Telstra Singapore Pte. Ltd, Singapore V. DCIT (International Taxation), New Delhi

ITA 3020/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5491 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 15-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Assessee Lawyers: S K AGGARWAL; SABHYA GUPTA
• Keywords: Transfer pricing; Double taxation relief; Retrospective amendment; Set aside
• Section: 271(1)(c); 143(3); 234B; 201; 144C; 9(1); 9(1); 9(1); 72; 13; 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI , ! ' ' . . %&' ()*! BEFORE MS. SUSHMA CHOWLA, VP & SHRI N.K.BILLAIYA, AM [THROUGH VIDEO CONFERENCING] + / ITA NOS.1548/DEL/2015 & 286/DEL/2016 , - - /ASSESSMENT YEARS 2011-12 & 2012-13 TELSTRA SINGAPORE PTE.LTD., UNIT NO.518/519/520, 5 TH FLOOR, TOWER-B, DLF TOWERS, JASOLA, NEW DELHI-110044. PAN-AADCT5366N .......... ./ /APPELLANT VS THE DCIT (INTERNATIONAL TAXATION), CIRCLE-3(1)(2), NEW DELHI. . 01./ / RESPONDENT + / ITA NO. 6733/DEL/2015 , - - /ASSESSMENT YEAR 2012-13 THE DCIT (INTERNATIONAL TAXATION), CIRCLE-3(1)(1), ROOM NO.419, E-2 BLOCK, DR.S.P.MUKHERJEE CIVIC CENTRE, J.L.N.MARG,NEW DELHI. .......... ./ /APPELLANT VS TELSTRA SINGAPORE PTE.LTD., C/O-M/S. SRBC & ASSOCIATE LLP, 6 TH FLOOR, HT HOUSE, 18-20 K.G.MARG, NEW DELHI-110001. PAN-AADCT5366N . 01./ / RESPONDENT 2 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS + / ITA NO.3020/DEL/2017 , - - /ASSESSMENT YEAR 2014-15 TELSTRA SINGAPORE PTE. LTD., 8, CROS STREET, 20-00 PWC BUILDING, SINGAPORE, PIN-048424. PAN-AADCT5366N .......... ./ /APPELLANT VS THE DCIT (INTERNATIONAL TAXATION), CIRCLE-3(1)(1), NEW DELHI. . 01./ / RESPONDENT ./23 / APPELLANT BY : SH. S.K.AGGARWAL, CA & SH. SABHYA GUPTA, CA 01./23 / RESPONDENT BY : SH. SATPAL GULATI, CIT DR 24) / DATE OF HEARING : 22.07.2020 56 24) / DATE OF PRONOUNCEMENT: 30 .09.2020 7 / ORDER PER SUSHMA CHOWLA,VP THE PRESENT BUNCH OF APPEALS FILED BY ASSESSEE AND THE REVENUE ARE AGAINST RESPECTIVE ORDERS OF ASSESSING OFFICER DATE D 01.01.2015; 16.11.2015 AND 30.11.2016 RELATING TO ASSESSMENT YEARS 2011-12 , 2012-13 AND 2014-15 RESPECTIVELY AGAINST THE ORDER/S PASSED UNDER SECTI ON 144(3) R.W.S 144C OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. THIS BUNCH OF APPEALS RELATING TO THE SAME ASSES SEE ON SIMILAR ISSUES ARE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C ONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. IT MAY ALSO BE POINTED OUT TH AT THE ASSESSEE HAS FILED THE 3 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS APPEALS FOR ASSESSMENT YEARS 2011-12, 2012-13 & 201 4-15 AND REVENUE IS IN CROSS-APPEAL FOR ASSESSMENT YEAR 2012-13. 3. IN ORDER TO ADJUDICATE THE ISSUE RAISED IN THE B UNCH OF APPEALS, WE MAY REFER TO THE FACTS AND ISSUE RAISED IN ASSESSEES A PPEAL IN ITA NO.1548/DEL/2015 RELATING TO ASSESSMENT YEAR 2011-1 2. ITA NO.1548/DEL/2015 [ASSESSMENT YEAR 2011-12] 4. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- THE APPELLANT RESPECTFULLY SUBMITS THAT THE PRESEN T APPEAL BEFORE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL ('HON'BLE IT AT') IS BEING FILED ON THE FOLLOWING GROUNDS: THAT THE ASSESSMENT ORDER PASSED U/S 143(3) READ WI TH SECTION 144C OF THE INCOME TAX ACT, 1961 ('THE ACT') BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION- NEW DELHI ('THE LEARNED AO' / 'THE LD. AO') IN PURSUANCE OF THE DIRECTIONS OF THE HON'BLE DISPUTE RESOLUTION PANEL- I ('HON'BLE DRP') IS AGAINST LAW, CONTRARY TO FACTS AND CIRCUMSTANCES OF THE CASE AND THUS ERRONEOUS AND UNSUSTAINABLE. 1. GROUNDS OF OBJECTION 1. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO, HAS ERRED IN HOLDING THAT PAYMENTS AMOUNTING TO INR 267,515,533 RECEIVED BY THE APPELLANT FROM INDIAN CUSTOMERS ('C USTOMERS' / 'SERVICE RECIPIENT' / 'PAYER') FOR PROVISION OF TELECOMMUNIC ATION CONNECTIVITY SERVICES (INTERNATIONAL PRIVATE LEASED CIRCUITS, MULTIPROTOC OL LABEL SWITCHING ('MPLS'), IPNPN, ETC., HEREINAFTER REFERRED TO AS ' BANDWIDTH SERVICES') AS CONSIDERATION FOR THE USE OF OR THE RIGHT TO USE OF AN EQUIPMENT AND/ OR USE OF A PROCESS AND! OR TRANSFER OF RIGHTS IN A PROCES S AND/ OR SERVICES IN CONNECTION WITH THE ABOVE PROCESS/ EQUIPMENT, IS TA XABLE AS A ROYALTY UNDER SECTION 9(1 )(VI) OF THE INCOME TAX ACT, 1961 ('THE ACT') READ WITH ARTICLE 12(3) OF THE INDIA SINGAPORE TAX TREATY ('T AX TREATY') IN CONTRAVENTION OF THE FOLLOWING WELL-ESTABLISHED FAC TS AND LEGAL POSITIONS: 1.1 THAT THE TAX TREATY PROVISIONS SHOULD APPLY IN THE APPELLANT'S CASE AND THE LEARNED AO WHILE ANALYZING THE WHOLE TRANSA CTION FAILED TO 4 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS APPRECIATE IN PROPER PERSPECTIVE, (A) THE APPLICABL E TAX TREATY PROVISIONS, INCLUDING THE ATTENDANT PROTECTION AND BENEFITS ARI SING THERE FROM, (B) THE APPLICABLE CASE LAWS ON THE SUBJECT, AND (C) THE RE LEVANT INTERNATIONAL COMMENTARIES AND REPORTS IN RELATION THERETO. 1.2 THAT THE INSERTION OF EXPLANATIONS 5 AND 6 VID E FINANCE ACT 2012 (WITH RETROSPECTIVE EFFECT FROM 1 JUNE 1976) TO SEC TION 9(1 )(VI) OF THE ACT SHOULD NOT APPLY TO AND DOES NOT ALTER THE TAX TREA TMENT OF A SERVICE TRANSACTION (AS IN THE APPELLANT'S CASE). THAT EXPL ANATIONS 5 AND 6 ONLY DISPENSE WITH THE CONDITION OF POSSESSION OR CONTRO L OF THE EQUIPMENT IN THE HANDS OF THE CUSTOMER AND NOT THE CONDITION OF USE OR RIGHT TO USE AN EQUIPMENT AND! OR PROCESS WHICH IS CODIFIED AS A CO NDITION UNDER EXPLANATION 2 TO SECTION 9(I)(VI) OF THE ACT. 1.3 THAT THE FINDING OF THE LEARNED AO THAT THE IN SERTION OF EXPLANATIONS 5 AND 6 ARE ONLY CLARIFICATORY IN NATURE IS INCORRE CT. THAT THESE FINDINGS ARE INCORRECT BECAUSE THE LEARNED AO HAS FAILED TO APPR ECIATE THAT THE TAX TREATIES IN CASE OF THE UNITED MEXICAN STATES AND H UNGARY (INCLUDING TAX TREATIES ENTERED INTO BY INDIAN GOVERNMENT AFTER IN SERTION OF EXPLANATION 5 AND 6) SPECIFICALLY INCLUDE 'TRANSMISSION BY SATELL ITE, CABLE, OPTIC FIBRE OR SIMILAR TECHNOLOGY' IN THE DEFINITION OF ROYALTY WH ICH CLAUSE IS CONSPICUOUS BY ITS ABSENCE IN THE TAX TREATY WHICH IS APPLICABL E IN THE APPELLANT'S CASE. 1.4 THAT THE LEARNED AO ERRED IN FACTS AND IN LAW BY NOT FOLLOWING THE DECISION OF THE HON'BLE ANDHRA PRADESH HIGH COURT I N THE CASE OF SANOFI PASTEUR HOLDING SA VS DEPARTMENT OF REVENUE [2013] [354 ITR 316] WHICH CORRECTLY HOLDS THAT THE RETROSPECTIVE AMENDMENTS T O THE ACT CANNOT BE READ AS AN AMENDMENT TO THE TAX TREATIES BY VIRTUE OF ARTICLE 3(2) OF THE TAX TREATIES. WHILE THE JUDGMENT OF THE HON'BLE ANDHRA PRADESH HIGH COURT WAS IN THE CONTEXT OF INDIA FRANCE TAX TREATY, THE LEARNED AO HAS FAILED TO APPRECIATE THAT THE RATIONALE OF THE SAID JUDGMENT IS EQUALLY APPLICABLE TO THE CASE OF THE APPELLANT IN THE CONTEXT OF THE TAX TREATY. 2. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN HOLDING THAT THE PAYMENTS R ECEIVED BY THE APPELLANT FROM INDIAN CUSTOMERS FOR PROVISION OF BA NDWIDTH SERVICES TO SUCH CUSTOMERS IS ROYALTY FOR THE USE OF, OR THE RI GHT TO USE OF AN EQUIPMENT AND/ OR USE OF A PROCESS AND! OR TRANSFER OF RIGHTS IN A PROCESS AND/ OR SERVICES IN CONNECTION WITH ABOVE PROCESS/ EQUIPMENT, IS TAXABLE UNDER SECTION 9(1)(VI) OF THE ACT READ WITH ARTICLE 12(3) OF THE TAX TREATY IN CONTRAVENTION OF THE FOLLOWING WELL-ESTABLISHED FAC TS AND LEGAL POSITIONS:- 5 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS 2.1 THAT INDISPUTABLY THE TRANSACTION IS THAT OF A RENDITION OF BANDWIDTH SERVICE BY THE APPELLANT, WHEREIN THE CUSTOMER ENJO YS AN UNINTERRUPTED 24X7 SERVICE TO RECEIVE AND SEND VOICE AND DATA AT A STANDARD RATE OF RELIABILITY AND IN CONSIDERATION OF WHICH FEES ARE EARNED BY THE APPELLANT. THE FAILURE BY THE APPELLANT TO RENDER THE BANDWIDT H SERVICE AT SUCH A RELIABILITY LEVEL RESULTING IN NON- PAYMENT OR LOSS OF CONSIDERATION FOR THE APPELLANT (EXCEPT ON AGREED UPON EXCUSABLE SERVICE OUTAGES) FURTHER FACTUALLY SUBSTANTIATES AND PROVES THAT THE TRANSAC TION UNDER QUESTION IS A PURE SERVICE TRANSACTION, AND IS NOT A TRANSACTION IN THE NATURE OF A RENTAL OR ONE INVOLVING A GRANT OF USE OR RIGHT TO USE ANY EQUIPMENT IN THE ENTIRE NETWORK TO THE CUSTOMER. 2.2 THAT ALTHOUGH THE RENDITION OF BANDWIDTH SERVI CE INVOLVES A LARGE GLOBAL NETWORK OF EQUIPMENTS, WHICH ARE EMPLOYED BY AND UNDER THE EXCLUSIVE DOMINION AND CONTROL OF THE APPELLANT AND OTHER SERVICE PROVIDERS FOR ULTIMATE DELIVERY OF BANDWIDTH SERVICES TO THE SERVICE RECIPIENTS IN INDIA, SUCH BANDWIDTH SERVICES DO NOT RESULT IN THE USE OR RIGHT TO USE ANY EQUIPMENT OR USE OF A PROCESS BY SUCH SERVICE RECIP IENTS. 2.3 THAT THE TWO STANDARD TESTS TO QUALIFY AS AN E QUIPMENT ROYALTY, AS ENUNCIATED THROUGH VARIOUS WELL- ESTABLISHED JUDICI AL DECISIONS, COMMENTARIES, REPORTS AND TAX TREATY INTERPRETATION S, WOULD FAIL WHEN APPLIED IN THE APPELLANT'S CASE BECAUSE: I) THERE IS NO CONTRACT BETWEEN THE APPELLANT AND A NY SERVICE RECIPIENT IN INDIA THAT GRANTS SUCH SERVICE RECIPIE NT THE USE OR RIGHT TO USE ANY EQUIPMENT, RESULTING IN HANDING OVER OF PHY SICAL POSSESSION, CONTROL OR USE OF THE EQUIPMENT, OR ANY PORTION OF THE UNDERLYING TELECOMMUNICATIONS NETWORK, BY THE SERVI CE RECIPIENT/PAYER FOR AN AGREED CONSIDERATION; AND II) THERE IS NO ECONOMIC EXPLOITATION OF THE GLOBAL NETWORK FOR THE COMMERCIAL BENEFIT OF THE SERVICE RECIPIENT/PAYER. 2.4 THAT THE INTERPRETATION TO BE PLACED ON THE EX PRESSION 'USE OR RIGHT TO USE' HAS BEEN CONSIDERED BY COURTS, AAR, COMMENTARY ON THE MODEL TAX CONVENTION BY THE ORGANIZATION FOR ECONOMIC CO-OPER ATION AND DEVELOPMENT ('OECD'), PROF. KLAUS VOGEL COMMENTARY ON DOUBLE TAXATION CONVENTIONS, 2001, REPORT OF THE TECHNICAL ADVISORY GROUP ('TAG'), ALL OF WHICH UNEQUIVOCALLY AND CONSISTENTLY STATE THAT REN DITION OF A SERVICE BY A SERVICE PROVIDER USING EQUIPMENT OR APPARATUS WOULD NOT CONSTITUTE ROYALTY, IN CONTRADISTINCTION TO SPECIFICALLY ALLOW ING OR GRANTING THE USE OR RIGHT TO USE OF SUCH EQUIPMENT OR APPARATUS IN THE HANDS OF THE CUSTOMER 6 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS BY WAY OF RENTING OR LEASING OF EQUIPMENT OR ALLOWI NG THE CUSTOMER TO COMMERCIALLY EXPLOIT SUCH EQUIPMENT FOR THE CUSTOME R'S OWN BENEFIT. 2.5. THAT THE LD. AO HAS ERRED IN HOLDING THAT PROV ISION OF BANDWIDTH SERVICES INVOLVES USE/ RIGHT TO USE EQUIPMENT/ USE OF PROCESS WITHOUT APPRECIATING THAT A) NO CAPACITY OR GLOBAL NETWORK EQUIPMENT (INCLUDING CABLES) ARE EARMARKED OR DEDICATED TO ANY SERVICE R ECIPIENT FOR ITS EXCLUSIVE USE OR ECONOMIC EXPLOITATION TO THEIR COM MERCIAL BENEFIT AND FURTHER IT IS A TECHNOLOGICAL IMPOSSIBILITY TO DEDI CATE ANY INFRASTRUCTURE OR CAPACITY TO ANY PARTICULAR SERVICE RECIPIENT! PAYER ; AND B) THE DELIVERY OF BANDWIDTH SERVICE IS NOTHING BUT A CONTRACT TO TRAN SMIT VOICE AND DATA AT A PARTICULAR VOLUME AND SPEED AND DOES NOT RESULT IN DEDICATING ANY IDENTIFIED CAPACITY, SEGMENT OR ANY PORTION OR ALLO WING ANY ACCESS TO SUCH GLOBAL NETWORK OF APPELLANT TO THE SERVICE RECIPIEN T/ PAYER. 2.6. THAT THE LD. AO HAS ERRED IN STATING THAT THE PROVISION OF IPLC/ MPLS CONNECTIVITY ESSENTIALLY INVOLVES ACCESS TO THE EQU IPMENT AND! OR PROCESS IN THE NETWORK OF THE APPELLANT FOR CONNECTIVITY AND T RANSMISSION OF DATA. 2.7. THAT THE LD. AO HAS FAILED TO APPRECIATE THAT THE ARRANGEMENT BETWEEN THE APPELLANT AND THE INDIAN PAYERS IS FOR PROVISION OF SERVICES AND CAN BY NO STRETCH OF IMAGINATION BE CONSTRUED A S PROVIDING ACCESS OVER ITS NETWORK AND! OR PROCESSES TO THE CUSTOMER. 2.8 THAT THE LD. AO ERRED IN NOT APPRECIATING THE FOLLOWING WHILE DISREGARDING THE DECISIONS RENDERED BY THE AAR IN C ASE OF DELL INTERNATIONAL SERVICES PRIVATE LIMITED (2008) (305 ITR 037 AAR) AND CABLE & WIRELESS NETWORKS INDIA PVT. LIMITED (2009) (315 ITR 72 AAR): I) THE AAR, IN BOTH DELL INTERNATIONAL AND CABLE & WIRELESS (SUPRA), AFTER DETAILED DISCUSSIONS IN UNEQUIVOCAL TERMS, HELD THAT PAYMENT FOR BANDWIDTH SERVICES (IDENTICAL TO THE FA CTS OF THE APPELLANT'S CASE) WOULD NOT CONSTITUTE A ROYALTY BO TH UNDER SECTION 9(I)(VI) OF THE ACT AND ARTICLE 12(3) OF THE RELEVA NT TAX TREATIES; II) THE SERVICE PROVIDERS, IN BOTH DELL INTERNATION AL AND CABLE & WIRELESS (SUPRA) ARE ENGAGED ONLY IN RENDERING BAND WIDTH SERVICES TO END CUSTOMERS WHO ENJOY AN UNINTERRUPTED SERVICE OF RECEIVING AND SENDING VOICE AND DATA IN EXCHANGE FOR A CONSID ERATION, WHICH IS AGAIN IDENTICAL TO THE FACTS OF THE APPELLANT IN ITS PROVISION OF BANDWIDTH SERVICES TO CUSTOMERS IN INDIA; 7 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS III) BOTH THE TESTS, PHYSICAL POSSESSION AND CONTRO L AND! OR ECONOMIC EXPLOITATION FOR COMMERCIAL BENEFIT WOULD NOT BE SA TISFIED IN A PURE SERVICE TRANSACTION BECAUSE THE USE OR RIGHT TO USE OF EQUIPMENT AND! OR ECONOMIC EXPLOITATION OF THE SEGMENT REMAINS IN THE HANDS OF THE SERVICE PROVIDER AND NOT IN THE HANDS OF THE ULTIMA TE RECIPIENT OF THE BANDWIDTH SERVICE, WHICH IS ALSO THE FACT PATTERN I N THE APPELLANT'S CASE; IV) IN ORDER TO BE CONSIDERATION FOR THE USE OR RIG HT TO USE OF AN EQUIPMENT, BOTH UNDER SECTION 9(I)(VI) OF THE ACT A ND ARTICLE 12(3) OF THE APPLICABLE TAX TREATIES, THE SAME HAS TO BE WIT H RESPECT TO SPECIFICALLY IDENTIFIED AND CONTRACTED FOR EQUIPMEN T AND NOT, AS IN THE APPELLANT'S CASE, FOR THE PROVISION AND CONSUMP TION OF A SERVICE. V) THE HON'BLE SUPREME COURT DISMISSED THE REVENUE' S SPECIAL LEAVE PETITION CC 6392/2010 AGAINST THE DECISION OF THE AAR IN CABLE & WIRELESS (SUPRA). 2.9 THAT THE LEARNED AO ERRED BY CONTENDING THAT V ARIOUS DECISIONS AS RELIED UPON BY THE APPELLANT DO NOT APPLY IN THE CA SE OF THE APPELLANT SINCE THESE INVOLVE ENTIRELY DIFFERENT FACT-SITUATION AND WERE RENDERED WITHOUT CONSIDERED THE IMPACT OF EXPLANATION 5. THE LEARNED AO FAILED TO APPRECIATE THAT THE RATIONALE OF THE DECISION OF TH E HON'BLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO . LTD V DIRECTOR OF INCOME TAX (2011) (332 ITR 340)REGARDING THE MEANIN G OF THE TERM 'USE OF EQUIPMENT' IN THE DEFINITION OF ROYALTY (PRIOR TO T HE EXPLANATIONS 5 AND 6 INTRODUCED BY THE FINANCE ACT 2012) WOULD BE EQUALL Y APPLICABLE WHILE CONSTRUING THE EXPRESSION IN THE TAX TREATY IN THE ABSENCE OF ANY SPECIFIC AMENDMENT TO THE TAX TREATY DEFINITION TO THE SIMIL AR EFFECT. 2.10 THAT THE LEARNED AO HAS ERRED IN DISREGARDING THE FACT THAT THE CASE OF NEW SKIES SATELLITE NV AND OTHERS V ADIT (2009) (319 ITR 269) WAS SET ASIDE AND REFERRED BACK BY THE HON'BLE DELHI HIGH C OURT (VIDE ORDER DATED 17 FEBRUARY 2011) TO THE HON'BLE IT AT FOR FRESH AD JUDICATION RELYING ON THE PRINCIPLES LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN CASE OF ASIA SATELLITE TELECOMMUNICATIONS (SUPRA). IT IS ALSO PE RTINENT TO NOTE THAT THE CASE OF NEW SKIES SATELLITE (SUPRA) INVOLVED THE IN TERPRETATION OF THE PROVISIONS OF THE ACT AS WELL AS THE INDIA - NETHER LANDS TAX TREATY AND THAT THE HON'BLE ITAT IN THAT CASE, FOLLOWING THE D IRECTIONS OF THE HON'BLE DELHI HIGH COURT AND IN LIGHT OF THE PRINCIPLES LAI D DOWN IN ASIA SATELLITE TELECOMMUNICATIONS (SUPRA) HAS SUBSEQUENTLY RULED I N FAVOR OF NEW SKIES SATELLITE VIDE ITS ORDER DATED 11 MARCH 2011. 8 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS 2.11 THAT THE LD AO HAS ERRED IN RELYING UPON THE D ECISION OF HON'BLE MADRAS HIGH COURT IN CASE OF VERIZON SINGAPORE PTE LTD VS. ITO (2011) 45 SOT 263, WITHOUT APPRECIATING THE FACT THAT THE SAI D DECISION INCORRECTLY TREATS DEFINITION OF ROYALTY AS PER THE BENEFICIAL PROVISIONS OF THE DT AA AS PARI MATERIA WITH THE PROVISIONS OF THE ACT. 2.12 WITHOUT PREJUDICE TO THE ABOVE, THE LD. AO REL IANCE ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN CASE OF VERIZON SINGAP ORE PTE LTD VS. ITO (SUPRA) IS MISPLACED AS THE JUDGMENT BY THE HON'BLE MADRAS HIGH COURT WAS IN CONTEXT OF THE TRANSMISSION OF DATA THROUGH UNDER-SEA CABLES USING THE INTEGRATED PRIVATE LEASED CIRCUIT ('IPLC') TECH NOLOGY WHEREAS IN THE CASE OF THE APPELLANT, THE TRANSMISSION OF DATA IS BASED ON USE OF BOTH IPLC AND MULTI-PROTOCOL LABEL SWITCHING ('MPLS') TE CHNOLOGY. 2.13 THAT THE LEARNED AO ERRED IN DISREGARDING THE PRINCIPLES LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF BSNL VS UNION OF INDIA (2006) (282 ITR 273) WHICH HELD THAT A SUBSCRIBER TO A TELEPHON E SERVICE DOES NOT INTEND TO OBTAIN OR ACQUIRE ANY RIGHT TO USE ANY EQ UIPMENT OR ANY PORTION OF THE UNDERLYING TELECOMMUNICATIONS NETWORK. SIMILARL Y, WHILE AVAILING BANDWIDTH SERVICES, THE CUSTOMER ALSO DOES NOT INTE ND TO OBTAIN OR ACQUIRE ANY RIGHT TO USE ANY EQUIPMENT OR ANY PORTION OF TH E UNDERLYING TELECOMMUNICATION NETWORK. 3. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN CONSIDERING RECEIPTS FROM C ERTAIN INDIAN CUSTOMERS IN RESPECT OF SERVICES UTILIZED IN BUSINESS OR PROF ESSION CARRIED ON BY SUCH CUSTOMERS OUTSIDE INDIA! FOR THE PURPOSE OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA AS ROYALTY WITHOUT AP PRECIATING THE SPECIFIC EXCLUSION AS CONTAINED IN SECTION 9(1)(VI)(B) OF TH E ACT. 4. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. WHILE HOLDING THE ENTIRE S UMS RECEIVED BY THE APPELLANT AS TAXABLE IN INDIA AS PER SECTION 9 OF T HE ACT READ WITH DT AA BETWEEN INDIA AND SINGAPORE, THE LD. AO HAS ERRED I N NOT EXCLUDING THE AMOUNT PERTAINING TO USE OF SERVICES PROVIDED BY BH ARTI IN INDIA. 5. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS U NDER SECTION 271(1)(C) OF THE ACT. THE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 9 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS 5. BRIEFLY IN THE FACTS OF THE CASE, THE ASSESSEE C OMPANY IS INCORPORATED IN SINGAPORE. IT IS ENGAGED IN THE BUSINESS OF PROVIDI NG DIGITAL TRANSMISSION OF DATA THROUGH INTERNATIONAL PRIVATE LINE OR MULTI-PR OTOCOL LABEL SWITCHING, ETC. TO FACILITATE HIGH SPEED DATA CONNECTIVITY (HEREINAFTE R REFERRED TO AS BANDWIDTH SERVICES). THE ASSESSEE PROVIDES BANDWIDTH SERVICE S OUTSIDE INDIA TO ITS CUSTOMERS. IT HAS ENTERED INTO GLOBAL BUSINESS SERV ICE AGREEMENT (GBSA) WITH VARIOUS CUSTOMERS. IN CASE WHERE SERVICES ARE PROVI DED BY INDIAN TELECOM OPERATOR LIKE BHARTI AIRTEL IN INDIA AND THE SERVIC ES OUTSIDE INDIA ARE PROVIDED BY THE ASSESSEE, IT ENTERS INTO ONE STOP SHOPPING S ERVICES AGREEMENT(OSS) WITH BHARTI AIRTEL OR ANY OTHER INDIAN TELECOM OPER ATOR, TO FACILITATE SINGLE BILLING FACILITY TO THE CUSTOMER. UNDER THE AGREEME NT WITH THE CUSTOMER, UNINTERRUPTED 24 X 7 SERVICES ARE AVAILABLE TO IT. IN CASE, THE SERVIC ES ARE UNAVAILABLE OR NOT AVAILABLE AT THE REQUISITE SPEED , THE CUSTOMER SHALL BE ENTITLED TO REBATE AS PER THE RATES AGREED UPON. TH E ASSESSEE FOR THE YEAR UNDER CONSIDERATION, HAD FILED THE RETURN OF INCOME AT NI L. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE AMOUNT RECEIVED FROM INDIAN CU STOMERS FOR THE PROVISIONS OF BANDWIDTH SERVICES OUTSIDE INDIA WAS EQUIPMENT/P ROCESS ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT READ WITH ARTICLE 12(3) OF THE INDIA SINGAPORE TAX TREATY. THE ASSESSING OFFICER IN THIS REGARD, HAS P LACED RELIANCE ON HONBLE MADRAS HIGH COURT IN THE CASE OF VERIZON SINGAPORE PTE LTD. VS ITO [2013] 39 TAXMANN.COM 70 (MADRAS) AND IN SPECIAL BENCH OF DEL HI ITAT IN THE CASE OF NEW SKIES SATELLITE NV VS ADIT (2009) (126 TTJ 1). THE DRP UPHELD THE FINDINGS OF THE ASSESSING OFFICER IN VIEW OF THE RA TIO LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF VERIZON SINGAPORE PTE LTD. VS ITO (SUPRA). 10 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS THE ASSESSING OFFICER PASSED THE FINAL ASSESSMENT O RDER AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE PROVIDES DATA CONNECTIVITY FOR HIGH TRANSMISSION OF DATA. IT WAS CLARIFIED BY THE LD.AR FOR THE ASSESSEE THAT IT WAS PROVIDING SERVICES IN THE FIEL D OF TRANSMISSION OF DATA OUTSIDE INDIA. EVEN THE INDIAN COMPANIES AVAILED S UCH SERVICES FROM INDIA FOR PROVIDING DATA OUTSIDE INDIA. OUR ATTENTION WAS DR AWN TO THE ASSESSMENT ORDER WITH SPECIAL REFERENCE TO PARAS 7.3 TO 7.5 AN D IT WAS POINTED OUT THAT THE FACTS MENTIONED IN THE SAID PARAS ARE NOT THAT OF T HE ASSESSEE. IN PARA 7.6, THE ASSESSING OFFICER TALKS OF PROCESS ROYALTY AND REFE RENCE TO EXPLANATION 2 UNDER SECTION 9(1)(VI) OF THE ACT AND NOT TO THE PROVISIO NS OF DTAA. THE ASSESSING OFFICER THEN REFERRED TO THE DECISION OF HONBLE MA DRAS HIGH COURT IN VERIZON SINGAPORE PTE. LTD. VS ITO (SUPRA) UPTO PAGE 16 AND THEN RELIANCE WAS PLACED ON THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN NEW SKIES SATELLITE [2016] 68 TAXMANN.COM 8 (DEL.). THE ASSESSING OFFICER AT PAG E 18 IN PARA 11.2 WRONGLY ALLEGES THAT THE ASSESSEE IS OWNER OF THE PROCESS. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT HONBLE DELHI HIGH COURT HAS REVE RSED THE DECISION OF SPECIAL BENCH IN NEW SKIES SATELLITE BV WHICH IS REPORTED I N 68 TAXMANN.COM 8, AS THE ISSUE STANDS COVERED BY ASIA SATELLITE TELECOMMUNIC ATIONS CO. LTD. VS DCIT [2011] 332 ITR 340 (DEL.). HE ALSO REFERRED TO THE ORDER OF TRIBUNAL WHERE THE SAID ISSUE WAS ALLOWED ON REMAND. THEN THE LD.AR F OR THE ASSESSEE REFERRED TO PARA 11.3 ONWARDS OF THE ASSESSMENT ORDER WHEREIN R EFERENCE WAS MADE TO EXPLANATION 5 UNDER SECTION 9(1)(VI) OF THE ACT I.E . EQUIPMENT ROYALTY. OUR 11 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS ATTENTION WAS DRAWN TO VARIOUS PARAS OF THE ASSESSM ENT ORDER WHEREIN REFERENCE WAS MADE TO THE PROVISION OF ACT AND NOT TO DTAA. THE ISSUE STANDS CONCLUDED IN PARA 12 BY THE ASSESSING OFFICER WHICH READS AS UNDER:- 12. THEREFORE, THE PAYMENTS MADE TO THE FOREIGN TE LECOM OPERATORS/NON-RESIDENT COMPANIES FOR INTERNATIONAL CONNECTIVITY SOLUTIONS THROUGH IPLC/MPLS/IP/VPN LINES AND NETWORK QUALIFY AS ROYALTY UNDER THE DTAAS, AND ACCORDINGLY LIABLE TO BE TAXED UNDER ARTICLE 12 OF THE DTAA AS EQUIPMENT ROYALTY/PROCESS ROYALTY. 7. REFERRING TO THE SYNOPSIS FILED ON THE ISSUE RAI SED, THE LD.AR FOR THE ASSESSEE REFERRED TO PARA 2.2, WHICH READS AS UNDER :- 2.2 THE APPELLANT WOULD LIKE TO SUBMIT THAT THE CO NSIDERATION AMOUNT RECEIVED FOR PROVIDING BANDWIDTH SERVICES WOULD NOT BE TAXABLE AS EQUIPMENT ROYALTY OR PROCESS ROYALTY UNDER THE TAX TREATY. THE APPELLANT THROUGH ITS SUBMISSIONS IN SUBSEQUENT PARAGRAPHS LA YS EMPHASIS ON THE FOLLOWING KEY ARGUMENTS: (I) THE TRANSACTION DOES NOT RESULT IN EQUIPMENT RO YALTY UNDER THE TAX TREATY AS THERE IS NO USE OR RIGHT TO USE ANY INDUS TRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT BY THE CUSTOMER' AVAILING THE BANDWIDTH SERVICES. HENCE, DOES NOT FALL IN THE DEFINITION OF ROYALTY A S PER TAX TREATY. (II) THE TRANSACTION DOES NOT RESULT IN PROCESS ROY ALTY UNDER THE TAX TREATY AS THERE IS NO USE OF ANY PROCESS BY THE CUSTOMER A VAILING THE BANDWIDTH SERVICES. HENCE, DOES NOT FALL IN THE DEFINITION OF ROYALTY AS PER TAX TREATY. (III) THE EXPLANATIONS 5 AND 6 TO SECTION 9(1)(VI) OF THE ACT CANNOT BE READ INTO THE TAX TREATY FOR THE DEFINITION OF EQUIPMENT AND! OR PROCESS ROYALTY. FURTHER, THE TAX TREATY SPECIFICALLY DOES NOT INCLU DE 'TRANSMISSION BY SATELLITE, CABLE, OPTIC FIBER OR SIMILAR TECHNOLOGY ' IN THE DEFINITION OF ROYALTY UNDER THE TAX TREATY, WHEREAS OTHER TAX TRE ATIES (INCLUDING TREATIES ENTERED AFTER INSERTION OF EXPLANATIONS 5 AND 6 VIDE FINANCE ACT, 2012) DO SPECIFICALLY CAPTURE SUCH TRANSMISSIONS IN THE ROYALTY DEFINITION. 8. THEN RELIANCE WAS PLACED UPON THE SERIES OF CAS ES, WHICH ARE AS UNDER:- I. DIRECTORATE OF INCOME TAX VS NEW SKIES SATELLITE-BV (SUPRA) II. ASIA SATELLITE TELECOMMUNICATION CO. LTD. (SUPRA) 12 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS III. VERIZON COMMUNICATION INDIA PVT LTD. (ITA NO.2235/D EL/2019) DATED 30 TH MARCH 2019 IV. THAICOM PUBLIC CO. LTD. [2018] 96 TAXMANN.COM 577 9. THE LD. AR POINTED OUT THAT THE BANDWIDTH SERVIC ES PROVIDED BY THE ASSESSEE COMPANY WERE NOT EQUIPMENT/PROCESS ROYALTY AS PER ARTICLE 12 UNDER INDIA SINGAPORE TAX TREATY. HE STRESSED THAT PROVI SION OF BANDWIDTH SERVICES FOR DIGITAL TRANSMISSION OF DATA BY THE ASSESSEE DO ES NOT RESULT IN USE OF ANY EQUIPMENT OR PROCESS BY THE CUSTOMER. HENCE, THE C ONSIDERATION RECEIVED FOR SERVICES DOES NOT FALL IN THE DEFINITION OF ROYALT Y UNDER THE TAX TREATY. THE ASSESSING OFFICER HAD MADE PASSING REFERENCE TO THE DEFINITION UNDER ARTICLE 12 OF THE DTAA. THEN HE TOOK US TO THE DECISION OF HO NBLE DELHI HIGH COURT IN NEW SKIES SATELLITE (SUPRA), WHEREIN IT WAS HELD TH AT THE DEFINITION OF ROYALTY WILL CONTINUE TO HOLD THE FIELD FOR THE PURPOSE OF DOUBLE TAX AVOIDANCE TREATY AGREEMENT. HE ALSO STRESSED THAT THE ADMISSION OF S LP AGAINST ANY HIGH COURT DECISION DOES NOT RENDER THE SAME INOPERATIVE; DECI SION OF THE HONBLE DELHI HIGH COURT STILL REMAINS OPERATIVE. HE THEN PLACED STRONG RELIANCE ON THE RATIO LAID DOWN BY THE PUNE BENCH OF ITAT IN JOHN DEERE I NDIA (P.) LTD. VS DDIT [2019] 102 TAXMANN.COM 267. 10. IT WAS SUBMITTED THAT THE ASSESSEE WAS PROVIDIN G STANDARD SERVICES TO ITS CUSTOMERS AND SIMILAR SERVICES WERE BEING PROVIDED TO MANY CUSTOMERS. IT WAS FURTHER STRESSED BY HIM THAT THE UNILATERAL ACT OF AMENDMENT IN THE INCOME TAX ACT CANNOT BE READ INTO TAX TREATY, AS THE DEFI NITION OF ROYALTY UNDER THE INDIA SINGAPORE TREATY HAS NOT BEEN AMENDED. THE L D.AR FOR THE ASSESSEE 13 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS STRESSED THAT THE RELIANCE ON THE DECISION OF HONB LE MADRAS HIGH COURT IN M/S VERIZON COMMUNICATIONS SINGAPORE PVT. LTD. (SUPRA) IS MISPLACED AS THE SAME WAS NOT APPROVED BY THE HONBLE DELHI HIGH COURT IN ASIA SATELLITE TELECOMMUNICATION CO.LTD. (SUPRA). HE STRESSED THA T THE ISSUE WHICH NEEDS TO BE DECIDED IS WHETHER THE RECEIPTS ON ACCOUNT OF CO NNECTIVITY CHARGES WAS ROYALTY OR NOT UNDER ARTICLE 12 OF DTAA BETWEEN IND IA AND SINGAPORE. THE LD.AR FOR THE ASSESSEE FURTHER POINTED OUT THAT GRO UND OF APPEAL NOS. 1 & 2 WERE ON MERITS AND GROUND OF APPEAL NOS. 3 & 4 WERE ALTERNATE ISSUE RAISED BY THE ASSESSEE. HE FURTHER POINTED OUT THAT THE ISSU E IN GROUND OF APPEAL NO.5 WAS PRE-MATURE. 11. THE LD.DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW INCLUDING THE ASSESSING OFFICER AND THE DRP. 12. COMING TO THE APPEAL OF THE REVENUE, IT WAS POI NTED OUT THAT THE ONLY ISSUE WAS WHETHER THE LEVY OF INTEREST U/S 234B OF THE ACT WAS CONSEQUENTIAL OR NOT. THE LD.AR FOR THE ASSESSEE STATED THAT THE DR P HAD APPLIED THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN DIT VS G.E. PACKAGED POWER INC. [2015] 56 TAXMANN.COM 190 (DEL.) AND NO CONTRARY DE CISION WAS AVAILABLE. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL FILED BY THE ASS ESSEE FOR DIFFERENT ASSESSMENT YEARS IS AGAINST THE CHARGEABILITY OF AM OUNT RECEIVED FROM INDIAN CUSTOMERS FOR PROVIDING BANDWIDTH SERVICES OUTSIDE INDIA AS EQUIPMENT/PROCESS ROYALTY U/S 9(1)(VI) OF THE ACT A ND/OR ARTICLE 12(3) OF THE INDIA SINGAPORE TAX TREATY. THE ASSESSEE IS A TAX RESIDENT OF SINGAPORE AND 14 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS THE BANDWIDTH SERVICES ARE PROVIDED AS STANDARD SE RVICES WHEREIN THE CUSTOMER ENJOYS AN UNINTERRUPTED 24X7 SERVICE TO TR ANSMIT VOICE AND DATA AT STANDARD RATE OF RELIABILITY. DELIVERY OF BANDWIDT H SERVICE AT A PARTICULAR SPEED (SAY 2 MBPS) IS NOTHING BUT A CONTRACT TO DELIVER V OICE AND DATA AT A PARTICULAR VOLUME AND SPEED, IS THE CLAIM OF THE ASSESSEE. IN CASE NO SERVICE IS PROVIDED OR THERE IS DEFAULT OF REGULAR SUPPLY, THEN THERE IS NON-PAYMENT OF CONSIDERATION BY THE PAYEE. THE ASSESSEE CLAIMS TH AT SUCH RENDITION OF SERVICE USING AN EQUIPMENT/PROCESS AND THE CUSTOMER BEING O NLY A RECIPIENT OF SERVICE WOULD NOT ATTRACT EQUIPMENT/PROCESS ROYALTY, AS THE TRANSACTION WOULD NOT FALL WITHIN THE EXPRESSION USE OR RIGHT TO USE. MERE RECEIPT OF SERVICE USING EQUIPMENT UNDER THE CONTROL, POSSESSION AND OPERATI ON OF SERVICE PROVIDER WOULD ONLY BE TRANSACTION OF A SERVICE AND NOT TO USE OR RIGHT TO USE AN EQUIPMENT, AND WOULD NOT ATTRACT ROYALTY UNDER TH E ACT OR THE TAX TREATY. 14. THE REVENUE AUTHORITIES ARE OF THE VIEW THAT TH E CONSIDERATION RECEIVED BY THE ASSESSEE FALLS WITHIN THE DEFINITION OF ROYA LTY BOTH U/S 9(1)(VI) OF THE ACT AND ALSO UNDER PROVISIONS OF TAX TREATY. 15. WE FIND THAT THE SIMILAR ISSUE AROSE BEFORE THE HONBLE DELHI HIGH COURT IN ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. VS. D IRECTOR OF IT (2011) 232 ITR 340 (DEL), WHICH IN TURN HAS BEEN FOLLOWED IN DIT V S. (1) NEW SKIES SATELLITE BV (2) SHIN SATELLITE PUBLIC CO. LTD. (2016) 382 ITR 1 14 (DEL). THE ASSESSEE THEREIN WAS ENGAGED IN THE BUSINESS OF LEASE OF TR ANSPONDER OR ALLOCATION OF TRANSPONDER CAPACITY ON SATELLITE FOR DIGITAL TRANS MISSION SERVICES. THE ISSUE BEFORE THE HONBLE HIGH COURT (SUPRA) WAS WHETHER T HE AMOUNTS RECEIVED FROM 15 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS CUSTOMERS FOR AVAILING THE TRANSPONDER CAPACITY WAS CHARGEABLE TO TAX IN INDIA AS ROYALTY. THE HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO.LTD.(SUPRA) HELD THAT THE TRAN SACTION DOES NOT RESULT IN ROYALTY (EQUIPMENT OR PROCESS) UNDER SECTION 9(1) (VI) OF THE ACT (PRIOR TO AMENDMENT BY FINANCE ACT, 2012). IT WAS FURTHER HE LD BY THE HONBLE DELHI HIGH COURT IN NEW SKIES SATELLITE (SUPRA) THAT THE TRANSACTION DOES NOT RESULT IN ROYALTY (EQUIPMENT OR PROCESS) AS SECTION 9(1) (VI) OF THE ACT, PRIOR TO AMENDMENT BY FINANCE ACT, 2012, WAS PARI-MATERIA WITH THE DEFINITION OF ROYALTY AS PER THE TAX TREATY AND HENCE, THE DECI SION IN THE CASE OF ASIA SATELLITE (SUPRA) WAS BINDING AND REQUIRED TO BE FO LLOWED. 16. THE HONBLE DELHI HIGH COURT IN NEW SKIES SATEL LITE (SUPRA) HELD AS UNDER:- ....... THE FIRST DETERMINATIVE INTERPRETATION GIV EN TO THE WORD 'ROYALTY' IN ASIA SATELLITE, WHEN THE DEFINITIONS WERE IN FACT P ARI MATERIA (IN THE ABSENCE OF ANY CONTOURING EXPLANATIONS), WILL CONTI NUE TO HOLD THE FIELD FOR THE PURPOSE OF ASSESSMENT YEARS PRECEDING THE FINAN CE ACT, 2012 AND IN ALL CASES WHICH INVOLVE A DOUBLE TAX AVOIDANCE AGRE EMENT .. .[VIDE PARA 60} ......... IN ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. 'S CASE (SUPRA) THIS COURT HELD THAT INCOME FROM DATA TRANSMISSION SERVI CES WOULD NOT QUALIFY AS ROYALTY IN ORDER FOR IT TO BE TAXABLE UNDER THE ACT. THE COURT FIRST RECOGNIZED THAT THE DEFINITION OF ROYALTY IN THE SE CTION IS WITH RESPECT TO PERMISSION GRANTED TO USE THE RIGHT IN RESPECT OF T HE PATENT, INVENTION, PROCESS, ETC., ALL ESSENTIALLY FORMS OF INTELLECTUA L PROPERTY. THIS PERMISSION RESTRICTS ITSELF MERELY TO THE LETTING OF THE LICEN SED ASSET. THE PERMISSION DOES NOT GO SO FAR AS TO ALLOW ALIENATION OF THE AS SET ITSELF. THAT BEING SAID, IT IS NOT SO RESTRICTED AS TO QUALIFY AS A CASE WHE RE THE LICENSOR USES THE ASSET HIMSELF ALBEIT FOR THE PURPOSES OF HIS CUSTO MERS ESSENTIALLY THEREFORE, ASIA SATELLITE TELECOMMUNICATIONS CO. LT D. 'S CASE (SUPRA) HELD THAT THE PRESENCE OF CONTROL WAS A CRITICAL FACTOR IN ADJUDGING WHETHER THERE WAS 'USE' OF A PARTICULAR PROCESS .... [VIDE PARA 2 8]. 16 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS 17. THE SPECIAL LEAVE PETITION AGAINST THE DECISIO N OF DELHI HIGH COURT IN NEW SKIES SATELLITE (SUPRA) IS PENDING BEFORE THE H ONBLE SUPREME COURT; BUT THAT DOES NOT RENDER THE DECISION OF THE HONBLE DE LHI HIGH COURT INEFFECTIVE. FURTHER WE FIND DELHI BENCHES OF THE TRIBUNAL IS SE VERAL DECISIONS HAVE FOLLOWED THE DECISION OF HONBLE DELHI HIGH COURT A ND HAS HELD THAT THE RECEIPT FROM BAND WIDTH SERVICES DO NOT QUALIFY AS ROYALTY AS PER INDIA SINGAPORE TAX TREATY. RELIANCE IS PLACED ON VERIZON COMMUNICATI ONS SINGAPORE PTE LTD. VS. DDIT IN ITA NO.2235/DEL/2019 ORDER DATED 30.03.202 0. 18. FURTHER IN THAICOM PUBLIC CO.LTD. [2018] 96 TAX MANN.COM 577, THE DELHI BENCH OF THE TRIBUNAL HELD THAT DESPITE THE A MENDMENT IN THE ACT, INCOME FROM DIGITAL BROADCAST SERVICES THROUGH TRAN SPONDERS IS NOT ROYALTY AS PER INDIA THAILAND TREATY. SIMILAR PROPOSITIONS HA VE BEEN LAID DOWN IN VARIOUS OTHER DECISIONS OF TRIBUNAL. 19. THE PUNE BENCH OF THE TRIBUNAL IN JOHN DEERE IN DIA PVT. LTD. VS DDIT IN ITA NOS.905 TO 908/PUN/2015 REPORTED IN [2019] 102 TAXMANN.COM 267, ORDER DATED 23.01.2019 VIDE PARA 100 RELIED ON DECISION OF HONBLE DELHI HIGH COURT IN ASIA SATELLITE TELECOMMUNICATIONS CO. LTD (SUPRA ) AND HELD THAT THERE WAS NO LEASE OF EQUIPMENT BUT ONLY USE OF BROADBAND FA CILITIES. APPLYING THE SAID RATIO TO THE FACTS OF THE PRESENT CASE, WE HOLD THA T IN THE CASE OF ASSESSEE, THERE IS NO QUESTION OF ANY EQUIPMENT ROYALTY WHERE THE A SSESSEE WAS ONLY USING LEASE LINES FOR TRANSMITTING DATA AND IT CANNOT BE SAID TO BE A CASE OF EQUIPMENT ROYALTY. THE PUNE BENCH OF THE TRIBUNAL VIDE PARA 98 RELIED TO THE DECISION OF T-3 ENERGY SERVICES INDIA PVT.LTD. VS J CIT, ITA NO.826/PUN/2015, 17 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS RELATING TO ASSESSMENT YEAR 2010-11, ORDER DATED 02 .02.2018 (SUPRA) WHICH IN TURN, HAD RELIED ON THE RATIO LAID DOWN BY THE HON BLE DELHI HIGH COURT IN NEW SKIES SATELLITE BV (SUPRA) AND HELD THAT CONSIDERAT ION RECEIVED FOR LEASE LINE CHARGES DOES NOT CONSTITUTE PROCESS ROYALTY. THE R ELEVANT PARA 98 READS AS UNDER:- 98. WE FIND THAT OBJECTIONS RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ARE NOT FULLY CORREC T. THE ASSESSING OFFICER HAD HELD IT TO BE A CASE OF BOTH EQUIPMENT AND PROC ESS ROYALTY. AS FAR AS THE ISSUE OF PROCESS ROYALTY IS CONCERNED, ADMITTED LY, THE ISSUE STANDS COVERED BY THE RATIO LAID DOWN BY THE TRIBUNAL IN M /S. T-3 ENERGY SERVICES INDIA PVT. LTD. VS. JCIT (SUPRA), WHICH IN TURN, HA D RELIED ON THE RATIO LAID DOWN IN DIT VS. (1) NEW SKIES SATELLITE BV (2) SHIN SATELLITE PUBLIC CO. LTD. (SUPRA). THE TRIBUNAL AFTER REFERRING TO THE DECIS ION IN DIT VS. (1) NEW SKIES SATELLITE BV (2) SHIN SATELLITE PUBLIC CO. LT D. (SUPRA) IN PARAS 17 TO 20 HAD FURTHER VIDE PARAS 21 AND 22 HELD THAT WHERE TH E TERM ROYALTY UNDER DTAA BETWEEN INDIA AND USA WAS NOT AMENDED, THEN TH E ASSESSEE WAS NOT LIABLE TO WITHHOLD TAX ON PAYMENTS MADE TO ITS ASSOCIATED ENTERPRISES ON ACCOUNT OF LEASE LINE CHARGES AND IN TURN, RELYI NG ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE HONBLE HIGH COURT IN DIT VS. WNS UK LTD. (2013) 214 TAXMAN 317 (BOM), HELD AS UNDER:- 21. IN THE PRESENT CASE ALSO, THOUGH DEFINITION OF ROYALTY UNDER THE ACT HAD BEEN AMENDED, BUT THE TERM ROYALTY UN DER THE DTAA BETWEEN INDIA AND USA IS NOT AMENDED. IN THE ABSEN CE OF THE SAME, WE HOLD THAT IN VIEW OF THE DEFINITION OF RO YALTY UNDER DTAA, THE ASSESSEE IS NOT LIABLE TO WITHHOLD TAX ON THE P AYMENTS MADE TO ITS ASSOCIATED ENTERPRISE ON ACCOUNT OF LEASE LINE CHARGES. WE ARE NOT GOING INTO DIFFERENT DECISIONS OF THE TRIBUNAL ON THIS ASPECT, IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE HIGH COU RT OF DELHI, WHICH THOUGH IS NOT JURISDICTIONAL HIGH COURT BUT THE ISS UE RAISED IN THE SAID APPEAL IS SIMILAR TO THE ISSUE RAISED BEFORE U S IN THE PRESENT APPEAL. WE MAY ALSO POINT OUT THAT THE HONBLE HIG H COURT OF DELHI HAD ALSO TAKEN NOTE OF THE RATIO LAID DOWN BY THE H ONBLE BOMBAY HIGH COURT IN CIT VS. SEIMENS AKTIONGESELLSCHAFT (S UPRA), WHICH IN TURN, HAS APPLIED THE RATIO OF THE HON'BLE SUPREME COURT OF CANADA IN R VS. MELFORD DEVELOPMENTS INC., 82 DTC 6281 (19 82) AND OBSERVED AS UNDER:- 'THE RATIO OF THE JUDGMENT, IN OUR OPINION, WOULD M EAN THAT BY A UNILATERAL AMENDMENT IT IS NOT POSSIBLE FOR ONE NAT ION WHICH IS PARTY TO AN AGREEMENT TO TAX INCOME WHICH OTHERWISE WAS N OT SUBJECT TO 18 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS TAX. SUCH INCOME WOULD NOT BE SUBJECT TO TAX UNDER THE EXPRESSION 'LAWS IN FORCE'. . . WHILE CONSIDERING THE DOUBLE TAX AVOIDANCE AGREEMEN T THE EXPRESSION 'LAWS IN FORCE' WOULD NOT ONLY INCLUDE A TAX ALREADY COVERED BY THE TREATY BUT WOULD ALSO INCLUDE ANY OT HER TAX AS TAXES OF A SUBSTANTIALLY SIMILAR CHARACTER SUBSEQUENT TO THE DATE OF THE AGREEMENT AS SET OUT IN ARTICLE I(2). CONSIDERING T HE EXPRESS LANGUAGE OF ARTICLE I(2) IT IS NOT POSSIBLE TO ACCE PT THE BROAD PROPOSITION URGED ON BEHALF OF THE ASSESSEE THAT TH E LAW WOULD BE THE LAW AS APPLICABLE OR AS DEFINE WHEN THE DOUBLE TAXATION AVOIDANCE AGREEMENT WAS ENTERED INTO.' 22. IN THE FACTS OF THE CASE BEFORE THE HONBLE BOM BAY HIGH COURT THE WORD ROYALTY WAS NOT DEFINED IN GERMAN TREATY AND IN THAT CONTEXT, THE HONBLE BOMBAY HIGH COURT HELD THAT TH EY WERE UNABLE TO ACCEPT THE ASSESSEES CONTENTION THAT LAW APPLIC ABLE WOULD BE LAW WHICH EXISTED AT THE TIME THE DTAA WAS ENTERED INTO. IN THE FACTS OF THE CASE BEFORE US, THE WORD ROYALTY IS DEFINED IN DTAA ENTERED INTO BETWEEN USA AND INDIA AND APPLYING THE RATIO IN CIT VS. SEIMENS AKTIONGESELLSCHAFT (SUPRA), WE HOLD THA T ONCE A TERM HAS BEEN DEFINED IN DTAA, THEN THE SAID TERM IS TO BE APPLIED UNLESS AND UNTIL THE PARTIES TO THE DTAA AMENDS THE SAME. THE HONBLE HIGH COURT OF DELHI IN DIT VS. NOKIA NETWORKS OY (S UPRA) HAD APPLIED THE PROPOSITION LAID DOWN BY THE HONBLE BO MBAY HIGH COURT IN CIT VS. SEIMENS AKTIONGESELLSCHAFT (SUPRA) AND HELD THAT THE AMENDMENTS COULD NOT BE READ INTO THE TREATY. UNILATERAL AMENDMENT BY THE INDIAN GOVERNMENT TO THE TERM ROY ALTY BY WAY OF AMENDMENT TO SECTION 9(1)(VI) OF THE ACT CANNOT BE EXTENDED TO THE MEANING OF THE TERM UNDER DTAA. HENCE, WE HOLD REL IANCE OF LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON MUMBAI BENCH OF TRIBUNAL IN VIACOM 18 MEDIA (P.) LTD. VS. ACIT (SUPRA) AND BANGALORE BENCH OF TRIBUNAL IN VODAFONE SOUTH LTD. VS. DDIT (IT) AND ALSO MUMBAI BENCH OF TRIBUNAL IN C.U. INSPECTIO NS (I) (P) LTD. VS. DCIT (SUPRA) ARE NOT TO BE APPLIED IN VIEW OF THE I SSUE BEING SETTLED BY THE HONBLE HIGH COURT OF DELHI. 23. THE ASSESSEE ON THE OTHER HAND, HAS RELIED ON T HE DECISION IN WNS NORTH AMERICA INC. VS. ADIT (SUPRA) I.E. DECISI ON OF MUMBAI BENCH OF TRIBUNAL, WHICH HAS BEEN APPROVED BY THE H ONBLE HIGH COURT IN DIT VS. WNS UK LTD. (2013) 214 TAXMAN 317 (BOM). THE ISSUE BEFORE THE HONBLE HIGH COURT OF DELHI WAS IN THE HANDS OF RECIPIENT OF LEASE LINE CHARGES. THE ASSESSEE THER EIN HAD RECOVERED INTERNAL TELECOMMUNICATION CHARGES FROM WNS CHARGES AND THE TRIBUNAL HELD THE AMOUNT IN QUESTION WAS RECEIVED B Y THE SAID ASSESSEE AS REIMBURSEMENT OF LEASE LINE CHARGES AND WOULD NOT QUALIFY EITHER AS ROYALTY OR AS INCOME ATTRIBUTAB LE TO PE IN INDIA AND HENCE, IT WAS HELD THAT THERE WAS NO INCOME EAR NED BY THE 19 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS ASSESSEE. THE QUESTION BEFORE THE HONBLE HIGH COU RT WAS WHETHER THE AMOUNT RECEIVED ON ACCOUNT OF REIMBURSEMENT OF LEASE LINE CHARGES WOULD QUALIFY AS ROYALTY UNDER ARTICLE 12 OF INDIA UK TREATY AND THE SECOND QUESTION WAS IN RESPECT OF CH ARGES BEING ATTRIBUTABLE TO PE IN INDIA. THE HONBLE HIGH COUR T VIDE PARA 5 HAD NOTED THE DECISION OF TRIBUNAL BUT HAD HELD THAT SI NCE THE DECISION OF TRIBUNAL WAS BASED ON THE FINDINGS OF FACT, THERE W AS NO REASON TO ENTERTAIN QUESTION NOS.4 AND 5. 24. APPLYING THE PRINCIPLE LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN DIT VS. NEW SKIES SATELLITE BV (SUPRA), WE HOLD THAT WHERE THE PROVISIONS OF DTAA OVERRIDES THE PROVISIONS OF INCOME-TAX ACT AND THE DEFINITION OF ROYALTY HAVING NOT BEEN UND ERGONE ANY AMENDMENT IN DTAA, THE ASSESSEE WAS NOT LIABLE TO W ITHHOLD TAX ON THE LEASE LINE CHARGES PAID BY IT. THE AMENDED PRO VISIONS OF SECTION 9(1)(VI) OF THE ACT BROUGHT INTO FORCE BY THE FINAN CE ACT, 2012 ARE APPLICABLE TO DOMESTIC LAWS AND THE SAID AMENDED DE FINITION CANNOT BE EXTENDED TO DTAA, WHERE THE TERM HAS BEEN DEFINE D ORIGINALLY AND NOT AMENDED. 20. NOW COMING TO THE NEXT CONNECTED PLEA OF THE ASSES SEE THAT WHEREIN THE DEFINITION OF ROYALTY HAS NOT BEEN AMENDED IN THE TAX TREATY, IS THE RECEIPT TAXABLE AS ROYALTY? 21. WE FURTHER HOLD THAT THE AMENDMENT, IF ANY TO T HE INCOME TAX ACT CANNOT BE APPLIED TO THE TAX TREATY. THE HONBLE D ELHI HIGH COURT IN DIT & OTHERS VS NOKIA NETWORKS OY & OTHERS [2013] 358 ITR 259 (DEL) HELD AS UNDER:- THE ASSESSEE HAS OPTED TO BE GOVERNED BY THE TREAT Y AND THE LANGUAGE OF THE SAID TREATY DIFFERS FROM THE AMENDED SECTION 9 OF THE ACT. IT IS CATEGORICALLY HELD IN CIT VS SIEMENS AKTIONGESELLSC HAFT 310 ITR 320 (BOM) THAT THE AMENDMENTS CANNOT BE READ INTO THE TREATY. 22. THE HONBLE BOMBAY HIGH COURT IN CIT VS RELIANC E INFOCOMM LTD. INCOME TAX APPEAL NO.1395 OF 2016 DATED 05.02.2019 HELD THAT MERE 20 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS AMENDMENTS IN THE ACT WOULD NOT OVERRIDE THE PROVIS IONS OF DOUBLE TAX AVOIDANCE AGREEMENT. 23. IN THE ABOVE-SAID FACTS AND CIRCUMSTANCES OF T HE CASE WHERE THE TAX TREATY BETWEEN INDIA SINGAPORE SPECIFICALLY DOES NO T INCLUDE TRANSMISSION BY SATELLITE, CABLE, OPTIC FIBER OR SIMILAR TECHNOLOGY IN THE DEFINITION OF ROYALTY UNDER THE TAX TREATY AND ALSO WHERE THE TAX TREATY HAD NOT UNDERGONE ANY AMENDMENT, THE PROVISIONS OF DTAA BEING MORE BENEFI CIAL TO THE ASSESSEE ARE ATTRACTED AND THE ASSESSEE IS NOT LIABLE TO BE TAXE D ON THE AMOUNT RECEIVED FROM INDIAN CUSTOMERS FOR THE PROVISION OF BANDWIDT H SERVICES OUTSIDE INDIA. 24. BEFORE PARTING, WE MAY ALSO REFER TO THE DECISI ON OF MADRAS HIGH COURT IN VERIZON COMMUNICATION INDIA PVT.LTD. (SUPRA), WHICH HAS BEEN RELIED UPON BY THE ASSESSING OFFICER AND THE LD. DR FOR THE REVENU E. WE FIND THAT THE ISSUE HAS BEEN ADDRESSED BY THE PUNE BENCH OF THE TRIBUNA L IN T-3 ENERGY SERVICES INDIA PVT.LTD. (SUPRA) AND RELIANCE WAS PLACED ON D ECISION OF HONBLE DELHI HIGH COURT IN NEW SKIES SATELLITE (SUPRA) AND IT WAS HEL D AS UNDER:- 3.22. .THE HONBLE HIGH COURT THEREAFTER TOOK N OTE OF VARIOUS DECISIONS ON THE ISSUE INCLUDING THAT OF HONBLE HI GH COURT OF MADRAS IN VERIZON COMMUNICATIONS SINGAPORE PTE. LTD. (SUPRA) AND DECLINED TO CONCLUSIVELY DETERMINE OR RECORD A FINDING AS TO WH ETHER AMENDMENT TO SECTION 9(I)(VI) OF THE ACT INDEED WAS CLARIFACTORY AS THE REVENUE SUGGESTED OR PROSPECTIVE, GIVE WHAT ITS NATURE MAY TRULY BE. THE HONBLE HIGH COURT FURTHER COMMENTED THAT THE ISSUE OF TAXABILITY OF I NCOME OF ASSESSEE MAY BE RESOLVED WITHOUT REDRESSAL OF ABOVE QUESTION PUR ELY BECAUSE THE ASSESSEE DID NOT PRESS THE SAID LINE OF ARGUMENT AN D HAD INSTEAD STATED THAT ULTIMATE TAXABILITY OF INCOME SHALL REST ON TH E INTERPRETATION OF TERMS OF DTAA. 21 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS 25. ANOTHER OBJECTION WHICH HAS BEEN RAISED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS RELIANCE ON SPECIAL BENCH DECI SION OF TRIBUNAL IN THE CASE OF NEW SKIES SATELLITE (SUPRA). THE SAID RELIANCE IS MISPLACED AS THE SPECIAL BENCH DECISION HAS BEEN SET ASIDE AND REFERRED BACK BY HONBLE DELHI HIGH COURT VIDE ORDER DATED 17.02.2011 FOR FRESH ADJUDIC ATION RELAYING ON THE PRINCIPLE LAID DOWN BY THE HONBLE DELHI HIGH COURT IN ASIA SATELLITE TELECOMMUNICATION (SUPRA). ON REMAND BACK, TRIBUNA L FOLLOWING THE DIRECTIONS OF THE HONBLE DELHI HIGH COURT AND IN LIGHT OF THE PRINCIPLES LAID DOWN IN ASIA SATELLITE TELECOMMUNICATIONS (SUPRA) HAD ALSO SUBSE QUENTLY RULED IN FAVOUR VIDE ITS ORDER DATED 11.03.2011. 26. IN VIEW OF THE ABOVE SAID FACTS, WE HOLD THAT T HERE IS NO MERIT IN THE ORDERS PASSED BY THE AUTHORITIES BELOW AND THE SAME ARE REVERSED. THE ASSESSEE COMPANY IS A TAX RESIDENT OF SINGAPORE, WH ICH IS PROVIDING BAND WIDTH SERVICES TO THE VARIOUS INDIAN TELECOM OPERATORS LI KE BHARTI AIRTEL IN INDIA AND THE SERVICES ARE BEING PROVIDED OUTSIDE INDIA AND T HE CONSIDERATION RECEIVED BY THE ASSESSEE COMPANY IS NOT TAXABLE AS ROYALTY IN VIEW OF THE BENEFICIAL PROVISIONS OF DTAA BETWEEN INDIA AND SINGAPORE UNDE R WHICH THE DEFINITION OF ROYALTY HAS NOT BEEN AMENDED. THUS, GROUND OF APP EAL NOS. 1 & 2 RAISED BY THE ASSESSEE ARE ALLOWED. 27. GROUND OF APPEAL NOS. 3 & 4 RAISED BY THE ASSES SEE BEING ALTERNATE ISSUE BECOME ACADEMIC IN NATURE AND ARE DISMISSED. 28. THE ISSUE RAISED IN GROUND OF APPEAL NO.5 BY TH E ASSESSEE IS PREMATURE, HENCE DISMISSED. 22 ITA NOS.1548/DEL/2015 & OTHERS ASSESSMENT YEARS 20 11-12 & OTHERS 29. THE FACTS IN ITA NO.1548/DEL/2015 ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NOS. 286/DEL/2016 & 3020/DEL/2017 AND OUR DECIS ION IN ITA NO.1548/DEL/2015 SHALL APPLY MUTATIS MUTANDI TO THE SAME. 30. THE ONLY ISSUE RAISED IN THE REVENUES APPEAL I S AGAINST THE LEVY OF INTEREST U/S 234B OF THE ACT AND WHETHER SAID LEVY IS CONSEQUENTIAL OR NOT. THE ISSUE STANDS COVERED BY THE DECISION OF HONBLE DEL HI HIGH COURT IN DIT & OTHERS VS NOKIA NETWORKS OY & OTHERS (SUPRA). THE ASSESSEE IS A TAX RESIDENT OF SINGAPORE AND PROVISIONS OF LEVY OF INTEREST U/S 234B OF THE ACT ARE NOT ATTRACTED. THE GROUNDS OF APPEAL RAISED BY REVENUE ARE DISMISSED. 31. IN THE RESULT, ALL APPEALS FILED BY THE ASSESSE E ARE ALLOWED AND APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2020. SD/- SD/- (N.K.BILLAIYA) (SUSHMA CHOWLA) )* / ACCOUNTANT MEMBER ! / VICE PRESIDENT / DATED : 30 TH SEPTEMBER, 2020 *AMIT KUMAR* 720,489:94; COPY OF THE ORDER IS FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT 3. <4 = > / THE CIT(A) 4. ? <4 / THE PR. CIT 5. 6. 9@A0,4, ( ( / DR, ITAT, DELHI A-B; GUARD FILE. 7 / BY ORDER , 1940,4 // TRUE COPY // C DE*F , ( ASSISTANT REGISTRAR, ITAT, DELHI