Intelsat Global Sales and Marketing Ltd, New Delhi V. DCIT, Circle1(1), Chennai

ITA 2223/CHNY/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5034 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 11-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAYAKUMAR
• Keywords: Double taxation relief; Retrospective amendment
• Section: 143(3); 6

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY , JUDICIAL MEMBER & SHRI S. JAYARAMAN, ACCOU NTANT MEMBER ./ I.T.A.NO. 2 223/MDS/2017 / ASSESSMENT YEAR :20 1 4 - 1 5 M/S. INTELSAT GLOBAL SALES AND MARKETING LIMITED, CO PRICEWATERCOOPERS (P) LTD., 8 TH FLOOR, PRESTIGE PALLADIUM BAYAN, 129 - 140, GREAMS ROAD, CHENNAI 600 0 06 . [PAN: A AB C I1539E ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX , CIRCLE 1(1), INTERNATIONAL TAXATION , CHENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI ASHIK SHAH, CA / RESPONDENT BY : SHRI VIJAYAKUMAR PANNA, ST. COUNSEL / DATE OF HEARING : 30 . 1 1 .201 7 / DATE OF P RONOUNCEMENT : 01 . 0 1 .201 8 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER OF THE ASSESSMENT DATED 19.07.2017 CONSEQUENT TO THE DIRECTIONS OF THE LD. DRP DATED 25.05.2017 RELEVANT TO THE ASSESSMENT YEAR 2014 - 15. THE EFFECTIVE GROUND RAISED BY THE ASSESSEE IS THAT THE LD. DRP/ASSESSING OFFICER ERRED IN HOLDING THAT THE RECEIPTS OF THE ASSESSEE IN RELATION TO SATELLITE TRANSMISSION I.T.A. NO. 2 223 /M/ 17 2 SERVICES FALLS WITHIN THE AMBIT OF ROYALTIES AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VI) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] AND ALSO QUALIFY AS FEE FOR TECHNICAL SERVI CES AS DEFINED UNDER SECTION 9(1)(VII) OF THE ACT AND ARTICLE 13(4) OF THE INDIA - UK DTAA. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A UNITED KINGDOM BASED FOREIGN COMPANY ENGAGED IN PROVIDING SATELLITE CAPACITY VIA SPACE SEGMENT AND RELATED SE RVICES TO INDIAN CUSTOMERS EITHER DIRECTLY OR THROUGH VSNL. THE ASSESSEE FILED ITS RETURN OF INCOME ORIGINALLY ON 26.09.2014 DECLARING NIL INCOME BOTH UNDER NORMAL PROVISION AND MAT AND CLAIMING REFUND OF .11,88,64,670/ - ON ACCOUNT OF TAX DEDUCTED AT BY ITS INDIAN CUSTOMERS FOR THE PAYMENTS MADE BY THEM. 2.1 THE COMPANY IS IN THE BUSINESS OF LEASING OUT ITS SATELLITE CAPACITY IN THE FORM OF ITS VARIOUS SERVICES. DURING THE YEAR ENDED 31.03.2015, THE ASSE SSEE HAS RECEIVED .130,22,53,670/ - FROM ITS INDIAN CUSTOMERS TOWARDS THE PROVISION OF A DEDICATED SERVICE WHERE THE CAPACITY OF A PORTION/WHOLE OF A TRANSPONDER IS ALLOCATED/RESERVED FOR A PARTICULAR CUSTOMER AND PROVISION OF A DEDICATED, POINT - TO - POINT, SYMMETRIC, CLEAR CHANNEL CIRCUIT, ETC. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE PAYMENTS RECEIVED BY THE COMPANY IS TAXABLE AS ROYALTY FOR THE USE OF EQUIPMENT UNDER SECTION 9(1)(VI) OF THE ACT. FURTHER, THE FINANCE ACT, 2012 HAS AMENDED THE EXP LANATION 5 AND 6 TO SECTION 9(1) OF THE ACT AND BROUGHT THE I.T.A. NO. 2 223 /M/ 17 3 TELECOMMUNICATION EQUIPMENTS UNDER THE MEANING OF ROYALTY WITH EFFECT FROM 01.06.1976. ACCORDINGLY, THE ASSESSEE WAS SHOW - CAUSED AS TO WHY THE INCOME OF THE ASSESSEE IS NOT TAXABLE AS ROYALTY UN DER THE ACT. AFTER CONSIDERING THE ELABORATE DISCUSSION AND VARIOUS CASE LAW RELIED UPON, THE ASSESSING OFFICER WAS OF THE OPINION AND TO BE IN CONSISTENT WITH EARLIER ASSESSMENT YEARS, HELD THAT THE PAYMENTS RECEIVED BY THE ASSESSEE AS ROYALTIES AS PER SECTION 9(1)(VI) READ WITH THE RETROSPECTIVE AMENDMENT TO THE ACT. AS PER THE PROVISIONS OF SECTION 144C(1) OF THE ACT, A DRAFT ASSESSMENT ORDER DATED 10.08.2016 WAS FORWARDED TO THE ASSESSEE. THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE THE LD. DRP. BY RE JECTING THE OBJECTIONS RAISED BY THE ASSESSEE, THE LD. DRP, VIDE ITS ORDER DATED 25.05.2017 SUSTAINED THE DRAFT ASSESSMENT. BASED ON THE ORDER OF THE LD. DRP, THE ASSESSING OFFICER CONCLUDED THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 144C(13) OF THE ACT BY ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT .130,22,53,670/ - . 3. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BY FILING COPY OF THE ORDERS OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS , THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT SIMILAR IDENTICAL ISSUES HAVE BEEN REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER TO RE - EXAMINE THE ISSUES AND DECIDE AFRESH. ACCORDINGLY, HE PRAYED THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO, SIMILAR DIRECTIONS MAY I.T.A. NO. 2 223 /M/ 17 4 BE GIVEN. ON THE OTHER HAND, THE LD. DR FAIRLY CO NCEDED THE SUBMISSIONS OF THE LD. COUNSEL. 4. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN SIMILAR FACTS AND CIRCUMSTANCES ON AN IDENTICAL ISSUE, IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2013 - 14 IN I.T.A. NO. 645/MDS/2017 VIDE ORDER DATED 27.09.2017 , THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 4. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE PARTIES AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ON IDEN TICAL CIRCUMSTANCES, THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2002 - 03 TO 2012 - 13 IN I.T.A. NOS.1070 TO 1074 & 1621/MDS/2010, 1562/MDS/2011, 2246/MDS/2012, 470/MDS/2014, 432/MDS/2015 AND 516/MDS/2016, EXAMINED THIS ISSUE ELABORATELY AND FOUND THAT THE MATTER NEEDS TO BE RE - EXAMINED. IN FACT, THIS TRIBUNAL EXAMINED THE MATTER ON FACTS AND DIRECTED THE ASSESSING OFFICER TO RE - EXAMINE AS FOLLOWS: - 16. IF THE ASSESSEE - COMPANY DISMANTLED THE EQUIPMENT/ MACHINERY INSTALLED AT CHANDIGARH AN D CHENNAI IN THE YEAR 2004, IT IS NOT KNOWN HOW THE ASSESSEE IS TESTING THE QUALITY OF SIGNAL RETRANSMITTED TO INDIA. THE SO CALLED EARTH STATION MAINTAINED BY VSNL AND OTHER COMPANIES IN INDIA MAY BE DOWN LINKING THE SIGNAL/DATA FROM THE SATELLITE. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE EARTH STATION SAID TO BE MAINTAINED BY VSNL AND OTHER COMPANIES COULD RECEIVE SIGNAL/DATA WITHOUT ANY INTERVENTION BY THE ASSESSEE - COMPANY IN INDIA. THIS FACT WAS NOT EXAMINED BY BOTH THE AUTHORITIES BELOW. FURTHER, HOW THE SIGNALS WERE RECEIVED IN INDIA WITHOUT INTERVENTION OF THE ASSESSEE - COMPANY NEEDS TO BE EXAMINED. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT TECHNICAL EXPERTS FROM VSNL OR ANY OTHER COMPANIES WHICH ENTERED INTO AGREEMENT WITH ASSES SEE - COMPANY NEEDS TO BE EXAMINED ABOUT THE MODE OF RECEIPT OF SIGNAL/DATA WHICH WAS RETRANSMITTED BY THE ASSESSEE - COMPANY IN INDIA. SINCE THE ASSESSING OFFICER HAS NOT EXAMINED THE TECHNICAL EXPERTS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT TO APPR ECIATE THE REAL SERVICES RENDERED BY THE ASSESSEE, THE MATTER NEEDS TO BE RE - EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, THE O RDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE - EXAMINE I.T.A. NO. 2 223 /M/ 17 5 THE MATTER AFRESH AFTER EXAMINING THE TECHNICAL EXPERTS FROM VSNL WHO IS RESPONSIBLE FOR MAINTA INING THE EARTH STATION IN INDIA OR ANY OTHER COMPANIES WHICH HAS ENTERED INTO SIMILAR AGREEMENT WITH THE ASSESSEE AND BRING ON RECORD THE ACTUAL SERVICES RENDERED BY THE ASSESSEE CONSEQUENT TO THE AGREEMENT SAID TO BE ENTERED INTO TELECASTING COMPANIES / TELECOM OPERATORS AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 5. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT DURING THE YEAR UNDER CONSIDERATION ALSO IT NEEDS TO BE RE - EXAMINED. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE - EXAMINE BOTH THE ISSUES IN THE LIGHT OF THE DIRECTION ISSUED BY THIS TRIBUNAL FOR ASSESSMENT YEARS 2002 - 03 TO 2012 - 13. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4.1 IN VIEW OF THE ABOVE OBSERVATIONS OF THE TRIBUNAL, FOR THE ASSESSMENT YEAR 2014 - 15 ALSO, WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO RE - EXAMINE BOTH THE ISSUES IN THE LIGHT OF THE DIRECTIONS ISSUED BY THIS TRIBUNAL FOR EARLIER ASSESSMENT YEARS. 5 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 01 ST JANUARY, 2018 AT CHENNAI. SD/ - SD/ - ( S. JAYARAMAN ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 01 . 0 1 .201 8 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.