Telstra Singapore Pte. Ltd, Singapore V. DCIT (International Taxation), Circle-3(1)(1), New Delhi

ITA 599/DEL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2435 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Appeal Filed On: 26-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S.K. AGGARWAL
• Keywords: Double taxation relief
• Section: 143(3); 13

Judgement Text

I.T.A.No.599/Del/2021 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D” NEW DELHI BEFORE SHRI G.S. PANNU, HON’BLE PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER आ.अ.स ं /.I.T.A No.599/Del/2021 /Assessment Year: 2017-18 Telstra Singapore Pte. Ltd., 8 Cross Street, 22-00, Manulife Towers, Singapore, SG – 048424. ब म Vs. DCIT (International Taxation), Circle-3(1)(1), New Delhi. PAN No. AADCT5366N अ Appellant /Respondent िनधा रतीक ओरसे /Assessee by Shri S.K. Aggarwal, CA राज वक ओरसे /Revenue by Ms. Sapna Bhatia, CIT DR स ु नवाईक तारीख/ Date of hearing: 03.08.2022 उ ोषणाक तारीख/Pronouncement on 27.09.2022 आदेश /O R D E R PER C.N. PRASAD, J.M. This appeal is filed by the assessee for the AY 2017-18 against the order of the assessment order dated 31.03.2021 passed u/s 143(3) read with section 144C(13) pursuant to the directions of the DRP u/s 144C(5) of the Act dated 30.09.2020. 2. The Ld. Counsel for the assessee at the outset submits that the question that arises for consideration in the assessee’s appeal is whether the bandwidth services are covered as “Equipment Royalty” or “Process I.T.A.No.599/Del/2021 2 Royalty” under Article 12 of the India, Singapore Tax Treaty. The Ld. Counsel for the assessee submits that the assessee is a company incorporated in Singapore and is a tax resident of Singapore. It is engaged in the business of providing digital transmission of data through International Private Line (‘IPL’) or Multi-Protocol Label Switching (‘MPLS’), etc. to facilitate high-speed data connectivity (hereinafter referred to as ‘bandwidth services’). The Ld. Counsel for the assessee submits that the assessee provides bandwidth services outside India to its customers. It has entered into Global Business Service Agreement (‘GBSA’) with various customers. In the case where services are provided by an Indian telecom operator like Bharti Airtel in India and the services outside India are provided by the assessee, it enters into a One Stop Shopping Service Agreement (‘OSS’) with Bharti Airtel or any other Indian telecom operator, to facilitate single billing facility to the customer. Referring to Annexure 1 on Page 10 to 13 of the synopsis for an overview of the business process chart and details of services rendered by the assessee the Ld. Counsel for the assessee submits that as per the GBSA between the assessee and the customer, the customer enjoys an uninterrupted 24X7 service and such service would be available 99.60% of the time. If the service is unavailable or is not available as per the agreed speed, the customer shall be entitled to a rebate as per the rates agreed in clause 8.11 of the GBSA. I.T.A.No.599/Del/2021 3 3. The Ld. Counsel for the assessee submits that for the AY 2017-18, the assessee had filed its return declaring Nil income. The assessment was concluded under Section 143(3) r.w.s. 144C(1) of the I.T. Act, 1961, wherein the AO has considered the amount received from Indian customers for the provision of bandwidth services outside India as equipment/process royalty u/s 9(1)(vi) of the Act read with Article 12(3) of the India Singapore Tax Treaty (‘Tax Treaty’). The Ld. Counsel for the assessee submits that in arriving at the above conclusion in the assessment order, the Ld. AO has relied upon: i) Madras High Court decision in the case of Verizon Singapore Pte. Lt. Vs. ITO (2013) 39 taxmann.com 70 (Madras); and ii) Special Bench of Delhi ITAT decision in the case of New Skies Satellite NV vs. ADIT (2009) (126 TTJ 1). 4. The Ld. Counsel submits that since the assessee is a tax resident of Singapore, it would be governed by the provisions of Article 12 of the Tax Treaty to the extent that these are more beneficial. The definition of royalty as per Article 12 of the India – Singapore Tax Treaty is enclosed on page no. 427 to 446 of the Paper Book. Bandwidth services are not equipment/process royalty under the Tax Treaty. The Ld. Counsel submits that as per the definition of ‘royalty’ in Article 12 of the Tax Treaty, royalty means consideration amount received for use of, or the right to use. a. Any secret formula or process...................... b. Any industrial, commercial or scientific equipment............ I.T.A.No.599/Del/2021 4 5. The Ld. Counsel submits that provision of bandwidth services for digital transmission of data by the assessee does not result in use or right to use any equipment or process by the customer and hence, the consideration received for services does not fall in the definition of royalty under the Tax Treaty. The questions that have arisen for consideration in the captioned appeal is whether the bandwidth services are covered as “Equipment Royalty” or “Process Royalty” under Article 12 of the India – Singapore Tax Treaty. 5.1 The Ld. Counsel submits that its case is covered by the decision of Delhi ITAT in its own case for AY 2011-12, 2012-13 and 2014-15 in ITA Nos. 1548/Del/2015, 286/Del/2016, 6733/Del/2015, 3020/Del/2017 vide order dated 30.09.2020 which is placed at pages 95 to 116 of the Paper Book. 5.2 It is further submitted that the Hon’ble Delhi ITAT followed the aforesaid order for earlier years in assessee’s own case for AY 2015-16 and 2016-17 in ITA Nos. 5880/Del/2018, 5479/Del/2019 vide order dated 13.07.2022 which is placed at pages 117 to 122 of Paper Book. 5.3 The Ld. Counsel also submits that its case is also covered by the decisions of the Delhi High Court in the case of Director of Income Tax vs. New Skies Satellite – BV (68 taxmann.com 8) and Asia Satellite Telecommunications Co. Ltd. (332 ITR 340) and a series of decisions of the ITAT Delhi Benches as under: I.T.A.No.599/Del/2021 5 • Verizon Communications India Pvt. Ltd. ITA No. 2235/Del/2019, dated 30 March 2020; • Thaicom Public Co. Ltd. (2018) 96 taxmann.com 577, dated 26 April 2018; • Independent New Services (P) Ltd. (2018) 90 taxmann.com 163, dated 25 January 2018; • Geo Connect Limited ITA Nos. 1927/Del/2008 & 127/Del/2011, dated 17 January 2017; • Bharti Airtel Ltd. (2016) 67 taxmann.com 223, dated 17 March. 6. The Ld. DR supported the orders of the authorities below. 7. Heard rival submission, perused the orders of the authorities below and the decision of the Tribunal in assessee’s own case for the assessment years 2010-11 and 2012-13 in ITA Nos. 1548/Del/2015, 286/Del/2016 and ITA No. 3020/Del/2017 for AY 2014-15 dated 30.09.2020. 8. We find that the issue in appeal has been decided in favour of the assessee by the Tribunal holding that the consideration received by the assessee company for the bandwidth services to various Indian Telecom Operators like Bharti Airtel India the services provided outside India is not taxable as “Royalty” in view of the beneficial provisions of DTAA between India – Singapore observing as under: - I.T.A.No.599/Del/2021 6 I.T.A.No.599/Del/2021 7 I.T.A.No.599/Del/2021 8 I.T.A.No.599/Del/2021 9 I.T.A.No.599/Del/2021 10 I.T.A.No.599/Del/2021 11 I.T.A.No.599/Del/2021 12 I.T.A.No.599/Del/2021 13 9. The above order of the Tribunal for AYs 2011-12 and 2012-13 was followed by the Coordinate Bench of the Tribunal for the assessment years 2015-16 and 2016-17 in ITA No. 5880/Del/2018 and 5479/Del/2019 dated 13.07.2022. 10. Facts being identical. Respectfully following the decision of the Tribunal in assessee’s own case we allow the grounds of appeal raised by the assessee and direct the Assessing Officer to delete the additions made on account of “Royalty”. 11. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 27/09/2022 Sd/- Sd/- (G.S. PANNU) (C.N. PRASAD) PRESIDENT JUDICIAL MEMBER Dated: 27.09.2022 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, ITAT: Delhi Benches-Delhi