ADIT Circle 2 (2), V. Shin Satellite Public Co. Ltd,

ITA 914/DEL/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0195 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-02-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 10-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHWANI MAHAJAN
• Assessee Lawyers: F V IRANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `D: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER I.T. A. NOS.4394, 4395, 4396 & 4397/DEL/2005 ASSESSMENT YEARS : 1998-99, 1999-2000, 2000-01 & 2001-02 SHIN SATELLITE PUBLIC CO. LTD., DY. DIRECTOR OF IN COME-TAX, THAICOM SATELLITE STATION, VS. (INTERNATIONAL TAXAT ION)-2(2), 41/103, RATTANATHIBET ROAD, NEW DELHI. NONTHABURI 11000, THAILAND. PAN: AAGCS4481E I.T. A. NO.914/DEL/2008 ASSESSMENT YEAR : 2002-03 ASSTT. DIRECTOR OF INCOME-TAX, SHIN SATELLITE PUB LIC CO. LTD., CIRCLE 2(2) INTERNATIONAL TAXATION), VS. THAICOM S ATELLITE STATION, 41/103, RATTANATHIBET ROAD, NONTHABURI 11000, THAILAND. PAN: AAGCS4481E (APPELLANTS) (RESPONDENTS) ASSESSEE BY: SHRI F.V. IRANI, SR. ADVOCATE. DEPARTMENT BY: SHRI ASHWANI MA HAJAN, CIT-DR. O R D E R PER BENCH THE APPEALS PERTAINING TO THE ASSESSMENT YEARS 1998 -99, 1999-2000, 2000-01 AND 2001-02 ARE FILED BY THE ASSESSEE AGAIN ST ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) CONFIRMING THE PENALTY LEVIED BY THE 2 ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE IN COME-TAX ACT, 1961 (THE ACT). 2. ITA NO.914/DEL/2008 PERTAINING TO THE ASSESSMENT YEAR 2002-03 IS FILED BY THE REVENUE AGAINST THE ORDER DATED 31.12. 2007 OF THE LEARNED CIT(A) DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SEC. 271(1)(C) OF THE ACT. 3. IN ALL THESE ASSESSMENT YEARS, THE RECEIPTS RECE IVED BY THE ASSESSEE FROM TELECASTING COMPANIES OR INTERNET SERVICES PRO VIDERS TOWARDS PROVIDING TRANSPONDERS WAS HELD TO BE ROYALTY CHARGEABLE TO T AX IN INDIA BY THE ASSESSING OFFICER. THE AOS ORDER IN QUANTUM HAS B EEN UPHELD BY THE LEARNED CIT(A) FOLLOWING THE DECISION OF ITAT DELHI BENCH IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. (85 ITD 478). THE DECISION OF THE TRIBUNAL IN THE CASE OF ASIA SATELLITE TELECOMM UNICATIONS CO. LTD. HAS NOW BEEN REVERSED BY THE HONBLE DELHI HIGH COURT I N THE CASE OF CIT VS. ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. IN ITA 1 31 TO 134 OF 2003, DATED 31 ST JANUARY, 2011. 4. THE HONBLE HIGH COURT OF DELHI IN THE ABOVE REF ERRED CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD. IN ITA NOS. 13 1 TO 134/2003, HAS HELD THAT RECEIPTS EARNED FROM PROVIDING DATA TRANSMISSI ON SERVICES THROUGH PROVISION OF SPACE SEGMENT CAPACITY ON SATELLITES D OES NOT CONSTITUTE ROYALTY 3 WITHIN THE MEANING OF SEC. 9(1)(VI) OF THE ACT. IN DOING SO, THE HONBLE HIGH COURT HAS CONCLUSIVELY HELD THAT WHILE PROVIDI NG TRANSMISSION SERVICES TO ITS CUSTOMERS, THE CONTROL OF THE SATELLITE OR T HE TRANSPONDER ALWAYS REMAINS WITH THE SATELLITE OPERATOR AND THE CUSTOME RS ARE MERELY GIVEN ACCESS TO THE TRANSPONDER CAPACITY. ACCORDINGLY, SINCE TH E CUSTOMER DOES NOT UTILIZE THE PROCESS OR EQUIPMENT INVOLVED IN ITS OPERATIONS , THE CHARGES PAID TO THE SATELLITE OPERATORS ARE NOT COVERED WITHIN THE MEAN ING OF ROYALTY AS PROVIDED UNDER EXPLANATION 2 TO SEC. 9(1)(VI) AND THEREFORE, THE SAME CANNOT BE TREATED AS ROYALTY. IN THIS CASE, THE REVENUE ALSO RAISED THE QUESTION REGARDING APPLICABILITY OF SEC. 9(1)(VII) FOR THE F IRST TIME BEFORE THE TRIBUNAL. ALTHOUGH, THIS GROUND WAS ADMITTED, IT WAS NOT DECI DED AS THE RECEIPT WAS HELD TO BE ASSESSABLE UNDER SEC. 9(1)(VI) OF THE AC T BY THE TRIBUNAL. NO ARGUMENT WAS ADVANCED BY THE LEARNED COUNSEL FOR TH E REVENUE BEFORE THE HONBLE HIGH COURT IN THIS MATTER. THEREFORE, THE SUBMISSION OF THE REVENUE REGARDING APPLICABILITY OF SEC. 9(1)(VII) WAS NOT A CCEPTED. THE RESULT OF THE DECISION OF THE HONBLE HIGH COURT IS THAT THE RECE IPT RECEIVED BY THE ASSESSEE IS NOT TAXABLE EITHER UNDER SEC. 9(1)(VI) OR SEC. 9(1)(VII) OF THE ACT. 5. IN THE LIGHT OF THE AFORESAID DECISION OF THE DE LHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD. ( SUPRA), WE HAVE REVERSED THE ORDERS OF THE ASSESSING OFFICER AS WELL AS OF T HE LEARNED CIT(A) AND 4 DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE OUR ORDER OF EVEN DATE IN ITA NOS. 2598, 2599, 2600 & 2601/DEL/2004 AND ITA NO.496/DEL /2006 PERTAINING TO THE A.Y. 1998-99 TO 2002-03, HOLDING THAT THE RECEIPTS RECEIVED BY THE ASSESSEE FROM PROVIDING TRANSPONDERS TO VARI OUS CHANNELS IS NOT TAXABLE IN INDIA. 6. SINCE THE VERY ADDITION MADE BY THE AO STANDS DE LETED IN THE LIGHT OF OUR ORDER IN THE QUANTUM APPEAL, THE PENALTY LEVIED BY THE ASSESSING OFFICER DOES NOT SURVIVE. WE, THEREFORE, DELETE THE PENALT Y. 7. EVEN OTHERWISE, THOUGH THE QUANTUM APPEAL IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. WAS DECIDED B Y THE TRIBUNAL AGAINST THE ASSESSEE, THE PENALTY LEVIED BY THE AO UNDER SE C. 271(1)(C) WAS DELETED BY THE TRIBUNAL VIDE ORDER DATED 20 TH FEBRUARY, 2007 BY OBSERVING THAT THE ISSUE REGARDING TAXABILITY OF THE RECEIPTS IN THE C ASE WAS HIGHLY DEBATABLE. 8. IN THE PRESENT CASE, THE ASSESSEE HAS FURNISHED ALL THE DETAILS ABOUT THE RECEIPTS RECEIVED FROM THE TV CHANNELS AND MADE A B ONA FIDE CLAIM THAT THE SAME IS NOT TAXABLE IN INDIA, WHICH VIEW HAS NOW BE EN ACCEPTED BY THE HONBLE DELHI HIGH COURT, AND THEREFORE, THE ASSESS EES CLAIM CANNOT BE SAID TO BE MALA FIDE SO AS TO ATTRACT PENALTY UNDER SEC. 271(1)(C) OF THE ACT. 9. IN THE RESULT, WE REVERSE THE ORDERS OF THE AUTH ORITIES BELOW PERTAINING TO THE ASSESSMENT YEARS 1998-99 TO 2001-02 AND DELE TE THE PENALTY LEVIED BY 5 THE AO, AND UPHOLD THE ORDER OF THE CIT(A) IN DELET ING THE PENALTY FOR THE ASSESSMENT YEAR 2002-03. 10. IN THE RESULT, THE APPEALS FOR THE ASSESSMENT Y EARS 1998-99 TO 2001-02 FILED BY THE ASSESSEE ARE ALLOWED, AND THAT OF THE REVENUE FOR THE ASSESSMENT YEAR 2002-03 IS DISMISSED. 11. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 11 TH MARCH, 2011. SD/- SD/- (B.C. MEENA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH MARCH, 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.