DCIT (International Taxation), New Delhi V. M/s. Thaicom Public Co. Ltd., New Delhi

ITA 4523/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1365 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 24-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Keywords: Double taxation relief
• Section: 143(3); 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI , ! ' $%&'()*+,-+! BEFORE MS. SUSHMA CHOWLA, V.P & SHRI PRASHANT MAHAR ISHI, AM . / ITA NO.4523/DEL/2016 / ) ) / ASSESSMENT YEAR 2012-13 THE DCIT (INTERNATIONAL TAXATION), CIRCLE-3(1)(1), ROOM NO.419, E-2, DR.S.P.MUKHERJEE CIVIC CENTRE, J.L.N.MARG, NEW DELHI. .......... 01 /APPELLANT VS THAICOM PUBLIC CO. LTD., (EARLIER KNOWN AS SHIN SATELLITE PUBLIC CO.LTD.), C/O-MOHINDER PURI & CO., CAS, 1A, VANDANA, 11, TOLSTOY MARG, NEW DELHI-110001. PAN-AAGCS4481E . $201 / RESPONDENT 0134+ / APPELLANT BY : SH. SATPAL GULATI, CIT DR $20134+ / RESPONDENT BY : NONE 3&, / DATE OF HEARING : 18.03.2020 56 3&, / DATE OF PRONOUNCEMENT: 14.05.2020 +% / ORDER PER SUSHMA CHOWLA,VP THE PRESENT APPEAL FILED BY ASSESSEE IS AGAINST OR DER OF CIT(A)-43, NEW DELHI DATED 21.06.2016 RELATING TO ASSESSMENT YEAR 2012-13 AGAINST ORDER PASSED UNDER SECTION 144C(1) R.W.S 143(3) OF THE I NCOME-TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.4523/DEL/2016 ASSESSMENT YEAR 2012-13 2 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE TRANSPONDER CH ARGES RECEIVED BY THE ASSESSEE ARE NOT TAXABLE AS ROYALTY IGNORING THE FA CT THAT THE DECISION OF THE DELHI HIGH COURT IN ' ASSESSEES OWN CASE HAS N OT BEEN ACCEPTED BY THE DEPARTMENT AND AN SLP HAS BEEN FILED AND THUS T HE ISSUE HAS NOT ATTAINED ITS FINALITY. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT THE PAYMENT FOR PR OVISION OF TRANSPONDER CAPACITY IS NOT IN THE NATURE OF ROYALTY UNDER THE PROVISIONS OF THE I.T. ACT AS WELL AS UNDER THE CORRESPONDING PROVISIONS OF TH E DTAA BETWEEN INDIA AND THAILAND. (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE GIVE N PAYMENTS FALL WITHIN THE PURVIEW OF EQUIPMENT ROYALTY AS WELL AS PROCESS ROYALTY UNDER SECTION 9(1 )(VI) OF THE ACT. (IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT BY WAY OF INSERTION OF EXPLANATION 6 TO SECTION 9(1 )(VI) OF THE IT ACT, T HE MEANING OF THE TERM PROCESS HAS ONLY BEEN CLARIFIED WITHOUT AMENDING THE DEFINITION OF ROYALTY IN ANY MANNER. (V) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE EXPRESSION PROCESS IS NOT DEFINED IN THE INDIA - THAILAND DTAA, AND, T HEREFORE, ARTICLE 3(2) OF INDIA - THAILAND DTAA PERMITS THE ADOPTION OF THE T ERM PROCESS AS DEFINED UNDER THE DOMESTIC LAW. (VI) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN IGNORING THE FACT THAT THERE IS NOTHING IN THE INDIA- THAILAND DTAA THAT RESTRICTS THE SCOPE OF THE TERM PROCESS. 3. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHA LF OF THE ASSESSEE. HOWEVER, WE FIND THAT THE ISSUE STANDS COVERED IN F AVOUR OF THE ASSESSEE. HENCE, WE PROCEED TO DECIDE THE PRESENT APPEAL AFTE R HEARING THE LD.DR FOR THE REVENUE. ITA NO.4523/DEL/2016 ASSESSMENT YEAR 2012-13 3 4. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE H AD CLAIMED THAT THE INCOME EARNED BY IT FROM PROVIDING TRANSPONDER SERVICES TO CUSTOMERS IN INDIA IS NOT TAXABLE IN ITS HANDS. ACCORDING TO THE ASSESSEE, T HE INCOME EARNED BY IT FROM PROVIDING TRANSPONDER SERVICES IS NEITHER TAXABLE A S PER PROVISIONS OF THE ACT NOR AS PER INDIA-THAILAND DTAA. THE ASSESSING OFFI CER HELD THAT THE ASSESSEE TO BE IN DEFAULT AND HELD THAT THE TRANSPONDER CHAR GES RECEIVED BY THE ASSESSEE WERE TAXABLE AS ROYALTY IN THE HANDS OF THE ASSESSE E UNDER THE PROVISION OF SECTION 9(1)(VI) OF THE ACT AS WELL AS CORRESPONDIN G PROVISIONS OF DTAA BETWEEN INDIA AND THAILAND. THE CIT(A) VIDE PARA 4.4 AT PA GE 6 ONWARDS NOTES THAT THE ISSUE WAS ARISING IN THE EARLIER YEAR AND THE HONB LE HIGH COURT IN ASSESSEES OWN CASE HAD DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE. THE CITATION BEING DIT VS M/S. SHIN SATELLITE PUBLIC CO.LTD. 382 ITR 1 14, ORDER DATED 08.02.2016. THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE. THE REVE NUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) BEFORE US. 5. WE FIND THAT THE SIMILAR ISSUE OF TRANSPONDER CH ARGES BEING RECEIVED BY THE ASSESSEE, NON-RESIDENT WHILE PROVIDING DIGITAL BROADCAST SERVICES THROUGH THE TRANSPONDER TO THE CUSTOMERS, BOTH RESIDENTS I N INDIA AS WELL AS NON- RESIDENTS, WAS HELD TO BE NOT ROYALTY IN THE HANDS OF THE ASSESSEE, BOTH UNDER THE PROVISIONS AS WELL AS DTAA BETWEEN INDIA AND TH AILAND. THE ASSESSEE WAS EARLIER KNOWN AS M/S. SHIN SATELLITE PUBLIC CO.LTD. 6. SIMILAR ISSUE AROSE BEFORE IN THE HANDS OF THE ASSESSEE IN EARLIER YEARS AND THE MATTER TRAVELLED TILL HONBLE HIGH COURT. THE HONBLE HIGH COURT IN ITA NO.4523/DEL/2016 ASSESSMENT YEAR 2012-13 4 THE DECISION REPORTED DIT VS M/S. SHIN SATELLITE PU BLIC CO.LTD. (SUPRA) VIDE JUDGMENT DATED 08.02.2016 HAD RAISED THE FOLLOWING QUESTIONS BEFORE IT:- 1. WHETHER THE RECEIPTS OF THE ASSESSEES EARNED FR OM PROVIDING DATA TRANSMISSION SERVICES, FALL WITHIN THE TERM ROYALTY UNDER THE INCOME TAX ACT, 1961, AND (2) IF THE ANSWER TO THE FIRST IS IN THE AFFIRMATIVE, WHETHER THE ASSESSEES WOULD BE ELIGIBLE FOR THE BENEFIT UND ER THE RELEVANT DOUBT TAX AVOIDANCE AGREEMENTS. 7. THEREAFTER, THE MATTER WAS CONSIDERED AT LENGTH BY THE HONBLE HIGH COURT AND IT WAS CONCLUDED AS UNDER:- 59. ON A FINAL NOTE, INDIAS CHANGE IN POSITION TO THE OECD COMMENTARY CANNOT BE A FACT THAT INFLUENCES THE INT ERPRETATION OF THE WORDS DEFINING ROYALTY AS THEY STAND TODAY. THE ON LY MANNER IN WHICH SUCH CHANGE IN POSITION CAN BE RELEVANT IS IF SUCH CHANGE IS INCORPORATED INTO THE AGREEMENT ITSELF AND NOT OTHERWISE. A CHAN GE IN EXECUTIVE POSITION CANNOT BRING ABOUT A UNILATERAL LEGISLATIVE AMENDME NT INTO A TREATY CONCLUDED BETWEEN TWO SOVEREIGN STATES. IT IS FALLA CIOUS TO ASSUME THAT ANY CHANGE MADE TO DOMESTIC LAW TO RECTIFY A SITUAT ION OF MISTAKEN INTERPRETATION CAN SPONTANEOUSLY FURTHER THEIR CASE IN AN INTERNATIONAL TREATY. THEREFORE, MERE AMENDMENT TO SECTION 9(L)(V I) CANNOT RESULT IN A CHANGE. IT IS IMPERATIVE THAT SUCH AMENDMENT IS BRO UGHT ABOUT IN THE AGREEMENT AS WELL. ANY ATTEMPT SHORT OF THIS, EVEN IF IT IS EVIDENCE OF THE STATES DISCOMFORT- AT LETTING DATA BROADCAST REVEN UES SLIP BY, WILL BE INSUFFICIENT TO PERSUADE THIS COURT TO HOLD THAT SU CH AMENDMENTS ARE APPLICABLE TO THE DTAAS. 60. CONSEQUENTLY, SINCE WE HAVE HELD, THAT THE FIN ANCE ACT, 2012 WILL NOT AFFECT ARTICLE 12 OF THE DTAAS, IT WOULD FOLLOW THAT THE FIRST DETERMINATIVE INTERPRETATION GIVEN TO THE WORD. 'RO YALTY IN ASIA SATELLITES9, WHEN THE DEFINITIONS WERE IN FACT PARI MATERIA (IN THE ABSENCE OF ANY CONTOURING EXPLANATIONS), WILL CONTINUE TO HOLD THE FIELD FOR THE PURPOSE OF ASSESSMENT YEARS PRECEDING THE FINANCE ACT, 2012 AN D IN ALL CASES WHICH INVOLVE A DOUBLE TAX AVOIDANCE AGREEMENT, UNLESS TH E SAID. DTAAS ARE AMENDED, JOINTLY BY BOTH PARTIES TO INCORPORATE INC OME FROM DATA, TRANSMISSION SERVICES AS PARTAKING OF THE NATURE OF ROYALTY, OR AMEND THE DEFINITION IN A MANNER SO THAT SUCH INCOME AUTOMATI CALLY BECOMES ROYALTY. IT IS REITERATED, THAT THE COURT HAS NOT RETURNED, A FINDING ON WHETHER THE AMENDMENT IS IN FACT RETROSPECTIVE AND APPLICABLE T O CASES PRECEDING THE FINANCE ACT OF 2012 WHERE THERE EXISTS NO DOUBLE TA X AVOIDANCE AGREEMENT. ITA NO.4523/DEL/2016 ASSESSMENT YEAR 2012-13 5 8. APPLYING THE SAID PROPOSITION TO THE FACTS AND C IRCUMSTANCES OF THE CASE, WE HOLD THAT THE INCOME RECEIVED BY THE ASSESSEE NO N-RESIDENT ON ACCOUNT OF TRANSPONDER CHARGES FROM THE CUSTOMERS IN INDIA AMO UNTING TO RS.4.18 CRORES (APPROX.) WAS NOT TAXABLE AS ROYALTY IN ITS HANDS. THE SAME IS ALSO NOT TAXABLE UNDER THE PROVISIONS OF DTAA BETWEEN INDIA AND THAI LAND. CONSEQUENTLY, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISS ED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH MAY, 2020. SD/- SD/- (PRASHANT MAHARISHI) (SUSHMA CHOWLA) +, - / ACCOUNTANT MEMBER ! / VICE PRESIDENT / DATED : 14 TH MAY, 2020 * AMIT KUMAR * +%3$/&7(8+(&9 COPY OF THE ORDER IS FORWARDED TO : 1. 01 / THE APPELLANT 2. $201 / THE RESPONDENT 3. :& ; < / THE CIT(A) 4. = :& / THE PR. CIT 5. 6. / DR, ITAT, DELHI >)?9 GUARD FILE. +% / BY ORDER , 2(&$/& // TRUE COPY // ' @A-B , * ASSISTANT REGISTRAR, ITAT, DELHI