ADIT, New Delhi V. M/s. Intelsat Corporation, Gurgaon

ITA 4662/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58478 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-01-2012
• Assessment Year: misc
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND RAJAN
• Keywords: Double taxation relief
• Section: 11A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.4662/DEL/2011 ASSESSMENT YEAR : 2006-07 ADIT, CIRCLE 1 (2), INTERNATIONAL TAXATION, ROOM NO.410, DRUM SHAPE BUILDING, IP ESTATE, NEW DELHI. VS. INTELSAT CORPORATION, C/O PRICEWATER HOUSE COOPERS, BUILDING NO.8, 7 TH & 8 TH FLOOR, TOWER-B, DLF CYBER CITY, GURGAON. PAN : AADCP6533D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ARVIND RAJAN, CA REVENUE BY : SHRI ASHWANI KUMAR MAHAJAN, CIT DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 29 TH JULY, 2011 FOR ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, TH E LD. CIT (A) HAS ERRED IN HOLDING THAT THE PAYMENTS RECEIVED BY THE ASSESSEE COMPANY ARE NOT IN THE NATURE OF ROYALTY UNDER ARTICLE 12 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN I NDIA AND USA. 2. THE APPELLANT CRAVES TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. 2. THE ASSESSEE, EARLIER KNOWN AS PANAMSAT, IS A COMPANY INCORPORATED UNDER THE LAWS OF USA HAVING ITS REGISTER ED OFFICE AT 3400 ITA NO.4662/DEL/2011 2 INTERNATIONAL DRIVE NW, WASHINGTON DC, USA AND IS A T AX RESIDENT OF USA. DURING THE YEAR THE ASSESSEE HAS DERIVED INCOME FR OM PROVIDING TELECOMMUNICATION SERVICES TO VARIOUS CUSTOMERS IN INDIA AS WELL AS OUTSIDE INDIA. THE ASSESSEE WAS THE OWNER AND OPERATOR O F GLOBAL NETWORK OF TELECOMMUNICATION SATELLITES LOCATED IN O UTER SPACE AND WAS ENGAGED IN ACTIVE BUSINESS OF TRANSMITTING TELECOMMU NICATION SIGNALS TO/FROM ITS CUSTOMERS, VIZ., T.V. CHANNELS, NICNE T AND INTERNET SERVICE PROVIDERS (ISPS) FOR VARIOUS PURPOSES INCLUDING TELECOMMUNICATION, BROADCASTING AND TRANSFER OF IMAGE /VOICE DATA, ETC. THE ASSESSING OFFICER HAS TREATED THE RECEIPTS OF T HE ASSESSEE COMPANY AS ROYALTY AS PER THE PROVISIONS OF SECTION 9(1 )(VI), 9(1) (VII) OF THE ACT AND APPLIED ARTICLE 12(7) (B) OF THE TAX TREATY AND HELD THAT SUCH PAYMENTS ARE TAXABLE. HE COMPUTED THE RECEIPTS O F THE ASSESSEE FROM INDIAN CUSTOMERS AT ` 34,98,16,199/- AND THE SAID AMOUNT HAS BEEN TAXED AT 10% AND THE TAX HAS BEEN COMPUTED AT ` 3,49,81,619/-. THE REVENUE FROM NON-INDIAN CUSTOMERS HAS BEEN COMPUTE D AT ` 59,50,21,633/- WHICH HAS BEEN SEGREGATED INTO THREE O PERATIONS: (I) RECEIVED FROM THREE CHANNELS OF SONY PICTURES ENTERTAINMENT INC. (SET MAX) - ` 7,66,24,662/-. 90 % OF SUCH REVENUE HAS BEEN ATTRIBUTED TO INDIA AND THE AMO UNT HAS BEEN COMPUTED AT ` 6,89,62,195/- AND TAX HAS BEEN CO MPUTED AT ` 68,96,219/-. (II) SIMILARLY, IN RESPECT OF OTHER ADDITIONS, NAMELY , POGO, NICKELODEON INDIA, MTV INDIA, DISCOVERY THE REVENUE HAS BEEN COMPUTED AT ` 14,67,44,570/- OUT OF WHICH 50% HAS BE EN ATTRIBUTED TO INDIA AND THE AMOUNT OF REVENUE IS COM PUTED AT ` 7,28,72,285/- ON WHICH TAX HAS BEEN LEVIED AT ` 72,8 7,228/-. ITA NO.4662/DEL/2011 3 (III) THE REST OF THE REVENUE IS COMPUTED AT ` 37,26,52,401/- FROM WHERE 5% HAS BEEN ATTRIBUTED AND REVENUE IS COMPUTED AT ` 1,86,32,620/- ON WHICH TAX HAS BEEN COMPUTED AT ` 18,63,262/-. 3. THE TAX LIABILITY OF THE ASSESSEE HAS BEEN SHOWN IN TH E TABLE BY THE ASSESSING OFFICER WHICH IS REPRODUCED:- PARTICULARS TOTAL REVENUE ATTRIBUTED REVENUE TAX INDIAN CUSTOMERS 349,816,199 349,816,199 34,981,619 GLOBAL CUSTOMERS (ATTRIBUTION @ 90%) 76,624,662 68,962,195 6,896,219 GLOBAL CUSTOMERS (ATTRIBUTION @ 50%) 145,744,570 72,872,285 7,287,228 GLOBAL CUSTOMERS (ATTRIBUTION @ 5%) 372,652,401 18,632,620 1,863,262 TOTAL INCOME 510,283,300 51,028,330 4. THE ASSESSMENT SO MADE WAS CHALLENGED BEFORE THE CIT ( A) WHO HAS DECIDED THE APPEAL FILED BY THE ASSESSEE BY THE IMPU GNED ORDER DATED 29 TH JULY, 2011. LEARNED CIT (A) HAS GOT CONFIRMATION F ROM THE ASSESSING OFFICER OF THE FACT THAT WHETHER FACTS FOR THE PRESENT YEAR ARE SIMILAR TO THE FACTS FOR ASSESSMENT YEAR 2006-07 AND ASSESSIN G OFFICER VIDE LETTER DATED 11 TH JUNE, 2011 ADDRESSED TO CIT (A) HAS CONFIRMED THE FACTS OF THE PRESENT YEAR ARE SIMILAR TO THE FACTS FOR ASSESSMENT YEAR 2007-08 FOR WHICH THE ITAT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE BASIS OF THE DECISION OF HONBLE DELHI HIG H COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION COMPANY LTD. ON THE BASIS OF ORDER OF ITAT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2007- 08 AND THE DECISION OF HONBLE DELHI HIGH COURT, LEA RNED CIT (A) HAS HELD THAT NO INCOME OF THE ASSESSEE IS TAXABLE IN INDIA IN RESPECT OF AMOUNT RECEIVED BY THE ASSESSEE FOR PROVIDING SATELLITE TRANSMISSION ITA NO.4662/DEL/2011 4 SERVICES TO ITS CUSTOMERS. IT IS IN THIS MANNER, THE AFOR EMENTIONED ISSUE RAISED BY THE REVENUE HAS BEEN DECIDED BY LEARNED CIT (A). 5. AT THE OUTSET, IT WAS SUBMITTED BY THE LEARNED AR O F THE ASSESSEE THAT ITAT IN THE CASE OF THE ASSESSEE ITSELF FOR ASSESSMENT Y EAR 2007- 08 HAS DECIDED THE APPEAL OF THE ASSESSEE IN FAVOUR OF T HE ASSESSEE VIDE ORDER DATED 4 TH MARCH, 2011 IN ITA NO.5443/DEL/2010. COPY OF SUCH ORDER IS PLACED AT PAGE 1-10 OF THE PAPER BOOK A ND THE FINAL CONCLUSION OF THE TRIBUNAL AS CONTAINED IN PARA 4 REA DS AS UNDER:- 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS MADE BEFORE US. WE HAVE ALREADY MENTIONED THAT THERE IS A DISTINGUISHABLE FEATURE NAMELY THAT THE ASSESSEE HAS RECEIVED PAYMENTS FROM PERSONS RESIDENTS IN INDIA. HOW EVER, THE RECEIPTS HAVE BEEN TAXED U/S 9(1)(VII), EXPLANATION 2 , CLAUSE (VI) THEREUNDER. THE DECISION IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS COMPANY LIMITED IS TO THE CONTRARY AN D IN FAVOUR OF THE ASSESSEE. IT IS ALSO A MATTER OF FACT ON RECORD THAT THE ASSESSEE IS A TAX RESIDENT OF USA AND, THERE FORE, THE PROVISIONS CONTAINED IN THE DTAA ARE APPLICABLE. HOWEVER, WE ARE OF THE VIEW THAT WE NEED NOT GO INTO THE PROVI SIONS OF THE DTAA BECAUSE OF THE PROVISION CONTAINED IN SECTIO N 90(2) OF THE ACT. THIS PROVISION PROVIDES THAT WHERE THE CEN TRAL GOVERNMENT HAS ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSIDE INDIA UNDER SUB-SEC TION (1) FOR GRANTING RELIEF OF TAX, OR AS THE CASE MA Y BE, AVOIDANCE OF DOUBLE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, THE PROVISIONS OF THIS ACT SHAL L APPLIED TO THE EXTENT THEY ARE MORE BENEFICIAL TO THAT ASSESSEE . THE ASSESSEE IS FOUND TO HAVE INCURRED NO LIABILITY TO TAX UNDER THE ACT. THEREFORE, EVEN IF THE PROVISIONS OF THE TRE ATY GO AGAINST THE ASSESSEE, IT HAS TO BE GRANTED THE BE NEFIT OF THE ACT UNDER WHICH NO LIABILITY TO TAX CAN BE FASTEN ED ON THE ASSESSEE. ACCORDINGLY, GROUND NOS. 1 TO 5 ARE ALLOW ED. 6. IT WAS FURTHER SUBMITTED THAT THE ORDER OF THE TRI BUNAL HAS BEEN CONFIRMED BY HONBLE DELHI HIGH COURT IN DEPARTMENT AL APPEAL VIDE ORDER DATED 19 TH AUGUST, 2011 IN ITA NO.977/2011 AND COPY OF SUCH ORDER IS PLACED AT PAGE 11A OF THE PAPER BOOK IN WHI CH THEIR LORDSHIPS HAVE DECIDED THE ISSUE AS UNDER:- ITA NO.4662/DEL/2011 5 IN THE HIGH COURT OF DELHI AT NEW DELHI 19.08.2011 PRESENT : MR. RUCHESH SINHA, ADVOCATE FOR MR. N.P. SA HNI, ADVOCATE FOR THE REVENUE. ITA 977/2011 LEARNED COUNSEL FOR THE REVENUE COULD NOT DISPUTE THE P OSITION THAT ISSUES RAISED IN THIS APPEAL ARE DIRECTLY COVERED BY THE JUDGMENT OF THIS COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS LTD. VS. COMMISSIONER OF INCOME TA X (ITA 131/2003 DECIDED ON 31.01.2011). IN THAT JUDGMENT, A CATEGORICAL VIEW IS TAKEN THAT THE INCOME RECEIVED FROM THE ACTIVITIES UNDERTAKEN BY THE RESPONDENT/ASSESSEE WOULD N OT BE EXIGIBLE TO TAX IN INDIA. FOLLOWING THAT JUDGMENT, THIS APPEAL IS DISMISSED. 7. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDER OF THE ASSESSING OFFICER. 8. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ISSUE IS COVERED BY THE AFOREMENTIONED DECISION OF THE TRIBUNAL WHICH HAS BEEN CONFIRMED BY THE HONBLE HIGH COURT VIDE ORDER DATE D 19 TH AUGUST, 2011. THE RELEVANT PORTIONS OF BOTH THESE ORDERS HAVE BEEN REPRODUCED IN THE ABOVE PART OF THIS ORDER. THE FACT S OF THE PRESENT CASE HAVE BEEN FOUND TO BE IDENTICAL WITH THE FACTS O F THE CASE FOR ASSESSMENT YEAR 2007-08. THEREFORE, WE FIND NO MERIT I N THE DEPARTMENTAL APPEAL AND THE SAME IS DISMISSED. 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.01.20 12. SD/- SD/- [SHAMIM YAHYA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED,16.01.2012. ITA NO.4662/DEL/2011 6 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES