Intelsat Global Sales & Marketing Limited, CHENNAI V. Addl. DIT, CHENNAI

ITA 470/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8888 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Keywords: Business income; Transfer pricing; Residential status; Double taxation relief; Permanent establishment
• Section: 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NOS. 1070 TO 1074 & 1621/MDS/2010 1562/MDS/2011, 2246/MDS/2012, 470/MDS/2014, 432/MDS /2015 & 516/MDS/2016 / ASSESSMENT YEARS : 2002-03 TO 2012-13 M /S INTELSAT GLOBAL SALES AND MARKETING LTD C/O S.R BATLIBOI & CO. TPL HOUSE, SECOND FLOOR NO.3, CENOTAPH ROAD TEYNAMPET,CHENNAI 600 018 VS. THE INCOME TAX OFFICER /ASST. DIRECTOR OF INCOME TAX/ADDL. DIRECTOR OF INCOME TAX/DY. COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION I/I(1) CHENNAI [PAN AABCI 1539 B ] ( &' / APPELLANT) ( ()&' /RESPONDENT) ./ I.T.A.NOS. 872, 873 & 1080/MDS/2010 / ASSESSMENT YEARS : 2002-03, 2003-04 & 2005-06 THE INCOME TAX OFFICER INTERNATIONAL TAXATION I CHENNAI VS. M/ S INTELSAT GLOBAL SALES AND MARKETING LTD C/O S.R BATLIBOI & CO. TPL HOUSE, SECOND FLOOR NO.3, CENOTAPH ROAD TEYNAMPET, CHENNAI 600 018 ( &' / APPELLANT) ( ()&' /RESPONDENT) ASSESSEE BY : SHRI PAWAN KUMAR, CA DEPARTMENT BY : DR. M ILIND MADHUKAR BHUSA R I, CIT / DATE OF HEARING : 26 - 0 5 - 2016 / DATE OF PRONOUNCEMENT : 01 - 07 - 2016 ITA NO.1070/10 ETC. :- 2 -: / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER ALL THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)/DISPUTE RESOLUTION PANEL, CHENNAI, FOR AS SESSMENT YEARS 2002-03 TO 2012-13. SINCE COMMON ISSUE ARISES FOR C ONSIDERATION IN ALL THE APPEALS, WE HEARD THEM TOGETHER AND DISPOSING O F THE SAME BY THIS COMMON ORDER. THE REVENUE HAS ALSO FILED APPE ALS FOR ASSESSMENT YEARS 2002-03, 2003-04 AND 2005-06. 2. LET US FIRST TAKE ASSESSEES APPEALS. SHRI PAWAN KUMAR, LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE-COMPANY WAS INCORPORATED IN UK. THE ASSESSEE-COMPANY PROVID ES TRANSPONDER CAPACITY INSTALLED ON SATELLITE. ACCORDING TO THE LD. REPRESENTATIVE, TELECASTING COMPANIES/TELECOM OPERATORS UPLINK THEI R DATA TO THE SATELLITE OWNED BY THE ASSESSEE. THE DATA/SIGNAL R ECEIVED BY THE SATELLITE WOULD BE RECEIVED BACK BY THE EARTH STATI ONS IN DOWN LINKING PROCESS FROM WHERE THE TELECASTING FACILITY IS PROV IDED TO CUSTOMERS OF THE TELECASTING COMPANIES/TELECOM OPERATORS. ACCOR DING TO THE LD. REPRESENTATIVE, THE ASSESSEE-COMPANY ENTERED INTO A N AGREEMENT FOR PROVIDING TRANSMISSION CAPACITY SO AS TO ENABLE THE TELECASTING COMPANIES/TELECOM OPERATORS FROM INDIA TO UPLINK AN D DOWNLINK THE ITA NO.1070/10 ETC. :- 3 -: PROGRAMMES WHICH ARE TO BE TELECASTED. REFERRING T O THE COPY OF THE AGREEMENT SAID TO BE ENTERED INTO WITH VIDESH SANCH AR NIGAM LTD(VSNL), THE LD. REPRESENTATIVE SUBMITTED THAT TH E ASSESSEE HAS NO PERMANENT ESTABLISHMENT IN INDIA. THE ASSESSEE IS NOT PROVIDING ANY SERVICES IN INDIA. THE SATELLITE WAS STATIONED IN THE ORBIT. THE INDIAN TELECASTING COMPANIES/TELECOM OPERATORS UPLOAD THEI R RESPECTIVE SIGNALS TO THE TRANSPONDER PROVIDED BY THE ASSESSE E AND THEY WILL ALSO DOWN LINK THE SIGNALS FOR THE PURPOSE OF DISTR IBUTING TO THEIR RESPECTIVE CUSTOMERS. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE-COMPANY IS NOT RENDERING ANY SERVICES IN INDIA. THE ASSESSEE IS ALSO NOT HAVING ANY PERMANENT ESTABLISH MENT IN INDIA. REFERRING TO INDIA-UK DOUBLE TAXATION AVOIDANCE AGR EEMENT, MORE PARTICULARLY, ARTICLE 5, THE LD. REPRESENTATIVE SUB MITTED THAT THE ASSESSEE HAS NO PERMANENT ESTABLISHMENT WITHIN THE MEANING OF ARTICLE 5 OF INDIA-UK DTAA. MERELY BECAUSE THE ASSE SSING OFFICER SAYS THAT THERE WAS BUSINESS CONNECTION IN INDIA THAT CANNOT LEAD TO TAXABILITY OF NON-RESIDENT WHICH IS COVERED BY THE BENEFICIAL PROVISIONS OF THE TAX TREATY. REFERRING TO THE ASSESSMENT ORD ER, MORE PARTICULARLY PARA 7.2 FOR THE ASSESSMENT YEAR 2002-03, THE LD. R EPRESENTATIVE SUBMITTED THAT MERELY BECAUSE ONE OF THE GROUP COMP ANY INSTALLED A MACHINERY FOR DOWN LINKING THE SIGNAL FROM THE ASS ESSEES SATELLITE THAT CANNOT BE CONSTRUED AS THE ASSESSEE IS HAVIN G PERMANENT ITA NO.1070/10 ETC. :- 4 -: ESTABLISHMENT IN INDIA. ACCORDING TO THE LD. REPRES ENTATIVE, EVEN THOUGH A MACHINERY WAS INSTALLED BY ONE OF THE GROU P COMPANIES TO TEST THE QUALITY OF SIGNAL RECEIVED IN INDIA, THE S AME WAS REMOVED DURING THE YEAR 2004. THEREFORE, ON AND AFTER 2004 , THE ASSESSEE- COMPANY OR ANY OF ITS GROUP COMPANIES DO NOT HAVE A NY MACHINERY INSTALLED IN INDIA. WHEN THE ASSESSING OFFICER FOU ND THAT THERE WAS A MACHINERY TO TEST THE QUALITY OF SIGNAL RECEIVED IN INDIA BY ONE OF THE GROUP COMPANIES, HE FAILED TO EXAMINE THE TAXABILIT Y OF THE ASSESSEE- COMPANY WITH REFERENCE TO THE INCOME ATTRIBUTABLE T O THE ALLEGED OPERATIONS IN INDIA. 3. REFERRING TO THE JUDGMENT OF THE APEX COURT IN CIT VS TOSHOKU LTD, 125 ITR 525 AND ISHIKAWAJMA-HARIMA HEA VY INDUSTRIES LTD VS DIT, 288 ITR 408, THE LD. REPRESENTATIVE SUB MITTED THAT AT THE BEST, THE REVENUE CAN TAX A PORTION OF THE INCOME T HAT MAY BE ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA . 4. REFERRING TO ARTICLE 5(6) OF INDIA-UK DTAA, THE LD. REPRESENTATIVE SUBMITTED THAT A COMPANY WHICH IS A RESIDENT IN UK CONTROLS A COMPANY WHICH IS RESIDENT OF INDIA OR WH ICH CARRIES ON BUSINESS IN INDIA SHALL NOT BY ITSELF CONSTITUTE EI THER A PERMANENT ESTABLISHMENT OR OTHERWISE. THEREFORE, MERELY BECA USE AN ASSOCIATED ENTERPRISES EXISTED IN INDIA, THAT CANNOT BE A REAS ON TO CONCLUDE THAT ITA NO.1070/10 ETC. :- 5 -: THE ASSESSEE HAS A PERMANENT ESTABLISHMENT IN INDI A. ACCORDING TO THE LD. REPRESENTATIVE, SINCE THE ASSESSEE HAS NO PERMANENT ESTABLISHMENT IS IN INDIA, NO PORTION OF THE ASSES SEES INCOME CAN BE ATTRIBUTABLE TO GROUP COMPANYS EQUIPMENT WHICH WAS SAID TO BE INSTALLED AT CHANDIGARH AND CHENNAI UPTO THE YEAR 2 004. THE SATELLITE OPERATION WAS CARRIED OUT FROM OUTSIDE INDIA ONLY. THE ASSESSEE HAS NOT RENDERED ANY SERVICE IN THE TERRITORIAL JURISDI CTION OF INDIA. ACCORDING TO THE LD. REPRESENTATIVE, THE CONCEPT OF PERMANENT ESTABLISHMENT WOULD OVERRIDE THE ASSERTIONS MADE BY THE ASSESSEE REGARDING THE BUSINESS CONNECTION IN INDIA. 5. THE EQUIPMENTS SAID TO BE INSTALLED AT CHANDIGARH A ND CHENNAI ARE DIFFERENT FROM AN EARTH STATION. ACCOR DING TO THE LD. REPRESENTATIVE, COMMUNICATION SYSTEM MONITORING EQU IPMENT WAS OWNED BY THE ASSESSEES ASSOCIATED ENTERPRISE, VIZ . INTELSAT GLOBAL SERVICE CORPORATION, USA WHEREAS THE EARTH STATIONS ARE OWNED, OPERATED AND MAINTAINED BY VSNL. THE ASSESSEE HAS NOT OWNED ANY EARTH STATION IN INDIA. THE BASIC FUNCTION OF COMM UNICATION SYSTEM MONITORING EQUIPMENT OR THE EARTH STATION AS THE CA SE MAY BE, IT SHOULD BE OWNED BY THE ASSESSEE. ACCORDING TO THE LD. REPRESENTATIVE, THE BASIC FUNCTION OF COMMUNICATION SYSTEM MONITORING EQUIPMENT IS TO MONITOR THE SIGNALS. WH EREAS THE FUNCTION ITA NO.1070/10 ETC. :- 6 -: OF THE EARTH STATION IS TO RECEIVE THE DOWN LINKED SIGNAL FROM THE TRANSPONDER PROVIDED BY THE ASSESSEE. IN THIS CAS E, NO EARTH STATION WAS PROVIDED BY THE ASSESSEE IN ANY PART OF INDIA. IN FACT, THE EARTH STATION WAS OWNED BY VSNL, THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS NOT RENDERED ANY SERVICES IN INDIA. 6. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE WAS PROVIDING SATELLITE SERVICE THROUGH SPACE CAPAC ITY TO ITS CUSTOMERS. REFERRING TO THE AGREEMENT SAID TO BE ENTERED INTO BETWEEN THE ASSESSEE AND VSNL, THE LD. REPRESENTATIVE SUBMITTED THAT THE TRIAL AND OPERATIONS WERE SOLELY UNDERTAKEN BY THE ASSESSEE AND IT WAS NOT PARTED AWAY AT ANY POINT OF TIME. THE ASSESSEE ME RELY RECEIVES DATA/SIGNAL WHICH WAS UPLOADED BY VSNL AND THE SAME WAS PROCESSED THROUGH TRANSPONDER WHICH IS SITUATED IN THE SATELL ITE AT ORBIT AND THEREAFTER IT WAS RETRANSMITTED TO EARTH. IT IS FO R THE VSNL TO RECEIVE THE SIGNAL/DATA TRANSPONDED BY THE ASSESSEE FROM S ATELLITE BY INSTALLING EARTH STATION. IN THIS CASE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS NOT INSTALLED ANY MACHINERY OR EARTH STATION TO DOWNLINK THE SIGNAL FROM SATELLITE. 7. REFERRING TO THE JUDGMENT OF THE DELHI HIGH COURT I N ASIA SATELLITE TELECOMMUNICATIONS CO. LTD VS DIT, 332 IT R 340, THE LD. REPRESENTATIVE SUBMITTED THAT THE PAYMENT MADE BY T HE ASSESSEE ITA NO.1070/10 ETC. :- 7 -: CANNOT BE EVEN CONSTRUED AS ROYALTY. THE LD. RE PRESENTATIVE HAS ALSO PLACED HIS RELIANCE ON THE JUDGMENT OF THE DEL HI HIGH COURT IN THE CASE OF DIT VS NEW SKIES SATELLITE BV IN I.T.A.NOS. 473 TO 474/2012, THE COPY OF WHICH IS AVAILABLE AT PAGE 1 OF THE PAP ER BOOK. ACCORDING TO THE LD. REPRESENTATIVE, THE DEFINITION OF THE TE RM ROYALTY UNDER INDIA-UK DTAA AND INDO THAI DTAA, ARE PARI MATERI A, THEREFORE, THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF NE W SKIES SATELLITE BV(SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF TH E CASE. 8. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT THE P AYMENT MADE BY THE ASSESSEE CANNOT BE CONSTRUED TO BE A P AYMENT AS FEE FOR TECHNICAL SERVICES. ACCORDING TO THE LD. REPRE SENTATIVE, THE SERVICES RENDERED BY THE ASSESSEE-COMPANY IS A STANDARD SERV ICE, THEREFORE, IT DOES NOT QUALIFY AS FEE FOR TECHNICAL SERVICES. TH E LD. REPRESENTATIVE PLACED IS RELIANCE ON THE JUDGMENT OF THE MADRAS HI GH COURT IN THE CASE OF SKYCELL COMMUNICATIONS LTD VS THE DY. CIT, 251 ITR 53. MOREOVER, THE TECHNOLOGY WAS NOT MADE AVAILABLE TO ANYONE BY THE ASSESSEE, THEREFORE, THE SERVICES RENDERED BY THE ASSESSEE EVEN IF IT IS CONSIDERED TO BE A TECHNICAL SERVICE, IS NOT LIABLE FOR TAXATION. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS TO NECESSARILY MAKE AVAILABLE THE TECHNOLOGY TO VSNL FOR THE PURPO SE OF TREATING THE PAYMENT AS FEE FOR TECHNICAL SERVICES. OTHER THA N PROVIDING ITA NO.1070/10 ETC. :- 8 -: TRANSPONDER FOR DOWN LINKING DATA/SIGNAL BY VSNL, T HE ASSESSEE WAS NOT RENDERING ANY SERVICE. IN FACT, THE SYSTEM IN- BUILT IN THE TRANSPONDER PROCESS THE SIGNAL/DATA RECEIVED FROM V SNL AND THE SAME WAS RETRANSMITTED NOT ONLY TO INDIA BUT ALSO ACROSS THE GLOBE. ANYONE IN THE EARTH, ACCORDING TO THE LD. REPRESENTATIVE, COULD RECEIVE THE SIGNAL FROM SATELLITE. ON A QUERY FROM THE BENCH W HEN THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND VSNL SPECIFI CALLY INDICATES VSNL AS A DISTRIBUTOR FOR RECEIVING THE SIGNAL FROM ASSESSEES SATELLITE HOW ANYONE CAN RECEIVE THE SIGNAL IN INDIA, THE LD. REPRESENTATIVE COULD NOT ANSWER THE QUESTION. ACCORDING TO THE LD . REPRESENTATIVE, THE SIGNAL IS VERY MUCH AVAILABLE FOR 45% OF THE OR BIT. 9. REFERRING TO THE BUSINESS CONNECTION IN INDIA, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER HAS NEVER SAID THAT THE ASSESSEE HAS BUSINESS CONNECTION IN INDIA . IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS PER MANENT ESTABLISHMENT IN INDIA. IN FACT, THE CIT(A) IN THE IMPUGNED ORDER FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04 HELD THAT DISCUSSION WITH REGARD TO BUSINESS CONNECTION IN INDIA IS ONLY ACAD EMIC IN NATURE. ACCORDING TO THE LD. REPRESENTATIVE, BUSINESS CONNE CTION INVOLVES A RELATION BETWEEN THE BUSINESS CARRIED ON BY A NON-R ESIDENT WHICH EARNED PROFITS AND GAINS AND SOME ACTIVITY WHICH C ONTRIBUTES DIRECTLY ITA NO.1070/10 ETC. :- 9 -: OR INDIRECTLY FOR EARNING OF SUCH PROFIT AND GAINS. IN THIS CASE, ACCORDING TO THE LD. REPRESENTATIVE, THERE IS NO BU SINESS CARRIED ON BY NRI IN INDIA WHICH YIELDED THE PROFIT. ACCORDING T O THE LD. REPRESENTATIVE, THE ENTIRE SERVICES WERE RENDERED B Y NON-RESIDENT THROUGH SATELLITE STATIONED IN THE ORBIT. THE SIGN AL/DATA RECEIVED BY THE SATELLITE WAS PROCESSED THROUGH THE TRANSPON DER AND THEREAFTER IT WAS RETRANSMITTED ACROSS THE GLOBE. THEREFORE, ACC ORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS NOT RENDERED ANY SERVICE OR CARRIED ON ANY BUSINESS IN INDIA. 10. ACCORDING TO THE LD. REPRESENTATIVE, EVEN FOR ANY R EASONS THIS TRIBUNAL CAME TO THE CONCLUSION THAT THERE WAS A BUSINESS CONNECTION IN INDIA AND A PORTION OF THE INCOME WAS EARNED IN INDIA, THEN THE INCOME WHICH IS REASONABLY ATTRIBUTABLE TO THE FUNCTIONS PERFORMED BY THE ASSESSEE IN INDIA ALONE IS LIABLE FOR TAXATION. IN FACT, NO SUCH EXAMINATION WAS MADE BY BOTH THE AUTH ORITIES BELOW. ACCORDING TO THE LD. REPRESENTATIVE, MERE BUSINESS CONNECTION IS NOT SUFFICIENT TO TAX THE INCOME OF THE ASSESSEE IN IN DIA. APART FROM BUSINESS CONNECTION, SOME ACTIVITIES NEEDS TO BE CA RRIED ON BY THE ASSESSEE IN INDIA THEN ONLY A PORTION OF THE INCOME WHICH IS ATTRIBUTABLE TO THE ACTIVITY CARRIED ON BY THE ASS ESSEE IN INDIA IS LIABLE FOR TAXATION. THE LD. REPRESENTATIVE PLACED HIS RE LIANCE ON THE ITA NO.1070/10 ETC. :- 10 -: JUDGMENT OF THE APEX COURT IN THE CASE OF ISHIKAWA JMA-HARIMA HEAVY INDUSTRIES LTD (SUPRA). 11. REFERRING TO THE SERVICES RENDERED BY THE ASSESSEE , THE LD. REPRESENTATIVE SUBMITTED THAT THE COMPANY PROVIDES SATELLITE CAPACITY VIA SPACE SEGMENT AND RELATED SERVICES TO DISTRIBUT ORS IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT. ACCORDING TO THE LD. REPRESENTATIVE, THE AGREEMENT SAID TO BE ENTERED INTO BETWEEN THE ASSESSEE AND VSNL IS AVAILABLE ON RECORD. REFERRING TO CLAUSE ( 4) OF THE AGREEMENT, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSEE AUTHORIZES THE DISTRIBUTOR ON A NON-EXCLUSIVE BASIS, FOR SO LONG A S THE AGREEMENT REMAINS IN EFFECT, TO PROCURE FROM THE COMPANY SATE LLITE CAPACITY VIA THE SPACE SEGMENT AND RELATED SERVICES PURSUANT TO A SERVICE CONTRACT FOR SERVICES IN ACCORDANCE WITH THE ORDERING PROCED URES. ACCORDING TO THE LD. REPRESENTATIVE, VSNL IS SOLELY RESPONSIBLE FOR DOWN LINKING THE SIGNAL/DATA BY ESTABLISHING THE NECESSARY EARTH STA TION. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT FOR THE PURPO SE OF MAINTAINING EARTH STATION, VSL HAS TO OBTAIN NECESSARY PERMISSI ON/APPROVAL FROM GOVERNMENT OF INDIA. REFERRING TO THE AGREEMENT BE TWEEN VSNL AND THE ASSESSEE, THE LD. REPRESENTATIVE SUBMITTED THA T THE CONTRACT BETWEEN VSNL AND ASSESSEE IS ON PRINCIPAL TO PRINC IPAL BASIS AND THE ASSESSEE IS NOT PRIVY TO CONTRACTUAL TERMS BETWEEN VSNL AND ITS ITA NO.1070/10 ETC. :- 11 -: CUSTOMERS. ACCORDING TO THE LD. REPRESENTATIVE, IT IS FOR THE VSNL TO MARKET THEIR SERVICES VIA SPACE SEGMENTS AND RELATE D SERVICES. CONSIDERING THE NATURE OF THE CONTRACT AND THE SERV ICES RENDERED BY THE ASSESSEE-COMPANY, ACCORDING TO THE LD. REPRESEN TATIVE, THERE IS NO PRINCIPAL TO AGENT RELATIONSHIP AND THE RELATIONSHI P WAS ONLY PRINCIPAL TO PRINCIPAL. ACCORDING TO THE LD. REPRESENTATIVE, THE RESPONSIBILITY OF THE ASSESSEE IS TO MAINTAIN THE SATELLITE CAPACITY IN THE ORBIT WHEREAS THE RESPONSIBILITY OF VSNL IS TO MAINTAIN THE EARTH STATION FOR THE PURPOSE OF RECEIVING SIGNAL FROM THE SATELLITE. IN THIS CASE, ACCORDING TO THE LD. REPRESENTATIVE, THE PAYMENT MADE BY THE ASSESSEE CANNOT BE CONSTRUED AS ROYALTY OR FEE FOR TECHNICAL SER VICES. THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. 12. ON THE CONTRARY, DR. MILIND MADHUKAR BHUSARI, LD. D R SUBMITTED THAT ADMITTEDLY, THE ASSESSEE-COMPANY ENG AGED IN PROVIDING SATELLITE CAPACITY THROUGH SPACE SEGMENT AND RELATED SERVICES TO INDIAN CUSTOMERS. THE ASSESSEE-COMPANY IS PROVI DING SERVICE EITHER DIRECTLY OR THROUGH VSNL. THE TELECASTING C OMPANIES/TELECOM OPERATORS UPLINK THEIR DATA/SIGNAL TO SATELLITE MAI NTAINED BY THE ASSESSEE IN THE ORBIT. ON RECEIPT OF THE SIGNAL/DA TA, THE SYSTEM IN-BUILT IN THE SATELLITE WOULD PROCESS THE SAME AND DOWNLIN K THE SAME TO VSNL. VSNL, IN FACT, RECEIVES SIGNAL IN INDIA AND REDISTRIBUTE THE SAME ITA NO.1070/10 ETC. :- 12 -: TO VARIOUS CUSTOMERS. THE ASSESSEE IN FACT ENTERE D INTO AN AGREEMENT WITH VSNL AND OTHER TELECOM SERVICE PROVIDERS FOR P ROVIDING TRANSPONDER CAPACITY SO AS TO ENABLE THEM TO UPLINK AND DOWNLINK THE PROGRAMS TO BE TELECASTED. FOR THE PURPOSE OF MAIN TAINING THE QUALITY OF THE SIGNAL RECEIVED IN INDIA, THE ASSESSEE HAS MAINTAINED AN EQUIPMENT AT CHANDIGARH AND CHENNAI. THE ASSESSEE NOW CLAIMS BEFORE THIS TRIBUNAL THAT THE EQUIPMENTS INSTALLED AT CHANDIGARH AND CHENNAI DO NOT BELONG TO IT AND IN FACT IT WAS INST ALLED AND MAINTAINED BY AN ASSOCIATED CONCERN. THE FACT REMAINS THAT TH E EQUIPMENT INSTALLED AT CHANDIGARH AND CHENNAI IS TO TEST THE SIGNAL/DATA RECEIVED IN INDIA WHICH WAS RETRANSMITTED BY ASSESSEE. THER EFORE, ACCORDING TO THE LD. DR, TO TEST THE QUALITY OF SIGNAL WHICH WAS DOWN LINKED BY THE ASSESSEE AN EQUIPMENT WAS INSTALLED AND THE ASSESS EE IS ADMITTEDLY AS CLAIMED BEFORE THIS TRIBUNAL MAINTAINING THE SAM E THROUGH ITS ASSOCIATED CONCERN. THEREFORE, ACCORDING TO THE LD . DR, THE ASSESSEE IS HAVING A PERMANENT ESTABLISHMENT IN INDIA. ACCO RDING TO THE LD. DR, THE EQUIPMENT INSTALLED AND MAINTAINED IN INDIA FOR THE PURPOSE OF TESTING THE QUALITY OF SIGNAL RECEIVED IN INDIA HAS TO BE NECESSARILY TREATED AS AN EARTH STATION. MERELY BECAUSE VSNL H AS SEPARATE EARTH STATION TO DOWN LINK THE PROGRAMS RETRANSMITTED BY THE ASSESSEE- COMPANY THAT DOES NOT MEAN THAT THE EQUIPMENT INSTA LLED BY THE ASSESSEE-COMPANY THOUGH THROUGH ITS ASSOCIATED CONC ERN AS CLAIMED, ITA NO.1070/10 ETC. :- 13 -: CANNOT LOSE ITS CHARACTER AS EARTH STATION. ACCORD ING TO THE LD. DR, THE EQUIPMENT INSTALLED AT CHANDIGARH AND CHENNAI HAS T O BE NECESSARILY TREATED AS EARTH STATION, THEREFORE, THE ASSESSEE HAS BUSINESS CONNECTION IN INDIA HENCE, PROFIT AND GAIN ARISING OUT OF THE SERVICES RENDERED HAS TO BE NECESSARILY TREATED AS BUSINESS INCOME IN INDIA HENCE, EVEN AS PER THE INDIA-UK DTAA, THE SAME HAS TO BE TAXED ONLY IN INDIA. 13. REFERRING TO THE CLAIM OF THE ASSESSEE THAT THE E QUIPMENT INSTALLED AT CHANDIGARH AND CHENNAI WAS DISMANTLED FROM ASSESSMENT YEAR 2004, THE LD. DR SUBMITTED THAT DISMANTLING OF THE EQUIPMENT INSTALLED AT CHANDIGARH AND CHENNAI IS NOT BROUGHT TO THE NOTICE OF THE AUTHORITIES BELOW. 14. REFERRING TO THE ORDER OF THE CIT(A), THE LD. DR SU BMITTED THAT THE TRANSMISSION SERVICE PROVIDED BY THE ASSES SEE THROUGH SATELLITE IS TO ENABLE THE TRANSMISSION OF SIGNAL T HROUGH OPERATORS. THEREFORE, THE ASSESSEE-COMPANY RENDERED SERVICE IN INDIA AND HENCE, THE ASSESSING OFFICER HAS RIGHTLY BROUGHT THE SAME FOR TAXATION. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADM ITTEDLY, THE ASSESSEE ENGAGED IN PROVIDING SATELLITE CAPACITY T HROUGH ITA NO.1070/10 ETC. :- 14 -: SPACE SEGMENT AND RELATED SERVICES TO INDIAN CUSTOM ERS. THE ASSESSEE NOW CLAIMS THAT IT HAS NO PERMANENT ESTABL ISHMENT IN INDIA AND IT IS NOT DOING ANY SERVICE IN INDIA. THE CLAI M OF THE ASSESSEE IS THAT THE SIGNAL/DATA DOWN LINKED BY VSNL AND OTHER COMPANIES IN INDIA NAMELY, TELECASTING COMPANIES/TELECOM OPERATORS AR E RECEIVED FROM THE TRANSPONDER MAINTAINED BY THE ASSESSEES OWN S ATELLITE IN THE ORBIT. THE SIGNAL/DATA UPINKED TO THE TRANSPONDER W AS PROCESSED AND IT WAS TRANSMITTED/DOWN LINKED TO THE EARTH STATION. ACCORDING TO THE ASSESSEE, EARTH STATION IS NOT MAINTAINED BY THE A SSESSEE. IN FACT, THE SPECIFIC CLAIM OF THE ASSESSEE IS THAT EARTH S TATIONS ARE MAINTAINED BY THE RESPECTIVE COMPANIES/OPERATORS IN INDIA. TH E QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSESSEE RECEIVES SI GNAL/DATA TRANSMITTED BY THE COMPANIES IN INDIA AND PROCESS T HE SAME THROUGH TRANSPONDER/SATELLITE OWNED BY THE ASSESSEE WHICH ARE SITUATED IN THE ORBIT WHETHER THE ASSESSEE IS RENDERING ANY SERVI CE IN INDIA? IF THE ASSESSEE IS MAINTAINING SATELLITE IN THE ORBIT AND INDIAN COMPANIES ARE UPLOADING THE SIGNAL/DATA WHICH WAS RECEIVED BY THE SATELLITE AND TRANSMITTED TO INDIA THEN THE ASSESSEE MAY NOT BE RENDERING ANY SERVICE IN INDIA. IN THIS CASE, THE ADMITTED FACT IS THAT THE ASSESSEE IS MAINTAINING EQUIPMENT AT CHANDIGARH AND CHENNAI FOR THE PURPOSE OF TESTING THE QUALITY OF SIGNAL. THE VERY OBJECT OF THE AGREEMENT BETWEEN THE ASSESSEE AND VSNL IS TO UPLINK AND DOW N LINK THE SIGNAL ITA NO.1070/10 ETC. :- 15 -: AND THE ASSESSEE HAS TO MAINTAIN PROPER QUALITY OF THE SIGNAL WHICH WAS TRANSMITTED TO INDIA OR TO THE EARTH STATION. THE ASSESSEE NOW CLAIMS THAT THE EQUIPMENT INSTALLED IN INDIA AT CHA NDIGARH AND CHENNAI DOES NOT BELONG TO IT AND IT IS OWNED BY ITS ASSOCI ATED ENTERPRISE. THE FACT REMAINS THAT THE EQUIPMENT MAINTAINED AT CHAND IGARH AND CHENNAI IS FOR THE PURPOSE OF TESTING THE SIGNAL WH ICH WAS UPLOADED BY VSNL AND OTHER INDIAN COMPANIES WHILE IT WAS DOWN L INKED IN INDIA. THEREFORE, THE ASSESSEE IS MAINTAINING AN EQUIPMEN T IN INDIA THROUGH ITS ASSOCIATED ENTERPRISE FOR THE PURPOSE OF TESTIN G QUALITY OF SIGNAL RETRANSMITTED IN INDIA. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SO LONG AS THE ASSESSEE IS MAINTAININ G AND EQUIPMENT IN INDIA, IT HAS TO BE CONSTRUED THAT THE ASSESSEE IS RENDERING SERVICES IN INDIA. NOW THE ASSESSEE CLAIMS THAT THE EQUIPMEN T INSTALLED AT CHANDIGARH AND CHENNAI WAS DISMANTLED FROM THE YEAR 2004. HOWEVER, DISMANTLING OF MACHINERY/EQUIPMENT INSTALL ED AT CHANDIGARH AND CHENNAI IS NOT BROUGHT ON RECORD BY THE AUTHORI TIES BELOW. THE ASSESSING OFFICER PROCEEDED AS IF THE ASSESSEE IS MAINTAINING THE EQUIPMENT AT CHANDIGARH AND CHENNAI FOR ALL THE ASS ESSMENT YEARS CONTINUOUSLY. IT NEEDS TO BE EXAMINED WHEN THE AS SESSEE IS NOT MAINTAINING ANY EQUIPMENT AT CHANDIGARH/CHENNAI OR ANY OTHER PLACE, HOW THE QUALITY OF SIGNAL IS BEING TESTED BY THE AS SESSEE-COMPANY. VSNL OR ANY OTHER COMPANIES ENTERED INTO ANY AGREEM ENT WITH THE ITA NO.1070/10 ETC. :- 16 -: ASSESSEE-COMPANY FOR THE PURPOSE OF UP LINKING AND DOWN LINKING DATA/SIGNAL WOULD ENSURE THE ASSESSEE TO MAINTAIN THE GOOD QUALITY WHILE IT WAS BEING RETRANSMITTED. THEREFORE, THE ASSESSEE HAS TO MAINTAIN THE QUALITY OF SIGNAL WHICH WAS RETRANSMIT TED. IF THE QUALITY OF THE SIGNAL/DATA IS VERY POOR THEN THE RECIPIENT COM PANY MAY NOT ACCEPT THE SERVICE AS IT WAS CLAIMED BEFORE THIS TR IBUNAL. THEREFORE, THERE IS AN OBLIGATION ON THE PART OF THE ASSESSEE- COMPANY TO MAINTAIN GOOD QUALITY OF SIGNAL/DATA TO BE RETRANSMITTED SO THAT VSNL OR OTHER COMPANIES WHICH MAY REDISTRIBUTE THE SIGNAL TO THEI R RESPECTIVE CUSTOMERS. THEREFORE, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT IT IS OBLIGATION ON THE PART OF THE ASSESSEE TO MAINT AIN THE QUALITY OF SIGNAL/DATA WHICH WAS RETRANSMITTED. 16. IF THE ASSESSEE-COMPANY DISMANTLED THE EQUIPMENT/ MACHINERY INSTALLED AT CHANDIGARH AND CHENNAI IN TH E YEAR 2004, IT IS NOT KNOWN HOW THE ASSESSEE IS TESTING THE QUALITY OF SIGNAL RETRANSMITTED TO INDIA. THE SO CALLED EARTH STATIO N MAINTAINED BY VSNL AND OTHER COMPANIES IN INDIA MAY BE DOWN LINKI NG THE SIGNAL/DATA FROM THE SATELLITE. THE QUESTION ARISE S FOR CONSIDERATION IS WHETHER THE EARTH STATION SAID TO BE MAINTAINED BY VSNL AND OTHER COMPANIES COULD RECEIVE SIGNAL/DATA WITHOUT ANY INT ERVENTION BY THE ASSESSEE-COMPANY IN INDIA. THIS FACT WAS NOT EXAMI NED BY BOTH THE ITA NO.1070/10 ETC. :- 17 -: AUTHORITIES BELOW. FURTHER, HOW THE SIGNALS WE RE RECEIVED IN INDIA WITHOUT INTERVENTION OF THE ASSESSEE-COMPANY NEEDS TO BE EXAMINED. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE TECHNICAL EXPERTS FROM VSNL OR VERY ANY OTHER COMPANIES WHICH ENTERED INTO AGREEMENT WITH ASSESSEE-COMPANY NEEDS TO BE EXAMINED ABOUT TH E MODE OF RECEIPT OF SIGNAL/DATA WHICH WAS RETRANSMITTED BY T HE ASSESSEE- COMPANY IN INDIA. SINCE THE ASSESSING OFFICER HAS NOT EXAMINED THE TECHNICAL EXPERTS, THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT TO APPRECIATE THE REAL SERVICES RENDERED BY THE ASSESS EE, THE MATTER NEEDS TO BE REEXAMINED BY THE ASSESSING OFFICER. AC CORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL REEXAMINE THE MATTER AFRESH AFTER EXA MINING THE TECHNICAL EXPERTS FROM VSNL WHO IS RESPONSIBLE FOR MAINTAININ G THE EARTH STATION IN INDIA OR ANY OTHER COMPANIES WHICH HAS ENTERED INTO SIMILAR AGREEMENT WITH THE ASSESSEE AND BRING ON RECORD TH E ACTUAL SERVICES RENDERED BY THE ASSESSEE CONSEQUENT TO THE AGREEME NT SAID TO BE ENTERED INTO TELECASTING COMPANIES/TELECOM OPERATOR S AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVIN G A REASONABLE OPPORTUNITY TO THE ASSESSEE. ITA NO.1070/10 ETC. :- 18 -: 17. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE AR E ALLOWED FOR STATISTICAL PURPOSES. 18. NOW, COMING TO THE REVENUES APPEALS, THE FIRST CO MMON ISSUE RAISED BY THE REVENUE IS WITH REGARD TO INTER EST LEVIED U/S 234B OF THE ACT. 19. THE CLAIM OF THE ASSESSEE IS THAT INTEREST U/S 23 4B IS NOT LIABLE AT ALL. SINCE THE MAIN ISSUE IN THE ASSESS EES APPEAL IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE LEVY OF INTEREST U/S 2 34B IS ALSO NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. ACCORDIN GLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE O F LEVY OF INTEREST U/S 234B IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH. 20. THE REVENUE HAS RAISED ONE MORE GROUND WITH REGARD OF DEDUCTION OF TAX FOR ASSESSMENT YEARS 2002-03 AND 2 003-04. ACCORDING TO THE LD. DR, THE ASSESSING OFFICER OUGH T TO HAVE DEDUCED TAX @ 15%. HOWEVER, THE CIT(A) FOUND THAT TAX HAS TO BE DEDUCTED AT 10%. REFERRING TO THE ORDER OF THE ASSESSING OF FICER, THE LD. DR SUBMITTED THAT THE PAYMENTS RECEIVED BY THE ASSESS EE FROM VSNL RELATES TO THE SERVICES COVERED UNDER ARTICLE 13(2) (A) OF THE DTAA ITA NO.1070/10 ETC. :- 19 -: BETWEEN INDIA AND UK. THEREFORE, ARTICLE 7 OF THE DTAA MAY NOT BE APPLICABLE SINCE IT RELATES TO ROYALTIES. ACCORD ING TO THE LD. DR, SINCE THERE WAS A BUSINESS CONNECTION, THE PROFIT EARNED BY THE ASSESSEE HAS TO BE NECESSARILY CONSTRUED AS INCOME, THEREFOR E, THE ASSESSING OFFICER HAS TO DEDUCT TAX @ 15%. 21. WE HEARD THE LD. REPRESENTATIVE FOR THE ASSESSEE A LSO. SINCE THE MAIN ISSUE RELATES TO SERVICES RENDERED B Y THE ASSESSEE TO VSNL IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFF ICER SHALL RECONSIDER THE RATE OF TAX TO BE DEDUCTED AT THE TIME OF PAYME NT. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE A ND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH AND DECID E THE SAME IN ACCORDANCE WITH LAW. 22. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE A LLOWED FOR STATISTICAL PURPOSES. 23. TO SUMMARIZE, ALL THE APPEALS OF THE ASSESSEE AND REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1070/10 ETC. :- 20 -: 24. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JULY, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 1 ST JULY, 2016 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF