Bharti Airtel Ltd., Gurgaon V. ITO (TDS), New Delhi

ITA 3595/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6494 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-01-2016
• Assessment Year: misc
• Appeal Filed On: 09-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUJ ARORA
• Assessee Lawyers: MANISHA AGGARWALADV
• Keywords: Capital asset; Business income; Double taxation relief; Deemed to accrue or arise in india; Retrospective amendment; Additional evidence; Permanent establishment; Question of law; Non-deduction of tax
• Section: 206AA; 5(2); 201(1)

Judgement Text

ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NOS. 3593 TO 3596/DEL/2012 ASSESSMENT YEARS : 2008 - 09 TO 2011 - 12 BHARTI AIRTEL LIMITED, VS. ITO(TDS), AIRTEL CENTRE WARD 1(1), INTERNATIONAL TAXATION, N EW DELHI PLOT NO. 16, UDYOG VIHAR, PHASE-IV, GURGAON 122015 (PAN: AAACB2894G) (APPELLANT) (RESPONDENT) AND ITA NOS. 4076 TO 4079/DEL/2012 ASSESSMENT YEARS : 2008 - 09 TO 2011 - 12 ITO(TDS), VS. B HARTI AIRTEL LIMITED, WARD 1(1), INTERNATIONAL TAXATION, AIRTEL CEN TRE, NEW DELHI PLOT NO. 16, UDYOG VIHAR, PHASE IV, GURGAON-122015 (APPELLANT) (RESPONDENT) ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 2 ASSESSEE BY : SH. S.K. TULSIYAN, ADV., SH. SASHI TULSIYAN, MS. ABHA AGGARWAL, ADV., & MS. MANISHA AGGARWAL,ADV. DEPARTMENT BY : SH. ANUJ ARORA, CIT(DR) ORDER PER J. SUDHAKAR REDDY, AM: THESE ARE THE CROSS APPEALS AGAINST THE COMMON ORDE R PASSED BY THE LD. CIT(A)-XXIX, NEW DELHI DATED 21.5.2 012 IN APPEAL NO. 83 TO 86/11-12 FOR ASSESSMENT YEARS 2008 -09, 2009-10, 2010-11 & 2011-12. AS ISSUES ARISING IN T HESE APPEALS ARE COMMON, FOR THE SAKE CONVENIENCE THEY WERE HEAR D TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE BRIEF FACTS OF THE CASE ARE: 2.1 THE ASSESSEE M/S BHARTI AIRTEL LTD. IS A COMPANY AND IS A LEADING TELECOM SERVICE PROVIDER IN INDIA. IT IS ALSO A GLOBAL TELECOMMUNICATION COMPANY HAVING OPERATIONS IN SEVE RAL COUNTRIES. IT IS ENGAGED INTERNATIONALLY IN THE BUSINESS OF PROVIDING CELLULAR TELEPHONE FACILITIES TO SUBSCRIB ERS. THE DEPARTMENT OF TELECOMMUNICATION, GOVT. OF INDIA HAS GRANTED THE LICENSE TO THE ASSESSEE COMPANY FOR OPERATING I T SERVICES IN CERTAIN SPECIFIED CIRCLES. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 3 THE FACTS LEADING TO THE ASSESSMENT ARE BROUGHT OUT AT PARA NO. 4.2 TO 4.7 OF THE LD. CIT(A)S ORDER AT PAGES 7 TO 9. THIS IS BELOW EXTRACTED FOR READY REFERENCE:- 4.2 EARLIER, IN RESPECT OF DOMESTIC PART OF BUSINE SS OF THE ASSESSEE, DCIT, CIRCLE 49, NEW DELHI, PASSED AN ORDER UNDER SECTION 201(1)/201(1A)OF THE INCOME-TAX . ACT, 1961 FOR THE FINANCIAL YEARS 1995-96 TO 2002- 03 ON 26-03-2004, HOLDING THAT THE PAYMENT MADE BY THE ASSESSEE TO MTNL ON ACCOUNT OF INTERCONNECTION CHARGES, PORT/ACCESS CHARGES WAS 'FEES FOR TECHNICA L SERVICES' AND TAX. WAS REQUIRED TO BE DEDUCTED BY T HE APPELLANT U/S. 194J THERE FROM. SINCE MTNL HAD ALREADY FILED RETURN OF INCOME FOR THE AFORESAID FI NANCIAL YEAR, DECLARING RELEVANT AMOUNT RECEIVED FROM THE APPELLANT ON ACCOUNT OF INTERCONNECTION AND PORT/AC CESS CHARGES AS INCOME AND HAD PAID TAX THEREON, THE DCI T, CIRCLE 49, NEW DELHI DID NOT RAISE ANY DEMAND UNDER SECTION 201(1) ON THE APPELLANT FOR THE TAX IT HAD ALLEGEDLY NOT DEDUCTED, BUT LEVIED INTEREST U/S 201 (1 A) OF THE ACT FOR THE ALLEGED DEFAULT IN NOT DEDUCT ING SUCH TAXES FOR THE PERIOD OF DEFAULT. 4.3 THE APPELLANT FILED APPEAL AGAINST THE ORDER OF DCIT, CIRCLE 49, NEW DELHI BEFORE THE CIT-(A), NEW DELHI. THE CIT (A), RELYING ON THE DECISION OF HON' BLE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 4 MADRAS HIGH COURT IN THE CASE OF M/S SKYCELL COMMUNICATION LTD: 251 ITR 253, DELETED THE INTEREST LEVIED U/S 201(1A) ON THE GROUND THAT THE INTERCONNECTION/PORT ACCESS CHARGES PAID BY THE APPELLANT TO MTNL WERE NOT IN THE NATURE OF 'FEE FOR TECHNICAL SERVICES' UNDER SECTION 194J READ WITH EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. THE REVENUE PREFERRED APPEAL AGAINST THE ORDER OF THE C IT (A) BEFORE THE ITAT, WHICH WAS DISMISSED. 4.4 THEREUPON, THE REVENUE FILED APPEAL BEFORE THE DELHI HIGH COURT. THE COURT WHILE EXAMINING THE SCO PE OF THE DEFINITION OF 'FEE FOR TECHNICAL SERVICES' I N EXPLANATION 2 TO SECTION 9(1 )(VII) OF THE ACT, OBS ERVED THAT THE EXPRESSION 'TECHNICAL SERVICES' TAKES COLO UR FROM THE EXPRESSIONS 'MANAGERIAL SERVICES' AND 'CONSULTANCY SERVICES' WHICH NECESSARILY INVOLVE A HUMAN ELEMENT. SINCE THE SERVICES RENDERED QUA INTERCONNECTION/PORT ACCESS DID NOT INVOLVE ANY HUM AN INTERFACE, THE SAME COULD NOT, THEREFORE, BE REGARD ED AS 'TECHNICAL SERVICES' AS CONTEMPLATED UNDER SECTI ON 194J OF THE SAID ACT. ACCORDINGLY, THE REVENUE'S AP PEAL WAS DISMISSED. THE DECISION HAS BEEN REPORTED IN 31 9 ITR 139. THE REVENUE ASSAILED THE ORDER PASSED BY T HE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 5 DELHI HIGH COURT BY WAY OF SPECIAL LEAVE PETITION (S LP) BEFORE THE SUPREME COURT. 4.5 THE SUPREME COURT, VIDE ORDER DATED 12/08/2010, IN SLP NO. 16452 OF2009 WHILE AGREEING IN PRINCIPLE WITH THE AFORESAID OBSERVATION OF THE DELHI HIGH CO URT REGARDING INVOLVEMENT / PRESENCE OF HUMAN ELEMENT I N ORDER FOR 'TECHNICAL SERVICES' TO BE SAID TO HAVE B EEN RENDERED IN TERMS OF EXPLANATION 2 TO SECTION 9(1 ) (VII) OF THE ACT, SET-ASIDE THE MATTER AND DIRECTED THE ACIT(TDS), GURGAON TO DECIDE WHETHER THE PROCESS OF CARRIAGE OF CALLS REQUIRES MANUAL INTERVENTION OR N OT, BY EXAMINING TECHNICAL EXPERTS FROM THE SIDE OF THE DEPARTMENT, ALLOWING OPPORTUNITY TO THE APPELLANT F OR CROSS EXAMINATION. 4.6 IN THE SET ASIDE PROCEEDINGS, STATEMENTS OF MR. ASHOK MITTAL AND MR. TANAY KRISHNA, FROM C-DOT, WER E RECORDED BY THE ACIT (TDS), GURGAON ON 29.09.2010. MR. TANAY KRISHNA WAS CROSS-EXAMINED BY THE REPRESENTATIVE OF THE APPELLANT ON 04.10.2010. MR. TANAY KRISHNA WAS ALSO RE-EXAMINED ON 04.10.201 0 BY THE DEPARTMENT. THE APPELLANT ALSO SUBMITTED EVIDENCE BY WAY OF OPINION, DATED 14.12.2010, OF MR . G.S. GROVER, EX-MEMBER, TELECOM COMMISSION. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 6 SUBSEQUENTLY, THE ACIT (TDS), GURGAON, VIDE ORDER DATED, 03.01.2011, HELD THAT AS THERE WAS HUMAN INTERVENTION IN INSTALLING, MONITORING OF INFRASTRU CTURE ETC., THE SERVICES PROVIDED BY BSNL/ MTNL TO THE APPELLANT WERE COVERED WITHIN THE MEANING OF 'TECHNICAL SERVICES' AND TAX OUGHT TO HAVE BEEN DEDUCTED THEREFROM U/S 194J OF THE ACT. THE SAID OR DER OF PASSED BY ACIT (TDS), GURGAON IS CHALLENGED BY T HE ASSESSEE IN APPEAL. 4.7 PURSUANT TO THE AFORESAID ORDER, THE ACIT(TDS), GURGAON, VIDE LETTER DATED 8TH FEBRUARY, 2011, SENT INFORMATION TO THE INCOME-TAX OFFICER, TDS WARD 1(1 ), INTERNATIONAL TAXATION, NEW DELHI SO AS TO EXAMINE THE SIMILAR ISSUE INVOLVED IN INTERNATIONAL PART OF BUS INESS OF THE ASSESSEE. ON RECEIPT OF THE AFORESAID LETTER , THE ITO, TDS WARD 1(1), INTERNATIONAL TAXATION, NEW DEL HI, ISSUED SHOW CAUSE NOTICE, DATED 31ST MARCH, 2011, REQUIRING THE APPELLANT TO SHOW CAUSE AS TO WHY THE APPELLANT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT UNDER SECTION 201 (1) FOR FAILURE TO DEDUCT TAX AT SOURCE U/S 195 OF THE ACT IN RESPECT OF INTER CONNECTION CHARGES PAID BY THE APPELLANT TO VARIOUS FOREIGN TELECOM OPERATORS. THE ASSESSING OFFICER, V IDE ORDER DATED 12TH JANUARY, 2012, PASSED UNDER SECTIO N ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 7 201(1)/201(1A) OF THE ACT, WHICH IS IMPUGNED IN THE PRESENT APPEAL, HOLDING THEREIN THAT INTERCONNECT CHARGES PAID BY THE APPELLANT TO FOREIGN TELECOM OPERATORS WERE IN THE NATURE OF FEE FOR TECHNICAL SERVICES UNDER SECTION 9(1)(VII) AND ALTERNATIVELY, ROYALTY FOR USE OF PROCESS UNDER SECTION 9(1)(VI), ON WHICH TAX WAS DEDUCTIBLE UNDER SECTION 195 OF THE A CT AND THEREFORE THE APPELLANT WAS TO BE TREATED AS AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) FOR FAILUR E TO WITHHOLD TAX UNDER SECTION 195 OF THE ACT FROM THE IMPUGNED PAYMENTS. 2.2 THE AO HELD THAT INTER-CONNECT USAGE CHARGES (H EREINAFTER REFERRED IUC) PAID BY THE ASSESSEE TO THE FOREIG N TELECOM OPERATOR (HEREINAFTER REFERRED AS FTO), IN THE CO URSE OF CARRYING OUT ITS BUSINESS AS AN INTERNATIONAL LONG DISTANCE (HEREINAFTER REFERRED AS ILD) SERVICE PROVIDER ARE IN THE NATUR E OF FEE FOR TECHNICAL SERVICES (FTS) U/S. 9(1)(VII) OF THE IN COME TAX ACT, 1961 (HEREINAFTER REFERRED AS ACT) OR IN THE ALT ERNATIVE, IN THE NATURE OF ROYALTY U/S. 9(1)(VI) OF THE ACT. HENCE, HE HELD THAT THE INCOME FROM THE IUC IS DEEMED TO ACCRUE TO A RISE IN INDIA IN THE CASE OF FTO. THE AO HELD THAT THE ASSESS EE COMPANY WAS REQUIRED TO DEDUCT TAX AT SOURCE FROM SUCH PAYM ENTS U/S. 195 OF THE ACT AND FOR THE FAILURE TO DO SO, THE AS SESSEE COMPANY WAS LIABLE U/S. 201 OF THE ACT. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 8 2.3 THE REASONS/GROUNDS GIVEN BY THE AO FOR HOLDI NG THE AMOUNT OF IUC CHARGES, PAID BY THE ASSESSEE TO FTO ARE IN THE NATURE OF FTS/ ROYALTY ARE MENTIONED IN PARAS 6(H) OF THE ASSESSMENT ORDER. THIS PARA IS EXTRACTED BELOW FOR READY REFERENCE:- (I) THE ASSESSEE COMPANY REPEATEDLY SUBMITTED THAT THE FACILITY PROVIDED BY OTHER OVERSEAS SERVICE PROVIDE RS FOR INTERNATIONAL INTERCONNECTION SERVICES ARE BEING PR OVIDED THROUGH AUTOMATIC MACHINERY OR EQUIPMENTS AUTOMATIC ALLY BUT FAILED TO COUNTER THE OPINION OF THE EXPERTS WH O HAVE CATEGORICALLY ESTABLISHED THE HUMAN INTERVENTION WH ICH TAKES PLACE IN AREAS RIGHT FROM SETTING UP OF CAPACITY FO R INTERCONNECT AND FURTHER IN TESTING, COMMISSIONING OF INTERCONNECT CIRCUIT, INTERCONNECT PERFORMANCE STAN DARDS, INTERCONNECT CAPACITY, NETWORK INTERFACE, INTERCONN ECT LINK ARCHITECTURE, CONFIGURATION OF SYSTEM, TESTING, INT ERCONNECT TESTING, PILOT TESTING, OPERATION AND MAINTENANCE O F HARDWARE/SOFTWARE, SUPERVISION/MONITORING THE FUNCT IONING OF INTERCONNECT NETWORK, CAPACITY AUGMENTATION AND RECONFIGURATION AND CAPACITY ENHANCEMENT, MONITORIN G INCLUDING NETWORK MONITORING, MAINTENANCE, FAULT IDENTIFICATION, REPAIR AND ENSURING QUALITY OF SERV ICE AS PER INTERCONNECT AGREEMENT OF INTERCONNECT NETWORK SYST EM TO ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 9 PROVIDE FAULT FREE SERVICES ACCORDING TO INTERCONNE CT STANDARDS. (II) THE WHOLE PROCESS FOR CARRIAGE AND TRANSFER OF CALLS FROM THE NETWORK OF ONE OPERATOR TO ANOTHER IS NOT LIMIT ED TO PROCESS OF CARRIAGE OF CALLS THOUGH BEING AN AUTOMA TED PROCESS UNDERTAKEN BY A SERIES OF HIGHLY ADVANCED T ELECOM NETWORK EQUIPMENT. THE PROCESS OF INTERCONNECTION I S A COMPOSITE PROCESS INVOLVING SEVERAL ASPECTS WHICH R EQUIRES CONSTANT HUMAN INTERVENTION TO MAKE THE PROCESS OF CARRIAGE OF CALLS SATISFACTORY AND AS PER PERFORMAN CE STANDARD AGREED BY THE TWO PARTIES. (III) REGARDING INTERCONNECTION TO GATEWAY, IT IS W ORTH NOTING THAT MOBILE SWITCHING CENTRE (MSC) OF TWO DIFFERENT OPERATORS IS INTERCONNECTED USING ANY TRANSPORT TEC HNOLOGY WHICH INVOLVES WIRES AS WELL AS HUMAN INTERFACE FOR SETTING UP. FURTHER, IT INVOLVES DIFFERENT PHASES LIKE PLAN NING, SELECTION OF VENDOR, SUPPLY OF HARDWARE AND SOFTWAR E, INSTALLATION AS PER VENDOR GUIDELINES, CALL CONFIGURATION/PROVISIONING OF SYSTEM, EXHAUSTIVE TE STING ON VARIOUS MODES ON NETWORK PORTION, INTERCONNECT TEST ING AND ALSO REQUIRES SUPPORT/CONSENT OF OTHER INTERCONNECT OPERATOR. ALL THESE PHASES REQUIRE HUMAN INTERVENTI ONS WHICH ARE MOSTLY TECHNICAL IN NATURE. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 10 (IV) THE EXPLANATION OF THE ASSESSEE COMPANY/DEDUCT OR THAT NO INTERVENTION IS REQUIRED IN THE PROCESS OF CARRI AGE OF CALLS, IS TOTALLY HALF BAKED AS THE ASSESSEE COMPANY/DEDUC TOR FAILED TO FULLY APPRECIATE THAT SUCH PROCESS OF CAR RIAGE OF CALLS IS AUTOMATIC ONLY IN CASE OF SUCCESSFUL CALLS . WHEN A CALL GETS CONNECTED BY ONE OPERATOR TO ANOTHER, PER SE, IT IS AN AUTOMATIC CONNECTION BUT, THERE CAN BE INSTANCES WH ERE THERE IS A PROBLEM IN THE CALL CONNECT. THERE MAY B E PROBLEMS DUE TO CALL NOT REACHING THE DESTINATION O R THE VOICE NOT COMING/REACHING. FAILURE OF CALL COULD BE DUE TO MANY REASONS LIKE FAILURE IN PHYSICAL HARDWARE, PRO BLEM DUE TO SOFTWARE BUG, PROBLEM DUE TO SNAPPING OF OPTIC F IBER CABLES ETC. WHICH REQUIRES RESOLUTION THROUGH INTER VENTION OF TEAMS OF TECHNICAL EXPERTS TO REMEDY THE SITUATION AND HENCE THERE IS NO FULLY AUTOMATIC OPERATION OF THIS NETWORK. THOUGH THE CARRIAGE OF CALLS FROM ONE NETWORK TO TH E OTHER NETWORK FLOWS AUTOMATICALLY, TO MAKE THE CARRIAGE O F CALLS SUCCESSFUL, CONSTANT NETWORK MONITORING IS REQUIRED TO ATTAIN QUALITY OF SERVICE AT OPERATION MAINTENANCE CENTERS (QMC) WHICH OPERATES 24 X 7 X 365 WHEREIN TECHNICAL EXPER TS ARE MONITORING PHYSICAL EQUIPMENT AS WELL AS THE NETWOR K. THE PROCESS OF MONITORING-BY SUCH PROFESSIONALS IS EFFE CTIVELY REQUIRED TO PROVIDE OR TO AVAIL FAULT FREE SERVICES AT BOTH ENDS OF THE OMCS OF OPERATORS. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 11 (V) THOUGH THE 'CARRIAGE OF CALLS' IS AUTOMATIC, TH E PROCESS OF 'CARRIAGE OF CALLS' SHALL NOT TAKE PLACE UNLESS THE SYSTEMS ARE MADE OPERATIONAL OR MAINTAINED OR CONFIGURED BY THE SERVICE PROVIDER AT OMCS. TECHNICAL HELP IS REQUIRED TO DET ECT CERTAIN COMPLICATED FAULTS AT OMCS LIKE HARDWARE FA ULTS WHICH MAY REQUIRE CHANGE OF COMPONENTS, CARDS, ETC. AND/OR SOFTWARE FAULTS FOR WHICH PATCHES/RECTIFICATION OF SOFTWARE IS REQUIRED. SUCH AN INTERVENTION REQUIRES HIGHLY QUAL IFIED AND TRAINED TECHNICAL PROFESSIONAL HAVING EXPERTISE, EX PERIENCE AND ACUMEN IN THAT PARTICULAR AREA OF RELEVANT TECH NOLOGY AND IS NOT POSSIBLE BY A GENERAL TECHNICIAN OR SEMI SKILLED PERSON. (VI) THE ASSESSEE COMPANY/DEDUCTOR HAS BEEN CONSIDE RING THE ISSUE OF CALL CARRIAGE IN ISOLATION UNDER PROCE SS OF INTERCONNECTION WHICH INVOLVES MANY PROCESSES, LIKE CALL CONNECT, CALL ROUTING AND SIGNALING TAKING PLACE IN A NETWORK. THESE PROCESSES TAKEN TOGETHER FORM INTERCONNECTION BUT THE ASSESSEE COMPANY/DEDUCTOR HAS FAILED TO COUNTER THE OPINION OF THE EXPERTS WHO HAVE CATEGORICALLY ESTAB LISHED THAT HUMAN, INTERVENTION, TAKES PLACE DURING CARRIA GE OF CALL AS THE CALL ROUTING AND SIGNALING ARE PREDEFINED AS AN INITIAL SETUP OR IN INSTALLATION PHASE AND BASED ON THIS PR EDEFINED DATA, WHICH IS PART OF CONFIGURATION IN INTERCONNEC T SYSTEM, SUCH PHASES ARE SELECTED AUTOMATICALLY TO CALL CONN ECT AND ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 12 NOT JUST IN ROUTING. THE PROCESS OF CARRIAGE OF CAL L IS AUTOMATIC ONLY FOR SUCCESSFUL AND FAULT FREE CALLS (A SUCCESSFUL, CALL IS WHICH REACHES THE DESIRED DESTI NATION AND WHICH CARRIES QUALITY VOICE). THE CONFIGURATION (PR EDEFINED DATA IS PART OF CONFIGURATION OF INTERCONNECTING OF NETWORK) AND RECONFIGURATION OF DATA IN NETWORK SYSTEM AND C APACITY ENHANCEMENT ETC. ALSO ESSENTIALLY REQUIRE HUMAN INTERVENTION OF HIGHLY QUALIFIED AND TRAINED TECHNI CAL PROFESSIONAL HAVING EXPERTISE, EXPERIENCE AND ACUME N IN THAT PARTICULAR AREA OF RELEVANT TECHNOLOGY AND IT IS NOT POSSIBLE FOR A GENERAL TECHNICIAN OR SEMI SKILLED P ERSON TO DETERMINE/MANAGE THE ENTIRE INTERCONNECT PROCESS. (VII) ANOTHER CONTENTION OF THE ASSESSEE COMPANY, THAT THE OTHER MOBILE SERVICE PROVIDERS MONITOR/ MAINTAIN AN D REPAIR THEIR OWN INFRASTRUCTURE. HOWEVER, FOR ENSURING A S EAMLESS SERVICE BY EMPLOYING SPECIFIC SET OF PEOPLE TO CARR Y OUT OPERABILITY AND FUNCTIONING OF NETWORK, IT MAKES IT CLEAR THAT HUMAN INTERVENTION IS A NECESSITY TO PROVIDE SEAMLE SS SERVICE . (VIII) REGARDING THE SITUATION ON EXHAUSTION OF ALL OTTED CAPACITY AND ALLOTMENT OF ADDITIONAL CAPACITY, THE CAPACITY ENHANCEMENT IS A TIME CONSUMING EXERCISE BY A GROUP OF TECHNICALLY SKILLED PROFESSIONALS WITH CLOSE COORDI NATION OF BOTH THE PARTIES SIMULTANEOUSLY. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 13 (IX) THE CONTENTION OF THE ASSESSEE COMPANY THAT EV ERY SERVICE PROVIDER PROVIDING ANY SERVICE USING ITS OW N EQUIPMENT AND INFRASTRUCTURE WOULD ALWAYS INCUR SUC H COSTS TO ENSURE THAT ITS EQUIPMENT AND INFRASTRUCTURE IS IN THE BEST OF WORKING CONDITION TO ENSURE PROVISION OF SERVICE S FOR WHICH IT IS MEANT AND SUCH ACT IS NOT UNDERTAKEN AS A SERVICE TO THE RECIPIENT OF SERVICES PROVIDED BY UTILIZING THE SAME EQUIPMENT OR INFRASTRUCTURE IS NOT TENABLE SINCE TH E ASSESSEE COMPANY HAS FAILED TO APPRECIATE THE FACT THAT HAND LING OF EQUIPMENT AND INFRASTRUCTURE BY OPERATORS IN THEIR OWN NETWORK, IS TO ENSURE FAULT FREE SERVICE AND AS AN OBLIGATION FOR SUCCESS OF INTERCONNECT AS SEEN FROM THE CLAUSE S OF INTERCONNECT AGREEMENT OF INTERCONNECT PERFORMANCE STANDARDS. THIS NOT ONLY TAKES PLACE ON ONE SIDE BU T TAKES PLACE ON BOTH THE ENDS IN CLOSE CO-ORDINATION AND T HAT IS WHAT THE EXPERTS OPINED. (X) DURING THE PROCESS OF CARRIAGE OF CALLS, THE NE TWORK SYSTEM OF EACH CELLULAR PROVIDER REQUIRES MONITORING/SUPERVISION ON SEVERAL PARAMETERS OF THE NETWORK LIKE HEALTH, CONGESTION, FAULTS, ETC. FOR W HICH, RECONFIGURATION OF SYSTEM IS REQUIRED TO HANDLE SUC H CONGESTION BY WAY OF INCREASING THE TRANSPORT CAPAC ITY, INCREASING HARDWARE, MODIFYING THE REQUIRED SOFTWAR E, RECONFIGURING THE SYSTEMS, ETC. ON ALL THE ABOVE AR EAS OF ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 14 INTERVENTION, TECHNICAL EXPERT IS PERSISTENTLY REQU IRED TO MAKE THE PROCESS OF CARRIAGE OF CALL VICTORIOUS. PE RSONS INVOLVED IN THESE AREAS CANNOT BE MERELY A TECHNICI AN BUT ARE TO BE PROFESSIONALLY AND HIGHLY QUALIFIED EXPER TS HAVING GOOD KNOWLEDGE OF NETWORK MANAGEMENT, KNOWLEDGE OF HARDWARE & SOFTWARE, KNOWLEDGE OF NETWORK CONFIGURA TION, ETC. AS NO SERVICE PROVIDER DOES TAKE THE RISK OF L EAVING THE NETWORK SYSTEMS UNATTENDED, WHEN THE NETWORKS ARE INTERCONNECTED WITH EACH OTHER DURING THE PROCESS O F CARRIAGE OF CALLS, FOR THE SIMPLE REASON THAT EVEN A SMALL FAULT CAN CASCADE INTO LARGE FAULTS. WHICH COULD FI NALLY LEAD TO ENTIRE COLLAPSE OF THE SYSTEMS AND FAIL THE PROCESS OF CARRIAGE OF CALLS . (XI) THE TECHNICAL EXPERTS HAVE CLEARLY STATED THAT THE ENTIRE PROCESS OF CALL PROCESSING AND CAPACITY AUGMENTATIO N, I.E. ADDITIONAL CAPACITY WHEN CAPACITY GETS EXHAUSTED, I S ESSENTIALLY/NECESSARILY HUMAN INTERVENTION AND CANN OT BE DONE WITHOUT THE SERVICES OF HUMANS. THE INTERCONNE CT / ACCESS / PORT FACILITY IS REGARDED AS TECHNICAL SER VICES AND ALL PAYMENTS MADE ON ACCOUNT OF INTERCONNECT CHARGES/ACCESS/PORT CHARGES FALLS WITHIN THE MEANIN G OF THE TECHNICAL SERVICES. IN FACT, THE COMBINED ENVIRONME NT OF BOTH MEN AND MACHINERY IS NEEDED FOR PROVIDING TECH NICAL SERVICES. EVEN SOPHISTICATED AND AUTOMATED ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 15 MACHINERY/EQUIPMENT CANNOT WORK WITHOUT A HUMAN INTERFACE, AS THESE ARE REGULARLY REQUIRED TO MONIT ORING OF PERFORMANCE AND MAINTENANCE. A MACHINE OR INSTRUMEN T EVEN IF AUTOMATIC CANNOT BECOME OR REPLACE HUMAN MI ND. IN FACT, THERE ARE A NUMBER OF ARTICLES IN THE INTERCO NNECT AGREEMENT. WHICH ITSELF PROVIDE VARIOUS SPECIFICATI ONS FOR QUALITY OF SERVICES OR PERFORMANCES. (XII) THE AGREEMENT ENTERED BETWEEN BOTH THE OPERAT ORS IS FOR COMPOSITE SERVICES AND NOT JUST ONE PART OF CAR RIAGE OF CALLS. CARRIAGE OF CALLS IS THE END RESULT TO BE AC HIEVED THROUGH THE INTERCONNECTION CONSISTING OF MANY PROC ESSES. IT HAS ALSO BEEN CLARIFIED BY THE C.DOT EXPERT IN REFE RENCE TO QUESTION NO 1.0 DURING RE-EXAMINATION THAT EVEN IF AFTER INITIAL SETUP AND AFTER MAKING THE INTERCONNECTED N ETWORK FUNCTIONAL, IF HUMAN INTERVENTION IN THE FORM OF OP ERATION AND MAINTENANCE IS TAKEN AWAY, THE INTERCONNECTED NETWORK WILL NOT FUNCTION INDEFINITELY AND FURTHER THE PURP OSE OF INTERCONNECTION ALONG WITH THE QUALITY OF SERVICE W ILL NOT BE ACHIEVED (ANS. 11 & 12). LASTLY, IT IS ALSO IMPORTAN T TO MENTION HERE THAT;-. - THE ASSESSEE COMPANY/DEDUCTOR ITSELF IS DEDUCTING TDS ON THESE INTERCONNECT PAYMENTS TO DOMESTIC MOBILE SERVICE PROVIDERS WITH EFFECT FROM APRIL 2003. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 16 - THERE IS NO DIFFERENCE IN FLOW OF CALLS FOR AN INT ERNATIONAL CALL OR A NATIONAL CALL, EXCEPT THE FACT THAT THE I NTERCONNECT OPERATOR BEING NATIONAL OR INTERNATIONAL. ALL THE P ROCESSES INVOLVED IN ESTABLISHING A CALL AND TO MAKE IT SUCC ESSFUL IN INTERNATIONAL FLOW OF TRAFFIC TO EARN REVENUE, ARE THE SAME AS IN THE CASE OF DOMESTIC CALLS, AS OPINED BY THE TECHNICAL EXPERT VIDE HIS SECOND OPINION DATED 28/12/2011. - IT WAS CONFIRMED BY THE ASSESSEE COMPANY ITSELF VI DE LETTERS DATED 01/11/11 AND 09/11/11 THAT TECHNICALL Y THERE IS NO DIFFERENCE BETWEEN THE DOMESTIC IUC AND INTERNATIONAL IUC, EXCEPT THAT IN DOMESTIC IUQ, THE NETWORK AND THE EQUIPMENT OF THE OTHER TELECOM OPERATORS ARE LOCATED IN INDIA, WHEREAS, IN INTERNA TIONAL IUC, THE NETWORK AND THE EQUIPMENT OF THE OTHER TEL ECOM - OPERATORS ARE LOCATED OUTSIDE INDIA. 2.4 THE AO ALTERNATIVELY AND WITHOUT PREJUDIC E TO HIS FINDING THAT, THE SAID PAYMENT IS PAYMENT FOR FTS U/S. 9(1) (VII) OF THE ACT HAD HELD THAT THE PAYMENT WAS ROYALTY IN CLAU SE (III) OF EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT. 2.4.1 THE AO VIDE ORDER DATED 12.1.2012 RAISED THE DEMAND U/S. 201 AS WELL AS 201(IA) TO THE ASSESSMENT YEAR S 2008-09 TO 2011-12 FOR NON-DEDUCTION OF TAX AT SOURCE U/S. 19 5 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TH E ACT OF IUC PAYMENT MADE TO FTOS. HE LEVIED TAX ON HIGHER RATE OF 20% ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 17 (PLUS SURCHARGE & CESS) ON THE GROSS AMOUNT OF PAYM ENT MADE TO THE FTO FOR ALL THE YEARS UNDER CONSIDERATION B Y APPLYING THE PROVISIONS OF SECTION 206AA OF THE ACT. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN THE APPEAL BEFORE THE LD. FIR ST APPELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY UPHELD TH E ORDER OF THE AO TO THE EXTENT OF THE FINDING THAT THE PAYMENT OF IUC ARE IN THE NATURE OF FTS UNDER THE ACT. HE HAS HELD AS FOLLOW S:- 9.7 THE WHOLE CONTROVERSY IS WHETHER ANY HUMAN INTERVENTION EXISTS AT TIME OF PICKING UP OF CALL FROM ILD GATEWAY OF THE APPELLANT BY ILD GATEWAY OF FOREIGN OPERATORS AND IT HAS TO BE UNDERSTOOD AND RESOLVED BY EXAMINING THE STATEMENTS OF THE EXPERTS, WHICH HAVE BEEN REPRODUCED SUPRA. SCRUTINY OF THE STATEMENTS REVEAL FOLLOWING FACTS: WHEN A CALL GETS CONNECTED FROM ONE OPERATOR TO OTHER, PER SE IT IS AN AUTOMATIC CONNECTION, BUT TH ERE CAN BE INSTANCES WHEN THERE IS PROBLEM IN CALL CONN ECT WHICH REQUIRES HUMAN INTERVENTION. SUCCESSFUL AND FAULT FREE CALL HAPPENS WITHOUT MANUAL INTERVENTION. INTERVENTION BY TECHNICAL EXPERTS IS REQUIRED WHE N THERE IS FAILURE IN HARDWARE, PROBLEM DUE TO SOFTWA RE BUG OR SNAPPING OF FIBRE OPTIC CABLES. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 18 PER SE PROCESSING OF A SUCCESSFUL CALL HAS MANY ASPECTS LIKE CALL CONNECT, CALL ROUTING AND SIGNALI NG. CALL CONNECT COMPONENT CANNOT BE DISSECTED. BESIDE THESE FAULTS, CONSTANT NETWORK MONITORING IS REQUIRED TO BE DONE BY TECHNICAL EXPERTS TO ENSU RE FAULT FREE CONNECTION. THE NETWORK SYSTEM CANNOT BE LEFT UN-ATTENDED . HUMAN INTERVENTION IS REQUIRED FOR CAPACITY AUGMENTATION. THERE IS NO NETWORK SYSTEM WHICH CAN WORK CONTINUOUSLY WITHOUT ANY KIND OF HUMAN INTERVENTION . MACHINES CANNOT WORK ON THEIR OWN. THERE HAS TO BE MAN - MACHINE INTERFACE. ABOVE MENTIONED HUMAN INTERVENTIONS CANNOT BE MADE BY SEMI-SKILLED PERSONNEL OR MERE TECHNICIANS. SUCH PERSONS ARE HIGHLY QUALIFIED TECHNICAL EXPERTS HAVING GOOD KNOWLEDGE OF SOFTWARE, NETWORK MANAGEMENT AND CONFIGURATION. FOR A FAULT FREE RUNNING CALLS, OPERATION AND MAINTENANCE HAS TO BE AT BOTH THE ENDS AND IF THE SECOND OPERATOR DOES NOT MAINTAIN IT THEN THE CALL WILL FAIL. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 19 9.8 NOW, IF WE HAVE TO JUST SEE WHETHER THERE IS AN Y HUMAN INTERVENTION AT THE TIME OF INTERCONNECT, THE N THE ANSWER IS QUITE OBVIOUS THAT FOR A SUCCESSFUL C ALL, THE INTERCONNECT IS AUTOMATIC. THIS HAS BEEN ACCEPT ED BY THE AO ALSO. AS ALREADY DISCUSSED SUPRA, THIS CANNOT BE THE INTENTION/ESSENCE OF DIRECTION OF HON 'BLE SUPREME COURT AS THE INTERCONNECT OF CALL TAKES PLA CE IN FRACTION OF A SECOND AND DURING THAT PERIOD, NO EFF ECTIVE HUMAN INTERVENTION IS POSSIBLE. THEREFORE, WE HAVE TO SEE THE PROCESS OF INTERCONNECT OF CALL IN A HOLIST IC MANNER. THE AGREEMENT BETWEEN THE APPELLANT AND FOREIGN TELECOM OPERATORS IS TO PROVIDE FACILITY OF SUCCESSFUL INTERCONNECT OF CALL AT PORT/INTERCONNEC TION LOCATION OF TWO NET WORKS. THE CLAUSE 3.1 OF AGREEM ENT, WHICH IS STANDARD ONE FOR ALL OPERATORS, SAYS, 'EACH PARTY SHALL BE RESPONSIBLE TO CONNECT TO OTHER PART'S NETWORK AT ONE OF THE OTHER PART'S NETWORK INTERCONNECTION LOCATIONS, AND THE PARTIES SHALL BE RESPONSIBLE TO PROCURE, AT THEIR OWN EXPENSE, THE NECESSARY FACILITIES OR EQUIPMENT REQUIRED TO INTERCONNECT TO SUCH LOCATIONS.' 9.9 THOUGH, THE ULTIMATE PURPOSE OF THE AGREEMENT I S TO ACHIEVE SUCCESSFUL CARRIAGE OF CALL AT THE INTERCONNECTION LOCATION, THE PROCESS OF ESTABLISHI NG ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 20 INTERCONNECTION ITSELF IS ELABORATE ONE. IT INVOLVE S MAKING THE TWO NETWORK SYSTEMS COMPATIBLE, CONFIGURATION & RECONFIGURATION OF SYSTEM, ALLOTMEN T OF CAPACITY & CAPACITY AUGMENTATION WHENEVER REQUIRED, RE-ROUTING OF CALL IN EVENT OF OVERFLOW, FAULT FIND ING AND REPAIR AND OVER & ABOVE, CONSTANT MONITORING OF THE NETWORK SYSTEM SO AS TO ENSURE UN-INTERRUPTED CARRI AGE OF CALL. ALL THESE ACTIVITIES ARE PERFORMED BY HIGH LY QUALIFIED PROFESSIONALS AND NOT MERELY TECHNICIANS OR UNSKILLED WORKERS. ALL THESE HUMAN INTERVENTIONS AR E PRE-REQUISITE FOR SUCCESSFUL CONNECT OF THE CALL. W ITHOUT SUCH HUMAN INTERVENTION, THE SERVICE OF SUCCESSFUL CONNECTION OF CALL CANNOT BE PROVIDED. NOW, IT IS UNDISPUTED THAT WITH ADVENT OF LATEST TECHNOLOGY, T HE CALL CONNECT PROCESS HAS BECOME SOFTWARE BASED AND SUBSTANTIALLY AUTOMATIC. OVER A PERIOD OF TIME, THE AUTOMATION HAS INCREASED AND CORRESPONDINGLY HUMAN INTERVENTION HAS DECREASED PROGRESSIVELY. IF THE QUANTUM OF HUMAN INTERVENTION INVOLVED IS THE ONLY CRITERION FOR DETERMINING WHETHER A PARTICULAR SERV ICE IS IN NATURE OF TECHNICAL SERVICE, THEN WHAT USED TO B E A TECHNICAL SERVICE A FEW YEARS AGO, HAS CEASED TO BE SO NOW WITH PROGRESSIVE AUTOMATION; THIS HOWEVER DOES NOT MEAN THAT THE MACHINE HAS REPLACED THE MAN. IN CASE UNDER CONSIDERATION, IT IS CLEAR FROM CONTENTS OF ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 21 STATEMENTS THAT HUMAN INTERVENTION IS ESSENTIAL IN AREAS RIGHT FROM SETTING UP OF CAPACITY FOR INTERCO NNECT AND FURTHER IN TESTING, COMMISSIONING OF INTERCONNE CT CIRCUIT, INTERCONNECT PERFORMANCE STANDARDS, INTERCONNECT CAPACITY, NETWORK INTERFACE, CONFIGURA TION OF SYSTEM, TESTING, INTERCONNECT TESTING, PILOT TES TING, OPERATION AND MAINTENANCE OF HARDWARE/SOFTWARE, SUPERVISION/MONITORING THE FUNCTIONING OF INTERCONN ECT NETWORK, CAPACITY AUGMENTATION AND RECONFIGURATION AND CAPACITY ENHANCEMENT, CONSTANT MONITORING & MAINTENANCE, FAULT IDENTIFICATION, REPAIR ETC. ALL THIS IS REQUIRED TO ENSURE QUALITY OF SERVICE AS PER INTERC ONNECT AGREEMENT TO PROVIDE FAULT FREE SERVICES. CALL IS N OT SOMETHING WHICH CAN BE CARRIED IN PERSON BY A TECHNICAL PERSON. IT HAS TO PASS THROUGH A CONFIGUR ED NETWORK AND TECHNICAL PERSONNEL ARE REQUIRED TO SEE THAT NET WORK FUNCTIONS PROPERLY. THE DIRECTION CONTAINED IN HON'BLE SUPREME COURT'S ORDER CAN NOT BE CONSTRUED IN SUCH A MANNER TO SUGGEST THAT TECHNICA L PERSONS DO NOT HAVE ANY ROLE IN CARRIAGE OF CALL FR OM ONE NETWORK TO ANOTHER. IN VIEW OF THESE, I AGREE W ITH THE VIEW TAKEN BY THE AO THAT PAYMENTS MADE BY THE APPELLANT ARE IN NATURE OF FEE FOR TECHNICAL SERVIC ES: ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 22 9.10 THE DEFINITION OF FEE FOR TECHNICAL SERVICE IS GIVEN IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT, W HICH IS REPRODUCED AS UNDER: 'EXPLANATION 2 - FOR THE PURPOSES OF THIS CLAUSE, ' 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTAN CY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TE CHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERAT ION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJ ECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER T HE HEAD 'SALARIES'. 9.11 THE DEFINITION OF FTS AS PER DTAA IS THE SAME AS IN THE ACT. JUST TO TAKE AN EXAMPLE, FTS AS INDO-UK TREATY IS GIVEN IN ARTICLE 13(4), WHICH IS REPRODUC ED AS BELOW: 4. FOR THE PURPOSES OF PARAGRAPH (2) OF THIS ARTICLE, AND SUBJECT TO PARAGRAPH 5, OF THIS ARTICL E, THE TERM ''FEES FOR TECHNICAL SERVICES' MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL OR ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 23 CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) WHICH : THE DEFINITION SAYS THAT FTS CONSISTS OF TWO PARTS : A) CONSIDERATION FOR THE RENDERING OF ANY MANAGERIA L, TECHNICAL OR CONSULTANCY SERVICES. B) CONSIDERATION FOR PROVISION OF SERVICES OF TECHN ICAL OR OTHER PERSONNEL 9.12 THE SECOND PART OF DEFINITION TALKS ABOUT TECHNICAL PERSONNEL WHEREAS FIRST PART DOES N OT MENTION ABOUT TECHNICAL PERSONNEL. IT CAN REASONABL Y BE INFERRED THAT FIRST PART OF DEFINITION IS CONCER NED WITH TECHNICAL SERVICES PROVIDED IN ANY MANNER, MAY BE MAINLY THROUGH AUTOMATED MACHINE. IN CASE UNDER CONSIDERATION, THERE IS PRACTICALLY NO HUMAN INTERVENTION AT THE TIME OF CONNECT OF SUCCESSFUL C ALL AND THIS IS THE POSITION WHICH HAS BEEN ACCEPTED EV EN BY THE AO. THIS SITUATION IS TAKEN CARE OF BY THE F IRST PART OF DEFINITION OF FTS. THERE IS AMPLE HUMAN INTERVENTION INVOLVED AT DIFFERENT STAGES AS DISCUS SED SUPRA AND THIS SITUATION FALLS WITHIN PURVIEW OF SE COND PART OF DEFINITION OF FTS. 9.13 ANOTHER ARGUMENT TAKEN BY THE APPELLANT IS THA T PAYMENTS MADE BY IT ARE IN NATURE OF REVENUE SHARIN G AND HENCE NOT FTS. IT HAS BEEN ARGUED THAT THE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 24 APPELLANT HAS ENTERED INTO AGREEMENT WITH VARIOUS INTERNATIONAL TELECOM OPERATORS FOR THE PURPOSE OF TWO WAY CARRIAGE OF CALL INTERNATIONALLY. WHATEVER REVE NUE IS CHARGED FROM THE SUBSCRIBERS IS SHARED BETWEEN NETWORK OPERATORS DEPENDING UPON FLOW OF SUCCESSFUL CALLS AND THEREFORE NO NETWORK OPERATOR IS PROVIDIN G SERVICES TO OTHER NETWORK OPERATOR. THEREFORE, THE AMOUNT PAID TO THE FOREIGN TELECOM OPERATOR IS NOT QUA THE SERVICE PROVIDED BY THE FOREIGN TELECOM OPERATO R TO THE APPELLANT, BUT IS A SHARE OF REVENUES CALCULATE D ON THE BASIS OF PER CALL / PULSE. 9.14 THIS CONTENTION OF THE APPELLANT HAS BEEN DULY CONSIDERED AND IS FOUND TO BE FALLACIOUS. IT IS UNDISPUTED THAT AS A RESULT OF AGREEMENT BETWEEN TH E APPELLANT AND NON- RESIDENT TELECOM OPERATOR, NO JO INT VENTURE, AOP OR PARTNERSHIP COMES INTO EXISTENCE. I T IS ALSO EVIDENT FROM CLAUSE 18 OF THE AGREEMENT WHICH IS REGARDING RELATIONSHIP OF THE PARTIES. IT SAYS THAT , 'THE RELATIONSHIP BETWEEN THE PARTIES SHALL NOT BE THAT OF PARTNERS, AND NOTHING HEREIN CONTAINED SHALL BE DEEMED TO CONSTITUTE A PARTNERSHIP BETWEEN THEM, A JOINT VENTURE, OR A MERGER OF THEIR ASSETS OR THEIR FISCAL OR OTHER LIABILITIES O R UNDERTAKINGS. NEITHER PARTY SHALL HAVE RIGHT TO ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 25 BIND THE OTHER PARTY, EXCEPT AS EXPRESSLY PROVIDED FOR HEREIN.' 9.15 THEREFORE, AGREEMENT DOES NOT CREATE A NEW 'PERSON' AS DEFINED IN SECTION 2(31) OF THE ACT. TH E OBLIGATIONS OF THE APPELLANT HAVE TO BE SEEN IN ITS SEPARATE CAPACITY. WHEN A CALL IS CARRIED BY THE APPELLANT'S NETWORK FROM NLD NETWORK, THE APPELLANT BECOMES ENTITLED TO REVENUE FROM NLD NETWORK OPERATOR. FURTHER, WHEN CALL FROM ILD GATEWAY OF APPELLANT IS TAKEN OVER BY GATEWAY OF NON-RESIDENT OPERATOR, THE NON-RESIDENT GETS RIGHT TO RECEIVE RE VENUE FROM THE APPELLANT AND THAT PAYMENT BECOMES EXPENDITURE IN HANDS OF THE APPELLANT. THE NON-RESI DENT OPERATOR IS NOT ENTITLED TO GET REVENUE DIRECTLY FR OM NLD OPERATOR IN INDIA. SO IT IS NOT A SITUATION WHER E REVENUE FROM NLD OPERATOR COMES TO A COMMON POOL AND BOTH APPELLANT AND THE NON-RESIDENT OPERATOR AR E ENTITLED TO SHARE IT ACCORDING TO SOME FORMULA. THE PAYMENTS MADE BY THE APPELLANT TO NON-RESIDENT TELECOM OPERATORS ARE IN NATURE OF EXPENDITURE IN B OOKS OF ACCOUNTS OF THE APPELLANT AND SUCH PAYMENTS ARE IN NATURE OF FTS AS DISCUSSED SUPRA. THEREFORE, THIS CONTENTION OF THE APPELLANT IS REJECTED. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 26 9.16 THE APPELLANT HAS TAKEN ANOTHER ARGUMENT THAT IT MAKES PAYMENT ONLY FOR A SUCCESSFUL CALL AND OTHER ACTIVITIES OF FOREIGN OPERATOR LIKE MAINTENANCE OF NETWORK SYSTEM ARE NOT REMUNERATED BY IT. THEREFORE , OTHER INCIDENTAL ACTIVITIES WHERE SOME HUMAN INTERVENTION IS INVOLVED, ARE NOT IN NATURE OF SERV ICES FROM PERSPECTIVE OF THE APPELLANT. THIS CONTENTION OF THE APPELLANT IS MISLEADING. THE PAYMENT ON BASIS O F SUCCESSFUL CALL IS ONLY A MODE OF CALCULATING THE PAYMENT FOR PROVISION OF SERVICE OF TRANSMISSION OF CALL. THE SERVICE PROVIDED BY NON-RESIDENT OPERATOR CANNO T BE RESTRICTED BY ADOPTING A PARTICULAR MODE OF MAKI NG THE PAYMENT. 9.17 IT IS ALSO PERTINENT TO NOTE THAT THE APPELLAN T IS DEDUCTING TAX ON IV C PAYMENTS MADE TO DOMESTIC TELECOM OPERATORS, WHICH CLEARLY INDICATES THAT THE APPELLANT IS CONSCIOUS OF LEGAL PROVISIONS APPLICAB LE. THEN, WHY SUCH DEDUCTION IS NOT BEING MADE IN RESPE CT OF IUC PAYMENTS MADE TO FOREIGN TELECOM OPERATORS I S NOT EXPLAINABLE. 9.18 IN VIEW OF DISCUSSION SUPRA, I HOLD THAT THE I UC PAYMENTS MADE BY THE APPELLANT TO THE NON-RESIDENT TELECOM OPERATORS ARE IN NATURE OF FTS BOTH UNDER I T ACT, 1961 AND UNDER RELEVANT DT AA AND HENCE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 27 CHARGEABLE TO TAX IN INDIA. ACCORDINGLY, THE APPELL ANT IS HELD TO BE ASSESSEE IN DEFAULT U/S 201 (1) IN RESPE CT OF THESE PAYMENTS. THIS DISPOSES OFF GROUND OF APPEAL NO. 2,3,4,7,9,10,11,12,13,14,15,16,18. 3. LD. CIT(A) HELD THAT THE IUC PAYMENT CANNOT BE PL EADED AS ROYALTY. THE ALTERNATIVE FINDING OF THE ASSESSING WAS REVERSED BY THE LD. CIT(A). HE HAS HELD AS FOLLOWS:- 11.0 FINDING: 11.1 THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEE N CAREFULLY CONSIDERED. THE AO HAS HELD THAT THE PAYM ENTS MADE BY THE APPELLANT AMOUNT TO ROYALTY U/S 9(1 )(V I)(III) AS THESE ARE FOR USE OF PROCESS. THE CONTENTIONS OF TH E APPELLANT ARE SUMMARIZED AS UNDER: - THE PAYMENTS ARE IN NATURE OF REVENUE SHARING. - THE APPELLANT HAS NOT BEEN GIVEN 'USE OR RIGHT TO USE' OF PROCESS BY FOREIGN OPERATORS. - PROPOSED AMENDMENTS IN THE ACT DO NOT OVERRIDE TH E TREATY DEFINITION OF ROYALTY. - IN ANY CASE, THE APPELLANT CANNOT BE HELD TO BE A SSESSEE IN DEFAULT BECAUSE OF RETROSPECTIVE AMENDMENT. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 28 11.2 THE ARGUMENT OF THE APPELLANT THAT THE PAYMENT S ARE IN NATURE OF REVENUE SHARING _ AND HENCE DO NOT PARTAK E CHARACTER OF ROYALTY IS FALLACIOUS AS IT HAS BEEN D ISCUSSED SUPRA UNDER ISSUE NO. 1. IN ORDER TO CHARACTERIZE T HE PAYMENTS MADE BY THE APPELLANT, WE HAVE TO SEE THE LEGAL PROVISIONS AND RELEVANT CLAUSES OF AGREEMENT BETWEE N THE APPELLANT AND NON-RESIDENT TELECOM OPERATORS. THE D EFINITION OF TERM 'ROYALTY' IS PROVIDED IN EXPLANATION 2 TO S ECTION 9(1)(VI) OF THE ACT, WHICH IS BEING REPRODUCED AS B ELOW:- EXPLANATION 2. -FOR THE PURPOSES OF THIS CLAUSE, 'ROYALTY' MEANS CONSIDERATION (INCLUDING ANY LUMP S UM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UND ER THE HEAD 'CAPITAL GAINS') FOR- (I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING TH E GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVE NTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE M ARK OR SIMILAR PROPERTY; (II) THE IMPARTING OF ANY INFORMATION CONCERNING TH E WORKING OF, OR THE USE OF, A PATENT, INVENTION, MOD EL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 29 (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESI GN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL; (IVA) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMME RCIAL OR SCIENTIFIC EQUIPMENTS BUT NOT INCLUDING THE AMOU NT REFERRED TO IN SECTION 44BB; (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING TH E GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING FIL MS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION O R TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING , BUT NOT INCLUDING CONSIDERATION FOR THE SALE, DISTRIBUT ION OR EXHIBITION OF CINEMATOGRAPHIC FILMS; OR (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WI TH THE ACTIVITIES REFERRED TO IN SUB- CLAUSES (I) TO ( IV), (IVA) AND (V). THE DEFINITION OF ROYALTY AS PER ARTICLE 13(3) OF I NDO-UK TREATY IS AS UNDER: ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 30 3. FOR THE PURPOSES OF THIS ARTICLE, THE TERM 'ROYA LTIES' MEANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILMS, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RA DIO OR TELEVISION BROADCASTING, ANY PATENT, TRADEMARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, O R FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE; 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 INCO ME DERIVED BY AN ENTERPRISE OF A CONTRACTING STATE FRO M THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC. 11.3 ACCORDING TO AO, THE PAYMENTS ARE MADE FOR US E OF PROCESS AND HENCE IN NATURE OF ROYALTY UNDER CLAUSE (III) OF 9(1 )(VI) OF THE ACT. IN THE SAID CLAUSE, THE WORD EMPLOYED IS 'USE OF'. THE FACTUM OF 'USE OF PROCESS' HAS TO BE ESTABLISHED BEFORE A PAYMENT CAN BE CHARACTERIZED AS ROYALTY. T HE CLAUSE 3.1 OF AGREEMENT, WHICH IS STANDARD ONE FOR ALL OPERATORS, SAYS, 'EACH PARTY SHALL BE RESPONSIBLE T O CONNECT ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 31 TO OTHER PART'S NETWORK AT ONE OF THE OTHER PART'S NETWORK INTERCONNECTION LOCATIONS, AND THE PARTIES SHALL BE RESPONSIBLE TO PROCURE, AT THEIR OWN EXPENSE, THE N ECESSARY FACILITIES OR EQUIPMENT REQUIRED TO INTERCONNECT TO SUCH LOCATIONS. ' 11.4 THUS, THE ESSENCE OF THE AGREEMENT IS THAT EAC H PARTY TO THE CONTRACT SHALL CONNECT TO NETWORK OF OTHER P ARTY AT PORT LOCATIONS. IT IS NOT A CASE OF LEASE OR LICENC E OF NETWORK OF FOREIGN OPERATOR IN FAVOUR OF THE APPELLANT. ONC E TWO NETWORKS ARE INTERCONNECTED, THE FLOW OF CALL IS CO MPLETED. A FOREIGN OPERATOR CONNECTS HIS NETWORK WITH NETWORK OF THE APPELLANT AND CALL COMING FROM APPELLANT'S NETWORK IS TAKEN UP BY NETWORK OF FOREIGN OPERATOR FOR FURTHER TRANS MISSION. IN THIS MODEL, ONLY FOREIGN OPERATOR IS USING HIS N ETWORK AND APPELLANT IS NOT USING OR IS NOT ALLOWED TO USE NET WORK OF FOREIGN OPERATOR. THUS, THERE IS NO 'USE' ON PART O F THE APPELLANT. WHETHER TAKING-UP OF CALL BY NETWORK OF FOREIGN OPERATOR FROM NETWORK OF THE APPELLANT IS A 'PROCES S', IS ANOTHER ISSUE TO BE LOOKED INTO. THE AO HAS NOT GIV EN A FINDING TO THE EFFECT THAT IT CONSTITUTES A 'PROCES S'. ACCORDING TO EXPLANATION 6, WHICH IS PROPOSED TO BE INCORPORA TED IN SECTION 9(1)(VI) OF THE ACT BY FINANCE ACT 2012, TH E PROCESS SHALL INCLUDE TRANSMISSION BY OPTIC FIBRE OR SIMILA R TECHNOLOGY. THUS, AFTER THIS AMENDMENT, THE TRANSMI SSION OF ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 32 CALL ACROSS GATEWAY/INTERCONNECT SHALL BE A 'PROCES S' UNDER DOMESTIC LAW. HOWEVER, EVEN IF THERE IS A 'PROCESS' INVOLVED; THERE IS NO USE OF IT BY THE APPELLANT. IN DISCUSSI ON SUPRA UNDER ISSUE NO. 1, IT HAS BEEN HELD THAT NON-RESIDE NT TELECOM OPERATOR HAS PROVIDED TECHNICAL SERVICES TO THE APPELLANT. THIS IS POSSIBLE ONLY WHEN NON-RESIDENT OPERATOR IS USING HIS NETWORK. WITHOUT USING HIS NETWORK, NO N- RESIDENT CANNOT PROVIDE SERVICES TO THE APPELLANT. NOW, WHEN NON-RESIDENT IS USING HIS NETWORK, IT CANNOT B E SAID THAT THE APPELLANT IS USING THE NETWORK OF NON-RESI DENT OPERATOR. THEREFORE, TWO SITUATIONS ARE MUTUALLY EX CLUSIVE. ONLY ONE OF THEM, EITHER NON-RESIDENT OPERATOR OR T HE APPELLANT IS USING THE NETWORK OF NON-RESIDENT WHIL E TRANSMISSION OF CALL THROUGH OPTIC FIBER. IT HAS AL READY BEEN HELD THAT NON-RESIDENT OPERATOR HAS PROVIDED TECHNI CAL SERVICES TO THE APPELLANT AS IS THE CASE MADE BY TH E AO, CONSEQUENTLY IT CANNOT BE SAID THAT PAYMENTS MADE B Y THE APPELLANT ARE FOR 'USE OF PROCESS' AND HENCE IN NAT URE OF ROYALTY. THE APPELLANT HAS FURTHER CONTENDED THAT R ELIANCE PLACED BY THE AO ON DECISION IN CASE OF VERIZON COMMUNICATIONS SINGAPORE PVT. LTD. V. ITO: [2011] 45 SOT 263(CHENNAI) IS MISPLACED. I HAVE CAREFULLY GONE TH ROUGH FACTS OF THE CASE LAW. IN THAT CASE, THE INDIAN PAY ER COMPANY HAD OBTAINED 'LEASED LINES' ON HIRE BASIS U NDER A CONTRACT FROM NON-RESIDENT VERIZON COMMUNICATION. T HIS IS A ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 33 VITAL FACT WHICH MAKES ALL THE DIFFERENCE. WHEN AN INDIAN CO. TAKES LEASED LINE ON HIRE, THEN IT CAN BE SAID THAT IT HAD 'USED' IT. IN PRESENT APPEAL UNDER CONSIDERATION, T HE APPELLANT HAS NEITHER BEEN LEASED NOR BEEN GIVEN ON HIRE NETWORK OF FOREIGN OPERATOR, THEN IT CANNOT BE SAID THAT THE APPELLANT HAS 'USED' THE NETWORK BELONGING TO FOREI GN OPERATOR. THEREFORE, RELIANCE OF AO ON THE SAID CAS E LAW IS MISPLACED. 11.5 IT IS SEEN FROM PROPOSED EXPLANATION 5 & 6 AND MEMORANDUM OF EXPLANATION THAT MEANING OF WORD 'PRO CESS' HAS BEEN WIDENED, THE 'PROCESS' NEED NOT BE SECRET AND SITUS OF CONTROL & POSSESSION OF RIGHT, PROPERTY OR INFOR MATION HAS BEEN RENDERED IRRELEVANT. HOWEVER, ALL THESE CHANGE S DO NOT AFFECT THE DEFINITION OF ROYALTY AS PER DTAA. IN AR TICLE 13 (3)(A) OF INDO-UK TAX TREATY, THE WORD EMPLOYED IS 'USE OR RIGHT TO USE' IN CONTRADISTINCTION TO THE WORD 'USE ' IN DOMESTIC LAW. THE MEANING ATTACHED TO PHRASE 'USE O R RIGHT TO USE' HAS BEEN EXPLAINED IN VARIOUS JUDICIAL DECI SIONS IN CASE OF MIS YAHOO INDIA PVT LTD VS. DCIT (ITAT MUMBA I), STANDARD CHARTERED BANK V.' DDIT, MUMBAI, ISRO SATE LLITE CENTRE [2008 307 ITR 59 AAR] AND DELL INTERNATIONAL SERVICES (INDIA) P. LTD. [2008305 ITR 37 AAR]. ALL T HESE JUDICIAL PRONOUNCEMENTS SAY THAT IN ORDER TO SATISF Y 'USE OR RIGHT TO USE'; THE CONTROL AND POSSESSION OF RIGHT, PROPERTY OR ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 34 INFORMATION SHOULD BE WITH PAYER. THEREFORE, UNDER DT AA, THE RESTRICTED MEANING OF ROYALTY SHALL CONTINUE TO OPERATE DESPITE AMENDMENTS IN DOMESTIC LAW. 11.6 THE APPELLANT HAS FURTHER ARGUED THAT EVEN IF IT IS ASSUMED THAT PAYMENTS PARTAKE THE CHARACTER OF ROYA LTY AFTER RETROSPECTIVE AMENDMENT IN THE ACT, THE APPEL LANT CANNOT BE HELD TO BE ASSESSEE IN DEFAULT IN RESPECT OF THOSE PAYMENTS. I FIND FORCE IN THIS ARGUMENT IN VIEW OF VARIOUS JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT. TH E OBLIGATION IMPOSED UPON THE APPELLANT U/S 195 TO DEDUCT TAX I S 'AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE IS SUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER '. THEREFORE TIME OF CREDIT OR ACTUAL PAYMENT OF SUM I S RELEVANT TO SEE THE OBLIGATION OF THE PAYER. THUS, SUBSEQUEN T AMENDMENT THOUGH RETROSPECTIVE IN EFFECT, CANNOT CR EATE ANY OBLIGATION UPON PAYER WHICH DID NOT EXIST AT TI ME OF CREDITING OR ACTUAL PAYMENT OF THE SUM. 11.7 IN VIEW OF DISCUSSION SUPRA, I HAVE NO HESITAT ION TO HOLD THAT PAYMENTS MADE BY THE APPELLANT ARE NOT IN NATURE OF ROYALTY UNDER DOMESTIC LAW AND RELEVANT DTAA. TH IS DISPOSES OFF GROUND OF APPEAL NO. 19 WHICH IS ACCOR DINGLY ALLOWED. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 35 3.1 ON SECTION 206AA, THE LD. CIT(A) HELD THAT THIS SECTION IS APPLICABLE ONLY PROSPECTIVELY. 4. AGGRIEVED WITH THE FINDING OF THE LD. CIT(A), TH AT THE PAYMENT FOR IUC IS FTS, THE ASSESSEE FILED TH ESE APPEALS. THE REVENUE HAS FILED THE CROSS APPEALS AGAINST THE FIN DING OF THE LD. CIT(A) THAT IUC CANNOT BE TREATED AS ROYALTY AND AL SO THE FINDING THAT SECTION 206AA IS APPLICABLE ONLY PROSPECTIVELY . 5. LD. COUNSEL OF THE ASSESSEE SH. S.K. TULSIYAN, FI LED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE UN DER RULE 29 OF THE ITAT RULES, 1963 DATED 06.11.2013.THE ADDITIONA L EVIDENCE SOUGHT TO BE PRODUCED BY THE ASSESSEE, IS AN OPINIO N DATED 03.9.2013 OF SH. SH KAPADIA, FORMER CHIEF JUSTICE O F INDIA, ON THE APPLICABILITY OF WITHHOLDING TAX PROVISIONS U/S . 194J READ WITH SECTION 9(1)(VII) OF THE INCOME TAX ACT, IN THE CAS E OF THE ASSESSEE. THE LD. DR, MR. ANUJ ARORA, CIT(DR) STRONG LY OBJECTED TO THE ADMISSION OF THIS OPINION AS AN EVIDENCE ON THE GROUND THAT SHRI KAPADIA DELIVERED THE JUDGMENT IN THE ASS ESSEES OWN CASE WHEN HE WAS THE CHIEF JUSTICE OF THE SUPREME C OURT OF INDIA SETTING ASIDE THE MATTER TO THE ASSESSING OFFICER F OR FRESH CONSIDERATION AND ADJUDICATION AND AFTER RETIREMENT , HE HAD GIVEN AN OPINION IN THE VERY SAME CASE IN FAVOUR OF THE A SSESSEE, WHICH IS IMPROPRIETY AND UNETHICAL. HE ARGUED THAT THE C ONDUCT OF SH. S.H. KAPADIA WAS NOT ETHICAL, SPECIFICALLY WHEN HE WAS THE AUTHOR OF THE JUDGMENT IN THE CASE OF THE ASSESSEE WHERE H E HAD SET ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 36 ASIDE THE MATTER. HE REFERRED TO THE CODE OF CONDUC T LAID DOWN BY THE HONBLE SUPREME COURT FOR JUDGES. 6. AS WHAT IS SOUGHT TO BE PRODUCED IS AN OPINION OF FORMER CHIEF JUSTICE OF INDIA, WE HOLD THAT THIS IS NOT AD DITIONAL EVIDENCE WHICH COULD BE ADMITTED FOR THE PURPOSE OF ADJUDICA TION OF THESE APPEALS. WE DO NOT WISH TO EXPRESS ANY OPINION AS THE CONDUCT OF THE FORMER HONBLE CHIEF JUSTICE OF INDIA WHO DE LIVERED THE JUDGMENT IN THE CASE OF THE ASSESEE COMPANY, AND H AD GIVEN AN OPINION ON THE VERY SAME ISSUE AFTER RETIREMENT. HE NCE, THIS APPLICATION IS REJECTED. 7. LD. COUNSEL FOR THE ASSESSEE MR. TULSIYAN, SUBMIT TED AS FOLLOWS:- A) IUC PAID TO THE FTOS ARE NEITHER IN THE NATURE OF FTS NOR IN THE NATURE OF ROYALTY BOTH UNDER THE ACT AS WELL AS THE TAX TREATIES. BOTH THE ISSUES ARE COVERED IN F AVOUR OF THE ASSESSEE BY A NUMBER OF JUDGMENTS INCLUDING TH E JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE AS SESSEES OWN CASE. THAT THESE ISSUES ARE NO MORE RES-INTEGR A. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 37 B) INTER-CONNECT AGREEMENTS ARE BASICALLY REVENUE SHAR ING ARRANGEMENT BETWEEN THE TELECOM OPERATORS FOR POOL ING IN THEIR SERVICES. THE OBJECT OF THESE AGREEMENT ARE TO PROVIDE SEAMLESS FACILITY TO THE SUBSCRIBERS AND INCOME ACCRUES TO BOTH THE NETWORKS AND BOTH NET WORKS HAV E A RIGHT TO SHARE THE REVENUE GENERATED FROM SUCCESSFU L CALLS BETWEEN THE INTER CONNECTED OPERATORS. C) IUC HAVE BEEN IN THE NATURE OF SHARING OF REVENUE G ENERATED FROM SUCCESSFUL CALLS. THIS IS BUSINESS INCOMES OF SUCH OPERATORS. D) THE OPERATIONS OF THE FTOS IN THE FORM OF CARRIAGE AND TERMINATION OF CALLS OVER THEIR RESPECTIVE NETWORK , ARE CARRIED OUT ENTIRELY OUTSIDE INDIA AND HENCE, ARE N OT TAXABLE IN INDIA, IN TERMS OF EXPLANATION 1(A) TO SECTION 9 (1)(I) OF THE ACT. E) IUC CANNOT BE DEEMED TO ACCRUE OR ARISE IN THE HAND S OF THE FTOS U/S. 9(1) READ WITH SECTION 5(2) OF THE ACT. F) AS INCOME IN QUESTION IS THE BUSINESS INCOME, AN D AS THE FTOS DO NOT HAVE ANY PERMANENT ESTABLISHMENT IN IND IA, THE INCOME IS NOT TAXABLE IN INDIA EVEN UNDER ARTIC LE 7 OF THE DOUBLE TAXATION AVOIDANCE ACT. HENCE, THE ASSESSEE IS NOT REQUIRED TO WITHHOLD THE TAX U/S. 195 OF THE ACT FO R SUCH PAYMENTS AND CONSEQUENTLY, CANNOT BE HELD LIABLE U/ S. 201 OF THE ACT. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 38 G) SECTION 206AA CANNOT BE APPLIED RETROSPECTIVELY AND THAT THE BENEFICIAL PROVISIONS OF THE DTAAS HAVE TO BE APPLIED. H) THE LD. CIT(A) WAS RIGHT IN ADMITTING ADDITIONAL EVI DENCE. 8. LD. COUNSEL FOR THE ASSESSEE SH. TULSIYAN, MADE E LABORATE SUBMISSIONS, FILED PAPER BOOKS AS WELL AS WRITTEN S UBMISSIONS AND RELIED UPON VARIOUS CASE LAWS IN SUPPORT OF HIS CON TENTIONS. WE WOULD BE DEALING WITH ALL THESE ARGUMENTS AS WELL A S THE CASE LAW DURING THE COURSE OF OUR FINDING. 9. LD. DR, SH. ANUJ ARORA, ON THE OTHER HAND, VEHEME NTLY CONTROVERTED THE SUBMISSIONS OF THE LD. COUNSEL FO R THE ASSESSEE. HE RELIED ON THE ORDER OF THE AO AND SUBM ITTED THAT PAYMENT IN QUESTION IS FTS. HE SUBMITTED THAT THE HUMAN INTERVENTION IS ONE OF THE ISSUE WHICH WAS CONSIDER ED BY THE HONBLE SUPREME COURT OF INDIA AND AN OPEN REMAND W AS MADE TO THE AO FOR EXAMINING THIS ISSUE, WITHOUT DUE RE STRICTIONS OR CONDITIONS. HE ARGUED THAT THE ASSESSEES CONTENTI ON THAT THE AO SHOULD HAVE RESTRICTED HIMSELF ONLY TO THIS ASPEC T IS NOT CORRECT AND DOES NOT FLOW FROM THE JUDGMENT OF THE HONBLE SUPREME COURT AND SUBMITTED THAT THE AO COULD EXAMINE MANY OTHER ISSUES. HE FURTHER SUBMITTED THAT THE JUDGMENT OF THE HONBLE SUPREME COURT OF INDIA IN QUESTION, WHEREIN THE MAT TER WAS REMANDED TO THE AO, PERTAINING TO A PARTICULAR ASS ESSMENT YEAR IS NOT YET FINALIZED AND THAT THE ASSESSMENT OF MAN Y OTHER CASES WERE BEING FINALIZED BASED ON THIS SUPREME COURT JU DGMENT. HE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 39 ARGUED THAT THE ISSUE BEFORE THE HONBLE SUPREME CO URT WAS RELATING TO DOMESTIC TELEPHONE OPERATORS WHEREAS TH E CASE IN HAND, THE AO WAS EXAMINING THE PAYMENTS MADE TO FTO S. HE ARGUED THAT THE REGULATION OF THE TELECOM REGULATOR Y AUTHORITY OF INDIA (TRAI) DO NOT BIND FTOS AND HENCE THE DECISIO N CITED BY THE ASSESSEES COUNSEL BASED ON PAYMENTS TO DOMESTIC TE LEPHONE OPERATIONS, CANNOT BE APPLIED TO THE FACTS OF THE C ASE. 10. LD. DR FURTHER ARGUED THAT ALL THE AGREEMENTS TH E ASSESSEE ENTERED WITH THE FTOS WERE NOT WITH THE AO. REFERRI NG TO PAGE NO. 22 OF THE LD. CIT(A)S ORDER AS WELL AS PAGE NO . 35, HE DREW THE ATTENTION OF THE BENCH TO THE QUESTIONS AND ANS WERS RECORDED FROM SH. ASHOK MITTAL AS WELL AS SH. TANAI KRISHNAN ON OATH. SPECIFICALLY HE DREW THE ATTENTION OF THE BENCH TO QUESTION NO. 4, 5 AND 6 WHICH ARE AT PAGES 35 & 36 OF THE CIT(A )S ORDER AND TO THE ANSWERS TO QUESTION NO. 7 & 30 AND ARGUED TH AT IN THIS CASE THERE IS HUMAN INTERVENTION WHERE THERE IS CA PACITY AUGMENTATION AND THE FUNCTION OF THE PERSONNEL INC LUDE TESTING, SUPERVISING AND MONITORING ETC. AND SUPPORTED THE F INDINGS OF THE LD. CIT(A) THAT THERE WAS HUMAN INTERVENTION. HE R EFERRED TO THE CROSS EXAMINATION DONE BY THE ASSESSEE AS WELL AS THE RE- EXAMINATION DONE BY THE AO AND THE CONCLUSIONS DRA WN BY THE AO AND SUPPORTED THE CONCLUSIONS OF THE AO AS CONF IRMED BY THE LD. CIT(A). HE FURTHER POINTED OUT THAT THE ASSESSE E COMPANY HAS ITSELF DEDUCTED TDS ON THIS IUC FROM DOMESTI C MOBILE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 40 SERVICE PROVIDER W.E.F. APRIL, 2003 AND ARGUED THAT THERE IS NO DIFFERENCE IN FLOW OF CALLS OR OPERATIONS FOR A NAT IONAL CALL OR AN INTERNATIONAL CALL AND UNDER THESE CIRCUMSTANCES TA X SHOULD HAVE BEEN DEDUCTED ON PAYMENT MADE TO FTOS ALSO. 11. LD. DR FURTHER ARGUED THAT SERVICES HAS BEEN PRO VIDED BY THE FTOS TO THE ASSESSEE. HE VEHEMENTLY CONTENDED THAT THE SUBMISSIONS OF THE ASSESSEE THAT SERVICES ARE CONNE CTED WITH SUCCESSFUL CALLS ONLY IS FALLACIOUS. HE ARGUED THA T SERVICES ARE OBTAINED FROM FTOS EVEN IN A CASE WHERE A CALL HAS NOT MATERIALIZED AND THAT SUCCESSFUL CALLS ARE TAKEN IN TO ACCOUNT ONLY FOR THE PURPOSE OF BILLING. HE CONTENDED THAT METHO D OF BILLING CANNOT BE EQUATED WITH TYPE OF SERVICES OBTAINED BY THE ASSESSEE. HE SUBMITTED THAT THE OPERATIONS ARE DES CRIBED IN THE COMPOSITE AGREEMENT AND IT INCLUDES HOST OF SERVICE . HE SUBMITTED THAT THE CALL DROP IS ALSO CONSIDERED IN THESE AGREEMENTS AND IT IS PROVIDED THAT IN CASE OF CALL DROP, A PENALTY WOULD BE ATTRACTED. HE PLEADED THAT THE PITH AND SU BSTANCE OF THESE SERVICES SHOULD BE CONSIDERED AND NOT THE MO DE OF BILLING AND THE AGREEMENT SHOULD BE VIEWED IN A HOLISTIC MA NNER. HE REFERRED TO THE DEFINITION OF FTS U/S. 9(1)(VIII) A ND SUBMITTED THAT IT DOES NOT EXCLUDE LUMSUM CONSIDERATION. 12. ON THE ARGUMENT THAT IT IS A CASE OF REVENUE SH ARING THE LD. DR RELIED ON PAGE NO. 59 OF THE LD. CIT(A)S ORDER V IDE PARA NO. 9.13 TO 9.18 AND SUBMITTED THAT THE AGREEMENTS BETW EEN THE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 41 ASSESSEE AND FTOS ARE NOT JOINT VENTURE AGREEMENTS OR PARTNERSHIP CONCERNS AND THAT THEY ARE NOT A PERSO N UNDER THE ACT FOR BEING SEPARATELY ASSESSED. ON THE ISSUE WHETHER THE SERVICES CAN BE TREATED AS FTS UNDER THE TREATY WIT H CERTAIN COUNTRIES, HE DREW ATTENTION OF THE BENCH TO PAGE N O. 95 OF THE LD. CIT(A)S AND RELIED ON THE SAME. HE FURTHER RE LIED UPON ON CERTAIN CASE LAWS, WHICH WE WOULD BE DEALING IN THE COURSE OF OUR FINDING, AS AND WHEN REQUIRED. 13. ON THE REVENUES APPEALS, THE LD. DR SUBMITTED T HAT THE GROUND NO. 1 IS AGAINST THE ADMISSION OF ADDITIONAL EVIDENCE BY THE LD. CIT(A). HE PLEADED THAT THERE WAS VIOLATION OF RULE 46A AND SUBMITTED THAT THE LD. CIT(A) SHOULD NOT BE ADMI TTED THE EVIDENCE IN THE FORM OF (I) COPY OF THE AGREEMENTS WITH VARIOUS OVERSEAS TELECOM OPERATOR, (II) RESIDENT CERTIFICA TE, (III) NO PE CERTIFICATE OF THOSE NON-RESIDENTS OPERATORS AND ( IV) COPIES OF VOUCHERS REGARDING THE PAYMENT MADE TO THEM. HE REL IED UPON THE DECISION OF THE DELHI ITAT BENCH IN THE CASE OF JCIT, CIRCLE 17(1) VS. VENUS FINANCIAL SERVICES LTD. (2012) 21 T AXMAN.COM 436 (DELHI). 14. THE GROUND NOS. 2 TO 6 OF THE REVENUE APPEALS ARE ON THE ISSUE AS TO WHETHER THE PAYMENT FOR IUC TO FTOS ARE ROYALTY OR NOT. THE LD. DR BASICALLY RELIED UPON THE FINDING OF THE AO FROM PAGES 32 TO 40 AND SUBMITTED THAT WITHOUT PREJ UDICE TO THE FINDING THAT THESE PAYMENTS ARE FOR FTS, THE AO CAM E TO THE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 42 CONCLUSION THAT THE PAYMENTS IN QUESTION SHOULD IN THE ALTERNATIVE BE CLASSIFIED AS ROYALTY. LD. DR FURTHER CONTENDE D THAT THE AMENDMENTS BROUGHT TO SECTION 9(1)(VII) ARE RETROSP ECTIVE AND ARE CLARIFICATORY IN NATURE AND WERE ONLY BROUGHT I N TO CLARIFY THE UNINTENDED INTERPRETATION OF THE COURTS OF LAW. REFE RRING TO THE HONBLE DELHI HIGH COURT DECISION ON THIS ISSUE, HE SUBMITTED THAT THE HONBLE HIGH COURT HAS NOT ADJUDICATED THE ISSUES POST AMENDMENT, AS THE SAME WAS NOT BEFORE IT. HE SUBMIT TED THAT THE PAYMENT IS FOR USE OF A PROCESS AND HENCE COVER ED BY EXPLANATION 5 & 6 OF SECTION 9(1)(VI)(B) OF THE ACT . HE SPECIFICALLY RELIED UPON THE ORDERS OF THE ITAT, BANGALORE BENCH IN THE CASE OF VODAFONE SOUTH LTD. VS. DDIT (INT. TAXATION) REPO RTED (2015) 53 TAXMANN.COM 441 (BANGALORE-TRIB.) AND ARGUED THA T THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOR OF THE REV ENUE BY THIS DECISION. HE FURTHER RELIED UPON THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF VIACOM 18 MEDIA (P) LTD. VS. ADIT (INTERNATIONAL TAXATION), MUMBAI TRIBUNAL REPORTED IN (2014) 44 TAXMANN.COM 1 WHEREIN IT WAS HELD THAT, THE PAYMEN T OF FEES FOR USE OF SATELLITE TRANSPONDER SERVICE BY ASSESSE E TO ONE US COMPANY WAS TAXABLE AS ROYALTY UNDER ARTICLE 12 OF THE DTAA. 15. IN REPLY THERETO, LD. COUNSEL OF THE ASSESSEE D ISTINGUISHED THE CASE LAWS RELIED UPON BY THE LD. DR AND DISTINGU ISHED EACH AND EVERY CASE LAW ON FACTS AS WELL AS ON LAW. HE S UBMITTED THAT THE PROPOSITION OF LAW LAID DOWN BY THE JURISDICTI ONAL HIGH COURT ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 43 ON THE VERY SAME ISSUE ARE IN FAVOR OF THE ASSESEE AND HENCE THE ORDERS EVEN IF THEY WERE IN FAVOUR OF THE REVENUE F ROM OTHER JURISDICTION CANNOT BIND THE TRIBUNAL. HE FURTHER MADE DETAILED SUBMISSIONS TO THE EFFECT THAT THE ITAT SHOULD NOT FOLLOW THE DECISION OF THE BANGALORE BENCH OF THE ITAT IN THE CASE OF VODAFONE SOUTH LTD. VS. DDIT (INT. TAXATION) (SUPRA) AND THE DECISION OF THE MUMBAI, ITAT IN THE CASE OF VIACOM 18 MEDIA PVT. LTD. ETC. WE WILL DEAL WITH THESE ARGUMENTS IN DETA IL IN OUR FINDINGS. FINDING:- 16. RIVAL CONTENTION HEARD. ON A CAREFUL CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSA L OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAW CITED, WE HOLD AS FOLLOWS:- 17. THE LD. CIT(A) HAS CLASSIFIED THE ISSUES AS FOLL OWS:- I. WHETHER THE ASSESSEE IS LIABLE TO BE TREATED AS ASS ESSEE IN DEFAULT U/S. 201(1). II. WHETHER PAYMENTS MADE BY THE ASSESSEE ARE TAXABLE A S FEE FOR TECHNICAL SERVICES (HEREINAFTER REFERRED AS FTS). III. WHETHER THE PAYMENT MADE BY THE ASSESSEE ARE TAXABL E IN INDIA AS ROYALTY U/S. 9(1)(VI) OF THE ACT. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 44 IV. WHETHER THE PAYMENT MADE BY THE ASSESSEE CAN BE DEEMED TO ACCRUE OR ARISE IN INDIA U/S. 9(1)(VI)(B) / 9(1)(VII)(B) OF THE ACT. V. WHETHER MAKE AVAILABLE CLAUSE UNDER DTAA IS SATIS FIED. VI. WHETHER THERE IS NO FTS CLAUSE IN THE RELEVANT DTAA , WHERE THE PAYMENT ARE TAXABLE IN INDIA IN THE ABSE NCE OF THE FTS. VII. WHETHER SECTION 206AA OF THE ACT IS APPLICABLE WITH RETROSPECTIVELY. 18. THE ASSESSEE FILED THESE APPEAL ON THE ISSUES WHICH WERE ADJUDICATED AGAINST IT BY THE LD. CIT(A) AND THE REV ENUE HAS FILED THE APPEALS ON THE ISSUE WHICH WERE ADJUDICATED IN FAVOUR OF THE ASSESSEE BY THE LD. CIT(A). ASSESSEES APPEALS 19. THE GROUNDS IN THE ASSESSEES APPEAL ARE SUMMAR IZED AS FOLLOWS:- I). WHETHER THE ASSESSEE IS LIABLE TO BE TREATED AS THE ASSESSEE IN DEFAULT U/S. 201(1). II) WHETHER INTER-CONNECTED AGREEMENTS BETWEEN THE ASSESSEE AND THE FTOS ARE IN THE NATURE OF REVENUE SHARING ARRANGEMENTS. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 45 III) WHETHER THE PAYMENT MADE BY THE ASSESSEE TO F OREIGN TELECOM OPERATORS UNDER INTER-CONNECTION AGREEMENTS ARE TAXABLE IN INDIA AS FTS. IV) WHETHER PAYMENT MADE BY THE ASSESSEE TO FTOS, CAN BE DEEMED TO ACCRUE OR ARISE IN INDIA U/S. 9(1)(VI) & 9(1)(VII) OF THE ACT. V) WHETHER BENEFICIAL RATE PROVIDED UNDER DTAA WOUL D OVERRIDE THE PROVISIONS OF SECTION 206AA. 20. WE SUMMARIZE THE GROUNDS IN THE REVENUES APPE ALS AS FOLLOWS:- I) WHETHER THE PAYMENT MADE BY THE ASSESSEE TO FTOS AR E TAXABLE AS ROYALTY FOR THE USE OF PROCESS UNDER SEC TION 9(1)(VII) OF THE ACT AND RELEVANT DTAAS. II) WHETHER THE ASSESSEE CAN BE TREATED AS ASSESSEE IN DEFAULT U/S. 201 OF THE ACT IN RESPECT OF THE LIAB ILITY IMPOSED BY VIRTUE OF RETROSPECTIVE AMENDMENT TO LAW . III) WHETHER MAKE AVAILABLE CLAUSE UNDER RELEVANT DTAA ARE SATISFIED. IV) WHETHER SECTION 206AA OF THE ACT IS APPLICABLE RETROSPECTIVELY. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 46 V) WHETHER THE LD. CIT(A) ACTED IN VIOLATION OF THE PRO VISION OF RULE 46A IN ADMITTING ADDITIONAL EVIDENCE BY THE ASSESSEE. 20.1 WE NOW FRAME THE FOLLOWING ISSUES FOR OUR A DJUDICATION:- ISSUE NO. 1 WHETHER THE PAYMENT OF IUC BY ASSESSEE TO FTOS ARE TAXABLE AS FEE FOR TECHNICAL SERVICES U/S. 9(1)(VII) OF THE ACT. ISSUE NO. 2 WHETHER THE PAYMENT TO FTOS FOR IUCS ARE IN THE NATURE OF ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT. ISSUE NO. 3 WHETHER THE ASSESSEE IS LIABLE TO BE TREATED AS ASSESSEE IN DEFAULT U/S. 201 OF THE I.T. ACT. ISSUE NO. 4 WHETHER THE PAYMENT MADE BY THE ASSESSEE TO THE FTO CAN BE DEEMED TO ACCRUE OR ARISE IN INDIA. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 47 ISSUE NO. 5 WHETHER BENEFICIAL RATE PROVIDED UNDER DTAA OVERRIDE THE PROVISIONS OF SECTION 206AA AND WHETHER SECTION 206AA OF THE ACT IS APPLICABLE RETROSPECTEVELY. ISSUE NO. 6 WHETHER THE LD. CIT(A) ACTED IN VIOLATION OF THE PROV ISIONS OF RULE 46A IN ADMITTING THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. ISSUE NO. 7 WHETHER THE PAYMENT IS REVENUE SHARING OR NOT. 21. BEFORE WE ADJUDICATE EACH OF THE ISSUE, IT WOUL D BE RELEVANT TO DISCUSS AS TO WHAT IS THE INTER-CONNECTION, INTE R-CONNECTION USAGE CHARGES (IUC), INTERNATIONAL LONG STANDING DIS TANCE SERVICES (ILD) ETC. 22. THE LD. CIT(A)S IN THIS IMPUGNED ORDER AT PARA NO. 8.1 TO 8.4 AT PAGES 16 TO 19 HAS EXPLAINED THE MEANING OF THE AFORESAID TECHNICAL TERMS. FOR THE SAKE OF CONVENIENCE, THE S AME ARE REPRODUCED HEREUNDER:- 8.1 THE APPELLANT IS CARRYING ON THE BUSINESS OF P ROVIDING TELECOMMUNICATION SERVICES TO ITS SUBSCRIBERS. IN O RDER TO PROVIDE INTERNATIONAL CONNECTIVITY TO ITS SUBSCRIBE RS, THE APPELLANT HAS BEEN GRANTED LICENSE TO PROVIDE INTER NATIONAL LONG DISTANCE SERVICES (ILD) [LICENSE AGREEMENT NO.10- Q7/2002-BS-I(ILD-02) DATED 14TH MARCH 2002]. CLAUSE 2.2 (A) ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 48 OF THE SAID LICENSE IS REPRODUCED BELOW [REFER PAGE 36 OF LETTER DATED 28.03.2012]: '2.2(A) THE ILD SERVICE IS BASICALLY A NETWORK CARR IAGE SERVICE (ALSO CALLED BEARER), PROVIDING INTERNATIONAL CONNE CTIVITY TO THE NETWORK OPERATED BY FOREIGN CARRIERS. THE ILD SERVIC E PROVIDER IS PERMITTED FULL FLEXIBILITY TO OFFER ALL TYPES OF BEARER SERVICES FROM AN INTEGRATED PLATFORM. ILD SERVICE PROVIDERS WILL PROVIDE BEARER SERVICES SO THAT END-TO-END TELE-SERVICES SU CH AS VOICE, DATA, FAX, VIDEO AND MULTI-MEDIA ETC. CAN BE PROVID ED BY ACCESS PROVIDERS TO THE CUSTOMERS. .... ILD SERVICE PROVIDERS WOULD BE PERMITTED TO OFF ER INTERNATIONAL BANDWIDTH TO OTHER OPERATORS. ILD SERV ICE PROVIDER SHALL NOT ACCESS THE SUBSCRIBERS DIRECTLY WHICH SHOULD BE THROUGH NLD SERVICE PROVIDER OR THE ACCESS PROVI DER. RESELLERS ARE NOT PERMITTED.' CLAUSE 1 OF THE 'DEFINITIONS AND INTERPRETATIONS' O F THE SAID LICENSE DEFINES ACCESS PROVIDERS AS FOLLOWS: 'ACCESS PROVIDERS' MEANS BASIC, CELLULAR, AND CABLE SERVICE PROVIDERS WHO HAVE A DIRECT ACCESS WITH THE SUBSCRI BERS. 8.2 THUS, ILD BUSINESS IS NOTHING BUT PROVISION OF CONNECTIVITY TO THE SUBSCRIBER FOR INTERNATIONAL PORTION OF A CALL, WHICH MAY OR MAY NOT ORIGINATE DOMESTICALLY. THE LOCAL CONNECTIV ITY [WITHIN INDIA] IS PROVIDED BY ACCESS PROVIDERS AND NATIONAL LONG DISTANCE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 49 (NLD) OPERATORS, AND THE INTERNATIONAL LEG OF THE CO NNECTIVITY IS PROVIDED BY THE ILD OPERATOR IN CONJUNCTION WITH A F OREIGN TELECOM OPERATOR(S), WHO PROVIDE THE LAST MILE CONN ECTIVITY. THE FOLLOWING ARE THREE ILLUSTRATIONS OF CARRIAGE OF CA LLS PROVIDED BY THE ILD OPERATOR: A) CARRIAGE OF CALLS FROM INDIA TO OUTSIDE INDIA: TO GIVE AN EXAMPLE, IF A CELLULAR SUBSCRIBER IS LOC ATED IN DELHI AND SEEKS TO MAKE A CALL TO NEW YORK, THROUGH HIS C ELL PHONE, THE CALL WILL BE ROUTED AS FOLLOWS: IN THE ABOVE DIAGRAM, THE CALL MOVES FROM AURANGABA D MOBILITY CIRCLE TO THE NLD GATEWAY (SAY AT NAGPUR), TRAVELS ON ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 50 NLD NETWORK TILL ILD GATEWAY (SAY MUMBAI) FROM WHERE IT IS TRANSPORTED TO INTERNATIONAL OPERATOR(S) OUTSIDE IN DIA. IN ORDER TO PROVIDE SEAMLESS SERVICES TO ITS SUBSCR IBERS, THE APPELLANT ENTERS INTO AGREEMENT WITH OVERSEAS NETWO RK OPERATORS, TO CONNECT THE CALL OVER THEIR NETWORK. THEREFORE, CALL TRAFFIC ORIGINATING FROM INDIA IS CARRIED FIRST BY THE ACCE SS PROVIDER, THEN BY THE NLD OPERATOR, THEN BY THE ILD OPERATOR AND FI NALLY BY THE FOREIGN TELECOM OPERATOR, AND/OR LAST MILE SERVICE PROVIDER. THE FACTUAL POSITION, THEREFORE, IS THAT THE ENTIRE CHA INS OF OPERATOR(S) POOL THEIR NETWORK/INFRASTRUCTURE TO PROVIDE INTEGR ATED AND SEAMLESS CONNECTIVITY SERVICE TO THE SUBSCRIBER(S). THE ACCESS PROVIDER, DUE TO PRACTICAL/LEGAL CONSIDERATIONS, EN TERS INTO CONTRACT TO PROVIDE SEAMLESS END TO END CONNECTIVIT Y TO THE SUBSCRIBER, AND EARNS REVENUE FROM THE SUBSCRIBER. THE ENTIRE REVENUE PAID BY THE SUBSCRIBER TO THE ACCESS PROVID ER AND COLLECTED BY THE ACCESS PROVIDER IS SHARED WITH THE NLD OPERATORS (WHERE THE NLD OPERATOR IS DIFFERENT FROM THE ACCES S PROVIDER) AND WITH ILD OPERATOR, WHO IN TURN SHARES THE REVEN UE WITH THE FOREIGN TELECOM OPERATOR(S). B) CARRYING CALLS FROM OUTSIDE AND TERMINATING SUC H CALLS IN INDIA: THE CALL IN THIS CASE ORIGINATES FROM OUTSIDE INDIA . THE CALL MAY ORIGINATE FROM, SAY, A SUBSCRIBER OF AT & T, USA. T HE CALL WILL ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 51 TRAVEL AUTOMATICALLY ON THE NETWORK OF AT & T, USA AND WILL BE HANDED OVER AT THE POINT OF PRESENCE (POP) / LANDIN G STATION IN NEW YORK OF THE APPELLANT. FROM SUCH LANDING STATIO N, THE CALL IS CARRIED TO THE LANDING STATION OF THE APPELLANT, IN SAY, MUMBAI, WHERE IT IS HANDED OVER TO THE NETWORK OF NLD SERVI CE PROVIDER IN INDIA FOR FURTHER CARRIAGE/TRANSPORTATION TO ITS DE STINATION. IT IS ALSO POSSIBLE THAT THE NETWORK OF THE NLD SERVICE PR OVIDER MAY TRANSFER THE CALL TO THE ACCESS PROVIDER, (IF THE T WO ARE DIFFERENT), WHO MAY TRANSPORT IT TO THE CUSTOMER. AS CAN BE OBS ERVED FROM THE ABOVE, THE ROLE OF ILD OPERATOR IS TO TRANSPORT THE CALL FROM OUTSIDE INDIA TILL THE FIRST LANDING STATION IN IND IA. AS SUBMITTED EARLIER, THE ILD OPERATOR IS NOT ALLOWED TO TRANSPO RT CALLS WITHIN INDIA. C) CARRYING CALLS FROM A TELECOM SERVICE PROVIDER IN ONE COUNTRY OUTSIDE INDIA TO ANOTHER TELECOM SERVICE PR OVIDER AND ITS SUBSCRIBER IN A THIRD COUNTRY (HUBBING'): TO ILLUSTRATE, THE SUBSCRIBER OF A US TELECOM SERVI CE PROVIDER, IN NEW YORK WANTS TO MAKE A CALL TO SINGAPORE. THE CALL WILL ORIGINATE AT THE LOCAL NETWORK OF THE US TELECOM SU BSCRIBER WHICH TELECOM NETWORK WILL CARRY THE CALLS FOR INTERCONNE CT TO THE LANDING STATION OF THE APPELLANT IN NEW YORK. HERE THE CALL IS TRANSPORTED TO THE ILD NETWORK. THE CALL WILL THEN BE AUTOMATICALLY CARRIED ON THE NETWORK OF THE ILD OPE RATOR TO SINGAPORE AND THEN TRANSPORTED TO THE LOCAL OPERATO R IN ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 52 SINGAPORE. THE ILD OPERATOR WILL EARN INCOME FROM TH E US TELECOM SERVICE PROVIDER BUT WILL HAVE TO PAY THE I UC/ACCESS CHARGES TO THE LOCAL SINGAPOREAN TELECOM SERVICE PR OVIDER. 8.3 IT MAY BE NOTED THAT THE APPELLANT IS NOT AUTHO RIZED, UNDER THE ILD LICENSE, TO CARRY CALL TRAFFIC FROM ONE PLAC E TO ANOTHER WITHIN INDIA WHICH CAN BE CARRIED ONLY BY A NLD LIC ENSE HOLDER. IN THIS REGARD, THE RELEVANT CLAUSE OF THE NLD LICENSE IS GIVEN BELOW: '2.2(A) THE NLD SERVICE REFERS TO THE CARRIAGE OF S WITCHED BEARER TELECOMMUNICATIONS SERVICE OVER A LONG DISTA NCE AND NLD SERVICE LICENSEE WILL HAVE A RIGHT TO CARRY INTER CIRCLE TRAFFIC EXCLUDING INTRA-CIRCLE TRAFFIC EXCEPT WHERE SUCH CARRIAGE IS WITH MUTUAL AGREEMENT WITH ORIGINATING SERVICE PROVIDER. (B) THE LLCENCEE CAN ALSO MAKE MUTUALLY AGREED ARRANGEMENTS WITH BASIC SERVICE PROVIDERS FOR PICKI NG UP, CARRIAGE AND DELIVERY OF THE TRAFFIC FROM DIFFERENT LEGS BETWEEN LONG DISTANCE CHARGING CENTER (LDCE) AND SHORT DISTA NCE CHARGING CENTERS (SDCCS). (C) IN THE CASE OF CELLULAR MOBILE TELEPHONE SERVIC E TRAFFIC, THE INTER-CIRCLE TRAFFIC SHALL BE HANDED/TAKEN OVER AT THE POINT OF PRESENCE (POP) SITUATED IN LDCA AT THE LOCATION OF L EVEL I TAX IN ORIGINATING/TERMINATING SERVICE AREA. FOR WEST B ENGAL, ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 53 HIMACHAL PRADESH AND JAMMU & KASHMIR SUCH LOCATIONS SHALL BE ASANSOL, SHIMLA & JAMMU RESPECTIVELY. (D) NLD SERVICE LICENSEE SHALL BE REQUIRED TO MAKE O WN SUITABLE ARRANGEMENTS / AGREEMENTS FOR LEASED LINES WITH THE ACCESS PROVIDERS FOR LAST MILE. FURTHER, NLD SERVICE PROVID ERS CAN ACCESS THE SUBSCRIBERS DIRECTLY ONLY FOR PROVISION OF LEAS ED CIRCUITS/CLOSE USER GROUPS (CUGS). LEASED CIRCUIT IS DEFINED AS VI RTUAL PRIVATE NETWORK (VPN) USING CIRCUIT OR PACKET SWITCHED (IP PROTOCOL) TECHNOLOGY APART FROM POINT TO POINT NON-SWITCHED P HYSICAL CONNECTIONS/TRANSMISSION BANDWIDTH. PUBLIC NETWORK IS NOT TO BE CONNECTED WITH LEASED CIRCUITS/CUGS. IT IS CLARIFIE D THAT NLD SERVICE LICENSEE CAN PROVIDE BANDWIDTH TO OTHER TEL ECOM SERVICE LICENSEE ALSO.' 8.4 IT WILL THUS BE APPRECIATED THAT THE ENTIRE S ERVICES ARE PROVIDED BY THE APPELLANT AS AN ILD OPERATOR, OUTSID E INDIA. FROM THE ILD GATEWAY OF THE APPELLANT IN INDIA, THE CALL IS CARRIED TO THE GATEWAY OF THE APPELLANT OUTSIDE INDIA AND IF THE A PPELLANT HAS NO GATEWAY OUTSIDE INDIA, THE CALL IS CARRIED ON THE T ELECOM NETWORK OF THE FOREIGN OPERATOR(S}. THE CALL FROM THE GATEW AY OUTSIDE INDIA IS TRANSPORTED TO THE CUSTOMER DESTINATION BY THE LOCAL FOREIGN TELECOM OPERATOR(S). (EMPHASIS OURS) 23. A PERUSAL OF THE ABOVE EXTRACTED PARAS LEADS TO THE FOLLOWING CONCLUSIONS: ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 54 THE ASSESSEE, AS PART OF ITS ILD TELECOM SERVICES BU SINESS, IS RESPONSIBLE FOR PROVIDING SERVICES TO ITS SUBSCR IBERS IN RESPECT OF CALLS ORIGINATED/TERMINATED OUTSIDE INDIA. THUS, FOR THE PROVISIONS OF ILD SERVICES, THE ASSESSEE IS REQUIRED TO OBTAIN THE SERVICES OF FTOS FOR PROVISION OF CARRIAGE CONNECTI VITY SERVICES OVER THE LAST LEG BY THE COMMUNICATION CHANNEL I.E . THE LACK OF COMMUNICATION CHANNEL WHERE THE ASSESSEE DOES NOT H AVE A LICENCE/ CAPACITY TO PROVIDE CONNECTIVITY SERVICES. THUS, THE ILD BUSINESS IS THE PROVISIONS OF CONNECTIVITY TO THE SUBSCRIBERS FOR INTERNATIONAL PORTION OF THE CALL, WHICH MAY OR MAY NOT ORIGINATE DOMESTICALLY. THE LOCAL CONNECTIVITY WITHIN INDIA IS PROVIDED BY THE ACCESS PROVIDERS AND THE NATIONAL LONG DISTANCE OPERATORS (NLD OPERATORS) AND THE INTERNATIONAL CONNECTIVITY B Y THE ILD OPERATORS INTERCONNECTION WITH FTO, WHO PROVIDE THE LAST MILE CONNECTIVITY. AN INTERNATIONAL CALL HAS TO BE ROU TED THROUGH NLD/ILD USING THE INTERNATIONAL GATE WAY. FOR TERMIN ATION OF THE INTERNATIONAL CALLS IN INDIA, ILD HAVE COMMERCIAL AR RANGEMENTS WITH FOREIGN CARRIERS WHO DELIVER THE TRAFFIC USIN G THE INTERNATIONAL CONNECTIVITY AND CALLS ARE DELIVERED TO THE INDIAN ILD OPERATOR. THE ASSESSEE ENTERED INTO AN AGREEMENT W ITH OVERSEAS NETWORK CORPORATE TO CONNECT THE CALL OVER THE NETWORK. THIS IS DONE TO PROVIDE SEAMLESS CONNECTI VITY SERVICES TO THE SUBSCRIBERS. THE ACCESS PROVIDER PROVIDE S EAMLESS END TO END CONNECTIVITY TO THE SUBSCRIBERS AND THE ENTI RE REVENUE ARISE OUT OF SUCH SERVICES IS PAID BY THE SUBSCRIBE RS TO THE ACCESS ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 55 PROVIDER. IF THE NLD OPERATOR IS DIFFERENCE FROM AC CESS PROVIDER, THEN THE NLD OPERATOR BILLS THE ACCESS PROVIDER FOR HIS PART OF SERVICE RENDERED. THE ILD OPERATOR IS IN TURN BILL ED BY THE FTO IN THE FORM OF INTER-CONNECTED USAGE CHARGES (IUC). 24. THE BASIC ISSUE BEFORE US IS WHETHER SUCH INTER CONNECTED CHARGES BILLED BY THE FTOS AND PAID BY THE ASSESSE E ARE IN THE NATURE OF FEE OF TECHNICAL SERVICES (FTS) OR IN THE NATURE OF ROYALTY. WE WOULD FIRST TAKE UP THE ADJUDICATION OF THESE TWO ISSUES AND THEN WE WOULD BE REVERTING TO OTHER ISSU ES. 25. ISSUE NO. 1 WHETHER THE PAYMENT OF IUC BY ASSESSEE TO FTOS ARE TAXABLE AS FEE FOR TECHNICAL SERVICES U/S. 9(1)(VII) OF THE ACT. (AS THE SECTION 9(1)(VII) HAS ALREADY BEEN EXTRACTED IN THE EARLIER PARAGRAPHS, WE DO NOT REPEAT THE SAME.) 26. THE HONBLE DELHI HIGH COURT ON THIS ISSUE HEL D AS FOLLOWS IN THE ASSESSEES OWN CASE I.E. CIT VS. BHARTI CELLULA R LTD. (2009) 319 ITR 139 (DELHI):- THE EXPRESSION 'FEES FOR TECHNICAL SERVICES' AS AP PEARING IN S. 194J HAS THE SAME MEANING AS GIVEN TO THE EXPRESSIO N IN EXPLN. 2 TO S. 9(1)(VII). IN THE SAID EXPLANATION. THE EXPRESSION 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATI ON. FOR RENDERING ANY (MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES'. THE WORD (TECHNICAL' IS PRECEDED BY THE WORD (MANAG ERIAL' AND ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 56 SUCCEEDED BY THE WORD 'CONSULTANCY'. SINCE THE EXPR ESSION (TECHNICAL SERVICES' IS IN DOUBT AND IS UNCLEAR, TH E RULE OF NOSCITUR A SOCIIS IS CLEARLY APPLICABLE. THIS WOULD MEAN THAT THE WORD 'TECHNICAL' WOULD TAKE COLOUR FROM THE WORDS ' MANAGERIAL' AND 'CONSULTANCY', BETWEEN WHICH IT IS SANDWICHED. A MANAGERIAL SERVICE WOULD BE ONE WHICH PERTAINS TO O R HAS THE CHARACTERISTIC OF A MANAGER. IT IS OBVIOUS THAT THE EXPRESSION (MANAGER' AND CONSEQUENTLY (MANAGERIAL SERVICE' HAS A DEFINITE' HUMAN ELEMENT ATTACHED TO IT. TO PUT IT B LUNTLY, A MACHINE CANNOT BE A MANAGER. THE SERVICE OF CONSULT ANCY ALSO NECESSARILY ENTAILS HUMAN INTERVENTION. THE CONSULT ANT, WHO PROVIDES CONSULTANCY SERVICE, HAS TO BE A HUMAN BEI NG. A MACHINE CANNOT BE REGARDED AS A CONSULTANT. FROM TH E ABOVE DISCUSSION, IT IS APPARENT THAT BOTH THE WORDS 'MAN AQERIAL' AND 'CONSULTANCY' INVOLVE A HUMAN ELEMENT. AND, BOTH, M ANAGERIAL SERVICE AND CONSULTANCY SERVICE, ARE PROVIDED BY HU MANS. CONSEQUENTLY, APPLYING THE RULE OF NOSCITUR A SOCCI S, THE WORD 'TECHNICAL' AS APPEARING IN EXPLN. 2 TO S. 9(1)(VII ) WOULD ALSO HAVE TO BE CONSTRUED AS INVOLVING A HUMAN ELEMENT. BUT, THE FACILITY PROVIDED BY MTNL/ OTHER COMPANIES FOR INTE RCONNECT/ PORT ACCESS IS ONE WHICH IS PROVIDED AUTOMATICALLY BY MACHINES. IT IS INDEPENDENTLY PROVIDED BY THE USE O F TECHNOLOGY AND THAT TOO, SOPHISTICATED TECHNOLOGY, BUT THAT DOES NOT MEAN THAT MTNL/ OTHER COMPANIES WHICH PROV IDE SUCH FACILITIES ARE RENDERING ANY TECHNICAL SERVICES AS CONTEMPLATED ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 57 IN EXPLN. 2 TO S. 9(L)(VII). THIS IS SO BECAUSE THE EXPRESSION 'TECHNICAL SERVICES' TAKES COLOUR FROM THE EXPRESSI ONS 'MANAGERIAL SERVICES' AND 'CONSULTANCY SERVICES' WH ICH NECESSARILY INVOLVE A HUMAN ELEMENT OR, WHAT IS NOW ADAYS FASHIONABLY CALLED, HUMAN INTERFACE. IN THE FACTS O F THE PRESENT APPEALS, THE SERVICES RENDERED QUA INTERCONNECTION PORT ACCESS DO NOT INVOLVE ANY HUMAN INTERFACE AND, THEREFORE, THE SAME CANNOT BE REGARDED AS 'TECHNICAL SERVICES' AS CONTE MPLATED UNDER S. 194J. THE INTERCONNECT/ PORT ACCESS FACILITY IS ONLY A FACILITY TO USE THE GATEWAY AND THE NETWORK OF MTNL / OTHER COMPANIES. MTNL OR OTHER COMPANIES DO NOT PROVIDE AN Y ASSISTANCE OR AID OR HELP TO THE RESPONDENTS/ ASSES SEES IN MANAGING, OPERATING, SETTING UP THEIR INFRASTRUCTUR E AND NETWORKS. NO DOUBT, THE FACILITY OF INTERCONNECTION AND PORT ACCESS PROVIDED BY MTNL/ OTHER COMPANIES IS 'TECHNI CAL' IN THE SENSE THAT IT INVOLVES SOPHISTICATED TECHNOLOGY. TH E FACILITY MAY EVEN BE CONSTRUED AS A 'SERVICE' IN THE BROADER SENSE SUCH AS A 'COMMUNICATION SERVICE'. BUT, WHILE INTERPRETI NG THE EXPRESSION 'TECHNICAL SERVICE', THE INDIVIDUAL MEAN INGS OF THE WORDS 'TECHNICAL' AND 'SERVICE' HAVE TO BE SHED. AN D ONLY THE MEANING OF THE WHOLE EXPRESSION 'TECHNICAL SERVICES ' HAS TO BE SEEN. MOREOVER, THE EXPRESSION 'TECHNICAL SERVICE' WOULD HAVE REFERENCE TO ONLY TECHNICAL SERVICE RENDERED BY A H UMAN. IT WOULD NOT INCLUDE ANY SERVICE PROVIDED BY MACHINES OR ROBOTS. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 58 THUS, THE INTERCONNECT CHARGES/ PORT ACCESS CHARGES CANNOT BE REGARDED AS FEES FOR TECHNICAL SERVICES.' [EMPHASIS SUPPLIED] 27. THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE AFORESAID CASE MAY THUS BE SUMMARIZED AS UNDER: THE RULE OF NOSCITUR A SOCIIS IS CLEARLY APPLICAB LE AND THE WORD 'TECHNICAL' WOULD TAKE COLOUR FROM THE WORDS ' MANAGERIAL' AND 'CONSULTANCY', BETWEEN WHICH IT IS SANDWICHED. BOTH MANAGERIAL SERVICE AND CONSULTANCY SERVICE A RE PROVIDED BY HUMANS. CONSEQUENTLY, APPLYING THE RULE OF NOSCITUR A SOCCI S, THE WORD 'TECHNICAL' AS APPEARING IN EXPLN. 2 TO S. 9(1)(VII ) WOULD ALSO HAVE TO BE CONSTRUED AS INVOLVING A HUMAN ELEMENT THE EXPRESSION 'TECHNICAL SERVICE' WOULD HAVE REF ERENCE TO ONLY TECHNICAL SERVICE RENDERED BY A HUMAN. MTNL OR OTHER COMPANIES DO NOT PROVIDE ANY ASSISTA NCE TO THE ASSESSEE IN MANAGING, OPERATING, SETTING UP THE IR INFRASTRUCTURE AND NETWORKS. NO DOUBT, SUCH A FACILITY IS 'TECHNICAL' IN THE S ENSE THAT IT INVOLVES SOPHISTICATED TECHNOLOGY AND MAY EVEN BE C ONSTRUED AS 'COMMUNICATION SERVICE' BUT WHILE INTERPRETING THE ENTIRE EXPRESSION 'TECHNICAL SERVICE', THE INDIVIDUAL MEAN INGS OF THE WORDS 'TECHNICAL' AND 'SERVICE' HAVE TO BE SHED AND ONLY THE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 59 MEANING' OF THE WHOLE-EXPRESSION 'TECHNICAL SERVICE S' HAS TO, BE SEEN. THE SERVICES RENDERED QUA INTERCONNECTION/ PORT A CCESS DO NOT INVOLVE ANY HUMAN INTERFACE AND, THEREFORE, THE SAME CANNOT BE REGARDED AS 'TECHNICAL SERVICES' AS CONTEMPLATED UNDER S. 194J. 28. THE PHRASEOLOGY OF FEES FOR TECHNICAL SERVICES COVERS ONLY SUCH TECHNICAL SERVICES PROVIDED FOR FEES. THERE S HOULD BE A DIRECT CO-RELATION BETWEEN THE SERVICES WHICH ARE O N TECHNICAL NATURE AND THE CONSIDERATION RECEIVED IN LIEU OF RE NDERING THE SERVICES. THE SERVICES CAN BE SAID TO BE OF TECHNI CAL NATURE IS THE SPECIAL SKILLS AND KNOWLEDGE RELATING TO TECHNI CAL FIELD WHICH REQUIRED FOR THE PROVISIONS OF SUCH SERVICES. THES E ARE REQUIRED TO BE RENDERED BY HUMANS. THE SERVICES PROVIDED B Y MACHINES AND ROBUST DO NOT FALL WITHIN THE AMBIT OF TECHNICA L SERVICES AS PROVIDED U/S. 9(1)(VII) OF THE ACT. 29. ON APPEAL BY THE REVENUE, THE HONBLE SUPREME C OURT IN THE CASE REPORTED AS CIT VS. BHARTI CELLULAR LTD. ( 2011) 330 ITR 239 UPHELD THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT. THE HONBLE SUPREME COURT HAS HELD AS U NDER:- THE QUESTION BASICALLY INVOLVED IN THE LEAD CASE I S: WHETHER TDS WAS DEDUCTIBLE BY M/S. BHARTI CELLULAR LIMITED WHEN IT PAID INTERCONNECT CHARGES/ACCESS/PO RT CHARGES TO BSNL? FOR THAT PURPOSE, WE ARE REQUIRED TO ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 60 EXAMINE THE MEANING OF THE WORDS FEES FOR TECHNICA L SERVICES UNDER SECTION 194J READ WITH CLAUSE (B) O F THE EXPLANATION TO SECTION 194J OF THE INCOME TAX ACT, 1961, [`ACT', FOR SHORT] WHICH, INTER ALIA, STATES THAT FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME MEANING AS CONTAINED IN EXPLANATION 2 TO CLAUSE (VII) OF SECTI ON 9(1) OF THE ACT. RIGHT FROM 1979 VARIOUS JUDGMENTS OF THE H IGH COURTS AND TRIBUNALS HAVE TAKEN THE VIEW THAT THE W ORDS TECHNICAL SERVICES HAVE GOT TO BE READ IN THE NAR ROWER SENSE BY APPLYING THE RULE OF NOSCITUR A SOCIIS, PA RTICULARLY, BECAUSE THE WORDS TECHNICAL SERVICES IN SECTION 9 (1)(VII) READ WITH EXPLANATION 2 COMES IN BETWEEN THE WORDS MANAGERIAL AND CONSULTANCY SERVICES . THE PROBLEM WHICH ARISES IN THESE CASES IS THAT THE RE IS NO EXPERT EVIDENCE FROM THE SIDE OF THE DEPARTMENT TO SHOW HOW HUMAN INTERVENTION TAKES PLACE, PARTICULARLY, D URING THE PROCESS WHEN CALLS TAKE PLACE, LET US SAY, FROM DELHI TO NAINITAL AND VICE VERSA. IF, LET US SAY, BSNL HAS N O NETWORK IN NAINITAL WHEREAS IT HAS A NETWORK IN DELHI, THE INTERCONNECT AGREEMENT ENABLES M/S. BHARTI CELLULAR LIMITED TO ACCESS THE NETWORK OF BSNL IN NAINITAL A ND THE SAME SITUATION CAN ARISE VICE VERSA IN A GIVEN CAS E. DURING THE TRAFFIC OF SUCH CALLS WHETHER THERE IS ANY MANU AL INTERVENTION, IS ONE OF THE POINTS WHICH REQUIRES E XPERT ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 61 EVIDENCE. SIMILARLY, ON WHAT BASIS IS THE CAPACITY OF EACH SERVICE PROVIDER FIXED WHEN INTERCONNECT AGREEMENTS ARE ARRIVED AT? FOR EXAMPLE, WE ARE INFORMED THAT EACH SERVICE PROVIDER IS ALLOTTED A CERTAIN CAPACITY. ON WHAT BASIS SUCH CAPACITY IS ALLOTTED AND WHAT HAPPENS IF A S ITUATION ARISES WHERE A SERVICE PROVIDER'S ALLOTTED CAPACIT Y GETS EXHAUSTED AND IT WANTS, ON AN URGENT BASIS, ADDITI ONAL CAPACITY? WHETHER AT THAT STAGE, ANY HUMAN INTERVE NTION IS INVOLVED IS REQUIRED TO BE EXAMINED, WHICH AGAIN NEEDS A TECHNICAL DATA. WE ARE ONLY HIGHLIGHTING THESE FACT S TO EMPHASISE THAT THESE TYPES OF MATTERS CANNOT BE DEC IDED WITHOUT ANY TECHNICAL ASSISTANCE AVAILABLE ON RECOR D. THERE IS ONE MORE ASPECT THAT REQUIRES TO BE GONE INTO. I T IS THE CONTENTION OF RESPONDENT NO.1 HEREIN THAT INTERCONN ECT AGREEMENT BETWEEN, LET US SAY, M/S. BHARTI CELLULAR LIMITED AND BSNL IN THESE CASES IS BASED ON OBLIGAT IONS AND COUNTER OBLIGATIONS, WHICH IS CALLED A REVENUE SHARING CONTRACT. ACCORDING TO RESPONDENT NO.1, SE CTION 194J OF THE ACT IS NOT ATTRACTED IN THE CASE OF RE VENUE SHARING CONTRACT. ACCORDING TO RESPONDENT NO.1, IN SUCH CONTRACTS THERE IS ONLY SHARING OF REVENUE AND, THE REFORE, PAYMENTS BY REVENUE SHARING CANNOT CONSTITUTE FEES UNDER SECTION 194J OF THE ACT. THIS SUBMISSION IS N OT ACCEPTED BY THE DEPARTMENT. WE LEAVE IT THERE BECAU SE THIS ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 62 SUBMISSION HAS NOT BEEN EXAMINED BY THE TRIBUNAL. I N SHORT, THE ABOVE ASPECTS NEED RECONSIDERATION BY TH E ASSESSING OFFICER. WE MAKE IT CLEAR THAT THE ASSESS EE(S) IS NOT AT FAULT IN THESE CASES FOR THE SIMPLE REASON T HAT THE QUESTION OF HUMAN INTERVENTION WAS NEVER RAISED BY THE DEPARTMENT BEFORE THE CIT. IT WAS NOT RAISED EVEN B EFORE THE TRIBUNAL; IT IS NOT RAISED EVEN IN THESE CIVIL APPEALS. HOWEVER, KEEPING IN MIND THE LARGER INTEREST AND TH E RAMIFICATION OF THE ISSUES, WHICH IS LIKELY TO RECU R, PARTICULARLY, IN MATTERS OF CONTRACTS BETWEEN INDIA N COMPANIES AND MULTINATIONAL CORPORATIONS, WE ARE OF THE VIEW THAT THE CASES HEREIN ARE REQUIRED TO BE REMIT TED TO THE ASSESSING OFFICER (TDS). ACCORDINGLY, WE ARE DIRECTING THE ASSESSING OFFICE R (TDS) IN EACH OF THESE CASES TO EXAMINE A TECHNICAL EXPER T FROM THE SIDE OF THE DEPARTMENT AND TO DECIDE THE MATTER WITHIN A PERIOD OF FOUR MONTHS. SUCH EXPERT(S) WILL BE EXA MINED (INCLUDING CROSS-EXAMINED) WITHIN A PERIOD OF FOUR WEEKS FROM THE DATE OF RECEIPT OF THE ORDER OF THIS COURT . LIBERTY IS ALSO GIVEN TO RESPONDENT NO.1 TO EXAMINE ITS EXPERT AND TO ADDUCE ANY OTHER EVIDENCE. BEFORE CONCLUDING, WE AR E DIRECTING CBDT TO ISSUE DIRECTIONS TO ALL ITS OFFIC ERS, THAT IN SUCH CASES, THE DEPARTMENT NEED NOT PROCEED ONLY BY THE CONTRACTS PLACED BEFORE THE OFFICERS. (EMPHASIS O URS) ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 63 29.1 THUS IN OUR VIEW THE PROPOSITION OF LAW LAID DOWN IN THE JUDGMENT OF THE HONBLE DELHI HIGH COURT HAVE ATTAI NED FINALITY. THE HONBLE SUPREME COURT HELD THAT THE ISSUE AS TO WHETHER THERE IS INVOLVEMENT / PRESENCE OF HUMAN ELEMENT OR NOT WAS A FACTUAL AND TECHNICAL MATTER AND REQUIRED TO BE EXA MINED. THE OTHER PROPOSITION HAVE BEEN ACCEPTED BY THE HONBLE SUPREME COURT. AS THE HONBLE SUPREME COURT WAS OF THE OPI NION THAT THIS FACTUAL ASPECT OF HUMAN INTERVENTION WAS NOT EXAMIN ED BY THE AO, THE MATTER WAS REMANDED TO THE AO FOR FACTUAL EXAMINATION ONLY. THE AO IN PURSUANCE OF THE DIRECTIONS OF THE HONBLE SUPREME COURT EXAMINED WITNESS ON OATH AND ALSO GAV E THE ASSESSEE THE OPPORTUNITY TO CROSS EXAMINE THEM. HE ALSO RE- EXAMINED THE EXPERT WITNESS. OUR DECISION WILL BE B ASED ON THE EVIDENCE SO COLLECTED BY THE AO ON THIS ASPECT OF HUMAN INTERVENTION IN THE SERVICES RENDERED. IT HELD THAT THE WORD TECHNICAL SERVICES HAVE GOT TO BE READ IN THE NAR ROWER SENSE BY APPLYING THE RULE OF NOSCITUR A SOCIIS, PARTICULARL Y, BECAUSE THE WORDS TECHNICAL SERVICES IN SECTION 9(1)(VII) R/W EXPLN. 2 COMES IN BETWEEN THE WORDS MANAGERIAL AND CONSULTANCY SE RVICES. HENCE, THERE SHOULD BE INVOLVEMENT/ PRESENCE OF HUM AN ELEMENT FOR COMING TO A CONCLUSION THAT TECHNICAL SERVICE S CAN BE SAID TO HAVE BEEN RENDERED IN TERMS OF EXPLANATION 2 TO SECTION 9(1)((VII) OF THE ACT. IN OUR VIEW THE HONBLE SUPR EME COURT OF INDIA HAS APPROVED THE PROPOSITION LAID DOWN BY THE HONBLE HIGH COURT, THAT THIS IS A SERVICE AND THAT IF WOULD BE FTS AS DEFINED ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 64 U/S. 9(1)(VII) IF THERE IS HUMAN INTERFERENCE IN SU CH COMMUNICATION SERVICE. HENCE THE ISSUE TO BE CONSID ERED IS NARROW AND BASED ON EVIDENCE COLLECTED BY THE REVEN UE POST THE HONBLE SUPREME COURT JUDGMENT. ALL OTHER ISSUES AR E NO MORE RES-INTEGRA. 29.2 THIS ASPECT AS TO WHETHER A HUMAN ELEMENT IS INVOLVED IN SUCH INTERCONNECT SERVICES OR NOT, HAS BEEN EXAMINE D BY DIFFERENT BENCHES OF THE TRIBUNAL BASED ON THE EVIDENCE COLLE CTED BY THE AO IN THE ABOVE STATED SET-ASIDE PROCEEDINGS. THE FACTS THAT ARE ON RECORD ARE THE SAME AS THE FACTS AND EVIDENCE WH ICH HAVE BEEN EXAMINED BY VARIOUS COORDINATE BENCHES OF THE TRIBUNAL. THESE INCLUDE THE STATEMENT OF EXPERTS RECORDED BY THE ASSESSING OFFICER AND THE CROSS EXAMINATION DONE BY THE REPRESENTATIVE OF THE COMPANY. FOR THE SAKE OF BRE VITY, WE DO NOT EXTRACT THE STATEMENT AND CROSS EXAMINATION ETC . OF THE VARIOUS EXPERTS, AS THESE WERE CONSIDERED IN DETAIL BY THE COORDINATE BENCHES AND IT WAS HELD AS FOLLOWS: 29.3 THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF VODAFONE EAST LTD. VS. ADDL. CIT IN ITA NO. 243/KOL/2014, VID E ORDER DATED 15.9.2015 HELD AS FOLLOWS:- 'FROM THE AFORESAID STATEMENT RECORDED FROM TECHNIC AL EXPERTS PURSUANT TO THE DIRECTIONS OF THE SUPREME COURT IN CIT VS. BHARTI CELLULAR LTD. (330 ITR 239) WHICH HAS BEEN HE AVILY RELIED UPON BY THE LEARNED CITA, WE FIND THAT HUMAN INTERV ENTION IS ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 65 REQUIRED ONLY FOR INSTALLATION! SETTING UP/ REPAIRI NG/ SERVICING/ MAINTENANCE/ CAPACITY AUGMENTATION OF THE NETWORK. BUT AFTER COMPLETING THIS PROCESS, MERE INTERCONNECTION BETWE EN THE OPERATORS WHILE ROAMING, IS DONE AUTOMATICALLY AND DOES NOT REQUIRE HUMAN INTERVENTION AND ACCORDINGLY CANNOT B E CONSTRUED AS TECHNICAL SERVICES. IT IS COMMON KNOWL EDGE THAT WHEN ONE OF THE SUBSCRIBERS IN THE ASSESSEE'S CIRCL E TRAVELS TO THE JURISDICTION OF ANOTHER CIRCLE, THE CALL GETS C ONNECTED AUTOMATICALLY WITHOUT ANY HUMAN INTERVENTION AND IT IS FOR THIS, THE ROAMING CHARGES IS PAID BY THE ASSESSEE TO THE VISITING OPERATOR FOR PROVIDING THIS SERVICE. HENCE WE HAVE NO HESITATION TO HOLD THAT THE PROVISION OF ROAMING SE RVICES DO NOT REQUIRE ANY HUMAN INTERVENTION AND ACCORDINGLY WE H OLD THAT THE PAYMENT OF ROAMING CHARGES DOES NOT FALL UNDER THE AMBIT OF TDS PROVISIONS U/ S 194J OF THE ACT.' 30. THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF BHARTI HEXACOM LTD. VS. ITO (TDS) IN ITA 656/JP/2010 DATED 12.6.2015 HELD AS FOLLOWS : 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. AFTER GOING THROUGH THE ORDER OF THE ASSESSING OFFICER, LD CIT(A); SUBMISSIONS OF THE ASSESSEE AS WELL AS GOING THROUGH THE PROCESS OF PROVIDING ROAMING SERVICES; EXAMINATION OF TECHNICAL EXPERTS BY THE ACIT TDS, NEW DELHI IN THE CASE OF BHARTI CELLULAR LTD.; THEREAFTER CROSS ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 66 EXAMINATION MADE BY M/S BHARTI CELLULAR LTD.; ALSO OPINION OF HONBLE THE THEN CHIEF JUSTICE OF INDIA MR. S.H. KAPADIA DATED 03/09/2013 AND ALSO VARIOUS JUDGMENTS GIVEN BY THE ITAT AHMADABAD BENCH IN THE CASE OF CANARA BANK ON MICR AND PUNE BENCH DECISION ON DATA LINK SERVICES. WE FIND THAT FOR INSTALLATION/ SETTING UP/ REPAIRING/ SERVICING/ MAINTENANCE CAPACITY AUGMENTATION ARE REQUIRE HUMAN INTERVENTION BUT AFTER COMPLETING THIS PROCESS MERE INTERCONNECTION BETWEEN THE OPERATORS IS AUTOMATIC AND DOES NOT REQUIRE ANY HUMAN INTERVENTION. THE TERM INTER CONNECTING USER CHARGES (IUC) ALSO SIGNIFIES CHARGES FOR CONNECTING TWO ENTITIES. THE COORDINATE BENCH ALSO CONSIDERED THE HON'BLE SUPREME COURT DECISION IN THE CASE OF BHARTI CELLULAR LTD. IN THE CASE OF I-GATE COMPUTER SYSTEM LTD. AND HELD THAT DATA LINK TRANSFER DOES NOT REQUIRE ANY HUMAN INTERVENTION AND CHARGES RECEIVED OR PAID ON ACCOUNT OF THIS IS NOT FEES FOR TECHNICAL SERVIC ES AS ENVISAGED IN SECTION 194J READ WITH SECTION 9(1)(VII) READ WITH EXPLANATION-2 OF THE ACT. IN CASE BEFORE US, THE ASSESSEE HAS PAID ROAMING CHARGES I.E. IUC CHARGES TO VARIOUS OPERATORS AT RS. 10,18,92,350/-. RESPECTFULLY FOLLOWING ABOVE JUDICIAL PRECEDENTS, WE HOLD THAT THESE CHARGES ARE NOT FEES FOR RENDERING ANY TECHNICAL SERVICES AS ENVISAGED IN SECTION 194J OF THE ACT. THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) AND ASSESSEES APPEAL IS ALLOWED ON THIS GROUND ALSO. 31. THE AO AS WELL AS THE LD. CIT(A) HAS RECORDED TH AT THERE IS NO HUMAN INTERVENTION WHEN THE CALL IS SUCCESSFULLY COMPLETED. IT IS ALSO NOT DISPUTED THAT THERE IS NO DIFFERENCE IN THE TECHNOLOGY, ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 67 SYSTEM AND METHODOLOGY USED BY TELECOM COMPANIES IN PROVIDING INTER-CONNECTION OF DOMESTIC CALLS OR OF INTERNATIONAL CALLS. SO WHAT DECISION IS APPLICABLE FOR USE OF LO CAL CALLS ALSO APPLIES TO IUC OF INTERNATIONAL CALLS. THUS THE V IEW TAKEN ON THE DEDUCTIBILITY OF TDS ON IUC CHARGES PAID FOR LOCAL INTER CONNECTIVITY SERVICE WOULD ON ALL FOURS APPLY TO CH ARGES PAID FOR IUC FOR INTERNATIONAL INTER CONNECTIVITY. 32. THE CHENNAI BENCH OF THE ITAT IN THE CASE OF M/ S DISHNET WIRELESS LTD. VS. DCIT IN ITA NO. 320 TO 329/MAD/ 20 14 VIDE ORDER DATED 20.7.2015 ON THE ASPECT OF HUMAN INTERV ENTION HELD AS FOLLOWS:- '25. NOW COMING TO ROAMING CHARGES, THE CONTENTION OF THE ASSESSEE IS THAT HUMAN INTERVENTION IS NOT REQUIRED FOR PROVIDING ROAMING FACILITY, THEREFORE, IT CANNOT BE CONSIDERED TO BE A TECHNICAL SERVICE. WE HAVE GONE THOUGH THE JUD GMENT OF APEX COURT IN BHARTI CELLULAR LIMITED (SUPRA). THE A PEX COURT AFTER EXAMINING THE PROVISIONS OF SECTION 9(L)(VII) OF THE ACT, FOUND THAT WHENEVER THERE WAS A HUMAN INTERVENTION, IT HAS TO BE CONSIDERED AS TECHNICAL SERVICE. IN THE LIGHT TO THE ABOVE JUDGMENT OF THE APEX COURT, THE DEPARTMENT OBTAINED AN EXPERT OPINION FROM SUB-DIVISIONAL ENGINEER OF BSNL. THE SUB- DIVISIONAL ENGINEER CLARIFIED THAT HUMAN INTERVENTI ON IS REQUIRED FOR ESTABLISHING THE PHYSICAL CONNECTIVITY BETWEEN TWO OPERATORS FOR DOING NECESSARY SYSTEM CONFIGURATIONS . AFTER ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 68 NECESSARY CONFIGURATION FOR PROVIDING ROAMING SERVI CES, HUMAN INTERVENTION IS NOT REQUIRED. ONCE HUMAN INTERVENTI ON IS NOT REQUIRED AS FOUND BY THE APEX COURT, THE SERVICE PR OVIDED BY THE OTHER SERVICE PROVIDER CANNOT BE CONSIDERED TO BE A TECHNICAL SERVICE. IT IS COMMON KNOWLEDGE THAT, WHE N ONE' OF THE SUBSCRIBERS IN THE ASSESSEE'S CIRCLE TRAVELS TO THE JURISDICTION OF ANOTHER CIRCLE, THE CALL GETS CONNE CTED AUTOMATICALLY WITHOUT ANY HUMAN INTERVENTION. IT IS DUE TO CONFIGURATION OF SOFTWARE SYSTEM IN THE RESPECTIVE SERVICE PROVIDER'S PLACE. IN FACT, THE SUB-DIVISIONAL ENGIN EER OF BSNL HAS EXPLAINED AS FOLLOWS IN RESPONSE TO QUESTION NO. 23:- REGARDING ROAMING SERVICES AS EXPLAINED TO QUESTIO N NO. 21. REGARDING INTERCONNECTIVITY, INITIAL HUMAN INTERVEN TION IS REQUIRED FOR ESTABLISHING THE PHYSICAL CONNECTIVITY AND ALSO FOR DOING THE REQUIRED CONFIGURATION. ONCE IT IS WORKIN G FINE, NO INTERVENTION IS REQUIRED. IN CASE OF ANY FAULTS HUM AN INTERVENTION IS REQUIRED FOR TAKING NECESSARY CORRE CTIVE ACTIONS. IN VIEW OF THE ABOVE, ONCE CONFIGURATION WAS MADE, NO HUMAN INTERVENTION IS REQUIRED FOR CONNECTING RO AMING CALLS. THE SUBSCRIBER CAN MAKE AND RECEIVE CALLS, ACCESS A ND RECEIVE DATA AND OTHER SERVICES WITHOUT HUMAN INTERVENTION. LIKE ANY OTHER MACHINERY, WHENEVER THE SYSTEM BREAKDOWN, TO SET RIGHT THE SAME, HUMAN INTERVENTION IS REQUIRED. HOWEVER, FOR ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 69 CONNECTING ROAMING CALL, NO HUMAN INTERVENTION IS R EQUIRED EXCEPT INITIAL CONFIGURATION IN SYSTEM. THIS TRIBUN AL IS OF THE CONSIDERED OPINION THAT HUMAN INTERVENTION IS NECES SARY FOR ROUTINE MAINTENANCE OF THE SYSTEM AND MACHINERY. HO WEVER, NO HUMAN INTERVENTION IS REQUIRED FOR CONNECTING TH E ROAMING CALLS. THEREFORE, AS HELD BY THE APEX COURT IN BHAR TI CELLULAR LIMITED (SUPRA), THE ROAMING CONNECTIONS ARE PROVIDE D WITHOUT ANY HUMAN INTERVENTION AND THEREFORE, NO TECHNICAL SERVICE IS AVAILED BY THE ASSESSEE. THEREFORE, TDS IS NOT REQU IRED TO BE MADE IN RESPECT OF ROAMING CHARGES PAID TO OTHER SE RVICE PROVIDERS.' 33. ALL THE BENCHES OF THE TRIBUNAL ARE UNANIMOUS I N THEIR VIEW ON THIS ISSUE. WE SEE NO REASON WHATSOEVER TO DEVIA TE FROM THESE VIEWS. HENCE CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE REFERRED ORDERS, WE HOLD THAT THE PAYMENT IN QUESTION CANNOT BE CHARACTERIZED AS FEE FOR TECHNICAL SERVICES U/S. 9( 1)(VII) OF THE ACT. THERE IS NO MANUAL OR HUMAN INTERVENTION DURI NG THE PROCESS OF TRANSPORTATION OF CALLS BETWEEN TWO NETW ORKS. THIS IS DONE AUTOMATICALLY. HUMAN INTERVENTION IS REQUIRED ONLY FOR INSTALLATION OF THE NETWORK AND INSTALLATION OF OTH ER NECESSARY EQUIPMENTS/ INFRASTRUCTURE. HUMAN INTERVENTION IS ALSO NECESSARY FOR MAINTAINING, REPAIRING AND MONITORING EACH OPERATOR OR INDIVIDUAL NETWORK, SO THAT THEY REMAIN IN A ROBUST CONDITION TO PROVIDE FAULTLESS SERVICES TO THE CUST OMERS. HUMAN ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 70 INTERVENTION IS ALSO REQUIRED IN CASE WHERE THE NET WORK CAPACITY HAS TO BE ENHANCED BY THE TELECOM OPERATORS. SUCH HUMAN INTERVENTION CANNOT BE SAID TO BE FOR INTER-CONNECT ION OF A CALL. 34. WHERE ROUTING OF EVERY CALL HAS BEEN DECIDED, THE EXHAUSTIVE STANDARD OF CAPACITY OF THE TRANSPORTER NETWORK WILL AUTOMATICALLY RE-ROUTE THROUGH ANOTHER CHANNEL THRO UGH ANOTHER OPERATOR. HUMAN INTERVENTION IN SETTING UP ENHANCE D CAPACITY HAS NO CONNECTION OR RELATION WITH THE TRAFFIC OF C ALL. THUS IT IS CLEAR THAT IN THE PROCESS OF ACTUAL CALLS, NO MANUA L INTERVENTION IS REQUIRED. THE FINDING OF THE REVENUE AUTHORITIES T HAT INTERCONNECTION IS A COMPOSITE PROCESS, INVOLVING S EVERAL PROCESSES WHICH REQUIRE HUMAN INTERVENTION IS ERRON EOUS. THE TEST LAID DOWN BY THE HONBLE SUPREME COURT OF IND IA IN ITS ORDER WHEN THE CASE WAS REMANDED TO THE AO IS TO FIND OU T AS TO WHETHER DURING TRAFFIC OF CALLS, IS THERE WAS ANY MANUAL INTERVENTION?. THERE IS NO REFERENCE TO THE ISSUE S OF SET UP, INSTALLATION OR OPERATION MAINTENANCE OR REPAIR OF NETWORK AS EXPLAINED BY THE LD. CIT(A). THESE DECISIONS OF THE VARIOUS BENCHES OF THE ITAT, WHEN READ WITH THE JUDGMENT OF THE HONBLE DELHI HIGH COURT AS WELL AS THE HONBLE SUPREME COU RT, WOULD SETTLE THIS MATTER IN FAVOUR OF THE ASSESSEE. BUT AS A NUMBER OF OTHER DECISIONS HAVE BEEN RELIED UPON, WE EXAMINE T HE SAME. 35. THE HONBLE MADRAS HIGH COURT IN THE CASE OF S KYCELL COMMUNICATIONS LTD. VD. DCIT (2001) 251 ITR 53 (MAD. ) HAS ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 71 HELD THAT CALL CHARGES RECEIVED FROM TELECOM OPERAT ORS FROM FIRMS AND COMPANIES SUBSCRIBING TO CELLULAR MOBILE SERVICES PROVIDED BY THEM DO NOT COME WITHIN THE DEFINITION OF TECHNICAL SERVICES U/S. 194J READ WITH SECTION 9(1)(VII) EXPL N. 2, AS IT A MERE COLLECTION OF FEE FOR USE OF STANDARD FACILITY PROVIDED TO ALL THOSE WILLING TO PAY FOR IT. APPLYING THE PROPO SITION LAID DOWN IN THIS CASE LAW TO THE FACTS OF THIS CASE, WE HAVE TO HOLD THAT INTER CONNECTION FACILITY AND THE SERVICE OF THE FTO IN P ICKING UP, CARRYING AND SUCCESSFUL TERMINATION THE CALL OVER T HEIR RESPECTIVE NETWORK IS A STANDARD FACILITY AND THE AND FTO IN Q UESTION DOES NOT RENDER ANY TECHNICAL SERVICES TO THE ASSESSEE UNDER INTERCONNECT AGREEMENT. 36. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. ESTEL COMMUNICATIONS (P) LTD. (2008) 217 CTR (DEL) 102 HEL D AS FOLLOWS:- TRIBUNAL CONSIDERED THE AGREEMENT THAT HAD BEEN EN TERED INTO BY THE ASSESSEE WITH T AND CAME TO THE CONCLUS ION THAT THERE WAS NO PRIVITY OF CONTRACT BETWEEN THE CUSTOM ERS OF THE ASSESSEE AND T. IN FACT, THE ASSESSEE WAS MEREL Y PAYING FOR AN INTERNET BANDWIDTH TO T AND THEN SELLING IT TO ITS CUSTOMERS. THE USE OF INTERNET FACILITY MAY REQUIRE SOPHISTICATED EQUIPMENT BUT THAT DOES NOT MEAN THAT TECHNICAL SERVICES WERE RENDERED BY T TO THE ASSES SEE. IT WAS A SIMPLE CASE OF PURCHASE OF INTERNET BANDWIDT H BY THE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 72 ASSESSEE FROM T. UNDER THE CIRCUMSTANCES, THE TRIBU NAL CAME TO THE CONCLUSION THAT THERE WERE NO TECHNICAL SERVICES PROVIDED BY T TO THE ASSESSEE AND, THEREFORE, THE P ROVISIONS OF S. 9(L)(VII) DID NOT APPLY. TRIBUNAL HAS RIGHTL Y DISMISSED THE APPEAL AFTER TAKING INTO CONSIDERATION THE AGR EEMENT BETWEEN THE ASSESSEE AND T AND THE NATURE OF SERVIC ES PROVIDED BY T TO THE ASSESSEE. IT WAS A SIMPLE CASE OF PAYMENT FOR THE PROVISION OF A BANDWIDTH. NO TECHNI CAL SERVICES WERE RENDERED BY T TO THE ASSESSEE. ON A CONSIDERATION OF THE MATERIAL ON RECORD, NO SUBSTAN TIAL QUESTION ARISES IN THE MATTER. 37. IN THE CASE OF ACIT VS. HUGHES SOFTWARE SYSTEMS LTD. (2013) 35 CCH 416 DEL. TRIB, THE TRIBUNAL HAS HELD AS UNDER:- 'DEDUCTION. OF TAX AT SOURCE-FEES FOR TECHNICAL SER VICES- ASSESSEE WAS ENGAGED IN BUSINESS OF SOFTWARE DEVELO PMENT OF PRODUCTS AND PROVIDING SOFTWARE SERVICES IN INDI A AND OVERSEAS-ASSESSEE WAS TREATED AS 'ASSESSEE IN DEFAU LT' U/S 201(1) ON ACCOUNT OF NON-DEDUCTION OF TDS U/ S 194J FROM PAYMENT MADE FOR USE OF TELE-COMMUNICATION SERVICES I.E TELEPHONE CHARGES, LINK CHARGES AND BAND WIDTH CHAR GES AS 'FEE FOR TECHNICAL SERVICES' U/ S 9(1}(VII}-CIT(A} REVERSED FINDINGS OF AO-HELD, PAYMENTS WERE MADE TO MTNL & BS NL ETC. FOR PROVIDING SPACE FOR TRANSMISSION OF DATA F OR CARRIAGE OF VOICE AND FOR AVAILING SERVICE OF INTER-COMMUNIC ATION, PORT ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 73 ACCESS FOR WHICH NO HUMAN INTERVENTION WAS NECESSAR Y- PAYMENT CANNOT BE CHARACTERIZED AS 'FEE FOR TECHNIC AL SERVICES'-THUS, ASSESSEE CANNOT BE HELD TO BE IN DE FAULT -FOR NON- DEDUCTION OF TAX AT SOURCE FROM PAYMENT OF TELECOMMUNICATION. CHARGES IN TERMS OF SECTION 194J - REVENUE'S GROUND DISMISSED. 38. THE BANGALORE ITAT IN THE CASE OF WIPRO LTD. V S. ITO (2003) 80 TTJ (BANG) 191 HELD AS FOLLOWS:- 'INCOME DEEMED TO ACCRUE OR ARISE IN INDIA-FEES FOR TECHNICAL SERVICES/ ROYALTY-PAYMENT FOR TRANSMISSIO N OF DATA AND SOFTWARE THROUGH UPLINK AND DOWN LINK SERVICES - ASSESSEE ENGAGED, INTER ALIA, IN THE BUSINESS OF DE VELOPMENT OF SOFTWARE PROVIDING ON LINE SOFTWARE SERVICES THR OUGH CUSTOMER BASED CIRCUITS WITH THE HELP OF VSNL AND FO REIGN TELECOM COMPANIES OUTSIDE INDIA-AS PER THE AGREEMEN TS WITH SUCH TELECOM COMPANIES ASSESSEE IS TO USE THE STANDARD FACILITY HAVING STANDARD PRICING PATTERNS- THERE IS NOTHING TO SHOW THAT ASSESSEE WAS PROVIDED WITH ANY TECHNOLOGY OR TECHNICAL SERVICES- THEREFORE, THE AM OUNTS PAID BY ASSESSEE-COMPANY TO NON-RESIDENT TELECOM COMPANIES FOR DOWNLINKING AND TRANSMITTING OF DATA TO THE ASSESSEE'S CUSTOMERS LOCATED OUTSIDE INDIA CANNOT B E CONSIDERED AS 'FEES FOR TECHNICAL SERVICES' UNDER S . 9(L)(VII), MORESO WHEN SIMILAR SERVICES OFFERED BY VSNL IS NOT ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 74 REGARDED AS TECHNICAL SERVICES-FURTHER, NO PROCESS HAS BEEN MADE AVAILABLE TO THE ASSESSEE-HENCE, THERE IS NO Q UESTION OF APPLICABILITY OF S. 9(L)(VI) TOO-SO LONG AS THE AMOUNT PAID IS NOT TAXABLE UNDER THE ACT, THE CLAUSE IN THE DTA A CANNOT BRING THE CHARGE-HENCE, THERE WAS NO LIABILITY TO D EDUCT TAX UNDER S. 195' 39. IN VIEW OF THE ABOVE DISCUSSIONS, RESPECTFULLY FOLLOWING THE BINDING JUDGMENT OF THE HONBLE SUPREME COURT OF IN DIA, WE HAVE NO HESITATION IN UPHOLDING THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT, THE PAYMENT IN QUESTION CANNOT B E CONSIDERED AS FEE FOR TECHNICAL SERVICES IN TERMS OF SECTION 9(1)(VII) READ WITH EXPLN. 2 OF THE ACT. 40. THE SECOND ASPECT OF THE ISSUE ARE BEFORE US, I S WITHOUT PREJUDICE TO THE FINDING UNDER THE DOMESTIC LAW, WHE THER THE PAYMENT TO FTOS FOR IUC IS FEE FOR TECHNICAL SERV ICES UNDER THE DTAA, WHEREVER MAKE AVAILABLE CLAUSE IS FOUND IN THESE AGREEMENTS. IN VIEW OF OUR FINDING THAT THE PAYM ENT IS NOT FEE FOR TECHNICAL SERVICES UNDER THE ACT, IT WOULD BE A N ACADEMIC EXERCISE TO EXAMINE WHETHER THE PAYMENT IN QUESTION WOULD BE FEE FOR TECHNICAL SERVICES UNDER DTAAS. SUFFICE T O SAY WHEREVER TREATIES CONTAIN MAKING AVAILABLE CLAUSE, THEN IN TERMS OF THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ORS. VS. DE BEERS INDIA MINERALS PVT. LTD. (2012) 346 ITR 0467; THE PAYMENT CANNOT BE TREATED AS FTS UNDER TH E DTAA AS ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 75 THERE IS NO IMPARTING AS CONTEMPLATED IN THE TREAT IES. SIMILAR ARE THE PROPOSITIONS ON THE ISSUE OF MAKE AVAILABL E IN THE DECISIONS IN THE CASE OF MAHINDRA & MAHINDRA LTD. VS . DCIT 313 ITR 263; RAMOND LIMITED VS. DCIT 86 ITD 791; CABLE AND WIRELESS NETWORKS INDIA P. LTD. (2009) 315 ITR 72. 41. THE NEXT ASPECT OF THIS ISSUE, WHICH IS RAISED AS GROUND NO. 8 IN THE DEPARTMENTS APPEAL IS THAT, WHEN THE TREA TIES DO NOT CONTAIN FTS CLAUSE, WHAT IS THE IMPACT ON TAXABILI TY. WHEREVER FTS CLAUSE IS NOT AVAILABLE IN THE TREATY WITH A CO UNTRY, THEN THE INCOME IN QUESTION WOULD BE ASSESSABLE AS BUSINESS INCOME AND IT CAN BE BROUGHT TO TAX IN INDIA, ONLY IF THE FTO HA S THE PERMANENT ESTABLISHMENT IN INDIA AND IF THE EARNING OF INCOME IS ATTRIBUTABLE TO ACTIVITIES OR FUNCTIONS PERFORMED BY SUCH PERMAN ENT ESTABLISHMENT. THIS VIEW IS SUPPORTED BY THE DECISI ON OF THE COORDINATE BENCH. 42. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. PARADIGM GEOPHYSICAL PTY. LTD. 122 ITD 155 (2010) HE LD AS FOLLOWS:- WHAT ART. 7(7) SEEMS TO CONVEY IS THAT WHERE THE B USINESS PROFITS OF THE NON-RESIDENT INCLUDE ITEMS OF INCOME FOR WHICH SPECIFIC OR SEPARATE PROVISIONS HAVE BEEN MADE IN O THER ARTICLES OF THE TREATY, THEN THOSE PROVISIONS WOULD APPLY TO THOSE ITEMS. PER CONTRA, IF IT IS' FOUND THAT THOSE PROVISIONS ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 76 ARE NOT APPLICABLE TO THOSE ITEMS OF INCOME, THEN T HE LOGICAL RESULT WOULD BE THAT THOSE ITEMS OF INCOME WILL REM AIN IN ART. 7 AND WILL NOT GO OUT OF THE SAME. SUCH ITEMS OF IN COME WHICH DO NOT FALL UNDER ANY OTHER PROVISION OF THE DOUBLE TAX TREATY, WOULD CONTINUE TO BE VIEWED AS BUSINESS PROFITS COV ERED BY ART. 7. THE POSITION CANVASSED BY THE COUNSEL FOR T HE ASSESSEE SEEMS TO BE MORE LOGICAL THAN THE VIEW CANVASSED ON BEHALF OF THE DEPARTMENT. FEES FOR TECHNICAL SERVICES ARE ESS ENTIALLY BUSINESS PROFITS SINCE THE RENDERING OF SUCH SERVIC ES IS THE BUSINESS OF THE NON-RESIDENT. IN ORDER TO TAKE OUT AN ITEM OF INCOME FROM THE BUSINESS PROFITS, IT IS NECESSARY U NDER ART. 7(7) THAT THERE SHOULD BE SOME OTHER PROVISION IN T HE TREATY DEALING SPECIFICALLY WITH THE ITEM OF INCOME SOUGHT TO BE TAKEN OUT FROM THE BUSINESS PROFITS. IF THERE IS NO OTHER PROVISION IN THE TREATY OR IF THE PROVISION MADE IN THE TREATY I S NOT FOUND APPLICABLE OR TO COVER THE ITEM OF INCOME SOUGHT TO BE TAKEN OUT FROM THE BUSINESS PROFITS, FOR WHATEVER REASON, THEN IT FOLLOWS THAT THE PARTICULAR ITEM OF INCOME SHOULD C ONTINUE TO REMAIN UNDER ART. 7. IN LIGHT OF THE ABOVE DISCUSSI ON, THE AMOUNT RECEIVED BY THE ASSESSEE COMPANY FROM RIL UND ER THE CONTRACT DID NOT REPRESENT CONSIDERATION FOR ANY TE CHNICAL SERVICES RENDERED TO RIL WHICH MADE AVAILABLE TECHNI CAL KNOWLEDGE, EXPERIENCE, SKILL, ETC. OR CONSISTED OF THE DEVELOPMENT AND TRANSFER OF ANY TECHNICAL PLAN OR D ESIGN WITHIN THE MEANING OF ART. 12(3)(G) OF THE INDO AU STRALIAN ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 77 TREATY. THE CONSIDERATION WILL CONTINUE TO BE VIEWE D AS BUSINESS PROFITS UNDER ART. 7 OF THE TREATY AND SIN CE THE ASSESSEE HAD NO PE IN INDIA THE BUSINESS PROFITS CA NNOT BE TAXED IN INDIA.' 43. SIMILARLY, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SIEMENS AKTIONGESELLSCHAFT (2009) 310 ITR 320 ( BOM) 'DOUBLE TAXATION RELIEF AGREEMENT BETWEEN INDIA' AN D' FEDERAL REPUBLIC OF GERMANY-ROYALTY VIS-A-VIS INDUS TRIAL AND COMMERCIAL PROFITS-EVEN THOUGH S. 9 WOULD APPLY, PR OVISIONS OF DTAA, IF MORE BENEFICIAL, WOULD PREVAIL- ASSESS EE HAVING NO PE IN INDIA, AMOUNT OF ROYALTY, SOUGHT TO BE ASS ESSED AS INDUSTRIAL OR COMMERCIAL PROFIT, IS NOT ASSESSABLE TO TAX IN INDIA-IF THE CONSIDERATION RECEIVED BY THE ASSESSEE FOR GRANT OF THE PATENTS AND LICENSE IS REGARDED AS ROYALTY A S THE GRANT ADMITTEDLY TOOK PLACE OUTSIDE INDIA; THE QUESTION O F APPLYING DEEMING PROVISIONS OF EXPLANATION TO S. 9 INSERTED BY THE FINANCE ACT, 2007 WOULD NOT ARISE AND FURTHER, ASSE SSEE HAVING NO PE IN INDIA, SUCH INCOME WOULD NOT BE TAX ABLE IN INDIA AS INDUSTRIAL AND COMMERCIAL PROFITS IN TERMS OF ART. III OF INDO-GERMAN DTAA-INCOME FROM ACTIVITIES COVERED BY ARTS. V TO XII BY VIRTUE OF ART. 111(3) ARE SPECIFI CALLY EXCLUDED FROM THE EXPRESSION 'INDUSTRIAL OR COMMERC IAL PROFITS' IN ART. III AS THEY ARE TO BE TAXED IN THE MANNER PROVIDED UNDER ARTS. V TO XII-THEREFORE, INCOME OTH ER THAN OF THE NATURE PROVIDED IN ARTS. V TO XII, IF RELATA BLE TO INDUSTRIAL OR COMMERCIAL PROFITS WOULD FALL UNDER A RT. III, NOT CHARGEABLE TO TAX IN THE ABSENCE OFPE-THIS VIEW IS FURTHER FORTIFIED BY THE FACT THAT ART. III OF THE 1960 DTA A HAS BEEN SUBSTITUTED BY DTAA OF 1995 AND A NEW ART. VIIIA HA S BEEN INSERTED EXPLAINING THE EXPRESSION 'ROYALTIES '' ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 78 44. IN VIEW OF THE ABOVE REASONS, WE HOLD THAT WHER EVER UNDER THE DTAAS. MAKE AVAILABLE CLAUSE IS FOUND, THEN AS THERE IS NO IMPARTING, THE PAYMENT IN QUESTION IS NOT FTS UND ER THE TREATY AND WHEN THERE IS NO FTS CLAUSE IN THE TREATIES, THE PAYMENT FALLS UNDER ARTICLE 7 OF THE TREATY AND IS BUSINESS INCOME. 45. ISSUE NO. 2 WHETHER THE PAYMENT TO FTOS FOR IUCS ARE IN THE NATURE OF ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT. 46. THE SPECIFIC CHARGE OF THE AO IS THAT TAKING U P A CALL BY THE FTO FROM THE ASSESSEE IS A USE OF PROCESS AND HEN CE THE PAYMENT FOR THE SAME IS ROYALTY IN TERMS OF CLAUS E (III) OF EXPLANATION 2 TO SECTION 9(1)(IV) OF THE ACT. 47. WE ANALYSE THE FINDING OF THE LD. CIT(A) ON THIS ISSUE. A) SECTION 9(1)(VI)(III) EMPLOYS THE WORD USE OF. THE FACTUM OF USE OF PROCESS HAS TO BE ESTABLISHED BEFORE TH E PAYMENT CAN BE CHARACTERIZED AS ROYALTY. A PERUSAL OF THE AGRE EMENTS BETWEEN THE PARTIES DEMONSTRATE THAT IT IS NOT A CA SE OF LEASE OR LICENCE OF NETWORK OF FOREIGN OPERATOR IN FAVOUR OF THE ASSESSEE. THE FOREIGN OPERATOR CONNECTS HIS NETWORK TO THAT O F THE ASSESSEE FOR FURTHER TRANSMISSION. HENCE, IN THIS MODEL, ONL Y THE FOREIGN OPERATOR IS USING HIS NETWORK AND THE ASSESSEE IS N OT USING OR IS NOT ALLOWED TO USE NETWORK OF FOREIGN OPERATOR. T HEREFORE, THE DEFINITION OF ROYALTY IS NOT ATTRACTED. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 79 B) THE AO HAS NOT GIVEN A FINDING AS TO WHETHER TAK ING UP A CALL BY THE FTO FROM THE ASSESSEE IS A PROCESS. THE DEFINITION OF THE TERM PROCESS RATHER THE MEANING OF WORD PROCESS HAS BEEN EXPANDED BY INSERTION OF EXPLANATION 6 TO SECT ION 9(1)(VI) OF THE INCOME TAX ACT, INTRODUCED BY THE FINANCE A CT, 2012 TO INCLUDE TRANSMISSION BY OPTIC FIBRE OR SIMILAR TECH NOLOGY. THUS, AFTER THE AMENDMENT, TRANSMISSION OF CALL ACROSS GA TEWAY SHALL BE A PROCESS UNDER THE DOMESTIC LAW. EVEN IT IS CO NSIDERED A PROCESS, AS THERE IS NO USE OF IT BY THE ASSESSEE, THE DEFINITION OF ROYALTY IS NOT ATTRACTED. C) THE FTO PROVIDES TECHNICAL SERVICES TO THE AS SESSEE BY USING ITS NETWORK. WHEN THE FTO IS USING ITS NETWOR K, IT CANNOT BE SAID THAT ASSESSEE IS USING THE NETWORK OF THE NON -RESIDENT OPERATOR. HENCE, BOTH THE SITUATIONS ARE MUTUALLY EXCLUSIVE. AS THE ASSESSEE IS NOT USING THE NETWORK OF THE FTO, T HE PAYMENT MADE IS NOT FOR USE OF PROCESS, HENCE, NOT IN THE NATURE OF ROYALTY. D) THE AOS RELIANCE ON THE JUDGMENT OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF VERIZON COMMUNICATIO NS SINGAPORE PTE. LTD. VS. ITO (2011) 45 SOT 263 (CHENNAI) IS MIS PLACED, AS IN THAT CASE THE INDIAN COMPANY OBTAINED LEASED LINES ON HIRE/LEASE BASIS UNDER THE CONTRACT. THE FACTS ARE DIFFERENT. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 80 E) EXPLANATION 5 & 6 INCORPORATED IN SECTION 9(1)(V I) BY THE FINANCE ACT, 2012 DO NOT AFFECT THE DEFINITION OF R OYALTY, AS PER DTAA. THE INDO UK TAX TREATY, EMPLOYS THE WORD US E OR RIGHT TO USE IN CONTRA DISTINCTION TO THE WORD USE IN DOMESTIC LAW. AS PER VARIOUS JUDICIAL PRONOUNCEMENTS, IN ORDER TO SATISFY THE WORD USE OR RIGHT TO USE, THE CONTROL AND POSSESS ION OF RIGHT, PROPERTY OR INFORMATION SHOULD BE WITH THE PAYER. THUS UNDER THE DTAA ROYALTY HAS A MUCH RESTRICTED MEANING. F) WITHOUT PREJUDICE TO THE ABOVE FINDINGS, EVEN IF THE PAYMENTS PARTAKE THE CHARACTER OF ROYALTY AFTER RET ROSPECTIVE AMENDMENT IN THE ACT, THE ASSESSEE CANNOT BE HELD T O BE AN ASSESSEE IN DEFAULT IN RESPECT OF THOSE PAYMENTS MA DE PRIOR TO THE AMENDMENT, AS BROUGHT OUT IN THE FINANCE ACT, 2012. G) THE OBLIGATION IMPOSED UPON THE ASSESSEE U/S. 19 5 TO DEDUCT TAX SPECIFIES THAT IT SHOULD BE AT THE TIME OF CREDITED OF SUCH INCOME TO THE ACCOUNT OR AT THE TIME OF PAYME NT THEREOF WHICHEVER IS EARLIER AND BOTH THESE EVENTS HAD TAK EN PLACE MUCH PRIOR TO THE AMENDMENT BROUGHT IN BY THE FINANCE A CT. 48. WE UPHOLD THE FINDING OF THE 1 ST APPELLATE AUTHORITY FO THE FOLLOWING REASONS. THE AO HAS TAKEN A CONTRADICTORY STAND THAT THE PAY MENTS IN QUESTION MAY BE TREATED AS ROYALTY FOR USE OF PR OCESS IN TERMS OF SECTION 9(1)(VI) OF THE ACT, IF IN CASE THE APPE LLATE AUTHORITIES ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 81 HOLD THAT THE PAYMENT TO FTOS ARE IN THE NATURE OF FEE FOR TECHNICAL SERVICES. AS THE AO HAS HELD THAT THE PA YMENT IN QUESTION IS ROYALTY, AS IT IS FOR THE USE OF PROCE SS, AS PER CLAUSE (III) TO EXPLANATION 2 TO SECTION 9(1)((IV) OF THE ACT, WE RESTRICT OUR FINDING TO THIS ISSUE ONLY. THE TERM PROCESS OCCURS UNDER CLAUSE (I), (II) AND (III) TO EXPLANATION 2 TO SECT ION 9(VI). IT READS AS UNDER:- EXPLANATION 2. -FOR THE PURPOSES OF THIS CLAUSE, 'ROYALTY' MEANS CONSIDERATION (INCLUDING ANY LUMP S UM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UND ER THE HEAD 'CAPITAL GAINS') FOR- (I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING TH E GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVE NTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE M ARK OR SIMILAR PROPERTY; (II) THE IMPARTING OF ANY INFORMATION CONCERNING TH E WORKING OF, OR THE USE OF, A PATENT, INVENTION, MOD EL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESI GN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (EMPHASIS OURS) ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 82 49. BY THE FINANCE ACT, 2012, EXPLANATION 5 & 6 ARE ADDED WITH RETROSPECTIVE EFFECT FROM 1.6.1976 WHICH READS AS U NDER:- EXPLANATION 5 FOR THE REMOVAL OF DOUBTS, IT IS H EREBY CLARIFIED THAT THE ROYALTY INCLUDES AND HAS ALWAYS INCLUDED CONSIDERATION IN RESPECT OF ANY RIGHT, PR OPERTY OR INFORMATION, WHETHER OR NOT (A) THE POSSESSION OR CONTROL OF SUCH RIGHT, PROPERTY OR INFORMATION IS WITH THE PAYER; (B) SUCH RIGHT, PROPERTY OR INFORMATION IS USED DIRECTL Y BY THE PAYER; (C) THE LOCATION OF SUCH RIGHT, PROPERTY OR INFORMATION IS IN INDIA. EXPLANATION 6.- FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE EXPRESSION PROCESS INCLUDES A ND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSIO N BY SATELLITE (INCLUDING UP-LINKING, AMPLIFICATION, CONVERSION FOR DOWN-LINKING OF ANY SIGNAL), CABLE, OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY, WHETHER O R NOT SUCH PROCESS IS SECRET. 50. BEFORE WE DEAL THE ISSUE AS TO WHETHER THE PAYM ENT IS QUESTION FOR USE OF PROCESS, WE FEEL IT RELEVANT TO EXTRACT CERTAIN CLAUSES OF THE AGREEMENTS (A) AGREEMENT BETWEEN BHA RTI AIRTEL LTD. AND SUNRISE COMMUNICATIONS AG, WHICH READS AS U NDER:- ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 83 '1. OBJECT OF THE AGREEMENT 1.1 EACH PARTY AGREES TO PROVIDE THE OTHER PARTY WITH CONNECTING, TRANSIT AND TERMINATION SERVICES (HEREI NAFTER REFERRED TO AS ''THE SERVICES') ALLOWING THE CONVEYANCE OF I NTERNATIONAL AND/ OR NATIONAL CALLS ON A NON-EXCLUSIVE BASIS AS DEFINED IN THE SERVICE DESCRIPTION(S) ASSOCIATED WITH THIS AGREEME NT. 1.2 THIS AGREEMENT SHALL NOT BE CONSTRUED TO CONS TITUTE A PARTNERSHIP OR AGENCY RELATIONSHIP BETWEEN THE PART IES. THE PARTIES ARE ENTERING INTO THIS AGREEMENT ON A PRINC IPAL TO PRINCIPAL BASIS. EACH PARTY ACTS IN ITS OWN NAME AND OPERATES FOR ITS OWN BENEFIT AND RISK WHILE PERFORMING ITS OBLIGATIONS U NDER THIS AGREEMENT. 1.3 NEITHER OF THE PARTIES HERETO SHALL HAVE ANY RIGHTS IN THE EQUIPMENTS OR IN THE NETWORK OF THE OTHER PARTY (EG. LIENS OR PLEDGES). EACH PARTY IS AND REMAINS RESPONSIBLE FOR ITS NETWORK AND FOR THE PROVISION OF SERVICES RELATING TO IT, U NLESS SPECIFICALLY STATED OTHERWISE IN THIS AGREEMENT. ' 3. DEFINITION OF SERVICES THE PARTIES SHALL CONNECT, AND KEEP CONNECTED, FOR THE DURATION OF THIS AGREEMENT, THEIR SYSTEMS AT POINTS OF INTERCON NECTION (POI) IN ORDER TO CONVEY CALLS TO AND FROM THOSE SYSTEMS AND TO PROVIDE VOICE SERVICES TO EACH OTHER IN ACCORDANCE WITH THI S AGREEMENT AND AS SPECIFIED IN THE SCHEDULES HERETO. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 84 5. TECHNICAL STANDARDS AND INTERCONNECTION 5.1 .. 5.2 EACH PARTY SHALL AT ITS OWN COST, UNLESS OTHERW ISE AGREED, BE RESPONSIBLE FOR PROVIDING, INSTALLING, TESTING, MAK ING OPERATIONAL AND MAINTAINING ALL EQUIPMENT ON ITS SIDE OF EACH P OINT OF INTERCONNECTION (POI) AS DEFINED IN THE TFD. 5.3.. 7. EQUIPMENT 7.1 EACH PARTY SHALL AT ITS OWN COST, UNLESS OTHERW ISE AGREED BY BOTH PARTIES, BE RESPONSIBLE FOR PROVIDING, INSTALL ING, TESTING, MAKING OPERATIONAL AND MAINTAINING ALL EQUIPMENT ON ITS SIDE OF EACH POINT OF INTERCONNECTION. 7.2 9. CHARGES 9.1 EACH PARTY SHALL NOTIFY THE OTHER IN WRITING OF ITS 'PER MINUTE' RATES FOR THE SERVICE(S]ON A REGULAR BASIS, AS DEFI NED IN THE SERVICE. DESCRIPTION(S) (SEE SCHEDULE 1). ALL RATES SHALL BE STATED IN DOLLAR ($). EACH PARTY SHALL INVOICE THE OTHER PA RTY FOR THE SERVICE(S) PROVIDED BASED ON ACTUAL CALL DURATION A ND NUMBER OF CALLS (WHERE APPLICABLE), WHICH WILL BE CALCULATED IN THE RELEVANT SERVICE DESCRIPTIONS. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 85 (B). AGREEMENT BETWEEN BHARTI AIRTEL LTD. (BHARTI) A ND AIRTEL TANZANIA LTD. (AIRTEL) (COPY ENCLOSED AT PAGES 39 TO 74 OF THE PB): WHEREAS BHARTI AND AIRTEL ARE PROVIDERS OF INTERNAT IONAL TELECOMMUNICATIONS SERVICES AND WHEREAS, BHARTI DES IRES TO PROCURE CERTAIN TELECOMMUNICATIONS SERVICES PROVIDE D BY AIRTEL AND AIRTEL DESIRES TO PROCURE CERTAIN TELECOMMUNICAT IONS SERVICES PROVIDED BY BHARTI; AND WHEREAS, PARTIES, WHICH ARE ALREADY PROVIDING CARRIER-TO-CARRIER TRAFFIC, IS NO W INTERESTED IN CREATING A NON-EXCLUSIVE CARRIER-TO-CARRIER RELATIO NSHIP WITH BHARTI; AND WHEREAS, THE PARTIES HAVE AGREED TO ENTER INTO THIS AGREEMENT TO SET OUT THE ARRANGEMENT BETWEEN THE PARTIES IN R ESPECT OF THE EXCHANGE OF INTERNATIONAL TELECOMMUNICATION SERVICE S AS ALSO THE SETTLEMENT RATES IN RESPECT OF THE SERVICE(S) LISTE D IN RELEVANT ANNEXURES ATTACHED. 3. OPERATIONAL MATTERS 3.1 EACH PARTY SHALL BE RESPONSIBLE TO CONNECT TO T HE OTHER PARTY'S NETWORK AT ONE OF THE OTHER PARTY'S NETWORK INTERCO NNECTION LOCATIONS, AND THE PARTIES SHALL BE RESPONSIBLE TO PROCURE, AT THEIR OWN EXPENSE, THE NECESSARY FACILITIES OR EQUIPMENT REQUIRED TO INTERCONNECT TO SUCH LOCATIONS. 3.2. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 86 3.3.. 3.4 THE PARTIES SHALL COORDINATE THE MANAGEMENT OF THEIR RESPECTIVE SYSTEM FACILITIES, WITH EACH PARTY BEING RESPONSIBLE FOR PROVIDING AND OPERATING, AT ITS OWN EXPENSE, ITS RE SPECTIVE NETWORK FACILITIES. THE PARTIES ALSO SHALL INTERFAC E ON A 24 HOURS/ 7 DAYS A WEEK BASIS TO ASSIST EACH OTHER WITH THE ISO LATION AND REPAIR OF ANY FACILITY FAULT IN THEIR RESPECTIVE NE TWORKS.' 'ANNEX 1 - [BHARTI VOICE TERMINATION SERVICES, THIS ANNEX TO INTERNATIONAL TELECOMMUNICATION SERVI CES IS SUBJECT TO THE TERMS AND CONDITIONS OF THE RECIPROC AL TELECOMMUNIA TIONS SERVICES AGREEMENT ENTERED INTO BETWEEN AIRTEL TANZANIA LIMITED ('AIRTEL') AND BHART I AIRTEL LTD. ('BHARTI') EFFECTIVE AS OF SERVICES BHART I WILL TERMINATE INTERNATIONAL TELECOMMUNICATIONS TRAFFIC (IDD TYPE), WHICH AIRTEL HAS DELIVERED TO ONE OF BHARTI'S INTERC ONNECTION LOCATIONS TO THOSE DESTINATIONS AS AGREED FROM TIME TO TIME.' 'ANNEX 3 [AIRTEL TANZANIA LIMITED, VOICE TERMINATION SERVICES, THIS ANNEX FOR DOMESTIC AND INTERNATIONAL TELECOMMU NICATION SERVICES IS SUBJECT-TO THE TERMS AND CONDITIONS OF THE RECIPROCAL TELECOMMUNIATIONS SERVICES AGREEMENT ENTERED INTO BETWEEN AIRTEL TANZANIA LIMITED ('AIRTE L') AND BHARTI AIRTEL LTD. ((BHARTI') EFFECTIVE AS OF SERVIC ES AIRTEL ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 87 WILL TERMINATE INTERNATIONAL TELECOMMUNICATIONS TRA FFIC (IDD TYPE), WHICH BHARTI HAS DELIVERED TO ONE OF AIRTELS INTERCONNECTION LOCATIONS TO THOSE INTERNATIONAL DE STINATIONS. 51. A PERUSAL OF THESE AGREEMENTS DEMONSTRATE THAT, EACH PARTY UNDER THE AGREEMENT REMAINS RESPONSIBLE FOR ITS OWN NETWORK AND FOR THE PROVISION OF SERVICES RELATED TO IT. THE TELECOM OPERATOR PROVIDE CONNECTING, TRANSIT AND TERMINATIO N SERVICES TO EACH OTHER ON A RECIPROCAL BASIS AND NEITHER OF TH E PARTIES SHALL HAVE ANY RIGHTS IN THE EQUIPMENTS OR IN THE NETWOR K OF OTHER PARTIES. THE CHARGES UNDER THE AGREEMENT ARE ALSO LEVIED FOR THE SERVICES PROVIDED UNDER THE AGREEMENT, BASED ON T HE ACTUAL CALL DURATION AND NUMBER OF CALLS SUCCESSFULLY DELIVERED TO THE OTHER PARTIES. THE AGREEMENT ARE NOT FOR RENTING, HIR ING, LETTING OR LEASING OUT OF ANY OF THE NETWORK ELEMENTS OR RESOU RCES TO THE OTHER PARTIES OR FOR RENDERING TELECOMMUNICATION SE RVICES ON A RECIPROCAL BASIS. THE ASSESSEE MERELY DELIVERS TH E CALL THAT ORIGINATES ON ITS NETWORK TO ONE OF THE INTER CONN ECTION LOCATIONS OF THE FTO AND FTO CARRIES AND TERMINATES THE CALL ON ITS NETWORK. THE ASSESSEE IS NOWHERE CONCERNED WITH THE ROUTE, E QUIPMENT, PROCESS OR NETWORK ELEMENTS USED BY THE FTO IN THE COURSE OF RENDERING SUCH SERVICES. 52. THE TERM PROCESS' USED UNDER EXPLANATION 2 TO SECTION 9(1)(VI) IN THE DEFINITION OF 'ROYALTY' DOES NOT IM PLY ANY 'PROCESS' WHICH IS PUBLICLY AVAILABLE. THE TERM 'PROCESS' OCC URRING UNDER ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 88 CLAUSES (I), (II) AND (III) OF EXPL 2 TO SECTION 9( 1)(VI) MEANS A PROCESS WHICH IS AN ITEM OF INTELLECTUAL PROPERTY . CLAUSE (III) OF THE SAID EXPLANATION READS AS FOLLOWS: '(III) THE USE OF ANY PATENT, INVENTION, MODEL, DES IGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERT Y' CLAUSES (I) & (II) OF THE SAID EXPLANATION ALSO USE THE SAME COINAGE OF TERMS. THE WORDS WHICH SURROUND THE WORD 'PROCESS' IN CLAUSES (I) TO (III) OF EXPLANATION 2 TO SECTION 9( 1 )(VI) REFER TO VARIOUS SPECIES OF INTELLECTUAL PROPERTIES SUCH AS PATENT, INVENTION, MODEL, DESIGN, FORMULA, TRADE MARK ETC. THUS THE WORD 'PROCESS' MUST ALSO REFER TO A SPECIE OF INTELLECTU AL PROPERTY APPLYING THE RULE OF EJUSDEM GENERIS OR NOSCITUR A SOCIIS AS HELD IN THE CASE OF CIT VS. BHARTI CELLULAR LTD. (2011) 330 ITR 239]. THE EXPRESSION 'SIMILAR PROPERTY' USED AT THE END O F THE LIST FURTHER FORTIFIES THE STAND THAT THE TERMS 'PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE M ARK' ARE TO BE UNDERSTOOD AS BELONGING TO THE SAME CLASS OF PROPER TIES VIZ. INTELLECTUAL PROPERTY. 'INTELLECTUAL PROPERTY' AS UNDERSTOOD IN COMMON PAR LANCE MEANS: KNOWLEDGE, CREATIVE IDEAS, OR EXPRESSIONS OF HUMAN MIND THAT HAVE COMMERCIAL VALUE AND ARE PROTECTABLE UNDER COP YRIGHT, PATENT, SERVICE MARK, TRADEMARK, OR TRADE SECRET LA WS FROM IMITATION, INFRINGEMENT, AND DILUTION. INTELLECTUAL PROPERTY ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 89 INCLUDES BRAND NAMES, DISCOVERIES, FORMULAS, INVENT IONS, KNOWLEDGE, REGISTERED DESIGNS, SOFTWARE, AND WORKS OF ARTISTIC, LITERARY, OR MUSICAL NATURE. IT IS ONE OF THE MOST READILY TRADABLE PROPERTIES IN THE DIGITAL MARKETPLACE.' [AS PER DEF INITION PROVIDED IN BUSINESSDICTIONARY.COM] 53. THE TERM 'PROCESS' IS THEREFORE TO BE UNDERSTOO D AS AN ITEM OF INTELLECTUAL PROPERTY RESULTING FROM THE DISCOVE RY, SPECIALIZED KNOWLEDGE, CREATIVE IDEAS, OR EXPRESSIONS OF HUMAN MIND HAVING A COMMERCIAL VALUE AND NOT WIDELY AVAILABLE IN PUBL IC DOMAIN. IT IS THEREFORE AN INTANGIBLE ASSET, THE EXCLUSIVE RIG HT OVER WHICH NORMALLY RESTS WITH ITS DEVELOPER / CREATOR OR WITH THE PERSON TO WHOM SUCH ASSET HAS BEEN EXCLUSIVELY TRANSFERRED. IN ORDER TO RECEIVE A 'ROYALTY' IN RESPECT OF ALLOW ING THE USAGE OR RIGHT TO USE ANY PROPERTY INCLUDING AN INT ELLECTUAL PROPERTY, THE OWNER THEREOF MUST HAVE AN EXCLUSIVE RIGHT OVER SUCH PROPERTY. AS FAR AS INTELLECTUAL PROPERTIES (IPS) ARE CONCERNED, THESE HAVE SIGNIFICANCE FOR THE PURPOSE OF 'ROYALTY' ONLY TILL THE TIME THE OWNERSHIP (AS DIFFERENTIATED FROM THE RIGHT TO USE) OF SUCH PROPERTY VESTS EXCLUSIVELY WITH A S INGLE PERSON AND SUCH PERSON BY VIRTUE OF ITS EXCLUSIVE OWNERSHI P ALLOWS THE USAGE OR RIGHT TO USE SUCH IP TO ANOTHER PERSON/ PE RSONS FOR A CONSIDERATION IN THE FORM OF 'ROYALTY'. PAYMENT MAD E FOR ANYTHING WHICH IS WIDELY AVAILABLE IN THE OPEN MARKET TO ALL THOSE WILLING TO ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 90 PAY, CANNOT CONSTITUTE 'ROYALTY' AND IS ESSENTIALLY IN THE NATURE OF BUSINESS INCOME. THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. NAYVELI LIGNITE CORPORATION LTD. (2000) 243 ITR 0459 HELD THAT 'THE TERM (ROYALTY' NORMALLY CONNOTES THE PAYMENT M ADE TO A PERSON WHO HAS EXCLUSIVE RIGHT OVER A THING FOR ALL OWING ANOTHER TO MAKE USE OF THAT THING WHICH MAY BE EITHER PHYSI CAL OR INTELLECTUAL PROPERTY OR THING. THE EXCLUSIVITY OF THE RIGHT IN RELATION TO THE THING FOR WHICH ROYALTY IS PAID SHO ULD BE WITH THE GRANTOR OF THAT RIGHT. MERE PASSING OF INFORMATION CONCERNING THE DESIGN OF MACHINE WHICH IS TAILOR-MADE TO MEET THE REQUIREMENT OF A BUYER DOES NOT BY ITSELF AMOUNT TO TRANSFER OF ANY RIGHT OF EXCLUSIVE USER, SO AS TO RENDER THE PAYMENT MADE TH EREFOR BEING REGARDED AS ROYALTY. THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF N .V. PHILIPS GLOEILAMPENFABRIEKEN EINDHOVEN VS. CIT (1988) 172 I TR 0521 HELD AS UNDER: FROM THE DICTIONARY MEANING OF THE TERM ROYALTY', IT APPEARS THAT THE SAID TERM CONNOTES PAYMENTS PERIOD IC OR AT A TIME FOR USER BY ONE PERSON OF CERTAIN EXCLUSIVE RIGHTS BELONGING TO ANOTHER PERSON. THE EXAMPLES OF SUCH E XCLUSIVE RIGHTS ARE RIGHTS IN THE NATURE OF A PATENT, MINERA L RIGHTS OR RIGHT IN RESPECT OF PUBLICATIONS. IT IS POSSIBLE TH AT A PERSON ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 91 WHO INVESTS MAY NOT TAKE OUT A PATENT FOR HIS INVEN TION BUT UNLESS SOME THERE INVENTOR INDEPENDENTLY AND BY HIS OWN EFFORTS COME TO DUPLICATE THE INVENTION THE ORIGINA L INVENTION REMAINS EXCLUSIVE TO THE INVESTOR AND IT IS CONCEIV ABLE THAT SUCH AN INVENTOR MIGHT EXPLOIT HIS INVENTION PERMIT TING SOME OTHER PERSON TO HAVE THE USER THEREOF AGAINST PAYM ENT. SIMILARLY, IT IS POSSIBLE FOR A PERSON CARRYING OUT OPERATIONS OF MANUFACTURE AND PRODUCTION OF A PARTICULAR PRODU CT TO ACQUIRE SPECIALISED KNOWLEDGE IN RESPECT OF SUCH MANUFACTURE AND PRODUCTION WHICH IS NOT GENERALLY A VAILABLE. A PERSON HAVING SUCH SPECIALISED KNOWLEDGE CAN CLAI M EXCLUSIVE RIGHT TO THE SAME AS LONG AS HE CHOOSES N OT TO MAKE SUCH SPECIALISED KNOWLEDGE PUBLIC. IT IS ALSO CONCEIVABLE THAT SUCH A PERSON CAN EXPLOIT AND UTIL ISE SUCH SPECIALISED KNOWLEDGE IN THE SAME WAY AS A PERSON H OLDING A PATENT OR OWNING A MINERAL RIGHT OR HAVING THE CO PYRIGHT OF A PUBLICATION TO ALLOW A LIMITED USER OF SUCH SPECI ALISED KNOWLEDGE TO OTHERS IN CONFIDENCE AGAINST PAYMENT. THERE IS NO REASON WHY PAYMENT FOR THE USER OF SUCH SPECIALI SED KNOWLEDGE, THOUGH NOT PROTECTED BY A PATENT, SHOULD NOT BE TREATED AS ROYALTY OR IN THE NATURE OF ROYALTY.-HAN DLEY PAGE US. BUTTERIOORTH. 19 TAX CASES 322 RELIED ON. ' THUS, THE TERM 'ROYALTY' CONNOTES EXCLUSIVITY AND T HE EXCLUSIVE RIGHT IN RELATION TO THE THING (BE IT PHY SICAL OR ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 92 INTELLECTUAL PROPERTY) FOR WHICH ROYALTY IS PAID SH OULD BE WITH THE GRANTOR OF THAT RIGHT. IN CASE AN INTELLECTUAL PROP ERTY, IT IS GENERALLY ASSOCIATED WITH SOME DISCOVERY, INVENTION , CREATION, SPECIALIZED KNOWLEDGE ETC. EMANATING FROM HUMAN MIN D AND IS PAYABLE TO THE INVENTOR / CREATOR FOR ALLOWING THE USAGE OF HIS INVENTION OR CREATION AND HAVING AN EXCLUSIVE RIGHT OVER IT. THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF NV PHILI PS GLOEILAMPENFABRIEKEN EINDHOVEN VS. CIT (SUPRA) HELD THAT A PERSON HAVING SOME SPECIALISED KNOWLEDGE CAN CLAIM EXCLUSIVE RIGHT TO THE SAME AS LONG AS HE CHOOSES NOT TO MAKE SUCH SPECIALISED KNOWLEDGE PUBLIC. SUCH A PERSON CAN EXP LOIT AND UTILISE SUCH SPECIALISED KNOWLEDGE IN THE SAME WAY AS A PERSON HOLDING A PATENT OR OWNING A MINERAL RIGHT OR HAVIN G THE COPYRIGHT OF A PUBLICATION TO ALLOW A LIMITED USE O F SUCH SPECIALISED KNOWLEDGE TO OTHERS IN CONFIDENCE AGAIN ST PAYMENT IN WHICH CASE IT IS TERMED AS ROYALTY. HOWEVER, ONCE S UCH SPECIALIZED KNOWLEDGE BECOMES PUBLIC; SUCH PERSON L OSES THE EXCLUSIVITY IN RESPECT OF SUCH SPECIAL KNOWLEDGE AN D HENCE, LOSES THE RIGHT TO RECEIVE ANY ROYALTY IN RESPECT OF THE SAME. THUS, FOR A PAYMENT TO BE CLASSIFIED ASSESSEE ROYALTY, 'EXCLU SIVITY' OF THE SUBJECT MATTER IS OF CRUCIAL RELEVANCE. 54. THE DICTIONARY MEANING OF THE TERM PROCESS (A S DEFINED IN BUSINESS DICTIONARY.COM) IS AS UNDER:- ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 93 SEQUENCE OF INTERDEPENDENT AND LINKED PROCEDURES W HICH, AT EVERY STAGE CONSUME ONE OR MORE RESOURCES (EMPL OYEE TIME, ENERGY, MACHINES, MONEY) TO CONVERT INPUTS (D ATA, MATERIAL, PARTS, ETC.) INTO OUTPUTS. THESE OUTPUTS THEN SERVE AS INPUTS FOR THE NEXT STAGE UNTIL A KNOWN GOAL OR END RESULT IS REACHED.' AS CAMBRIDGE DICTIONARIES ONLINE, DEFINES PROCES S TO MEAN A SERIES OF ACTIONS THAT YOU TAKE IN ORDER TO ACHIEVE A RESULT. 54.1 HENCE, THE TERM 'PROCESS' IMPLIES A SEQUENCE OF INTERDEPENDENT AND LINKED PROCEDURES OR ACTIONS CON SUMING RESOURCES TO CONVERT INPUTS INTO OUTPUTS. THEREFORE , 'PROCESS' WHEN VIEWED AS AN ASSET IS AN INTANGIBLE ASSET AND DOES NOT HAVE PHYSICAL EXISTENCE. VARIOUS TANGIBLE EQUIPMENTS AND RESOURCES MAY BE EMPLOYED IN EXECUTING A PROCESS BUT 'PROCESS ' PER SE, JUST LIKE A FORMULA OR DESIGN, IS INTANGIBLE. THE TERM ' PROCESS' AS CONTEMPLATED BY THE DEFINITION IS THUS REFERABLE TO 'KNOW-HOW' AND INTELLECTUAL PROPERTY. THERE IS A CLEAR DISTINC TION BETWEEN A 'PROCESS' AND THE PHYSICAL EQUIPMENTS AND RESOURCES DEPLOYED IN THE EXECUTION OF A 'PROCESS'. WHILE THE FORMER IS A N INTANGIBLE ASSET, THE LATTER IS TANGIBLE AND HAS A PHYSICAL EX ISTENCE. THE RIGHT TO RECEIVE A ROYALTY IN RESPECT OF A PROCESS WOULD ONLY BE WITH THE PERSON HAVING EXCLUSIVE RIGHT OVER SUCH 'P ROCESS' AND 'PROCESS' BEING IN THE NATURE OF INTELLECTUAL PROPE RTY, THE GRANTOR ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 94 OF SUCH RIGHT WOULD NORMALLY BE THE INVENTOR OR CRE ATOR OF SUCH PROCESS OR PERSON ENJOYING EXCLUSIVE OWNERSHIP OF S UCH PROCESS. THE OWNER OF THE 'PROCESS' MIGHT GRANT THE 'USE' O R RIGHT TO SUE TO DIFFERENT PERSONS AT THE SAME TIME, BUT THE EXCL USIVITY OF THE OWNERSHIP SHOULD BE WITH THE GRANTOR. THE ROYALTY I S PAID FOR THE USE OF THE 'PROCESS' AS AN ITEM OF IP BY THE MANU FACTURING COMPANY IN CONTRADISTINCTION TO THE EQUIPMENTS OR R ESOURCES DEPLOYED IN THE EXECUTION OF SUCH 'PROCESS'. THE PA YER MUST THEREFORE USE THE IP ON ITS OWN AND BEAR THE RISK O F ITS EXPLOITATION. IF THE IP IS USED BY THE OWNER HIMSEL F AND HE BEARS THE RISK OF EXPLOITATION OR LIABILITIES FOR THE USE , THEN AS THE OWNER MAKES OWN ENTREPRENEURIAL USE OF THE IP THE INCOME WOULD FALL UNDER THE SCOPE OF BUSINESS INCOME AND NOT ROYAL TY. A 'PROCESS' WHICH IS WIDELY KNOWN AND DEPLOYED BY EV ERYONE IN THE FIELD AND FOR WHICH THE OWNER DOES NOT HAVE EXCLUSI VE RIGHTS CANNOT BE A PROCESS CONTEMPLATED IN THIS SECTION 991)(VI) EXPLANATION (III). 54.2 IN THE CASE OF TELECOM INDUSTRY, ALL THE TELE COM OPERATORS HAVE SIMILAR INFRASTRUCTURE AND TELECOM N ETWORKS IN PLACE, FOR RENDITION OF TELECOMMUNICATION SERVICES . THE PROCESS EMBEDDED IN THE NETWORKS OF ALL TELECOM OPERATORS I S THE SAME. THE EQUIPMENTS, RESOURCES ETC. EMPLOYED IN THE EXEC UTION OF THE PROCESS MAY BE DIFFERENT IN PHYSICAL TERMS I.E. IN TERMS OF OWNERSHIP AND PHYSICAL PRESENCE, BUT THE PROCESS EM BEDDED IN ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 95 THE EXECUTION OF A TELECOM INFRASTRUCTURE IS THE SA ME AND COMMONLY AVAILABLE WITH ALL THE TELECOM OPERATORS. THE 'ROYALTY' IN RESPECT OF USE OF A 'PROCESS' WOULD IMPLY THAT T HE GRANTOR OF THE RIGHT HAS AN EXCLUSIVE RIGHT OVER SUCH 'PROCESS' AN D ALLOWS THE 'USE' THEREOF TO THE GRANTEE IN RETURN FOR A 'ROYAL TY'. IT IS NECESSARY THAT GUARANTEE MUST 'USE' THE 'PROCESS' ON ITS OWN AND BEAR THE RISK OF EXPLOITATION. THE 'PROCESS' OF RUN NING THE NETWORKS IN THE CASE OF ALL THE TELECOM OPERATORS I S ESSENTIALLY THE SAME AND THEY DO NOT HAVE ANY EXCLUSIVE RIGHT OVER SUCH 'PROCESS' SO AS TO BE IN A POSITION TO CHARGE A 'RO YALTY'. FOR ALLOWING THE USE OF SUCH PROCESS, THE TERM 'USE' IN CONTEXT OF ROYALTY CONNOTES USE BY THE GRANTEE AND NOT BY THE GRANTOR. A 'PROCESS' WHICH HAS BEEN IN PUBLIC DOMAIN FOR SOME TIME AND IS WIDELY USED BY EVERYONE IN THE FIELD CANNOT CONSTIT UTE AN ITEM OF INTELLECTUAL PROPERTY FOR THE PURPOSE OF CHARGE OF 'ROYALTY'. ANY COMPENSATION OR CONSIDERATION, IF AT ALL RECEIVED F OR ALLOWING THE USE OF ANY SUCH 'PROCESS' WHICH IS PUBLICALLY AVAIL ABLE AND NOT EXCLUSIVELY OWNED BY THE GRANTOR CONSTITUTES BUSINE SS INCOME AND NOT ROYALTY. 55. WE NOW CONSIDER THE INTERPRETATION OF THE TERM PROCESS AFTER INSERTION OF EXPLANATION 6 TO SECTION 9(1)(VI ) BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 1.6.1976. AS PER THIS EXPLANATION, THE EXPRESSION PROCESS INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATE LLITE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 96 (INCLUDING UP-LINKING, AMPLIFICATION, CONVERSION FO R DOWN-LINKING OF ANY SIGNAL), CABLE, OPTIC FIBRE OR BY ANY OTHER SIM ILAR TECHNOLOGY, WHETHER OR NOT SUCH PROCESS IS SECRET. HOWEVER, T HE EXPLANATION DOES NOT DO AWAY WITH THE REQUIREMENT OF SUCCESSFUL EXCLUSIVITY OF THE RIGHT IN RESPECT OF SUCH PROCESS BEING WITH THE PERSON CLAIMING ROYALTY FOR GRANTING ITS USAGE TO A TH IRD PARTY. NONE OF THE FTOS HAVE ANY EXCLUSIVE OWNERSHIP OR RIGHTS IN RESPECT OF SUCH PROCESS, AND HENCE IN OUR VIEW THE PAYMENT IN QUESTION CANNOT BE CONSIDERED AS ROYALTY. THE TELECOM OPE RATOR MERELY RENDER TELECOMMUNICATIONS SERVICES TO THE SUBSCRIBE RS, AS WELL AS INTERCONNECTING TELECOM OPERATORS WITH THE AID OF THEIR NETWORK AND THE PROCESS EMBEDDED THEREIN. THIS IS A STANDARD FACILITY WHICH IS USED BY THE FTO ITSELF. THUS THE INSERTION OF EXPLANATION 6 TO SECTION 9(1)(VI) DOES NOT ALTER TH E DECISION TAKEN BY US ON THIS ISSUE. 56. AS FAR AS THE INSERTION OF EXPLANATION 5 TO SEC TION 9(1)(VI) IS CONCERNED, WE HOLD THAT THIS EXPLANATION COMES INTO PLAY ONLY IN CASE OF ROYALTY FALLING WITHIN THE AMBIT OF SECTI ON 2 OF SECTION 9(1)(VI). WHEN A PROCESS IS WIDELY AVAILABLE IN TH E PUBLIC DOMAIN AND IS NOT EXCLUSIVELY OWNED BY ANYONE THE IT CANNO T CONSTITUTE AN ITEM OF INTELLECTUAL PROPERTY FOR THE PURPOSE OF CHARGE OF ROYALTY UNDER CLAUSES (I), (II) AND (III) OF EXPL ANATION 2 TO SECTION 9(1)(VI). HENCE, THE CRITERIA OF POSSESSIO N, CONTROL, ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 97 LOCATION INDIRECT USE ETC., AS EXPLAINED BY EXPLANA TION 5 HAS NO EFFECT IN THE CASE IN HAND. 57. THE ARGUMENTS OF THE LD. DR THAT EXPLANATION 5 I S ATTRACTED SINCE THE ASSESSEE COMPANY IS INDIRECTLY USING SUCH EQUIPMENT AND PROCESS THROUGH THE SERVICES PROVIDED BY THE FT O, IN OUR VIEW IS DEVOID OF MERITS. THERE IS DIFFERENCE BET WEEN THE SERVICES RENDERING AGREEMENTS AND ROYALTY AGREEMEN TS. IF THE ARGUMENTS OF THE DR IS ACCEPTED IT WOULD RESULT IN ABSURDITY. FOR EXAMPLE:- I) A PERSON HIRING A TAXI WILL BE PAYING A ROYALTY FOR INDIRECTLY USING THE PROCESS OF RUNNING OF THE ENGINES OF THE TAXI. II) A PERSON USING A CABLE CONNECTION WILL BE TERME D TO BE PAYING ROYALTY IN THE FORM OF CABLE CHARGES FOR IN DIRECTLY USING THE PROCESS OF RUNNING OF THE SYSTEMS OF THE CABLE OPERATORS. III) A TELEPHONE SUBSCRIBER USING OR MAKING A CALL WOULD BE HELD AS INDIRECTLY USING THE PROCESS OF THE SERVICE OF T ELECOM. 58. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARATI CELLULAR LTD. REPORTED IN 319 ITR 139 HAS GIVEN A FINDING THAT THE FACILITY IN QUESTION PROVIDED TO THE ASSESSEE IS A SERVICE AND IN A BROADER SENSE A COMMUNICATION SERVICE. THE FACIL ITY OF INTER- CONNECTION IS HELD AS PROVIDING SERVICE WHICH IS T ECHNICAL IN THE SENSE THAT INVOLVED SOPHISTICATED TECHNOLOGY. THU S THE FACTUAL FINDING OF THE JURISDICTIONAL HIGH COURT IN THIS VE RY FACTS AND ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 98 CIRCUMSTANCES IS THAT TECHNICAL SERVICES IS BEING PROVIDED BY THE FTOS TO THE ASSESSEE BUT THAT SUCH TECHNICAL SERV ICE IS NOT FTS AS DEFINED U/S. 9(1)(VII) OF THE ACT AS THERE IS NO HUMAN INTERVENTION. THIS FINDING THAT IT IS A SERVICE HAS NOT BEEN UPHELD BY THE HONBLE SUPREME COURT OF INDIA ONLY THE FACTUAL ISSUE AS TO WHETHER THERE WAS HUMAN INTERVENTION WA S SET ASIDE TO AO. UNDER SUCH CIRCUMSTANCES, THE QUESTION OF T AKING A CONTRARY VIEW THAT IT IS NOT A TECHNICAL SERVICES , BUT A CASE WHERE THE FTO HAD GRANTED THE ASSESSE A RIGHT TO USE A PROCESS AND THE PAYMENT IS FOR ROYALTY CANNOT BE COUNTENA NCED. APPLYING THE BINDING DECISION OF THE HONBLE JURISD ICTIONAL HIGH COURT WE HAVE TO HOLD THAT THE PAYMENT CANNOT BE TERMED AS COVERED BY EXPLANATION 2 READ WITH SECTION 9(1)(VI) OF THE ACT. ON THIS GROUND ALONE THE ORDER OF THE FIRST APPELLA TE AUTHORITY HAS TO BE UPHELD. THE CHARGE THAT THE PAYMENT IN Q UESTION IS FTS U/S. 9(1)(VII) EXCLUDES THE POSSIBILITY OF THE PAYMENT BEING ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT. BOTH THE SE SECTIONS DEAL WITH DIFFERENT SET OF FACTS SITUATION WHICH CANNOT CO-EXIST. 59.1 EVEN UNDER THE DTAA, AS HELD BY THE LD. FIRST APPELLATE AUTHORITY WE ARE OF THE VIEW THAT THE PAYMENT IN QU ESTION CANNOT BE TERMED AS ROYALTY. 59.2 THE ASSESSEE COMPANY HAS ENTERED INTO INTERC ONNECT AGREEMENTS WITH VARIOUS FOREIGN TELECOM OPERATORS W HO ARE RESIDENTS OF COUNTRIES LIKE AUSTRALIA, CANADA, FRAN CE, ISRAEAL, ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 99 NETHERLANDS, PORTUGUESE, REPUBLIC, SINGAPORE, SPAIN , SWEDEN, UNITED KINGDOM, UNITED STATES OF AMERICA, BANGLADES H, INDONESIA, MAURITIUS, NEPAL, PHILIPPINES, SAUDI ARA BIA, SRI LANKA, THAILAND, UAE ETC. INDIA HAS DOUBLE TAXATION AVOIDA NCE AGREEMENTS WITH ALL THE AFORESAID COUNTRIES. 59.3 THE DEFINITION OF 'ROYALTIES' (SIMPLY REFERRE D TO AS 'ROYALTY' UNDER THE INCOME-TAX ACT, 1961) IS MOSTLY CONTAINED IN ARTICLES 12 & 13 OF THE DTAAS BETWEEN INDIA AND THE AFORESAI D COUNTRIES. THE DEFINITIONS OF 'ROYALTIES' CONTAINED IN THE TRE ATIES WITH THE AFORESAID COUNTRIES ARE ALMOST PARI MATERIA INSOFAR AS THE ROYALTY IS FOR 'USE OF PROCESS' IS CONCERNED. WE QUOTE FROM ARTICLE 13(3) OF INDO-UK TREATY DEFINING THE TERM 'ROYALTIES' HER EUNDER: 3. FOR THE PURPOSE OF THIS ARTICLE, THE TERM (ROYA LTIES' MEANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FO R THE USE OF, OR THE RIGHT TO USE , ANY COPYRIGHT OF A LITERARY, ARTISTIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPHY FILMS OR WORK ON FILMS, TAPE OR OTHE R MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RA DIO OR TELEVISION BROADCASTING, ANY PATENT, TRADEMARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS , OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE; AND (B) PAYMENTS OF ANY KIND ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 100 RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RI GHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIP MENT, OTHER THAN INCOME DERIVED BY AN ENTERPRISE OF A CONTRACTING STATE FROM THE OPERATION OF SHIPS OR AI RCRAFT IN INTERNATIONAL TRAFFIC. (EMPHASIS OURS) 59.4 FURTHER, AS PER ARTICLE 12(3) OF THE INDO-US TREATY, THE TERM 'ROYALTIES' HAS BEEN DEFINED AS UNDER: 3. THE TERM ROYALTIES' AS USED IN THIS ARTICLE ME ANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF, OR THE RIGHT TO USE , ANY COPYRIGHT OF - A LITERARY, ARTISTIC, OR SCIENTIFIC WORK, INCLUDING.- CINEMATOGRAPHY FILMS OR WORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RA DIO OR TELEVISION BROADCASTING, ANY PATENT, TRADEMARK, 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 WHICH ARE CONTINGENT ON THE PRODUCTIVITY, USE, OR DISPOSITIO N THEREOF; AND (B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 101 COMMERCIAL OR SCIENTIFIC EQUIPMENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERPRISE DESCRIBED IN PARAGRAPH 1 OF ARTICLE 8 (SHIPPING AND AIR TRANSPOR T) FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2(C) OR 3 OF ARTICLE 8. ' (EMPHASIS OURS) THE DEFINITION OF 'ROYALTIES' UNDER INDO-CANADA TRE ATY IS THE SAME AS ABOVE. 59.5 SIMILARLY, ARTICLE 13(3) OF THE INDO-FRANCE T REATY DEFINES 'ROYALTIES' AS UNDER: 3. THE TERM ROYALTIES' AS USED IN THIS ARTICLE ME ANS PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE , ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, OR F ILMS OR TAPES USED FOR RADIO OR TELEVISION BROADCASTING, AN Y PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA O R PROCESS , OF FOR INFORMATION CONCERNING INDUSTRIAL, COMMERC IAL OR SCIENTIFIC EXPERIENCE.' (EMPHASIS OURS) THE DEFINITION OF ROYALTIES UNDER INDO-NETHERLANDS TREATY IS THE SAME AS ABOVE. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 102 59.6 THE TERM 'ROYALTIES', HAS BEEN SIMILARLY DEF INED IN ALL OTHER TREATIES. ON A PERUSAL OF THE DEFINITION OF 'ROYALT IES' PROVIDED IN VARIOUS TREATIES, IT IS CLEAR THAT, ALL THE TREATI ES USE THE EXPRESSION 'SECRET FORMULA OR PROCESS' IS SEPARATED BY A COMMA BEFORE AND AFTER THE EXPRESSION. THIS IMPLIES THAT' FORMULA/ PROCESS IS A PART OF THE SAME GROUP AND THE ADJECTI VE 'SECRET' GOVERNS BOTH. THUS, UNDER THE TREATIES, IN ORDER TO CONSTITUTE ROYALTY FOR USE OF OR THE RIGHT TO USE OF A PROCESS , THE PROCESS HAS TO BE 'SECRET'. IN THE CASE OF TELECOM INDUSTRY, HO WEVER, TELECOMMUNICATION SERVICES AS ALREADY OBSERVED BY U S ARE RENDERED THROUGH STANDARD FACILITIES AND NO 'SECRET PROCESS' IS INVOLVED. 60. A PERUSAL OF THE WORDING OF THESE TREATIES SHOW THAT ONLY PAYMENTS RECEIVED AS CONSIDERATION FOR THE USE OF , OR THE RIGHT TO USE IS NECESSARY FOR THE PAYMENT TO BE TERMED A S ROYALTY. THIS IS MUCH NARROWER TO THE DEFINITION OF ROYALTY UNDER THE ACT. AS HELD BY THE LD. CIT(A) THERE IS NO USE OF OR RIGHT TO USE OF ANY PROCESS IN THE FACTS AND CIRCUMSTANCES OF THE C ASE ON HAND AND HENCE, EVEN UNDER THE DTAAS, THE PAYMENT IN QU ESTION CANNOT BE TERMED AS ROYALTY. 60.1 THE HONBLE HIGH COURT OF DELHI IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. VS. DIRECTOR O F INCOME TAX (2011) 332 340 CONSIDERED THIS ISSUE AND HELD AS FO LLOWS :- ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 103 THE TAXPAYER, A HONG KONG BASED COMPANY, WAS ENGAG ED IN THE BUSINESS OF SATELLITE COMMUNICATIONS AND BRO ADCASTING FACILITIES. THIS BUSINESS: WAS CARRIED OUT THROUGH THE MEDIUM OF SATELLITES, OWNED AND LEASED, WHICH ARE PLACED I N GEOSTATIONARY ORBITS. THESE SATELLITES DID NOT USE INDIAN ORBITAL SLOTS. THEY ALSO DID NOT GET PLACED OVER TH E INDIAN SKY SPACE ON ANY OCCASION. THE ASSESSEE ENTERED INT O AGREEMENTS WITH TV CHANNELS & COMMUNICATION COMPANI ES SO THAT THEY ARE ABLE TO UTILIZE ITS TRANSPONDER CA PACITY FOR DATA TRANSMISSION. THEY COULD PLINK THEIR SIGNALS O N THE TRANSPONDER THROUGH THEIR OWN EARTH STATIONS. SUCH EARTH STATIONS ARE LOCATED OUTSIDE INDIA. ON RECEIPT OF T HE SIGNALS, THE TRANSPONDER AMPLIFIES THE SIGNAL AND SENDS IT T O THE TARGET AREA. THE AREA SO COVERED, CALLED THE FOOTPR INT AREA, INCLUDED THE TERRITORY OF INDIA. THE ASSESSEE HELD THAT ITS INCOME WAS NOT CHARGEABLE TO TAX IN INDIA BECAUSE I T DOES NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. IN PARTICULAR, IT WAS ARGUED THAT THERE WAS NO OFFICE OR CUSTOMERS IN INDIA. THE DELHI TRIBUNAL IN THE SAID CASE HELD THAT DESPITE THE FACT THAT THE ASSESSEE COULD HAVE BUSINESS CONNECTION IN INDIA, NONE OF ITS OPERATIONS WERE CA RRIED OUT IN INDIA. IN ADDITION, THE PAYMENT MADE BY THE CUST OMERS WAS NOT FOR USE OF THE EQUIPMENTS SO THAT THERE WAS NO EQUIPMENT ROYALTY ANGLE IN THIS CASE. HOWEVER, THE HON'BLE TRIBUNAL ALSO HELD THAT IN THE FACTS OF THE CASE, T HE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 104 CUSTOMERS WERE MAKING PAYMENT TO THE NON-RESIDENT F OR USE OF A PROCESS. IT WAS OBSERVED THAT TO CONSTITUTE RO YALTY, THE PROCESS NEED NOT BE A SECRET PROCESS. THE INCOME OF THE NON-RESIDENT WAS RULED TO BE 'PROCESS ROYALTY.' TH E COURT HELD, (I) 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 LOCATIONS NOT SITUA TED IN INDIAN AIRSPACE), THESE WERE AMPLIFIED THROUGH COMP LICATED PROCESS; AND (III) THE PROGRAMMES SO AMPLIFIED WERE RELAYED IN THE FOOTPRINT AREA INCLUDING INDIA WHERE THE CAB LE OPERATORS CAUGHT THE WAVES AND PASSED THEM OVER TO THE INDIAN POPULATION. THE FIRST TWO STEPS WERE NOT CAR RIED OUT IN INDIA. MERELY BECAUSE THE FOOTPRINT AREA INCLUDED I NDIA AND THE PROGRAMMERS BY ULTIMATE CONSUMERS/VIEWERS WATCH ED THE PROGRAMMES IN INDIA, EVEN WHEN THEY WERE UPLINK ED AND RELAYED OUTSIDE, INDIA, THAT WOULD NOT MEAN THAT TH E ASSESSEE WAS CARRYING OUT ITS BUSINESS 'OPERATIONS IN INDIA. THE EXPRESSIONS 'OPERATIONS' AND 'CARRIED OUT IN IN DIA'' OCCURRING IN EXPLANATION L(A) TO SECTION 9(1)(I) SI GNIFY THAT IT WAS NECESSARY' TO ESTABLISH THAT ANY PART OF THE AS EESEEE'S OPERATIONS WERE CARRIED OUT IN INDIA. NO MACHINERY OR COMPUTER WAS INSTALLED BY THE ASSESSEE IN INDIA THR OUGH WHICH THE PROGRAMMES REACHED INDIA. THE PROCESS OF ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 105 AMPLIFYING AND RELAYING SHE PROGRAMMES WAS PERFORME D' IN THE SATELLITE WHICH WAS NOT SITUATED IN INDIAN AIRS PACE. EVEN THE TRACKING, TELEMETRY AND CONTROL OPERATIONS TO B E PERFORMED OUTSIDE INDIA IN HONG KONG. THERE WAS NO CONTRACT OR AGREEMENT BETWEEN THE ASSESSEE EITHER W ITH THE CABLE OPERATORS OR VIEWERS FOR RECEPTION OF SIGNALS IN INDIA. THUS, SECTION 9(1)(I) WAS NOT ATTRACTED. (II) 'THAT THE PROCESS OF TRANSMISSION OF TELEVISIO N PROGRAMMES STARTED WITH TELEVISION CHANNELS (CUSTOM ERS OF THE ASSESSEE) UPLINKING THE SIGNALS CONTAINING THE TELEVISION PROGRAMMES ; THEREAFTER THE SATELLITE RECEIVED THE SIGNALS AND AFTER AMPLIFYING 'AND CHANGING THEIR FREQUENCY RELAYED IT DOWN IN INDIA AND OTHER COUNTRIES WHERE THE CABLE O PERATORS CAUGHT THE SIGNALS AND DISTRIBUTED THEM TO THE PUBL IC. ANY PERSON WHO HAD A DISH ANTENNA, COULD ALSO CATCH THE SIGNALS RELAYED FROM THESE SATELLITES: 'THE ROLE OF THE ASS ESSEE 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 PAYMENT TO TH E ASSESSEE. THE ASSESSEE WAS THE OPERATOR OF THE SATE LLITES AND WAS IN CONTROL OF THE SATELLITE. IT HAD NOT LEA SED OUT THE EQUIPMENT TO THE CUSTOMERS. THE ASSESSEE HAD MERELY GIVEN ACCESS TO A BROADBAND WIDTH AVAILABLE IN A TRANSPON DER WHICH CAN BE UTILIZED FOR THE PURPOSE OF TRANSMITTI NG THE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 106 SIGNALS OF THE CUSTOMER. A SATELLITE IS NOT A MERE CARRIER, NOR IS THE TRANSPONDER SOME- THING WHICH IS DISTINCT AN D SEPARABLE FROM THE SATELLITE AS SUCH. THE TRANS-PON DER IN FACT CANNOT FUNCTION WITHOUT THE CONTINUOUS SUPPORT OF VARIOUS SYSTEMS AND 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 H ANDED OVER BY THE SATELLITE OPERATOR TO ITS CUSTOMERS. TH E TERMS 'LEASE OF TRANSPONDER CAPACITY', 'LESSOR', 'LESSEE' AND 'RENTAL' USED IN THE AGREEMENT WOULD NOT BE THE DET ER- MINATIVE FACTORS. THERE WAS NO USE OF 'PROCESS' BY THE TELEVISION CHANNELS. MOREOVER, NO SUCH PURPORTED US E HAD TAKEN PLACE IN INDIA. THE TELECAST COMPANIES/CUSTOM ERS WERE SITUATED OUTSIDE INDIA AND SO WAS THE ASSESSEE . THE AGREEMENTS UNDER WHICH THE SERVICES WERE PROVIDED B Y 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 THAT THE PROCE SS HAD TAKEN PLACE IN INDIA. ISRO SATELLITE CENTRE [ISAC], IN RE [2008] 307 ITR 59 (AAR), ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. V. DIT [2007] 288 ITR 408 (SC) AND LAKSHMI AUDIO VISUA L INC. V. ASST. CCT [2001] 124 STC 426 (KARN) APPLIED . ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 107 III) THAT THE MONEY RECEIVED FROM THE CABLE OPERATO RS BY THE OPERATORS WAS TREATED AS INCOME BY THESE TELECAST O PERATORS WHICH HAD IN INDIA AND THEY HAD OFFERED AND PAID TA X. THUS, THE INCOME GENERATED IN INDIA HAD BEEN DULY SUBJECT ED TO TAX IN INDIA. THE PAYMENT MADE BY THE TELE CAST OPE RATORS SITUATED ABROAD TO THE ASSESSEE WHICH WAS ALSO A N ON- RESIDENT DID NOT REPRESENT INCOME BY WAY OF ROYALTY AS DEFINED IN EXPLANATION SECTION 9(1)(VI) OF THE ACT. ARTICLE 12 OF THE MODEL DOUBLE TAXATION AVOIDANCE AGREEMENT FR AMED BY THE ORGANISATION OF ECONOMIC CO-OPERATION AND DEVELOPMENT CONTAINS A DEFINITION OF 'ROYALTY' WHIC H IS IN ALL RESPECTS VIRTUALLY THE SAME AS THE DEFINITION OF 'R OYALTY' CONTAINED IN (III) OF EXPLANATION 2 TO SECTION 9(1) (VI) OF THE ACT. THE COMMENTARY BY THE OECD CAN BE RELIED UPON. (IV) THAT THE TRIBUNAL RIGHTLY ADMITTED THE ADDITIO NAL GROUND QUESTION OF APPLICABILITY OF SECTION 9(1)(VII) ON T HE GROUND THAT IT WAS LEGAL AND DID NOT REQUIRE CONSIDERATION OF ANY FRESH FACTS, AS ALL NECESSARY FOR ADJUDICATION WHET HER THE AMOUNT RECEIVED WAS CHARGEABLE TO TAX SECTION 9(1)( VII) WERE AVAILABLE ON RECORD. HOWEVER, NO ARGUMENTS BEE N ADVANCED BY THE DEPARTMENT ON THIS GROUND, IT HAD T O BE PRESUMED THAT THE CASE WAS NOT SOUGHT TO BE COVERED UNDER THIS PROVISION. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 108 61. IN THE CASE OF DCIT VS. PANAMSAT INTERNATIONAL SYSTEMS INC. (2006) 103 TTJ 861 (DEL) THE TRIBUNAL HAS HEL D AS UNDER:- THERE IS A ''PROCESS'' INVOLVED IN THE ACTIVITY CA RRIED ON BY THE ASSESSEE. THERE IS A COMMA AFTER THE WORDS 'SECRET FORMULA OR PROCESS' IN ART. 12.3(A) OF INDO -US DTAA WHICH INDICATES THAT BOTH THE WORDS 'FORMULA' AND 'PROCESS' ARE QUALIFIED BY THE WORD 'SECRET'. T HE REQUIREMENT THUS UNDER THE TREATY IS THAT BOTH THE FORMULA AND THE PROCESS, FOR WHICH THE PAYMENT IS MADE, SHOULD BE A SECRET FORMULA OR A SECRET PROCES S IN ORDER THAT THE CONSIDERATION MAY BE CHARACTERISED A S ROYALTY. NORMALLY PUNCTUATION BY ITSELF CANNOT CONT ROL THE INTERPRETATION OF A STATUTORY PROVISION. HOWEVE R, THE PUNCTUATION-THE USE OF THE COMMA-COUPLED WITH T HE SETTING AND WORDS SURROUNDING THE WORDS UNDER CONSIDERATION, INDICATES THAT UNDER THE TREATY EVEN THE PROCESS SHOULD BE A SECRET PROCESS SO THAT THE PAYM ENT THEREFORE, IF ANY, MAY BE ASSESSED IN INDIA AS ROYA LTY. THE WORDS WHICH SURROUND THE WORDS 'SECRET FORMULA OR PROCESS', IN ART. 12.3(A) OF THE TREATY REFER TO VA RIOUS SPECIES OF INTELLECTUAL PROPERTIES SUCH AS PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, ETC. THUS THE WORDS 'SECRET FORMULA OR PROCESS' MUST ALSO REFER TO A SP ECIE OF INTELLECTUAL PROPERTY APPLYING THE RULE OF EJUSD EM ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 109 GENERIS OR NOSCITUR A SOCIIS.-ASIA SATELLITE TELECOMMUNICATION CO. LTD. VS. DY. CITT(2003) 78 TTJ (DEL) 489 : (2003) 85 ITD 478 (DEL) DISTINGUISHED. (PARA 19) SO FAR AS THE TRANSPONDER TECHNOLOGY IS CONCERNED THERE APPEARS TO BE NO 'SECRET TECHNOLOGY', KNOWN O NLY TO A FEW. THERE IS EVIDENCE TO SHOW THAT THE TECHNO LOGY IS EVEN AVAILABLE IN THE FORM OF PUBLISHED LITERATURE/BOOK FROM WHICH A PERSON INTERESTED IN I T CAN OBTAIN KNOWLEDGE RELATING THERETO. THERE IS NO EVID ENCE LED FROM THE SIDE OF THE DEPARTMENT TO SHOW THAT TH E TRANSPONDER TECHNOLOGY IS SECRET, KNOWN ONLY TO A F EW, AND IS EITHER PROTECTED BY LAW OR IS CAPABLE OF BEI NG PROTECTED BY LAW. SINCE THERE IS NOTHING SECRET ABO UT THE PROCESS INVOLVED IN THE OPERATION OF A TRANSPON DER, THE PAYMENT FOR THE USE OF THE PROCESS- ASSUMING IT TO BE SO-DOES NOT AMOUNT TO ROYALTY' (PARA 20) THE ARGUMENT THAT THE CONSIDERATION HAS BEEN RECEIVED B Y THE ASSESSEE FOR LETTING THE BROADCASTERS USE THE P ATENT RELATING TO THE TRANSPONDER/SATELLITE GOES FARTHER THAN THE ASSESSMENT ORDER AND THEREFORE CANNOT BE ACCEPTED. EVEN ON MERITS THE ARGUMENT IS NOT ACCEPTABLE SINCE THE PATENT RELATING TO THE TRANSPONDER/SATELLITE IS NOT WITH THE ASSESSEE BUT IS ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 110 WITH THE MANUFACTURER OF THE SAME. THERE IS NO CLAU SE IN THE PURCHASE AGREEMENT TO SHOW THAT THE PATENT RELATING TO THE TRANSPONDER/SATELLITE WAS ALSO TRANSFERRED TO THE ASSESSEE BY THE MANUFACTURER. IF THE PATENT DID NOT ENSURE TO THE ASSESSEE, HOW THE ASSESSEE COULD HAVE, EVEN IN THE WILDEST OF IMAGINATIONS, LET THE BROADCASTERS USE THE SAME FOR CONSIDERATION. THE ARGUMENT SOUGHT TO BE MADE IS FACTUALLY NOT BORNE OUT. THERE IS NOT ON IOTA OF EV IDENCE TO SHOW THAT THE ASSESSEE HAD ANY PATENT TO THE SATELLITE OR TRANSPONDER WHICH IT ALLOWED THE BROADCASTERS TO USE FOR A CONSIDERATION. (PARA 21) 62. IN THE CASE OF CABLE & WIRELESS NETWORKS INDIA (P) LTD. IN RE (2009) 315 ITR 0072, THE AAR HELD AS UNDER:- CABLE & WIRELESS NETWORKS INDIA (P) LTD.; IN RE (2009) 315 ITR 0072: HELD THAT 'PAYMENT MADE BY APPLICANT TO THE UK COMPANY FOR PROVIDING INTERNATI ONAL LEG OF THE SERVICES IN TRANSMITTING VOICE/DATA TO P LACES OUTSIDE INDIA USING ITS INTERNATIONAL INFRASTRUCTU RE AND EQUIPMENTS IS NEITHER ROYALTY NOR FEES FOR TECHNICA L SERVICES; PAYMENT IS IN THE NATURE OF BUSINESS PROF ITS AND IN THE ABSENCE OF PE OF UK COMPANY IN INDIA, SA ME IS NOT TAXABLE IN INDIA.' ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 111 FURTHER, AT PARAS 8.1 TO 8.3, THE HON'BLE AAR HELD AS UNDER: 'NO MATERIAL HAS BEEN PLACED TO SHOW THAT C&W UK USES ANY SECRET PROCESS IN THE TRANSMISSION OF THE INTERNATIONAL LEG OF THE SERVICE, OR THAT THE APPLI CANT PAYS TOWARDS THE USE OR RIGHT TO USE THAT SECRET PROCESS. IT IS WELL SETTLED THAT TELECOM SERVICES A RE STANDARD SERVICES. THE ARRANGEMENT BETWEEN THE APPLICANT AND C& W UK IS FOR RENDITION OF SERVICE A ND THE APPLICANT PAYS FOR THE SAME. IT IS FOR C & W UK TO SEE HOW IT WILL PROVIDE THAT SERVICE. THE APPLICANT IS NOT CONCERNED WITH THE SAME. THE REVENUE HAS THUS FAILE D TO SHOW HOW THE PAYMENTS MADE BY THE APPLICANT WILL BE ROYALTY INCOME IN THE HANDS OF C&W UK.'-DELL INTERNATIONAL SERVICES INDIA (P) LTD., IN RE(2008) 2 18 CTR (AAR) 209 : (2008) 10 DTR (AAR) 249 : (2008) 305 ITR 37 (AAR) FOLLOWED. 62.1 APPLYING THE PROPOSITION LAID DOWN IN THE CAS E LAWS TO THE FACTS OF THE CASE, WE HAVE TO HOLD THAT THE PAY MENT IN QUESTION IS NOT ROYALTY AS CONTEMPLATED UNDER THE DTAAS. 62.2 NOW THE QUESTION IS WHETHER THERE WOULD BE AN Y CHANGE IN THIS POSITION SUBSEQUENT TO THE RETROSPEC TIVE AMENDMENTS BROUGHT OUT BY THE FINANCE ACT, 2002 W. E.F. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 112 1.6.1976 BY ADDING EXPLANATION 5 & 6 TO SECTION 9(1 )(VI OF THE ACT. THE ANSWER IS NO AS CHANGES IN DOMESTIC LAW CA NNOT BE READ INTO THE TREATIES AS LONG AS THERE IS NO CHANGE IN THE WORKING OF THE TREATIES. 63. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF DIT VS. NOKIA NETWORKS (2013) 358 ITR 259 HAS HELD AS UNDER:- S. 9 HAS BEEN AMENDED VIDE FINANCE ACT, :;2012 AND EXPLANATIONS HAVE BEEN INSERTED WITH RETROSPECTIVE EFFECT FROM 1-6-1976. THE REVENUE ARGUED THAT THE AMENDMEN TS ARE ONLY CLARIFICATORY IN NATURE AND SUBMITTED THAT THE QUESTION OF 'COPYRIGHTED ARTICLE' OR ACTUAL COPYRIG HT DOES NOT ARISE IN THE CONTEXT OF SOFTWARE BOTH IN THE DTAA A ND IN THE INCOME TAX ACT SINCE THE RIGHT TO USE SIMPLICITER O F A SOFTWARE PROGRAM ITSELF IS A PART OF THE COPYRIGHT IN THE SOFTWARE IRRESPECTIVE OF WHETHER OR NOT A FURTHER R IGHT TO MAKE COPIES IS GRANTED. THE DECISION OF THE DELHI B ENCH OF THE ITAT HAS DEALT WITH THIS ASPECT IN ITS JUDGMENT IN GRACEMAC CO. VS. ADIT 134 TTJ (DELHI) 257 POINTING OUT THAT EVEN SOFTWARE BOUGHT OFF THE SHELF, DOES NOT C ONSTITUTE A 'COPYRIGHTED ARTICLE'. IT WAS CATEGORICALLY HELD IN CIT VS. SIEMENS AKTIONGESELLSCHAFT, 310 ITR 320 (BOM) THAT THE AMENDMENTS CANNOT BE READ INTO THE TREATY AND ON 'T HE WORDING OF THE TREATY, IT WAS ALREADY HELD THAT A C OPYRIGHTED ARTICLE DOES NOT FALL WITHIN THE PURVIEW OF ROYALTY . ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 113 GRACEMAC CO. VS. ADIT 134 TTJ (DELHI) 257, CIT VS. SIEMENS AKTIONGESELLSCHAFT, 310 ITR 320 (BOM.), DIT VS. ERICSSON, 343 ITR 370, RELIED ON. 64. RECENTLY, THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. NEW SKIES SATELLITE BV & ORS. IN ITA NO. 473/2012 & ORS. VIDE JUDGMENT DATED 8.2.2016 HAS HELD AS UNDER:- 39. IT IS NOW ESSENTIAL TO DECIDE THE SECOND QUEST ION I.E. WHETHER THE ASSESSEES IN THE PRESENT CASE WILL OBTAIN ANY RELIE F FROM THE PROVISIONS OF THE DTAAS. UNDER ARTICLE 12 OF THE DOUBLE TAX AV OIDANCE AGREEMENTS, THE GENERAL RULE STATES THAT WHEREAS TH E STATE OF RESIDENCE SHALL HAVE THE PRIMARY RIGHT TO TAX ROYAL TIES, THE SOURCE STATE SHALL CONCURRENTLY HAVE THE RIGHT TO TAX THE INCOME, TO THE EXTENT OF 15% OF THE TOTAL INCOME. BEFORE THE AMEND MENT BROUGHT ABOUT BY THE FINANCE ACT OF 2012, THE DEFINITION OF ROYALTY UNDER THE ACT AND THE DTAAS WERE TREATED AS PARI MATERIA. THE DEFINITIONS ARE REPRODUCED BELOW: ARTICLE 12(3), INDO THAI DOUBLE TAX AVOIDANCE AGREE MENT: 3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE ALIENA TION OR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITER ARY, ARTISTIC OR SCIENTIFIC WORK (INCLUDING CINEMATOGRAPH FILMS, PHO NOGRAPHIC RECORDS AND FILMS OR TAPES FOR RADIO OR TELEVISION BROADCASTING), ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECR ET FORMULA ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 114 OR PROCESS, OR FOR THE USE OF, OR THE RIGHT TO USE INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OR FOR INFORMAT ION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE. ARTICLE 12(4), INDO NETHERLANDS DOUBLE TAX AVOIDANC E AGREEMENT ITA 473/2012, 474/2012, 500/2012 & 244/2014 PAGE 31 4. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCE RNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. SECTION 9(1)(VI), EXPLANATION 2, INCOME TAX ACT, 19 61 (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FORMUL A OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY 40. IN ASIA SATELLITE TELECOMMUNICATION THE COURT, WHILE INTERPRETING THE DEFINITION OF ROYALTY UNDER THE ACT, PLACED REL IANCE ON THE DEFINITION IN THE OECD MODEL CONVENTION. SIMILAR CA SES, BEFORE THE TAX TRIBUNALS THROUGH THE NATION, EVEN WHILE DISAGR EEING ON THE ULTIMATE IMPORT OF THE DEFINITION OF THE WORD ROYAL TY IN THE CONTEXT OF DATA TRANSMISSION SERVICES, SYSTEMATICALLY AND WITH OUT EXCEPTION, HAVE TREATED THE TWO DEFINITIONS AS PARI MATERIA. T HIS COURT CANNOT TAKE A DIFFERENT VIEW, NOR IS INCLINED TO DISAGREE WITH THIS APPROACH FOR IT IS IMPERATIVE THAT DEFINITIONS THAT ARE SIMI LARLY WORDED BE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 115 INTERPRETED SIMILARLY IN ORDER TO AVOID INCONGRUITY BETWEEN THE TWO. THIS IS, OF COURSE, UNLESS LAW MANDATES THAT THEY B E TREATED DIFFERENTLY. THE FINANCE ACT OF 2012 HAS NOW, AS OB SERVED EARLIER, INTRODUCED EXPLANATIONS 4, 5, AND 6 TO THE SECTION 9(1)(VI). THE QUESTION IS THEREFORE, WHETHER IN AN ATTEMPT TO INT ERPRET THE TWO DEFINITIONS UNIFORMLY, I.E. THE DOMESTIC DEFINITION AND THE TREATY DEFINITION, THE AMENDMENTS WILL HAVE TO BE READ INT O THE TREATY AS WELL. IN ESSENCE, WILL THE INTERPRETATION GIVEN TO THE DTAAS FLUCTUATE WITH SUCCESSIVE FINANCE ACT AMENDMENTS, WHETHER RET ROSPECTIVE OR PROSPECTIVE? THE REVENUE ARGUES THAT IT MUST, WHILE THE ASSESSE ES ARGUE TO THE CONTRARY. THIS COURT IS INCLINED TO UPHOLD THE CONT ENTION OF THE LATTER. 41. THIS COURT IS OF THE VIEW THAT NO AMENDMENT TO THE ACT, WHETHER RETROSPECTIVE OR PROSPECTIVE CAN BE READ IN A MANNE R SO AS TO EXTEND IN OPERATION TO THE TERMS OF AN INTERNATIONAL TREAT Y. IN OTHER WORDS, A CLARIFICATORY OR DECLARATORY AMENDMENT, MUCH LESS O NE WHICH MAY SEEK TO OVERCOME AN UNWELCOME JUDICIAL INTERPRETATIO N OF LAW, CANNOT BE ALLOWED TO HAVE THE SAME RETROACTIVE EFFECT ON A N INTERNATIONAL INSTRUMENT EFFECTED BETWEEN TWO SOVEREIGN STATES PR IOR TO SUCH AMENDMENT. IN THE CONTEXT OF INTERNATIONAL LAW, WHI LE NOT EVERY ATTEMPT TO SUBVERT THE OBLIGATIONS UNDER THE TREATY IS A BREACH, IT IS NEVERTHELESS A FAILURE TO GIVE EFFECT TO THE INTEND ED TRAJECTORY OF THE TREATY. EMPLOYING INTERPRETIVE AMENDMENTS IN DOMEST IC LAW AS A MEANS TO IMPLY CONTOURED EFFECTS IN THE ENFORCEMENT OF TREATIES IS ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 116 ONE SUCH ATTEMPT, WHICH FALLS JUST SHORT OF A BREACH , BUT IS NEVERTHELESS, IN THE OPINION OF THIS COURT, INDEFEN SIBLE. 64.1 AFTER CONSIDERING THE VIENNA CONVENTION ON TH E LAW OF TREATIES, 1969 (VCLT) AND THE JUDGMENTS OF THE HON BLE SUPREME COURT OF CANADA AND OTHER PRECEDENTS, THE H ONBLE HIGH COURT FURTHER HAS HELD AS UNDER :- 60. CONSEQUENTLY, SINCE WE HAVE HELD THAT THE FINA NCE ACT, 2012 WILL NOT AFFECT ARTICLE 12 OF THE DTAAS, IT WOULD FOLLOW THAT THE FIRST DETERMINATIVE INTERPRETATION GIVEN TO THE WORD ROY ALTY IN ASIA SATELLITE59 , WHEN THE DEFINITIONS WERE IN FACT PAR I MATERIA (IN THE ABSENCE OF ANY CONTOURING EXPLANATIONS), WILL CONTI NUE TO HOLD THE FIELD FOR THE PURPOSE OF ASSESSMENT YEARS PRECEDING THE FINANCE ACT, 2012 AND IN ALL CASES WHICH INVOLVE A DOUBLE TAX AV OIDANCE AGREEMENT, UNLESS THE SAID DTAAS ARE AMENDED JOINTLY BY BOTH PARTIES TO INCORPORATE INCOME FROM DATA TRANSMISSIO N SERVICES AS PARTAKING OF THE NATURE OF ROYALTY, OR AMEND THE DE FINITION IN A MANNER SO 59 SUPRA NOTE 1 ITA 473/2012, 474/2012, 5 00/2012 & 244/2014 PAGE 50 THAT SUCH INCOME AUTOMATICALLY BEC OMES ROYALTY. IT IS REITERATED THAT THE COURT HAS NOT RETURNED A FINDING ON WHETHER THE AMENDMENT IS IN FACT RETROSPECTIVE AND APPLICAB LE TO CASES PRECEDING THE FINANCE ACT OF 2012 WHERE THERE EXIST S NO DOUBLE TAX AVOIDANCE AGREEMENT. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 117 65. THUS, RESPECTFULLY FOLLOWING THE JURISDICTIO NAL HIGH COURT DECISION AS WELL AS THE JUDGMENTS OF THE OTHER COUR TS, WE AGREE WITH THE SUBMISSION OF THE LD. COUNSEL FOR THE ASS ESSEE THAT THE AMENDMENTS TO THE FINANCE ACTS CANNOT BE READ INTO THE DTAAS. 66. LD. DR RELIED UPON THE DECISION OF THE BANGALO RE BENCH OF THE ITAT IN THE CASE OF VODAFONE SOUTH VS. DCIT (SU PRA) WHEREIN IT WAS HELD THAT THERE IS LIABILITY FOR DEDUCTION O F TAX AT SOURCE ON IUC PAYMENTS AS THESE PAYMENTS WERE HELD TO BE P AYMENTS, FOR USE OF PROCESS AND HENCE PAYMENT FOR ROYALTY. WE HAVE PERUSED THIS DECISION OF THE ITAT. THE PROPOSITIO N LAID DOWN THEREIN ARE CONTRARY TO THE PROPOSITIONS LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIT VS. NE W SKIES SATELLITE BV & ORS. (SUPRA) AS WELL AS ASIA SATELLITE TELECOM MUNICATIONS CO. LTD. VS. DIRECTOR OF INCOME TAX (SUPRA) AND IN T HE CASE OF OF THE ASSESSEE ITSELF AS WELL AS IN THE CASE OF DIT V S. NOKIA NETWORKS (SUPRA) AND OTHER JUDGMENTS REFERRED IN OU R DECISION. EVEN THE HONBLE SUPREME COURT HAS HELD THAT SUCH P AYMENTS ARE ONLY FOR SERVICE RENDERED. MOREOVER, THE AGREEMENTS ENTERED INTO BY M/S VODAFONE SOUTH INDIA WITH THE FTOS, ARE NOT BEFORE US. AS PER THE TERMS OF THE AGREEMENT BEFORE US, THE AS SESSEE HAD TO PAY THE INTER CONNECTIVITY USAGE CHARGES TO THE F TOS, FOR SERVICES PROVIDED BY THEM AND NOT FOR THE USE OF OR THE RIGHT TO USE OF THE PROCESS IN THEIR TELECOM NETWORK. IN T HE CASE IN HAND, THE ASSESSEE NEVER USED OR HAD ACQUIRED THE RIGHT T O USE THE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 118 PROCESS OF THE FTOS. THIS DECISION OF THE ITAT, BA NGALORE BENCH AS ALREADY STATED, IS CONTRARY TO THE PROPOSITION L AID DOWN IN JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF THE ASSESSEE ITSELF WHERE IT IS HELD THAT THE PAYMENT W AS FOR SERVICE AND THIS NECESSARILY EXCLUDES THE POSSIBILITY OF T HE PAYMENT BEING HELD AS THAT WHICH IS MADE FOR ROYALTY, AS BO TH ARE CONTRADICTORY POSITION. THIS DECISION HAS BEEN AFF IRMED BY THE HONBLE SUPREME COURT. THUS, WE FOLLOW THE BINDING DECISION OF THE JURISDICTIONAL HIGH COURT IN THE MATTER AND UP HOLD THE FINDING OF THE LD. CIT(A). 67. SIMILARLY, THE RELIANCE PLACED BY THE LD. DR ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VE RIZON COMMUNICATIONS SINGAPORE PTE. LTD. VS. ITO (INTERNA TIONAL TAXATION) REPORTED IN (2014) 361 ITR 0575 IS ALSO M ISPLACED FOR THE FOLLOWING REASONS:- (A) M/S VERIZON COMMUNICATIONS RECEIVED INTERNATI ONAL PRIVATE LEASED CIRCUIT CHARGES FROM CUSTOMERS FOR P ROVIDING POINT TO POINT DEDICATED PRIVATE LINE TO COMMUNICAT E BETWEEN OFFICES THAT ARE GEOGRAPHICALLY DISPERSED THROUGHOUT THE WORLD, THE SAID CASE THE BANDWIDTH C APACITY WAS DEDICATED FOR THE USE OF THE INDIAN CUSTOMER IRRESPECTIVE OF ACTUAL USAGE. IN THE CASE OF THE PRESENT ASSESSEE, NO SUCH POINT TO POINT DEDICATED PRIVATE LINE WAS MADE AVAILABLE BY THE FTOS. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 119 (B) IN THE CASE OF VERIZON COMMUNICATIONS THE CUST OMER HAS DEDICATED ACTIVE INTERNET CONNECTION AT A PARTI CULAR SPEED, SO THAT THE CONTRACTED BANDWIDTH IS PROVIDE D AND THE EQUIPMENT AT THE CUSTOMER END IS ALSO DELIVERED BY VCPL. IN THE CASE OF THE ASSESSEE NO EQUIPMENT IS GIVEN B Y THE FTO TO THE ASSESSEE. THE ASSESSEE MERELY DELIVERS A CALL USING ITS OWN NETWORK, TO THE INTERCONNECTION LOCAT ION OF THE FTOS WHICH PICKS UP THE CALL AND FURTHER TRANSMIT AND TERMINATES AT THE DESIRED DESTINATION BY USING ITS OWN NETWORK. C) IN THE CASE OF VERIZON COMMUNICATION THE CUSTOME R HAS A SIGNIFICANT ECONOMIC INTEREST IN THE VCPLS EQUIPMENT TO THE EXTENT OF THE BANDWIDTH HIRED BY THE CUSTOME R. THE BANDWIDTH CAPACITY IS GIVEN TO THE CUSTOMER ON A D EDICATED BASIS FOR A ENTIRE CONTRACT PERIOD. THE ASSESSEE H AS NO SUCH INTEREST. 68. LD. DR FURTHER RELIED UPON THE DECISION OF ITAT , MUMBAI IN THE CASE OF VIACOM 18 MEDIA (P) LTD. VS. ADIT (INTER NATIONAL TAXATION), (2014) 44 TAXMANN.COM 1 (MUMBAI TRIBUNAL ). THIS DECISION IS ALSO CONTRARY TO THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE. THE ITAT HAS HELD THAT M/S VIACOM 18 MEDIA PVT. LTD. WAS ENGAGED IN THE BROADCASTING OF ITS VARIOUS PROGRAMMES ON TV CHANNELS INCLUDING MARKETING AND ADVERTISING AIRTIME. THE M UMBAI BENCH ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 120 ALSO HELD THAT THE JUDGMENT OF THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF ASIA SATELLITE COMMUNICATIONS CO. LTD. VS. DIT (SUPRA) IS NOT APPLICABLE TO THE FACTS OF VIACO M 18 (SUPRA) CASE. IT IS NOT SO IN THE CASE ON HAND. IN ANY EV ENT THE INTERPRETATION GIVEN BY THE MUMBAI ITAT IS DIVERGE NT FROM THE LAW LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN T HE CASE OF ASIA SATELLITE COMMUNICATION CO. LTD. (SUPRA) AND HENCE WE CANOT FOLLOW THE SAME. 69. THUS, WE UPHOLD THE ORDER OF THE LD. FIRST APPE LLATE AUTHORITY THAT THE PAYMENT MADE FOR FTO FOR INTERCO NNECTION CHARGES DOES NOT FALL WITHIN THE AMBIT OF THE DEFIN ITION OF ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT OR UNDER THE DEFI NITION OF ROYALTY UNDER THE TREATIES. 70. NOW WE TAKE UP THE OTHER ISSUES. ISSUE NO. 3 WHETHER THE ASSESSEE IS LIABLE TO BE TREATED AS ASSESSEE IN DEFAULT U/S. 201 OF THE I.T. ACT. 71. UNDER SECTION 195, ANY PERSON, WHO IS RESPONSIB LE FOR MAKING A PAYMENT TO A PERSON WHO IS A NON-RESIDENT, OF ANY SUM, WHICH IS CHARGEABLE TO TAX UNDER THE ACT, IS REQUIR ED TO DEDUCT THE TAX THEREON AT THE RATES IN FORCE. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF GE TECHNOLOGY CENTRAL (P) LTD. VS. CIT (2010) 327 ITR 456 (SC) HELD THAT THE PAYER BECOMES AN ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 121 ASSESSEE IN DEFAULT, ONLY WHEN HE FAILS IN HIS STAT UTORY OBLIGATIONS UNDER SECTION 195(1) OF THE ACT. IF THE PAYMENT DO ES NOT CONTAIN AN ELEMENT OF INCOME, THE PAYER CANNOT BE MADE LI ABLE TO DEDUCT TAX U/S. 195 OF THE ACT AND HE CANNOT BE DEC LARED TO BE AN ASSESSEE IN DEFAULT. 72. WE HAVE HELD THAT THE PAYMENT IN QUESTION FOR IUC TO FTOS IS NEITHER FTS NOR ROYALTY EITHER UNDER THE AC T OR UNDER THE TREATIES. WE HAVE IN SUBSEQUENT PARAGRAPHS GIVEN REASONS AS TO WHY THE INCOME IN QUESTION ARISING FROM THE PAYMENT CANNOT BE DEEMED TO ACCRUE OR ARISE IN INDIA. THUS THE ASSESS EE CANNOT BE DECLARED AS ASSESSEE IN DEFAULT AS IT HAS NOT FAI LED IN ITS STATUTORY OBLIGATIONS TO DEDUCT TAX AT SOURCE U/S. 195 OF THE ACT. ASSESSEE CANNOT BE HELD THE ASSESSEE IN DEFAULT UND ER SECTION 201 OF THE I.T. ACT. HENCE, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. ISSUE NO. 4 WHETHER THE PAYMENT MADE BY THE ASSESSEE TO THE FTO CAN BE DEEMED TO ACCRUE OR ARISE IN INDIA. 73. THE UNDISPUTED FACT IS THAT NONE OF THE OPERATIONS OF THE FTOS ARE IN INDIA. THE CALL IS DELIVERED OUTSIDE I NDIA AND IS CARRIED AND TERMINATED OUTSIDE INDIA. UNDER THESE C IRCUMSTANCES, THE QUESTION IS WHETHER THE FTO IS LIABLE TO PAY T AX ON THE INCOME DERIVED BY IT, ON THE GROUND THAT, THE INCO ME IS RECEIVED OR IS DEEMED TO HAVE BEEN RECEIVED IN INDIA OR ON THE GROUND ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 122 THAT, THE INCOME ACCRUES OR ARISES IN INDIA OR IS DEEMED TO ACCRUE OR ARISE IN INDIA, DURING THE RELEVANT YEAR . ON FACTS, IT IS CLEAR THAT SECTION 5(2)(A) IS NOT APPLICABLE, AS T HE PAYMENTS WERE NEITHER RECEIVED NOR DEEMED TO HAVE BEEN RECEI VED BY THE FTOS IN INDIA. THE FIRST PART OF SECTION 5(1)(2 )(B) IS ALSO NOT APPLICABLE. HENCE, WE HAVE TO TEST THE RECEIPTS, AS PER THE DEEMING PROVISIONS CONTAINED IN THE I.T. ACT I.E. WHETHER THE RECEIPT IN QUESTION CAN BE DEEMED TO ACCRUE OR ARI SE IN INDIA, U/S. 9, READ WITH SECTION 5(2)(B) OF THE ACT. 74. THE PAYMENT IN QUESTION DOES NOT ACCRUE OR ARI SE TO THE FTOS, THROUGH OR FROM ANY PROPERTY OF THE FTOS IN INDIA OR FROM ANY ASSET OR SOURCE OF INCOME OF THE FTOS I N INDIA OR THROUGH THE TRANSFER OF ANY CAPITAL ASSET OF THE F TOS IN INDIA. THE ENTIRE BUSINESS OPERATIONS ARE CARRIED OUT OUTS IDE INDIA BY THE FTOS. UNDER THESE CIRCUMSTANCES, THE PROPOSIT ION OF LAW LAID DOWN IN THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ASIA SATELLITE COMMUNICATION COMPANY LTD . (SUPRA) APPLIES IN THIS CASE. HENCE, NO INCOME IS DEEMED TO ACCRUE OR ARISE TO THE FTOS IN INDIA. 75. EVEN IF IT IS ASSUMED THAT THE PAYMENTS ACCRUED OR ARISE TO THE FTOS EITHER DIRECTLY OR INDIRECTLY THROUGH OR F ROM ANY BUSINESS CONNECTION IN INDIA SINCE THE BUSINESS OPERATIONS OF THE FTOS ARE CARRIED OUT ENTIRELY OUTSIDE INDIA, NO PART OF SUCH INCOME CAN ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 123 BE SAID TO BE REASONABLY ATTRIBUTABLE TO THE BUSIN ESS CONNECTION OF THE FTOS IF IN INDIA. 76. THE MUMBAI BENCH OF THE ITAT IN THE CASE OF JCT I VS. SIEMENS AKTIENGESELLSCHAFT (2010) 133 TTJ 0563 HAS HELD AS UNDER:- 'EXPLN. L(A) TO S. 9(1) PROVIDES THAT FOR THE PURPO SES OF THIS CLAUSE, IN THE CASE OF A BUSINESS OF WHICH ALL THE OPERATIONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE. IN INDIA SHALL BE ONLY SUCH PART OF THE INCO ME AS IS. REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRI ED OUT IN INDIA. FROM THIS EXPLANATION, IT IS FURTHER AMPL Y CLEAR THAT EVEN IF THERE IS A BUSINESS CONNECTION OF THE NON- RESIDENT IN INDIA, THEN ALSO ONLY THAT PART OF THE INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA WHICH I S RELATABLE TO THE OPERATIONS CARRIED OUT IN INDIA. S O EVEN IF IT IS PRESUMED FOR A MOMENT, THAT THERE WAS ANY BUSINESS CONNECTION OF THE ASSESSEE IN INDIA, STILL IN THE ABSENCE OF ANY OPERATIONS CARRIED ON BY THE ASSESSE E IN INDIA IN THIS REGARD, THERE CANNOT BE ANY QUESTION OF BRINGING THE CASE WITHIN THE AMBIT OF S. 9(1). IT I S PERTINENT TO MENTION THAT THE ASSESSEE CATEGORICALL Y STATED BEFORE THE AO THAT THE LOCAL ACTIVITY WITH REFERENCE TO INSTALLATION WAS CARRIED OUT BY S LTD. IN ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 124 THEIR INDEPENDENT CAPACITY. IT HAS FURTHER BEEN CLA IMED THAT INCOME FROM SUCH SERVICES HAS BEEN DULY OFFERE D FOR TAXATION BY THE INDIAN COMPANY, WHICH HAS NOT BEEN DISPUTED BY THE DEPARTMENTAL REPRESENTATIVE. THEREFORE, NO PART OF THE INCOME AS RELATABLE TO TH E SALE OF EQUIPMENT BY THE ASSESSEE CAN BE SAID TO HA VE DEEMED TO ACCRUE OR ARISE TO THE ASSESSEE IN INDIA WITHIN THE MEANING OF S. 9.' 77. THE HONBLE HIGH COURT IN THE CASE OF CIT VS. G OODYEAR TYRE & RUBBER CO. (1989) 184 ITR 369 (DEL.) HELD THAT EV EN THOUGH THE NON-RESIDENT HAD A BUSINESS CONNECTION IN INDI A, IF NO OPERATIONS WERE CARRIED OUT IN INDIA, THE INCOME CA NNOT BE SUBJECT TO TAX IN INDIA. HENCE, THE PAYMENT CANNOT BE BROUGHT WITHIN THE AMBIT OF SECTION 9(1) R.W.S. 5(2) OF THE ACT. 78. EVEN UNDER THE DTAA, THE PAYMENTS BEING IN THE NATURE OF BUSINESS INCOME OF THE FTOS, ARTICLE 7 OF THE REL EVANT DTAAS GOVERNS THE SAME. THERE IS NO DISPUTE THAT THE FTOS DO NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. UNDER SUCH CIRCUMSTANCES, UNDER ARTICLE 7 OF THE TREATY THE I NCOME CANNOT BE BROUGHT TO TAX IN INDIA. HENCE, THE PAYMENT OF IUC TO THE FTOS CANNOT BE DEEMED TO ACCRUE OR ARISE IN INDIA U NDER ANY OF THE CLAUSE OF SECTION 9(1) READ WITH SECTION 5(2) O F THE ACT. THEREFORE THIS ISSUE IS DECIDED IN FAVOU R OF THE ASSESSEE. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 125 ISSUE NO. 5 WHETHER BENEFICIAL RATE PROVIDED UNDER DTAA OVERRIDE THE PROVISIONS OF SECTION 206AA AND WHETHER SECTION 206AA OF THE ACT IS APPLICABLE RETROSPECTIVELY. 79. THIS ISSUE OF RETROSPECTIVE APPLICABILITY IS COVERE D IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DE CISION OF THE ITAT, PUNE BENCH IN THE CASE OF DDIT (IT-II), PUNE VS. SERUM INSTITUTE OF INDIA LTD. (2015) 56 TAXMANN.COM 1. HEN CE, RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH, WE HOLD THAT SECTION 206AA CANNOT BE APPLIED RETROSPECTIVEL Y. 80. RECENTLY THE BANGALORE B BENCH OF THE TRIBUNA L IN THE CASE OF M/S WIPRO LTD. VS. ITO (INT. TAXATION) IN ITA NO. 1544 TO 1547/BANG./2013 (AY 2011-12) HAS HELD AS UNDER:- WHERE THE TAX HAS BEEN DEDUCTED ON THE STRENGTH OF THE BENEFICIAL PROVISIONS OF SECTION OT MS, THE PROVISIONS OF SECTION 206AA OF THE ACT CANNOT BE INVOKED BY THE ASSESSING OFFICER TO INSIST ON THE T AX DEDUCTION @ 20%, HAVING REGARD TO THE OVERRIDING NATURE OF THE PROVISIONS OF SECTION 90(2) OF THE AC T. SECTION 206AA OF THE ACT DOES NOT OVERRIDE THE PROVISIONS OF SECTION 90(2) OF THE ACT AND IN THE PAYMENTS MADE TO NON-RESIDENTS, THE ASSESSEE CORRECTLY APPLIED THE RATE OF TAX PRESCRIBED UNDER THE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 126 OT MS AND NOT AS PER SECTION 206AA OF THE ACT BECAU SE THE PROVISIONS OF THE DTAAS WAS MORE BENEFICIAL. (II) THE EXPLANATION BELOW SUB-SECTION-1 OF SECTION 200A OF THE IT ACT, WHICH CLARIFIES THAT IN RESPECT OF DEDUCTION OF TAX AT SOURCE WHERE SUCH RATE IS NOT I N ACCORDANCE WITH PROVISIONS OF THIS ACT CAN BE CONSIDERED AS AN INCORRECT CLAIM APPARENT FROM THE STATEMENT. HOWEVER, IN THE CASE IN HAND, IT IS NOT A SIMPLE CASE OF DEDUCTION OF TAX AT SOURCE BY APPLYI NG THE RATE ONLY AS PER THE PROVISIONS OF ACT, WHEN TH E BENEFIT OF DTAA IS AVAILABLE TO THE RECIPIENT OF TH E AMOUNT IN QUESTION. THEREFORE, THE QUESTION OF APPL YING THE RATE OF 20% AS PROVIDED U/S 206AA OF THE IT ACT IS AN ISSUE WHICH REQUIRES A LONG DRAWN REASONING AND FINDING. HENCE, WE ARE OF THE CONSIDERED OPINION, T HAT APPLYING THE RATE OF 20% WITHOUT CONSIDERING THE PROVISIONS OF DTAA AND CONSEQUENT ADJUSTMENT WHILE FRAMING THE INTIMATION U/S 200A IS BEYOND THE SCOPE OF THE SAID PROVISION. THUS, THE AO HAS TRAVELLED BEYO ND THE JURISDICTION OF MAKING THE ADJUSTMENT AS PER TH E PROVISIONS OF SECTION 200A OF THE IT ACT, 1961. 81. RESPECTFULLY, FOLLOWING THE COORDINATE BENCH DE CISION WE HOLD THAT THE BENEFICIAL RATE PROVIDED IN THE DTAA OVERRIDE THE ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 127 PROVISIONS OF SECTION 206AA OF THE ACT. THUS THIS ISSUE IS RESOLVED IN FAVOUR OF THE ASSESSEE. ISSUE NO. 6 WHETHER THE LD. CIT(A) ACTED IN VIOLATION OF THE PROV ISIONS OF RULE 46A IN ADMITTING THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE 82. AFTER HEARING RIVAL SUBMISSIONS, WE FIND THAT T HE ASSESSEE WAS NOT ALLOWED SUFFICIENT TIME BY THE AO TO FILE THE REQUISITE DETAILS. IT IS NOT IN DISPUTE THAT THE DETAILS AND DOCUMENTS PRODUCED ARE VOLUMINOUS. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE TIME GIVEN BY THE AO TO FURNISH ALL THE INFORMATION AND DETAILS PERTAINING TO MANY PAST YEA RS, AND THAT THE ASSESSEE REQUIRED TIME TO COLLECT THE SAME FRO M THIRD PARTIES WHO WERE LOCATED OVERSEAS AND THAT SUCH AN EXERCISE WAS TIME CONSUMING. THE ASSESSEE HAS REQUESTED THE AO SPEC IFICALLY ON 5.1.2012 TO ALLOW MORE TIME TO COMPILE THE DETAILS. THE AO WITHOUT GIVING ANY FURTHER OPPORTUNITY, WITHIN 7 DA YS OF SUCH A REQUEST PASSED THE IMPUGNED ORDER. UNDER THE CIRC UMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ADMITTING ADDITIONAL EVIDENCE UNDER RULE 46A AS THESE GO INTO THE ROOT OF THE MATTER. THE FIRST APPELLATE AUTHORITY ALSO REC ORDED THAT THESE ADDITIONAL EVIDENCE ARE CRUCIAL FOR DECIDING THE PR IMARY ISSUES THAT WERE RAISED IN THE APPEAL. ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 128 83. THE LD. DR IN SUPPORT OF HIS CONTENTION THAT THE LD. CIT(A) SHOULD NOT HAVE ADMITTED ADDITIONAL EVIDENCE RELIED UPON ON THE FOLLOWING DECISIONS. - ORDER OF THE ITAT, D BENCH, DELHI IN THE CASE O F ITO VS. LIFE LINE BIOTECH LTD. REPORTED (2014) 52 TAXMANN.COM 27 (DELHI TRIB.) - ORDER OF THE ITAT, H BENCH, DELHI IN THE CASE O F JCIT VS. VENUS FINANCIAL SERVICES LTD. REPORTED IN (201 2) 21 TAXMANN.COM 436 (DELHI) 84. THE ASSESSEE ALSO RELIED UPON THE DECISION OF T HE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VI RGIN SECURITIES & CREDITS (P) LTD. 332 ITR 396. 85. WE HAVE PERUSED THESE DECISIONS. THESE ARE DIST INGUISHED ON FACTS. WHEN THE LD. DR HAS NOT DISPUTED THE FIN DING OF THE LD. CIT(A) THAT SUFFICIENT TIME WAS NOT GRANTED TO T HE ASSESSEE TO FILE THE REQUISITE DETAILS. HE HAS ALSO NOT DISPUTE D THE FINDING THAT THESE DOCUMENTS ARE CRUCIAL FOR ADJUDICATING THIS A SPECT. THESE WERE NOT THE FACTS IN THESE CASES CITED BY THE LD. D R. 86. IN THE DECISION OF THE HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. VIRGIN SECURITIES & CREDITS (P) LTD. (SUP RA) REPORTED IN 332 ITR 396 AT PARA 8 HELD AS FOLLOWS:- ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 129 8 THE AFORESAID CONTENTION APPEARS TO BE DEVOID O F ANY MERIT. IT IS A MATTER OF RECORD THAT BEFORE ADM ITTING THE ADDITIONAL EVIDENCE; THE COMMISSION OF INCOME-T AX (APPEALS) HAD OBTAINED A REMAND REPORT FROM THE ASSESSING OFFICER. WHILE SUBMITTING HIS REPORT, THE ASSESSING OFFICER HAD NOT OBJECT, TO THE ADMISSION OF THE ADDITIONAL EVIDENCE, BUT HAD MERELY REITERATED CONTENTIONS IN THE ASSESSMENT ORDERS. IT IS ONLY AF TER CONSIDERING REMAND REPORT, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAD ADMITTED THE ADDITIONAL EVIDENCE. IT CANNOT BE DISPUTED THAT THIS ADDITIONA L EVIDENCE WAS CRUCIAL TO THE DISPOSAL OF THE APPEAL AND HAD A DIRECT BEARING 0N THE QUANTUM OF CLAIM MADE B Y THE ASSESSEE. THE PLEA OF THE ASSES WAS TAKEN BEFOR E THE ASSESSING OFFICER REMAINS THE SAME. THE ASSESSI NG OFFICER HAD TAKEN ADVERSE NOTE BECAUSE OF NON- PRODUCTION OF CERTAIN DOCUMENTS TO SUPPORT THE PLEA AND IT WAS IN THESE CIRCUMSTANCES, THE ADDITIONAL EVIDENCE WAS SUBMITTED BEFORE THE COMMISSIONER OF INCOME- (APPEALS). IT CANNOT BE SAID NOR IS IT THE CASE OF THE REVENUE THAT ADDITIONAL EVIDENCE IS NOT PERMISSIBLE AT ALL BEFORE THE FIRST APPELLATE AUTHO RITY. ON CONTRARY, RULE, 46A OF THE RULES PERMITS THE COMMISSIONER OF INCOME-(APPEALS) TO ADMIT ADDITIONA L EVIDENCE IF HE FINDS THAT THE SAME IS CRUCIAL FOR D ISPOSAL ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 130 OF THE APPEAL. IN THE FACTS OF THIS CASE, THEREFORE , WE ARE OF THE OPINION THAT ON THIS ASPECT, NO SUBSTANT IAL QUESTION OF LAW ARISES. 87. THE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. TEXT HUNDRED INDIA (P) LTD. AT PARA 13 HELD AS FOLLOWS: 13. T H E A FOR ESA ID CA S E L AW CL EA RL Y LA YS DO W N A N EAT PRIN C IPL E OF LA W THAT T HE DI SC R E TION LI ES W I T H TH E T R IBUN A L TO A DMIT A DDITIONAL EV IDENCE IN TH E INTERES T O F JUST ICE ON CE TH E T RIBUN A L A F FIRMS TH E OPINION TH A T DOING S O WOULD BE N ECES SARY FOR P R OP E R ADJUDI CA TION OF TH E MATTER . THIS C AN B E DON E EVEN WHEN A PPLI CA TION I S F IL E D BY ON E OF T H E P A R T I E S TO TH E A PP EA L AND IT N EE D NOT T O B E A SUO MO T U A C T I ON OF TH E T RIBUN A L. TH E A FOR E SAID RUL E IS M A D E E N A BLIN G THE T RIBUN A L T O A DMIT TH E A DDI TI ON A L EV ID E N CE IN I TS DI SC R E TION IF THE T RIBUN A L HOLD S T H E V I EW T HA T S U C H A DDI TIO N A L EV ID E N CE W OULD B E N ECES SAR Y TO D O SUB STANT I A L JU S TI CE IN T H E M ATTER . IT IS WE LL -SETT L E D T H A T T H E ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 131 PR OCE DUR E I S H A NDM A ID O F JU ST I CE AN D JU ST I CE S H O ULD N OT B E A LL OWE D T O B E C HO KE D ONLY B ECA U SE OF S OM E IN A D VE RT E N T E RROR OR O MI SS ION O N TH E PART O F ON E OF TH E P A RTI ES TO L EA D EV ID E NC E A T TH E APPROPRI A T E STA G E. ON CE IT I S FOUND TH A T TH E P A RT Y INT E NDIN G T O L E AD E VID E NC E B E FOR E TH E TRIBUN A L FOR THE FIR S T TIM E W AS PR E V E NT E D BY S U FF ICI E NT CA US E TO L EA D S U C H AN EV ID E NCE AND T HAT TH I S EV ID E N CE WOULD HA VE M A T E RI A L B EA RIN G ON T H E I SS U E W HI C H N EE D S TO B E D EC ID E D B Y TH E TR IBUN A L AN D E NDS O F JU ST I CE D E M A ND A DMIS S ION OF S U CH EV ID E N CE . TH E T RIBUN A L CA N P ASS A N O RD ER TO T H AT EFFECT. 88. APPLYING THE PROPOSITION LAID DOWN IN THE DECIS IONS TO THE FACTS OF THE CASE, WE UPHOLD THE ORDER OF THE LD. CI T(A). ISSUE NO. 7 89. ON THE ISSUE WHETHER THE PAYMENT IS REVENUE SHARING OR NOT. THOUGH DETAILED ARGUMENTS HAVE BEEN ITA NOS. 3593 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 TO 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] 132 ADVANCED BY BOTH THE PARTIES ON THIS ISSUE, WE DO NOT ADJUDICATE THE SAME AS IN OUR OPINION THIS REQUIRES FURTHER DE TAILS AND DOCUMENTS WHICH ARE NOT ON RECORD. HENCE WE LEAVE T HIS QUESTION OPEN. 90. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED AND ALL THE REVENUES APPEALS ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 2016. SD/- SD/- ( H.S. SIDHU ) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH MARCH, 2016 COPY FORWARDED TO: - 1. APPELLANT : 2. RESPONDENT : 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR