ASSESSEE WAS FOR USE OF TRANSPONDER AS EQUIPMENT AND IT WAS NOT ROYALTY WITHIN THE MEANING OF ARTICLE 12(3)(B) OF INDO - US TREATY. IT WAS FURTHER SUBMITTED THAT THE AMOUNT RECEIVED IN THE HANDS OF M/S INTELSAT C ORPORATION, USA MAY CONSTITUTE BUSINESS PROFITS, H OWEVER, IN VIEW OF FACT THAT M/S INTELSAT CORPORATION, USA DOES NOT HAVE A PE IN INDIA, THE RECEIPT WAS NOT TAXABLE IN INDIA. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: DIT VS M/S TV TODAY NETWORK LTD. 41 TAXMANN.COM 192 (DEL.) ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 6 M/S TV TODAY NETWORK LTD. VS ACIT IN ITA NO. 1376/DEL/2010, ORDER DATED 19.05.2015 M/S VIACOM 18 MEDIA PVT. LTD. VS ADIT (INTERNATIONAL TAXATION) - 2(2), MUMBAI 153 ITD 384 (MUM) ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. VS DI T (2011) 332 ITR 340 (DEL.) 7 . THE LD. CIT(A), HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE PAYMENTS MADE BY THE ASSESSEE WERE TO BE TERMED AS ROYALTY AND THE SAME WERE TAXABLE IN THE HANDS OF THE RECIPIENT ( AND THER EFORE, MUST GO UNDER TAX WITHHOLDING ), IN SPITE OF THE PAYEE NOT CARRYING OF BUSINESS IN INDIA OR NOT HAVING BUSINESS CONNECTION IN INDIA. 8 . NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHO RITIES BELOW AND FURTHER SUBMITTED THAT M/S INTELSAT CORPORATION WAS NOT HAVING ANY PE IN INDIA AND THE AMOUNT PAID WAS NOT IN THE NATURE OF THE ROYALTY. THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO. THE RELIANCE WAS PLACE D ON THE FOLLOWING CASE LAWS: UNITED HOME ENTERTAINMENT PVT. LTD. VS ADDL. CIT IN ITA NOS. 5171 TO 5181/MUM/2013, ORDER DATED 28.11.2016 [TS - 6867 - ITAT - 2016 (MUM) - O] DIT VS NEW SKIES SATELLITE BV IN ITA NOS. 473 & 474 /2012 ORDER DATED 08.02.2016 OF HON BLE DELHI H.C. 9 . IN HIS RIVAL SUBMISSIONS, THE LD. CIT DR STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND REITERATED THE OBSERVATIONS MADE IN THE SAID ORDER. 10 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE T HROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOT ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 7 IN DISPUTE THAT M/S INTELSAT CORPORATION IS A COMPANY INCORPORATED UNDER THE LAWS OF UNITED STATES AND IS A TAX RESIDENT OF THE UNITED STATES. M/S INTELSAT CORPORATION DOES NOT HAV E A PERMANENT ESTABLISHMENT (PE) IN INDIA WITHIN THE MEANING OF ARTICLE 5 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND THE USA . THE SAID COMPANY HAS NOT RENDERED ANY SERVICES IN INDIA. THE ASSESSEE FOR THE PURPOSE OF BROADCASTING ITS NEWS PROGRAM HAD ENTERED INTO AN AGREEMENT WITH M/S INTELSAT CORPORATION, USA. UNDER SUCH AGREEMENT M/S INTELSAT CORPORATION HAD PROVIDED FACILITIES TO THE ASSESSEE FOR USE OF ITS TRANSPONDER FACILITIES THROUGH ITS SATELLITE LOCATED IN OUTER SPACE. THE IN TELSAT CORPORATION OPERATES A GLOBAL NETWORK OF TELECOMMUNICATION SATELLITE AND THE VARIOUS TV CHANNELS USE THE SAID SATELLITE FOR TRANSMISSION OF IMAGES AND VIDEOGRAPH, THE EVENTS AS THEY HAPPENED ON THE EARTH, USED THE UPLINK FACILITIES TO SEND THE SIGNA LS, AFTER ENCODING THEM TO THE SATELLITE OF INTELSAT. ON THE INTELSAT SATELLITE, WHICH IS ALSO REFERRED AS TRANSPONDER, THE SIGNALS ARE DECODED , DOWN - LINKED AND SCATTERED OVER THE AREA COVERED BY INTELSAT. THE ASSESSEE HAS ENTERED INTO A CONTRACT WITH M/S INTELSAT CORPORATION, USA, FOR USING THE LETTER S SATELLITE (THE TRANSPONDER CAPACITY) AND BY THIS ENTIRE MECHANISM, SIGNALS WERE MADE AVAILABLE TO THE CABLE OPERATORS WHO IN TURN BEAM THE SIGNALS, IMAGES OF THE ASSESSEE S TV CHANNEL TO THE PUBLIC AT LARGE AT THEIR HOMES. IN THE PRESENT CASE, WHEN THE ASSESSEE WAS NOT ABLE TO OPERATE THE SATELLITE FOR TRANSPONDER BY ITSELF , IT CAN SAFELY BE SAID THAT ACCESS TO THE TRANSPONDER DOES NOT AMOUNT TO USE OF ANY EQUIPMENT. IN THE INSTANT CASE, T HE ACTIVITIES AND S ERVICES WERE CARRIED OUT THROUGH THE TRANSPONDER LOCATED IN THE SPACE AND THESE WERE NOT CARRIED OUT OR P ERFORMED IN INDIAN TERRITORIES, TH E ASSESSEE WAS NOT HAVING AN Y CONTROL OVER THE TRANSPONDERS, I T ONLY HAS A RIGHT TO USE A CERTAIN CAPACITY WHICH WAS AVAILABLE WITHIN THE OVERALL CAPACITY OF THE ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 8 TRANSPONDER. THEREFORE, IT CAN BE SAID THAT THE TRANSPONDER MAY PROVIDE SERVICES NOT ONLY TO THE ASSESSEE BUT ALSO TO A NUMBER OF OTHER ENTITIES WHICH ARE OPERATING TV CHANNELS. THEREFORE, THE AMOUNT PAID BY THE ASSESSEE WOULD ALTHOUGH CONSTITUTE BUSINESS PROFITS OF M/S INTELSAT CORPORATION, USA, BUT THERE WAS NO PERMANENT ESTABLISHMENT OF M/S INTELSAT CORPORATION IN INDIA AND IT IS TAX RESIDENT IN USA, T HE AMOUNT PAID BY THE ASSESSEE WAS NOT CHARGEABLE TO TAX IN INDIA, THEREFORE, THE PROVISIONS OF SECTION 195 OF THE ACT WILL NOT BE APPLICABLE. 11 . ON A SIMILAR ISSUE, THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. VS DIT (2011) 332 ITR 340 (DEL.) HAS HELD AS UNDER : THAT UNDER THE AGREEMENT WITH TELEVISION CHANNELS, THE ROLE ATTRIBUTED TO THE ASSESSEE WAS AS FOLLOWS : (I) PROGRAMMES WERE UPLINKED BY THE TELEVISION CHANNELS (ADMITTEDLY NOT FROM INDIA) ; (II) AFTER RECEIPT OF THE PROGRAMMES AT THE SATELLITE (AT LOCATI ONS NOT SITUATED IN INDIAN AIRSPACE), THESE WERE AMPLIFIED THROUGH COMPLICATED PROCESS; AND (IN) THE PROGRAMMES SO AMPLIFIED WERE RELAYED IN THE FOOTPRINT AREA INCLUDING INDIA WHERE THE CABLE OPERATORS CAUGHT THE WAVES AND PASSED THEM OVER TO THE INDIAN PO PULATION. THE FIRST TWO STEPS WERE NOT CARRIED OUT IN INDIA. MERELY BECAUSE THE FOOTPRINT AREA INCLUDED INDIA AND THE PROGRAMMERS BY ULTIMATE CONSUMERS/VIEWERS WATCHED THE PROGRAMMES IN INDIA, EVEN WHEN THEY WERE UPLINKED AND RELAYED OUTSIDE INDIA, THAT WO ULD NOT MEAN THAT THE ASSESSEE WAS CARRYING OUT ITS BUSINESS OPERATIONS IN INDIA. THE EXPRESSIONS 'OPERATIONS' AND 'CARRIED OUT IN INDIA' OCCURRING IN EXPLANATION 1(A) TO SECTION 9(1)(I) SIGNIFY THAT IT WAS, NECESSARY TO ESTABLISH THAT ANY PART OF THE ASSE SSES'S OPERATIONS WERE CARRIED OUT IN INDIA. NO MACHINERY OR COMPUTER WAS INSTALLED BY THE ASSESSEE IN INDIA THROUGH WHICH THE PROGRAMMES REACHED INDIA. THE PROCESS OF AMPLIFYING AND RELAYING THE PROGRAMMES WAS PERFORMED IN THE SATELLITE WHICH WAS NOT SITU ATED IN INDIAN AIRSPACE. EVEN THE TRACKING, TELEMETRY AND CONTROL OPERA TIONS WERE PERFORMED OUTSIDE ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 9 INDIA IN HONG KONG. THERE WAS NO CONTRACT OR AGREEMENT BETWEEN THE ASSESSEE EITHER WITH THE CABLE OPERATORS OR VIEWERS FOR RECEPTION OF SIGNALS IN INDIA. T HUS, SECTION 9(1)(I) WAS NOT ATTRACTED. (II) THAT THE PROCESS OF TRANSMISSION OF TELEVISION PROGRAMMES STARTED WITH TELEVISION CHANNELS (CUSTOMERS OF THE ASSESSEE) UPLINKING THE SIGNALS CONTAINING THE TELEVISION PROGRAMMES; THEREAFTER THE SATELLITE RECEIV ED THE SIGNALS AND AFTER AMPLIFYING AND CHANGING THEIR FREQUENCY RELAYED IT DOWN IN INDIA AND OTHER COUNTRIES WHERE THE CABLE OPERATORS CAUGHT THE SIGNALS AND DISTRIBUTED THEM TO THE PUBLIC. ANY PERSON WHO HAD A DISH ANTENNA, COULD ALSO CATCH THE SIGNALS R ELAYED FROM THESE SATELLITES. THE ROLE OF THE ASSESSEE WAS THAT OF RECEIVING THE SIGNALS, AMPLIFYING THEM AND AFTER CHANGING THE FREQUENCY RELAYING THEM ON THE EARTH. FOR THIS SERVICE, THE TELEVISION CHANNELS MADE PAY - MENT TO THE ASSESSEE. THE ASSESSEE WAS THE OPERATOR OF THE SATELLITES AND WAS IN CONTROL OF THE SATELLITE. IT HAD NOT LEASED OUT THE EQUIPMENT TO THE CUSTOMERS. THE ASSESSEE HAD MERELY GIVEN ACCESS TO A BROADBAND WIDTH AVAILABLE IN A TRANSPONDER WHICH CAN BE UTILIZED FOR THE PURPOSE OF TRANSMI TTING THE SIGNALS OF THE CUSTOMER. A SATELLITE IS NOT A MERE CARRIER, NOR IS THE TRANSPONDER SOME THING WHICH IS DISTINCT AND SEPARABLE FROM THE SATELLITE AS SUCH. THE TRANS PONDER IN FACT CANNOT FUNCTION WITHOUT THE CONTINUOUS SUPPORT OF VARIOUS SYSTEMS A ND COMPONENTS OF THE SATELLITE. CONSEQUENTLY, IT IS ENTIRELY WRONG TO ASSUME THAT A TRANSPONDER IS A SELF - CONTAINED OPERATING UNIT, THE CONTROL AND CONSTRUCTIVE POSSESSION OF WHICH IS OR CAN BE HANDED OVER BY THE SATELLITE OPERATOR TO ITS CUSTOMERS: THE TE RMS 'LEASE OF TRANSPONDER CAPACITY', 'LESSOR', 'LESSEE' AND 'RENTAL' USED IN THE AGREEMENT WOULD NOT BE THE DETER MINATIVE FACTORS. THERE WAS NO USE OF 'PROCESS' BY THE TELEVISION CHANNELS. MOREOVER, NO SUCH PURPORTED USE HAD TAKEN PLACE IN INDIA. THE TELE CAST COM - PANIES/CUSTOMERS WERE SITUATED OUTSIDE INDIA AND SO WAS THE ASSESSEE. THE AGREEMENTS UNDER WHICH THE SERVICES WERE PROVIDED BY THE ASSESSEE TO ITS CUSTOMERS WERE EXECUTED ABROAD. THE TRANSPONDER WAS IN ORBIT. MERELY BECAUSE IT HAD ITS FOOTPRINT ON VARIOUS CONTINENTS THAT WOULD NOT MEAN THAT THE PROCESS HAD TAKEN PLACE IN INDIA. ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 10 12 . SIMILARLY, THE ITAT MUMBAI BENCH L , MUMBAI IN THE CASE OF ADDIT(IT) - 2(2)(1) VS TAJ TV LTD. REPORTED AT (2016) 72 TAXMANN.COM 143 HELD AS UNDER: 17. WE HAVE CAR EFULLY CONSIDERED THE ENTIRE GAMUT OF FACTS AS DISCUSSED IN THE IMPUGNED ORDERS, RIVAL SUBMISSIONS MADE BEFORE US, MATERIALS RELIED UPON AND THE DECISIONS RELIED UPON. THE ASSESSEE - COMPANY IS INCORPORATED AND REGISTERED UNDER THE MAURITIUS LAW AND IS ALSO THE TAX RESIDENT OF MAURITIUS, THEREFORE, QUA ITS VARIOUS STREAMS OF INCOME, INDIA - MAURITIUS DTAA HAS TO BE SEEN. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TELECASTING SPORTS CHANNEL CALLED 'TEN SPORTS' AND FOR GENERATING REVENUE, IT HAS BEEN COLLECTING A DVERTISEMENT REVENUE AND DISTRIBUTION OF CHANNEL IN INDIA. IT HAS APPOINTED TAJ INDIA AS ITS ADVERTISING SALES AGENT TO SELL COMMERCIAL SLOT/SPOT TO THE PROSPECTIVE ADVERTISERS AND OTHER PARTIES IN INDIA IN CONNECTION WITH THE BUSINESS OF PROGRAMMING AND T ELECASTING OF 'TEN SPORTS' CHANNEL. AS PER THE AGREEMENT, COMMISSION @ 10% OF THE ADVERTISEMENT REVENUE WAS PAID TO TAJ INDIA. THE ASSESSEE HAS CLAIMED THAT, SUCH AN INCOME IS NOT TAXABLE IN INDIA, BECAUSE THERE IS NO PE IN INDIA AS TAJ INDIA IS NOT A DEPE NDENT AGENT OF THE ASSESSEE WITHIN THE TERMS OF ARTICLE 5(4). THIS CONTENTION OF THE ASSESSEE HAS BEEN NEGATED BY THE LD. CIT(A) AFTER DISCUSSING THE ISSUE IN DETAIL AND HOLDING THAT, THERE IS NO AGENCY RELATIONSHIP BETWEEN THE ASSESSEE AND THE TAJ INDIA Q UA THE ADVERTISEMENT INCOME WITHIN THE SCOPE OF ARTICLE 5(4). HOWEVER, IN THE REVENUE'S APPEAL, THE MAIN ISSUE INVOLVED IN GROUND NO.1 IS WITH REGARD TO TAXABILITY OF DISTRIBUTION REVENUE IN TERMS OF 'DISTRIBUTION AGREEMENT' DATED 1ST MARCH, 2002. UNDER TH E TERMS OF THE DISTRIBUTION AGREEMENT, THE ASSESSEE HAS APPOINTED TAJ INDIA AS EXCLUSIVE DISTRIBUTOR IN INDIA AND PROHIBITS THE ASSESSEE FOR ENTERING INTO DISTRIBUTION AGREEMENT WITH ANYBODY ELSE. THE LD. CIT(A) AFTER TAKING NOTE OF THE 'DISTRIBUTION AGREE MENT' AND EXAMINING VARIOUS TERMS AND CLAUSES USED THEREIN AND ALSO TAKING INTO CONSIDERATION THE CONDUCT OF THE PARTIES, CAME TO THE CONCLUSION THAT, TAJ INDIA IS NOT ACTING AS AGENT OF THE ASSESSEE BUT IT HAD OBTAINED THE RIGHT OF DISTRIBUTION OF CHANNEL FOR ITSELF AND SUBSEQUENTLY IT IS ENTERING INTO CONTRACT WITH OTHER PARTIES IN ITS OWN NAME IN WHICH THE ASSESSEE IS NOT PARTY. THE DISTRIBUTION OF ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 11 THE REVENUE BETWEEN THE ASSESSEE AND TAJ INDIA HAS BEEN ALLOCATED IN THE RATIO OF 60:40 AND THE ENTIRE RELA TIONSHIP IS PRINCIPAL TO PRINCIPAL BASIS. THE LD. CIT(A) HAS ALSO NOTED THAT, THERE IS NO EVIDENCES ON RECORD TO SHOW THAT, TAJ INDIA WAS ACTING AS AGENT OF THE ASSESSEE FOR THE DISTRIBUTION BUSINESS IN ANY MANNER. THIS FINDING OF FACT OF THE LD. CIT(A) IS CORROBORATED BY THE TERMS AND CONDITIONS OF THE DISTRIBUTION AGREEMENT AS WELL AS SUB - DISTRIBUTOR AGREEMENT AS PLACED IN THE PAPER BOOK. THUS, SUCH A FINDING OF FACT BY THE LD. CIT(A) WITHOUT THERE BEING ANY REBUTTAL BY WAY OF ANY CONTRARY MATERIAL, IS AF FIRMED. EVEN IF WE INDEPENDENTLY EXAMINE THE FACTS OF THE CASE VIS - A - VIS THE PROVISIONS CONTAINED IN ARTICLE 5(4) TO 5(6) WHICH DEALS WITH THE AGENCY PE, IT CAN BE SEEN THAT THERE IS NO AGENCY PE OF THE ASSESSEE IN INDIA. RELEVANT ARTICLE 5 DEALING WITH TH E AGENCY PE IS REPRODUCED HERE UNDER: '4. NOTWITHSTANDING THE PROVISIONS OF PARAGRAPHS 1 AND 2 OF THIS ARTICLE, A PERSON ACTING IN A CONTRACTING STATE FOR OR ON BEHALF OF AN ENTERPRISE OF THE OTHER CONTRACTING STATE (OTHER THAN AN AGENT OF AN INDEPENDENT STATUS TO WHOM THE PROVISIONS OF PARAGRAPH 5 APPLY) SHALL BE DEEMED TO BE A PERMANENT ESTABLISHMENT OF THAT ENTERPRISE IN THE FIRST - MENTIONED STATE IF: I . HE HAS AND HABITUALLY EXERCISES IN THAT FIRST MENTIONED STATE, AN AUTHORITY TO CONCLUDE CONTRAC TS IN THE NAME OF THE ENTERPRISE UNLESS HIS ACTIVITIES ARE LIMITED TO THE PURCHASE OF GOODS OR MERCHANDISE FOR THE ENTERPRISE; OR II . HE HABITUALLY MAINTAINS IN THAT FIRST - MENTIONED STATE A STOCK OF GOODS OR MERCHANDISE BELONGING TO THE ENTERPRISE FROM WHICH H E REGULARLY FULFILS ORDERS ON BEHALF OF THE ENTERPRISE. 5. AN ENTERPRISE OF A CONTRACTING STATE SHALL NOT BE DEEMED TO HAVE A PERMANENT ESTABLISHMENT IN THE OTHER CONTRACTING STATE MERELY BECAUSE IT CARRIES ON BUSINESS IN THAT OTHER STATE THROUGH A BROKER , GENERAL COMMISSION AGENT OR ANY OTHER AGENT OF AN INDEPENDENT STATUS, WHERE SUCH PERSONS ARE ACTING IN THE ORDINARY COURSE OF THEIR BUSINESS. HOWEVER, WHEN THE ACTIVITIES OF SUCH AN AGENT ARE DEVOTED EXCLUSIVELY OR ALMOST EXCLUSIVELY ON BEHALF OF THAT EN TERPRISE, HE WILL NOT BE CONSIDERED AN AGENT OF AN INDEPENDENT STATUS WITHIN THE MEANING OF THIS PARAGRAPH. ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 12 6. THE FACT THAT A COMPANY, WHICH IS A RESIDENT OF A CONTRACTING STATE CONTROLS OR IS CONTROLLED BY A COMPANY WHICH IS A RESIDENT OF THE OTHER CONTR ACTING STATE, OR WHICH CARRIES ON BUSINESS IN THAT OTHER CONTRACTING STATE (WHETHER THROUGH A PERMANENT ESTABLISHMENT OR OTHERWISE) SHALL NOT, OF ITSELF, CONSTITUTE EITHER COMPANY A PERMANENT ESTABLISHMENT OF THE OTHER'. THUS, AN AGENT IS DEEMED TO BE A P E OF A FOREIGN ENTERPRISE, IF HE IS NOT INDEPENDENT AND HAS HABITUALLY EXERCISES AN AUTHORITY TO CONCLUDE CONTRACTS IN THE NAME OF THE ENTERPRISE UNLESS THE ACTIVITIES OF SUCH PERSON ARE LIMITED TO THOSE MENTIONED IN PARAGRAPH 4 THAT IS, TO THE PURCHASE OF GOODS OR MERCHANDISE FOR THE ENTERPRISE; OR IF HE HAS NO SUCH AUTHORITY, BUT HABITUALLY MAINTAINS A STOCK OF GOODS OR MERCHANDISE FROM WHICH HE REGULARLY DELIVERS GOODS OR MERCHANDISE ON BEHALF OF THE ENTERPRISE. THUS, THE CHARACTER OF AN AGENT, WHO CAN B E SAID TO BE A DEPENDENT ONLY IF, FIRSTLY, THE COMMERCIAL ACTIVITY FOR THE ENTERPRISE IS SUBJECT TO INSTRUCTIONS OR COMPREHENSIVE CONTROL AND SECONDLY, HE DOES NOT BEAR THE ENTREPRENEUR RISK. IT IS SUFFICIENT FOR THE ESTABLISHMENT OF AN AGENCY PE THAT THE AGENT HAS SUFFICIENT AUTHORITY TO BIND THE ENTERPRISE'S PARTICIPATION IN THE BUSINESS ACTIVITY. HERE IN THIS CASE, NONE OF THE CONDITIONS AS STIPULATED IN ARTICLE 5(4) IS APPLICABLE BECAUSE TAJ INDIA IS ACTING INDEPENDENTLY QUA ITS DISTRIBUTION RIGHTS AND THE ENTIRE AGREEMENT OSTENSIBLY IS ON PRINCIPAL TO PRINCIPAL BASIS AS ANALYZED AND FOUND BY LD. CIT (A). WHEN THE ENTIRE RELATIONSHIP QUA THE DISTRIBUTION REVENUE IS THAT OF PRINCIPAL TO PRINCIPAL BASIS AND THE TAJ INDIA IS ACTING INDEPENDENTLY, THEN IT MO VES OUT FROM THE CONDITIONS LAID DOWN IN ARTICLE 5(4). THUS THE DISTRIBUTION INCOME BY THE ASSESSEE CANNOT BE TAXED IN INDIA, BECAUSE TAJ INDIA DOES NOT CONSTITUTE AN AGENCY PE UNDER THE TERMS OF ARTICLE 5(4). THUS, THE ORDER OF THE CIT (A) IS UPHELD AND G ROUND NO.1 AS RAISED BY THE REVENUE IS DISMISSED. 18. NOW, COMING TO THE ISSUE OF DISALLOWANCE OF VARIOUS EXPENSES UNDER SECTION 40(A)(I) LIKE, 'TRANSPONDER CHARGES' AND 'UPLINKING CHARGES' AS RAISED IN GROUND NO.2(I) AND 2(II), IT IS SEEN THAT THESE, PAY MENTS HAS BEEN PAID TO PANAMSAT INTERNATIONAL SYSTEMS INC. USA FOR PROVIDING FACILITY OF TRANSPONDER FOR TELECASTING 'TEN SPORTS' CHANNEL IN VARIOUS COUNTRIES INCLUDING INDIA. THE ASSESSEE ENTERED INTO AN AGREEMENT WITH PANAMSAT TO UTILIZE THE ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 13 TRANSPONDER FACILITY PROVIDING BY THE SAID US BASED COMPANY FOR TELECASTING ITS SPORTS CHANNEL WHICH ARE ON THE FOOTPRINT OF TRANSPONDER OF PANAMSAT. THE REVENUE'S CASE BEFORE US IS THAT, FIRSTLY, IT IS TAXABLE UNDER SECTION 9(1)(VI) AS 'ROYALTY' AND ALSO UNDER ARTICL E 12(3)(B) OF INDO - US - DTAA. SIMILARLY, THE UPLINKING CHARGES PAID FOR UPLINKING THE CHANNELS TO PANAMSAT SATELLITE FOR DELAY IN TRANSMISSION AND FOR UPLINKING SIGNALS FOR LIVE EVENTS FROM THE VENUE OF THE EVENTS TO THE SATELLITE HAVE BEEN TREATED TO BE 'RO YALTY'. SINCE, THE ASSESSEE HAD NOT DEDUCTED TDS UNDER SECTION 195, DISALLOWANCE UNDER SECTION 40(A)(I) HAS BEEN MADE. THE ASSESSEE'S CASE BEFORE US IS THAT, FIRSTLY, PANAMSAT IS A USA BASED COMPANY, THEREFORE, INDO - US DTAA IS APPLICABLE AND SINCE IT DOES NOT HAVE ANY PE OR BUSINESS CONNECTION IN INDIA, THEREFORE, THE PAYMENT MADE TO A NON - RESIDENT OUTSIDE INDIA FOR AVAILING SERVICE OF EQUIPMENT PLACED OUTSIDE INDIA CANNOT BE TAXED IN INDIA. IN SUPPORT OF SUCH A CONTENTION DECISION OF HON'BLE BOMBAY HIGH CO URT IN THE CASE OF SET SATELLITE (SINGAPORE) PTE LTD. (SUPRA) HAS BEEN RELIED UPON. IN ANY CASE, IT HAS BEEN SUBMITTED THAT, EVEN OTHERWISE ALSO THE DEFINITION OF 'ROYALTY' UNDER ARTICLE 12(3) OF INDO - US - DTAA IS ALSO NOT APPLICABLE, BECAUSE TRANSPONDER CHA RGES IS ONLY USE OF FACILITY AND IT IS NOT AN EQUIPMENT AND DOES NOT AMOUNT TO USE OF ANY COPYRIGHT EFFECTING WORK, SECRET FORMULA, PROCESS ETC OR ANY OTHER TERM DESCRIBED IN PARA 3 OF ARTICLE 12. THE LD. CIT(A) HAS HELD THAT IT IS NOT A 'ROYALTY' AND SECO NDLY, EVEN OTHERWISE ALSO BY VIRTUE OF ARTICLE 12(7) SUCH A ROYALTY CANNOT BE TAXED IN INDIA, BECAUSE IT IS NOT BORNE BY PE OR FIXED PLACE OF THE US COMPANY IN INDIA. THE LD. DR HAS STRONGLY RELIED UPON AMENDED DEFINITION OF THE 'ROYALTY' UNDER THE ACT, WH EREIN, THE SCOPE AND DEFINITION OF 'ROYALTY' HAS BEEN ENLARGED BY THE NEWLY INSERTED EXPLANATION (VI) AND (VI) BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 01.06.1976 AND HAS CONTENDED THAT THE SAID DEFINITION IS TO BE READ INTO DTAA ALSO, THAT IS, THE DEFINITION OF 'ROYALTY' HAS TO BE TAKEN FROM THE DOMESTIC LAW. IN SUPPORT, LD. DR HAS STRONGLY RELIED UPON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF VERIZON COMMUNICATIONS SINGAPORE PTE LTD. (SUPRA) AND THE ITAT DECISION IN THE CASE OF VIACO M 18 MEDIA (P.) LTD. (SUPRA) ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 14 19. FIRST OF ALL, LET US EXAMINE THE DEFINITION OF 'ROYALTY' AS BEEN DEFINED UNDER ARTICLE 12 OF THE INDO - US - DTAA, WHICH HAS BEEN DEFINED IN THE FOLLOWING MANNER: '3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEANS: ( A ) PAYMENT S OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC, OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROADCASTING, 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 PROPERTY WHIC H ARE CONTINGENT ON THE PRODUCTIVITY, USE, OR DISPOSITION 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, OTHER THAN PAYMENTS DERIVED BY AN ENTERPRISE DESC RIBED IN PARAGRAPH 1 OF ARTICLE 8 (SHIPPING AND AIR TRANSPORT) FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2(C) OR 3 OF ARTICLE 8.' THE ARTICLE GIVES EXHAUSTIVE DEFINITION OF THE TERM 'ROYALTY' AND THEREFORE, THE DEFINITION AND SCOPE OF 'ROYALTY' IS TO BE SEEN FROM THE ARTICLE ALONE AND NO DEFINITION UNDER THE DOMESTIC ACT OR LAW IS REQUIRED TO BE CONSIDERED OR SEEN OR ANY AMENDMENT MADE IN SUCH DEFINITION WHETHER RETROSPECTIVE OR PROSPECTIVE WHICH CAN BE READ IN A MANNER SO AS TO EXTEND ANY OPERATION TO THE TE RMS AS DEFINED OR UNDERSTOOD IN THE TREATY. THE LEGISLATURE OR PARLIAMENT WHILE CARRYING OUT AMENDMENT TO INTERPRET OR DEFINE A GIVEN PROVISION UNDER THE DOMESTIC LAW OF THE COUNTRY CANNOT SUPERSEDE OR CONTROL THE MEANING OF THE WORD WHICH HAS BEEN EXPRESS LY DEFINED IN A TREATY NEGOTIATED BETWEEN EXECUTIVES OF TWO SOVEREIGN NATIONS. THE PAYMENT OF TRANSPONDER CHARGES TO PANAMSAT AND UPLINKING CHARGES CANNOT BE TREATED AS A CONSIDERATION FOR 'USE' OR 'RIGHT TO USE' ANY COPYRIGHT OF VARIOUS TERMS USED IN PARA 3(A) LIKE COPYRIGHT OF A LITERARY, ARTISTIC, OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROADCASTING OR IN ANY MANNER RELATES TO ANY ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 15 PATENT OR TRADE MARK, DESIGN, SECRET FORMULA OR PROCESS. IT IS ALSO NOT USE OR RIGHT TO USE ANY INDUSTRIAL, COMMERCIAL, OR SCIENTIFIC EQUIPMENT. THERE IS NO SUCH KIND OF RIGHT TO USE WHICH IS GIVEN BY PAN AM SAT TO ASSESSEE. THUS, THE SAID PAYMENT DOES NOT FALL WITHIN THE AMBIT OF THE TERMS USED IN PARA 3 OF ARTICLE 12. SO FAR AS THE READING OF AMENDED DEFINITION OF 'ROYALTY' AS GIVEN IN SECTION 9(1)(VI) INTO TREATY, HON'BLE DELHI HIGH COURT IN ITS LATEST JUDGMENT IN THE CASE OF NEW SKIES SATELLITE BV (SUPRA), WHEREIN IT H AS CONSIDERED HON'BLE MADRAS HIGH COURT DECISION IN THE CASE OF VERIZON COMMUNICATIONS SINGAPORE PTE LTD. (SUPRA) ALSO, HAVE DISCUSSED THE ISSUE THREADBARE AND CAME TO THE CONCLUSION IN THE FOLLOWING MANNER: '60. CONSEQUENTLY, SINCE WE HAVE HELD THAT THE FINANCE ACT, 2012 WILL NOT AFFECT ARTICLE 12 OF THE DTAAS, IT WOULD FOLLOW THAT THE FIRST DETERMINATIVE INTERPRETATION GIVEN TO THE WORD 'ROYALTY' IN ASIA SATELLITE, SUPRA NOTE 1, WHEN THE DEFINITIONS WERE IN FACT PARI MATERIA (IN THE ABSENCE OF ANY CONTO URING EXPLANATIONS), WILL CONTINUE TO HOLD THE FILED FOR THE PURPOSE OF ASSESSMENT YEARS PRECEDING THE FINANCE ACT, 2012 AND IN ALL CASES WHICH INVOLVE A DOUBLE TAX AVOIDANCE AGREEMENT, UNLESS THE SAID DTAAS ARE AMENDED JOINTLY BY BOTH PARTNERS TO INCORPOR ATE INCOME FROM DATA TRANSMISSION SERVICES AS PARTAKING OF THE NATURE OF ROYALTY, OR AMEND THE DEFINITION IN A MANNER SO THAT SUCH INCOME AUTOMATICALLY BECOMES ROYALTY. IT IS REITERATED THAT 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 TAX AVOIDANCE AGREEMENT.' THE AFORESAID DECISION TAKES CARE OF ALL THE ARGUMENTS RELIED UPON BY THE LD. DR INCLUDING THAT OF THE VERIZON COMMUNICA TIONS SINGAPORE PTE LTD'S. THE HON'BLE HIGH COURT HAS SPECIFICALLY CLARIFIED AS TO WHY THE SAID DECIEION OF MADRAS HIGH COURT CANNOT BE APPLIED IN SUCH CASES AFTER OBSERVING AS UNDER: '31. IN A JUDGMENT BY THE MADRAS HIGH COURT IN VERIZON COMMUNICATIONS SINGAPORE PTE LTD. V. THE INCOME TAX OFFICER, INTERNATIONAL TAXATION I, [2014] 361 ITR 575 , THE COURT HELD THE EXPLANATIONS TO BE APPLICABLE TO NOT ONLY THE DOMESTIC DE FINITION BUT ALSO CARRIED THEM TO INFLUENCE THE MEANING OF ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 16 ROYALTY UNDER ARTICLE 12. NOTABLY, IN BOTH CASES, THE CLARIFICATORY NATURE OF THE AMENDMENT WAS NOT QUESTIONED, BUT WAS INSTEAD APPLIED SQUARELY TO ASSESSMENT YEARS PREDATING THE AMENDMENT. THE CRU CIAL DIFFERENCE BETWEEN THE JUDGMENTS HOWEVER LIES IN THE APPLICATION OF THE AMENDMENTS TO THE DTAA. WHILE TV TODAY, SUPRA NOTE 22 RECOGNIZES THAT THE QUESTION WILL HAVE TO BE DECIDED AND THE SUBMISSION ARGUED, VERIZON, SUPRA NOTE 23 CITES NO REASON FOR TH E EXTENSION OF THE AMENDMENTS TO THE DTAA.' THUS, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT, WE HOLD THAT, THE DEFINITION OF ROYALTY AS ENLARGED BY FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT WILL NOT HAVE ANY AFFECT IN AR TICLE 12 OF DTAA.' 20. OTHERWISE ALSO, NOW IT IS QUITE TRITE POSITION THAT, AT THE TIME OF MAKING THE PAYMENT WHEN THERE IS NO AMENDMENT IN THE STATUTE, THEN ASSESSEE CANNOT BE EXPECTED TO WITHHOLD THE TAX, ESPECIALLY WHEN UNDER THE OLD PROVISION OR BY VI RTUE OF ANY JUDICIAL PRECEDENT SUCH PAYMENT DOES NOT FALL OR HAS BEEN HELD TO BE NOT FALLING WITHIN THE AMBIT AND SCOPE OF 'ROYALTY'. IN THESE KINDS OF CASES THERE WERE VARIOUS DECISIONS INCLUDING THAT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SET SA TELLITE (SINGAPORE) PTE LTD. THAT PAYMENT MADE TO THE NON - RESIDENT OUTSIDE INDIA FOR RENDERING THE SERVICES OF EQUIPMENT OUTSIDE INDIA IS NOT TAXABLE IN INDIA. HON'BLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. V. DIT [2011] 332 ITR 340/197 TAXMAN 263/9 TAXMANN.COM 168 LATER ON REITERATED THAT THERE IS NO ROYALTY PAYMENT IN SUCH CASES UNDER THE DOMESTIC LAW, THAT IS, SECTION 9(1)(VI), PRIO R TO AMENDMENT. THUS JUDICIAL PRECEDENTS SUPPORTED THE CASE OF THE ASSESSEE. HERE, THE MAXIM OF 'LEX NON COGIT AD IMPOSSPLIA, THAT IS, THE LAW OF THE POSSIBLY COMPELLING A PERSON TO DO SOMETHING WHICH IS IMPOSSIBLE, THAT IS, WHEN THERE IS NO PROVISION FOR TAXING AN AMOUNT IN INDIA THEN HOW IT CAN BE EXPECTED THAT A TAX SHOULD BE DEDUCTED ON SUCH A PAYMENT. THIS VIEW HAS BEEN UPHELD BY IN CATENA OF DECISIONS INCLUDING THE ITAT MUMBAI BENCHES IN THE CASE OF CHANNEL GUIDE INDIA LTD (SUPRA) WHEREIN, IT HAS BEEN HELD THAT, ASSESSEE CANNOT HELD TO BE LIABLE FOR DEDUCTING TDS IN VIEW OF THE RETROSPECTIVE AMENDMENT WHICH HAS COME AT A MUCH LATER DATE. THUS, WE HOLD THAT ASSESSEE WAS NOT LIABLE TO DEDUCT TDS AT THE TIME OF MAKING THE PAYMENTS. ITA NO . 1868, 1870 TO 1882 /DE L/201 6 ITA NOS.1884, 1886, 1888 TO 1890/DEL/2016 INDEPENDENT NEWS SERVICE PVT. LTD. 17 ACCORDINGLY, DISALLOWAN CE UNDER SECTION 40(A)(I) COULD NOT HAVE BEEN MADE BY THE AO AND THE ORDER OF THE CIT(A) IS AFFIRMED. GROUND NO.2(A) & (B) RAISED BY THE REVENUE ARE DISMISSED. 13 . IN THE PRESENT CASE ALSO, THE AMOUNT REMITTED BY THE ASSESSEE TO M/S INTELSAT CORPORATION, USA WAS NOT THE ROYALTY AND IT WAS NOT TAXABLE IN INDIA UNDER THE PROVISION OF ARTICLE 12 OF DTAA BETWEEN INDIA AND USA . THEREFORE, ASSESSEE WAS NOT OBLIGED TO DEDUCT TDS AND THE PROCEEDINGS U/S 195 OF THE ACT DESERVES TO BE QUASHED. IN THAT VIEW OF THE M ATTER THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) IS SET ASIDE AND THE ISSUE UNDER CONSIDERATION IS DECIDED IN FAVOUR OF THE ASSESSEE. 14 . IN ALL OTHER APPEALS, THE FACTS ARE IDENTICAL AND EVEN THE RIVAL CONTENTION WERE SIMILAR. THEREFORE, OUR FINDINGS GI VEN IN RESPECT OF ITA NO. 1882/DEL/2016 FOR THE ASSESSMENT YEAR 2015 - 16 SHALL APPLY MUTATIS MUTANDIS FOR ALL OTHER APPEALS. 15 . IN THE RESULT, THE APPEAL S OF THE ASSESSEE ARE ALLOWED . (ORDER P RONOUNCED IN THE COURT ON 25 /01/2018 ) SD/ - SD/ - ( BEENA A. PI LLAI ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 /01/2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR