NEW SKIES SATELLITES BV,C/O ERNST AND YOUNG LLP V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(2)(2), INTERNATIONAL TAXATION, NEW DELHI, DEPUTY COMMISSIONER OF INCOME TAX

ITA 983/DEL/2025

AI Insights

The case involves New Skies Satellites BV, a company incorporated in the Netherlands, which appealed against the final assessment order for the assessment year 2022-23. The primary contention was whether the income received from providing data transmission services via satellite should be taxed in India as 'royalty' or 'fee for technical services'. The Dispute Resolution Panel and the Assessing Officer had earlier held that such income was taxable, aligning with the definitions under the Income Tax Act and the India-Netherlands DTAA. However, the Tribunal, referencing previous High Court and Tribunal decisions favoring the assessee, overturned this position for the current assessment year.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360781 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2022-2023
• Other Referred Cases: Director of Income Tax vs. New Skies Satellite BV
• Laws Referred To: Income Tax Act, 1961, India-Netherlands Double Taxation Avoidance Agreement
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANJULA JAIN
• Assessee Lawyers: ANANYA KAPOOR; HONBLE DELHI HIGH COURT. IT IS FURTHER; HONBLE DELHI; OBSERVING
• Keywords: Transfer pricing; Question of law; Double taxation relief; Permanent establishment
• Section: 143(3); 234B

Judgement Text

"ITA No.983/D/2025 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No. 983/Del/2025 िनधा\u0005रणवष\u0005/Assessment Year: 2022-23 NEW SKIES SATELLITES BV. C/O ERNST AND YOUNG LLP Plot No.67, Sector-44, Haryana बनाम Vs. DCIT, Circle-2(2)(2), International Taxation, New Delhi. PAN No.AACCN1866C अपीलाथ\u0011 Appellant \u0013\u0014यथ\u0011/Respondent Assessee by Ms. Ananya Kapoor, Adv. Revenue by Ms. Anjula Jain, CIT DR सुनवाईक\bतारीख/ Date of hearing: 21.05.2025 उ\u000eोषणाक\bतारीख/Pronouncement on 23.05.2025 आदेश /O R D E R PER C.N. PRASAD, J.M. This appeal is filed by the assessee against the final assessment order dated 04.01.2025 for the AY 2022-23 passed by the Assessing Officer u/s 143(3) read with section 144C(13) of the Act pursuant to the directions of the DRP dated 10.12.2024 passed u/s 144C(5) of the I.T. Act. The assessee in its appeal raised the following grounds of appeal: - “1. That on the facts and in the circumstances of the case and in law; the Ld. Dispute Resolution Panel ITA No.983/D/2025 2 (‘the Panel’) erred in not directing the Learned Assessing Officer (‘Ld. AO\") to pass appropriate orders holding that the Appellant is not liable to be assessed to tax in India. 1.1. That on the facts and circumstances of the case and in law, the Panel and the Ld. AO erred in not following the orders passed by the Hon’ble High Court of Delhi for the Assessment years 2000-01 to 2014-15 and AY 2016-17 to AY 2018-19 and the Hon'ble Income Tax Appellate Tribunal for AY 2018- 19, AY 2020-21 and AY 2021- 22 in the Appellant’s own case since there was no change in facts recorded for the present year. 1.2. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in not holding that the payments received by the Appellant from providing data transmission services via Space Segment Capacity are assessable as business profits in India and in the absence of a Permanent Establishment under Article 5 of the India Netherlands Double Taxation Avoidance Agreement between India and Netherlands (‘the DTAA') the receipts earned by the Appellant are not taxable in India. 2. That on the facts and circumstances of the case and in law, the Ld. AO erred in holding that the payments received by the Appellant as consideration for data transmission services are in the nature of ‘Royalty’ as defined under section 9(1)(vi) of the Income Tax Act, 1961 (‘the Act’) and Article 12(4) of the DTAA. 2.1. That without prejudice to the above, on facts and circumstances of the case and in law. the Panel and the Ld. AO erred in reading into the expanded meaning of ‘Royalty’ contained in section 9(1)(vi) of the Act as retrospectively amended by Finance Act, 2012, for the purpose of interpreting the definition of ‘Royalty’ as provided under Article 12(4) of the India-Netherlands DTAA, when it is a settled ITA No.983/D/2025 3 position in law that amendment in the Act cannot have any effect in interpretation of DTAA as also held by the Hon’ble High Court of Delhi in the Appellant’s own case in [2016] 382 HR 114 (Delhi) for AY 2006-07 and AY 2008-09. 2.2. Without prejudice to ground 2 above, the Ld. AO and. the Panel erred in not taking cognizance of the fact that ‘use of a secret process' is a sine qua non for the payments to qualify as ‘Royalty’ under the India-Netherlands DTAA. 3. That the Ld. AO erred in holding that the payments received by the Appellant as consideration for data transmission services would also qualify as “fee for technical services” as defined under section 9(1)(vii ) of the Act as well as within the meaning of Article 12(5) of the India-Netherlands DTAA. 4. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest under Section 234B of the Act. 5. That on the facts and circumstances of the case and in law, tire Ld. AO has erred in levying interest amounting to INR 3,30,86,693/-. 6. That the Ld. AO erred in initiating penalty proceedings under section 270A of the Act.” 2. The Ld. Counsel for the assessee, at the outset, submits that the issue in appeal is squarely covered by the decisions of the Tribunal as well as the High Court in assessee’s own case for the earlier assessment years. The Ld. Counsel for the assessee referring to page 1 of the case law paper book submit that the Hon’ble High Court for the assessment years 2006-07 to 2009-10 held that the ITA No.983/D/2025 4 receipts earned by the assessee from providing data transmission services do not fall within the term of royalty under the Income Tax Act. Ld. Counsel for the assessee submits that similar view has been taken by the Hon’ble Delhi High Court for the AY 2009-10 to 2014-15 a copy of the order is placed at pages 62 to 66. The Ld. Counsel for the assessee further made submissions as under: - “1.1 The assessee is a company, incorporated under the laws of the Netherlands and is a tax resident of the Netherlands in terms of Article 4 of the Double taxation Avoidance Agreement (“DTAA”) between India and Netherlands. The assessee provides transmission services of voice, data and programmes by provision of space segment capacity on Satellites to customers under various contracts with customers around the world for these services. The Assessing Officer proposed certain adjustments in the income of the assessee in respect of the amount received by the assessee treating it as royalty and alternatively as fee for technical services. 1.2 Aggrieved against this, the assessee filed objections before Learned Dispute Resolution Panel who following the order of the earlier years confirmed the adjustment. Thereafter, the AO vide impugned order in pursuance of the direction of Ld. DRP held that revenue earned by the assessee from the provisions of transmission services of voice, data and programmes of space segment capacity on Satellites to customers was in the nature of “Royalty” u/s 9(l)(vi) of the Income Tax Act, 1961 (“the Act”) and Article 12(4) of the India-Netherland Double Taxation Avoidance Agreement (“DTAA”). Alternatively, he held that the revenue earned by the assessee is “Fee for Technical Services” u/s 9(1)(vii) of the Act r.w. Article 12(5) of the India-Netherlands DTAA. Thus, the AO assessed income of the assessee at INR 284,79,76,426/- vide order dated 04.01.2025 passed u/s 143(3) r.w.s. 144C(13) of the Act. 1.3 Further, while making the said allegations, the Ld. Assessing Officer and the Hon’ble DRP have relied on the ITA No.983/D/2025 5 orders passed in the preceding year§. The Relevant extracts of the order passed for the subject AY are reproduced as under: Relevant extracts of the Assessment order (Pg. 25-26)- running pg. 29-30 of the appeal set \"9.7 It is stated that in the earlier assessment years AY 2001-02 to AY 2013-14, appeals have been filed before Hon'ble Supreme Court against the order of the Hon'ble High Court of Delhi. For AY 2014-15, the Department has not preferred SLP on the ground that the Hon'ble High Court has itself held that, in its order in ITA No. 130/2019 that the decision of the Supreme Court in the pending cases of the assessee for AY 2001-02 to AY 2013-14 would be applicable to this also. 9.8 For AY 2015-16, SLP has not been filed against the order of the Hon'ble High Court as the order stated that the decision of the Supreme Court in the pending cases of the assessee for AY 2001-02 to 2013-14 would be applicable. Therefore, it is evident that the orders of the Hon'ble High Court are not against the interest of the Revenue and the Court has clearly specified that the decision of the Supreme Court would be binding on both assessee and Revenue. Hence, the contention of the assessee has not been accepted completely and is dependent upon the decision of the Apex Court in the aforementioned Civil Appeal. Even for AY 2016-17 and AY 2017-18, the Hon'ble High Court has also stated that the decision of the Supreme Court would be applicable and therefore the decision of the Hon'ble High Court in this regard is not against the Revenue rather it has been specifically stated by the Court that the decision of the Supreme Court would be binding. 9.9 The relevant portion of the order of the Hon'ble High Court for AY 2016-17 in ITA 3 75/2022 is reproduced for reference: \"....Learned counsel for the Appellant states that the ITAT has erred in holding that receipts of the ITA No.983/D/2025 6 assessee, earned from providing satellite transmission services do not fall within the term 'royalty' under the India-Netherlands DTAA even after insertion of Explanation 5 and 6 to section 9(1)(vi) of the Income Tax Act,1961 by Finance Act, 2012 and without considering the position of India on OECD commentary on this issue. 3. Admittedly, the question of law urged in the present appeal is covered by the decision of this Court in assessee's own case in Director of Income Tax vs. New Skies Satellite BV (2016) 382ITR 114. 4. Learned counsel for the Appellant states that the Revenue has not accepted the aforesaid decision and has preferred a Special Leave Petition against the same being Civil Appeal No.1380/2016. ---7. Accordingly, no substantial question of law arises for consideration in the present appeal and the same is dismissed. 8. However, it is clarified that the order passed in the present appeal shall abide by the final decision of the Supreme Court in the aforesaid Civil Appeal.\" The relevant portion of the order of the Hon'ble High Court for AY 2017-18 in ITA 65/2022 is reproduced for reference: — 10. The Department is in the process of filling SLP in the Hon'ble Supreme Court against the decision of the Hon'ble High Court of Delhi in ITA 41/2023 for AY 2018- 19. Hence, it is seen that the Department has not accepted the decision of the Hon'ble High Court of Delhi for the aforementioned Assessment years and hence the contention of the assessee is not accepted.” Relevant extracts of Page 45-46 of the Assessment Order- running pg. 49-50 of the appeal set It is stated that in the earlier assessment’ years AY 2001-02 to AY 2013-14, appeals have been filed before Hon’ble Supreme Court against the order of the Hon’ble High Court of Delhi. For AY 2014-15, the Department has not preferred SLP on the ground that the Hon’ble High Court has itself held that, in ITA No.983/D/2025 7 its order in ITA No. 130/2019 that the decision of the Supreme Court in the pending cases of the assessee for AY 2001-02 to AY 2013-14 would be applicable to this also. For AY 2015-16, SLP has not been filed against the order of the Hon’ble High Court as the order stated that the decision of the Supreme Court in the pending cases of the assessee for AY 2001-02 to 2013-14 would be applicable. Therefore, it is evident that the orders of the Hon’ble High Court are not against the interest of the Revenue and the Court has clearly specified that the decision of the Supreme Court would be binding on both assessee and Revenue. Hence, the contention of the assessee has not been accepted completely and is dependent upon the decision of the Apex Court in the aforementioned Civil Appeal. Even for AY 2016-17 and AY 2017-18, the Hon’ble High Court has also stated that the decision of the Supreme Court would be applicable and therefore the decision of the Hon’ble High Court in this regard is not against the Revenue rather it has been specifically stated by the Court that the decision of the Supreme Court would be binding 9.9The relevant portion of the order of the Hon'ble High Court for AY 2016-17 in ITA 375/2022 is reproduced for reference: “ ....Learned counsel for the Appellant states that the ITAT has erred in holding that receipts of the assessee, earned from providing satellite transmission services do not fall within the term 'royalty' under the India- Netherlands DTAA even after insertion of Explanation 5 and 6 to section 9(1)(vi) of the Income Tax Act, 1961 by Finance Act, 2012 and without considering the position of India on OECD commentary on this issue. 3. Admittedly, the question of law urged in the present appeal is covered by the decision of this Court in assessee’s own case in Director of Income Tax vs. New Skies Satellite BV (2016) 382 1TR 114. ITA No.983/D/2025 8 4. Learned counsel for the Appellant states that the Revenue has not accepted the aforesaid decision and has preferred a Special Leave Petition against the same being Civil Appeal No. 1380/2016.--7. Accordingly, no substantial question of law arises for consideration in the present appeal and the same is dismissed. However, it is clarified that the order passed in the present appeal shall abide by the final decision of the Supreme Court in the aforesaid Civil Appeal.” The relevant portion of the order of the Hon’ble High Court for AY 2017-18 in 1TA 65/2022 is reproduced for reference: “The issue, which the Revenue seeks to adjudicate i.e. satellite transmission services are within the term ‘royalty’ under India-Nether lands DTAA, is covered by the Division Bench ruling in The Commissioner of Income Tax - International Taxation -2 vs. New Skies Satellite B.V., ITA 416/2018, decided on 11.04.2018. In view of above, no question of law arises. The appeal is accordingly dismissed. It appears that an appeal has been entertained by the Supreme Court against the order passed in New Skies (supra). The parties to the present litigation i.e. the Revenue and the Assessee (New Skies Satellite B.V.), shall be bound by the decision on the question of law. to be decided finally in that regard.” The Department has filed SLP in the Hon'ble Supreme Court against the decision of the Hon'ble High Court of Delhi in ITA 41/2023 for AY 2018-19. For AY 2020- 21, the Revenue has filed appeal before the Hon'ble High Court against the order of the Hon'ble 1TAT & for AY 2021-22 the Revenue is in the process of filing appeal before the Hon'ble High Court against the order of the Hon'ble ITAT. Therefore, based on the above discussion, the income of the assessee is computed as under: ITA No.983/D/2025 9 Particulars Figures in Rupees Income as per ITR 1,48,88,490 Add: Royalty Income 2,84,79,76,426 Proposed assessed income taxable @ 10% 2,86,28,64,916 Relevant extracts of the Directions of the Hon’ble DRP - running pg. 72-73 of the appeal set “6(ii) The Panel has observed that the issues involved are similar to those in the case of the assessee for AY 2020-21 and 2021-22. It is seen that the DRP in its order for AY 2021-22 has relied on the directions passed by it for AY 2020-21. The directions of the DRP for AY 2021-22 are reproduced as under: “4.1 The panel notes that the issues and objections raised in Ground numbers I to 3 are interrelated and identical to those in the case of the assessee for AY 2020-21 as well as in A.Y. 2017-18. On same objections filed by the assessee in the AY 2017-18, which was followed by the Panel in A. Y. 2020-21, the DRP had observed as under - “ ...3.2 The matter is in litigation since last many years starting AY 2006-07 and upto AY 2014-15. The AO in his draft order, in para 9.7 brought out that the department is in appeal before Hon’ble Supreme Court against the judgment of Hon’ble Delhi High Court in case of the assessee which has been admitted. It has to be borne in mind that the panel is an extension of the assessment process and the AO is now bound by the directions of DRP. Accordingly, the matter needs to be kept alive in view of its pendency before the Apex Court. The panel accordingly upholds the adjustment made by the A O in this matter. The objections are rejected.” 4.2 During DRP proceedings the AR of the assessee has submitted that on identical facts and issues for AY 2001-02 to 2014-15, 2016-17, 2017-18 & 2018-19, the matter has been decided in favour of the assessee by Hon’ble Delhi High Court. It is further ITA No.983/D/2025 10 submitted that the Department has preferred appeal for AY 2001-02 to 2014-15 before the Hon’ble Supreme Court while the AR has no information regarding filing of appeals against the order of Hon'ble Delhi High Court for AY 2016-17 to 2018-19. The AO is directed to verify if the decision of the Hon’ble Delhi High Court for AY 2016-17 to 2018-019 has been accepted by the Revenue and no further appeal has been filed on identical issues before the Hon’ble Supreme Court. If the decision of the Hon ’ble Delhi High Court has been accepted by the Revenue, and no further appeal filed, the AO will follow the same. However if the same has been contested before the Hon’ble Supreme Court, the panel, in order to keep the issue alive and for the reasons recorded by the AO in Paras 3 to 9.6 of the DAO upholds the variations proposed by the AO in the DAO. Grounds No. 1 to 3 are accordingly disposed of” 6(iii) The assessee has submitted that for AY 2001-02 to 2014-15, the department has filed an appeal before the Hon'ble Supreme Court challenging the order of Hon’ble Delhi High Court. The assessee has further submitted that for AY 2016-17, 2017-18 and 2018-19, the Hon’ble High Court has decided the issue in favor of the assessee and for AY 2020-21 and 2021-22, the Hon’ble 1TAT has decided the issue in favor of assessee. Based on the above facts, the Panel members consider it appropriate to direct the AO to verify if the factual matrix and the issues involved are identical and if the said / decisions have been accepted by the Revenue. If the decisions have been accepted and no further appeal has been filed, the AO should follow the same. However, if further appeal has been filed, and the issue has not yet attained finality, in order to keep the issue alive, the proposed variation made by the AO deserves to be upheld. In view of the above, the grounds of objection 1 to 3(including sub-grounds), stand rejected.” 1.4 In this regard, it is submitted that this Hon’ble Tribunal and the jurisdictional High Court have decided the above issues in favour of the Appellant for AY 2000-01 to AY 2014-15 and AY 2016-17 to AY 2018-19. ITA No.983/D/2025 11 The substantial question of law framed by the Hon’ble High Court, vide order dated February 08, 2016, in ITA 473-474/2012 for AY 2006-07 and AY 2008-09, is reproduced below for your Honour’s ready reference: (pg. 1-7 of Case-law Compilation). “2. The substantial question framed by this Court is two-fold; (1) whether the receipts of the assessees earned from 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 under the relevant Double Tax Avoidance Agreements.” 1.5 The Hon’ble Delhi High Court answered the questions in favour of the assessee by observing as under (pg. 24 of the Case-law Compilation)'.- 59. “On a final note, India's change in position to the OECD Commentary cannot be a fact that influences the interpretation of the words defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into a treaty’ concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well. Any attempt short of this, even if it is evidence of the State's discomfort at letting data broadcast revenues slip by, will be insufficient to persuade this Court to hold that such amendments are applicable to the DTAAs. 60. Consequently, since we have held that the. Finance Act, 2012 will not affect Article 12 of the DTAAs, it would follow that the first determinative interpretation ITA No.983/D/2025 12 given to the word \"royalty\" in Asia Satellite59, 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 and in all cases which involve a Double Tax Avoidance Agreement, unless the said DTAAs are amended jointly by both parties to incorporate income from data transmission services as partaking of the nature of royalty, or amend the definition in a manner so that such income automatically becomes royalty. It is reiterated that the Court has not returned a finding on whether the amendment is in fact retrospective and applicable to cases preceding the Finance Act of 2012 where there exists no Double Tax Avoidance Agreement. 61. For the above reasons, it is held that the interpretation advanced by the Revenue cannot be accepted. The question of law framed is accordingly answered against the Revenue. The appeals fail and are dismissed, without any order as to costs.” 1.6 Further it is submitted that the appeal for the immediately preceding year i.e. AY 2021-22 has also been adjudicated in favour of the Assessee.by the Hon’ble ITAT vide order dated 07.06.2.025 in ITA No. 2733/Del/2023 (copy enclosed at Page 237-244 of the Case-law Compilation). 1.7 Also, appeals for earlier years i.e. AY 2018-19 and AY 2020-21 have also been adjudicated in favour of the Assessee by the Hon’ble ITAT in ITA 436/Del/2022 and ITA 2944/Del/2022 vide orders dated 22.04.2022 and 06.02.2024 respectively (copy of order for AY 2018-19 at Page 196- 227 and order for AY 2020-21 at Page 228-236 of the Case-law Compilation). 1.8 In all these cases it has been held that the Assessee is not liable to tax in India as ‘royalty’ and alternatively, as fees for technical services. In fact the Respondents, when filing the appeal in High Court against favourable order of ITAT, restricted their appeal to Royalty and gave up the issue of fees for technical services. This aspect has also been noted by ITAT in favour of the Assessee in its ITA No.983/D/2025 13 orders for earlier years, common order for AY 2009-10 to AY 2013-14 at para 6, 6.1 to 6.4 (copy of order at Pg. 32-51 of the Case-Law Compilation) while adjudicating in favour of the Assessee. Prayer In view of the above and in light of the fact that the appeal is covered by the decision of the jurisdictional High Court in the assessee’s own case, we request your Honour to delete the addition and allow the appeal in favour of the Assessee.” 3. On the other hand, the Ld. DR fairly submitted that the issue in appeal is decided in favour of the assessee and it is recurring issue from year to year where the Assessing Officer following the stand taken by the Revenue in earlier years the receipts by the assessee from providing data transmission service was held to be royalty. 4. Heard rival submissions, perused the orders of the authorities below. It is undisputed fact that the issue is recurring issue and the Assessing Officer following its earlier orders has been holding that the receipts from providing data transmission services was held to be royalty u/s 9(1)(vi) of the Act and Article 12(4) of the DTAA with Netherlands. We find that the issue is squarely covered by the various decisions of the Tribunal and also the High Court in assessee’s own case for the assessment years 2006-07 to 2020-21. The latest order of the Tribunal for the AY 2021-22 in ITA ITA No.983/D/2025 14 No.2733/Del/2023 dated 07.06.2024 the Tribunal following earlier years order and also the decision of the Hon’ble High Court deleted the addition made observing as under: - “2. The assessee has raised the following Grounds of Appeal:- “1. That on the facts and in the circumstances of the case and in law, the Ld. Dispute Resolution Panel ('the Panel') erred in not directing the Learned Assessing Officer ('Ld. AO') to pass appropriate orders holding that the Appellant is not liable to be assessed to tax in India. 1.1. That on the facts and circumstances of the case and in law, the Panel and the Ld. AO erred in not following the orders passed by the Hon'ble High Court of Delhi for the Assessment years 2000-01 to 2014-15 and AY 2016-17 to AY 2017-18 and the Hon'ble Income Tax Appellate Tribunal for AY 2016-17 to AY2018-19 in the Appellant's own case since there was no change in facts recorded for the present year. 1.2. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in not holding that the payments received by the Appellant from providing data transmission services via Space Segment Capacity are assessable as business profits in India and in the absence of a Permanent Establishment under Article 5 of the India-Netherlands Double Taxation Avoidance Agreement between India and Netherlands ('the DTAA), the receipts earned by the Appellant are not taxable in India. 2. That on the facts and circumstances of the case and in law, the Ld. AO erred in holding that the payments received by the Appellant as consideration for data transmission services are in the nature of 'Royalty' as defined under section 9(l)(vi) of the Income Tax Act, 1961 ('the Act') and Article 12(4) of the DTAA. ITA No.983/D/2025 15 2.1. That without prejudice to the above, on facts and circumstances of the case and in law, the Panel and the Ld.AO erred in reading into the expanded meaning of ‘Royalty ’ contained in section 9(1) (vi) of the Act as retrospectively amended by Finance Act, 2012, for the purpose of interpreting the definition of ‘Royalty’ as provided under Article 12(4) of the India-Netherland DTAA, when it is a settled position in law that amendment in the Act cannot have any effect in interpretation of DTAA as also held by the Hon'ble High Court of Delhi in the Appellant's own case in [2016] 382 ITR 114 (Delhi) for AY 2006-07 and AY 2008-09. 2.2. Without prejudice to ground 2 above, the Ld. AO and the Panel erred in not taking cognizance of the fact that 'use of a secret process' is a sine qua non for the payments to qualify as 'Royalty' under the India- Netherlands DTAA. 3. That the Ld. AO erred in holding that the payments received by the Appellant as consideration for data transmission services would also qualify as \"fee for technical- services\" as defined under section 9(1) (vii) of the Act as well as within the meaning of Article 12(5) of the India-Netherlands DTAA. 4. That the Ld. AO erred in initiating penalty proceedings under section 270A of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.” 3. Briefly stated, the assessee is a company, incorporated under the laws of the Netherlands and is a tax resident of the Netherlands in terms of Article 4 of the Double taxation Avoidance Agreement (“DTAA”) between India and Netherlands. The assessee provides transmission services of voice, data and programmes by provision of space segment capacity on Satellites to customers under various contracts with customers around the world for these services. The Assessing Officer (“AO”)/TPO (“Transfer Pricing Officer”) proposed certain ITA No.983/D/2025 16 adjustments in the income of the assessee in respect of the amount received by the assessee treating it as royalty and the AO also treated the same as fee for technical services. Aggrieved against this, the assessee filed objections before Ld. Dispute Resolution Panel (“DRP”) who following the order of the earlier year and confirmed the adjustment. Thereafter, the AO vide impugned order in pursuance of the direction of DRP held that revenue earned by the assessee from the provisions of transmission services of voice, data and programmes of space segment capacity on Satellites to customers was in the nature of “Royalty” u/s 9(l)(vi) of the Income Tax Act, 1961 (“the Act”) and Article 12(4) of the India-Netherland Double Taxation Avoidance Agreement (“DTAA”). Alternatively, he held that the revenue earned by the assessee is “Fee for Technical Services” u/s 9(l)(vii) of the Act r.w. Article 12(5) of the India-Netherlands DTAA. Thus, the AO assessed income of the assessee at INR 273,31,46,361/- vide order dated 28.8.2023 passed u/s. 143(3) r.w.s. 144C(13) of the Act. 4. Aggrieved against this, the assessee preferred appeal before this Tribunal. 5. At the time of hearing, Ld. AR submitted that that Grounds No. 1, 2 & 3 are squarely covered by the judgement of Hon’ble Delhi High Court rendered in the case of Director of Income Tax vs New Skies Satellite BV & Others in ITA No.473/2012 & Others order dated 08.02.2016 and also covered by the decision of the Tribunal in the assessee’s own case for assessment year 2020-21 vide ITA No. 2944/Del/2022 dated 06.02.2024 wherein, the aforesaid Hon’ble High Court judgement was followed. Therefore, he requested to follow the same and accordingly allow the Ground No. 1, 2 & 3 raised by the assessee. 6. Ld. CIT-DR controvert the aforesaid submissions made by the Ld. AR and supported the orders of the authorities below. 7. We have heard the rival contentions and perused the material available on record and also gone through the orders of the authorities below. Undisputedly, Ld.DRP has ITA No.983/D/2025 17 followed its direction in earlier years in passing the impugned directions. For the sake of clarity, the relevant contents of the DRP directions are reproduced as under: 4.1 “The panel notes that the issues and objections raised in Ground numbers 1 to 3 are interrelated and identical to those in case of the assessee for AY 2020-21 as well as AY 2017-18. On same objections filed by the assessee in the AY 2017-18, which was followed by the Panel in AY2020-21, the DRP had observed as under - 3.1 All the above grounds are related to the issue of amended definition of Royalty in the Income Tax Act and the definition taken in the DTAA when it was signed. The assessee operates satellites and derives income by leasing out its transponders for telecasts by various TV channels and Internet Service providers (clients). The clients enter agreements with the assessee directly or indirectly to avail of the services. The services are beamed in specific footprints of the satellite catchment area. The services availed by Indian Channels and payments made by such channels have been assessed by the AO as 'Royalty’ in view of the amended definition of Royalty per section 9(l)(vi) read with explanations (expln 2 in particular). The assessee has challenged this contention by referring to the definition of Royalty in the relevant DTAA. The assessee has also submitted the judgment by Hon'ble Delhi High Court in its own case on similar issues where relief has been granted to the assessee basis the definition of Royalty in the DTAA. 3.2 The matter is in litigation since last many years starting AY 2006-07 and upto AY 2014-15. The AO in his draft order, in para 9.7 brought out that the department is in appeal before Hon'ble Supreme Court against the judgment of Hon'ble Delhi High Court in case of the assessee which has been admitted. It has to be borne in mind that the panel is an extension of the assessment process and the AO is now bound by the directions of DRP. Accordingly, the matter needs to be kept alive in view of its pendency before the Apex Court. The panel accordingly upholds the ITA No.983/D/2025 18 adjustment made by the AO in this matter. The objections are rejected.\" 4.2 During DRP proceedings the AR of the assessee has submitted that on identical facts and issues for AY 2001-02 to 2014-15, 2016-17, 2017-18 & 2018-19, the matter has been decided in favour of the assessee by Hon’ble Delhi High Court. It is further submitted that the Department has preferred appeal for AY 2001-02 to 2014-15 before the Hon’ble Supreme Court but the AR has no information regarding filing of appeals against the order of Hon’ble Delhi High Court for AY 2016-17 to 2018-19. The AO is directed to verify the decision of the Hon’ble Delhi High court for AY 2016-17 to 2018- 19 has been accepted by the Revenue and no further appeal has been filed on identical issues before the Hon’ble Supreme Court. If the decision of the Hon’ble Delhi High Court has been accepted by the Revenue, and no further appeal filed, the AO will follow the same. However, if the same has been contested before the Hon’ble Supreme Court, the panel, in order to keep the issue alive and for the reasons recorded by the AO in Paras 3 to 9.6 of the DAO upholds the variations proposed by the AO in the DAO. Grounds No. 1 to 3 are accordingly disposed of.” 7.1. We find that in earlier years, Hon’ble Delhi High Court in the case of assessee had framed the substantial questions vide order dated 8.2.2016, in ITA 473-474/2012 for AY 2006-07 and AY 2008-09 as under:- (1) “whether the receipts of the asses sees earned from 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 under the relevant Double Tax Avoidance Agreements.” 7.2. The Jurisdictional Delhi High Court answered the aforesaid questions in favour of the assessee by observing as under:- 59. “On a final note, India's change in position to the OECD Commentary cannot be a fact that influences the ITA No.983/D/2025 19 interpretation of the words defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into a treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(l)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well. Any attempt short of this, even if it is evidence of the State's discomfort at letting data broadcast revenues slip by, will be insufficient to persuade this Court to hold that such amendments are applicable to the DTAAs. 60. Consequently, since we have held that the Finance Act, 2012 will not affect Article 12 of the DTAAs, it would follow that the first determinative interpretation given to the word \"royalty\" in Asia Satellite 59, 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 and in all cases which involve a Double Tax Avoidance Agreement, unless the said DTAAs are amended jointly by both parties to incorporate income from data transmission services as partaking of the nature of royalty, or amend the definition in a manner so that such income automatically becomes royalty. It is reiterated that the Court has not returned a finding on whether the amendment is in fact retrospective and applicable to cases preceding the Finance Act of 2012- where there exists no Double Tax Avoidance Agreement. 61. For the above reasons, it is held that the interpretation advanced by the Revenue cannot be accepted. The question of law framed is accordingly answered against the Revenue. The appeals fail and are dismissed, without any order as to costs.” 8. The facts and circumstances are identical in the instant year as well. The Revenue has not pointed any ITA No.983/D/2025 20 change into facts and circumstances of the present case. We therefore, respectfully following binding precedent (Supra), hereby direct the AO to delete the impugned addition. Accordingly, the Grounds No. 1 to 3 are allowed.” 5. Respectfully following the orders of the Tribunal and the Hon’ble High Court, we direct the Assessing Officer to delete the addition made. Ground nos. 1 to 3 are allowed. Ground nos. 4 & 5 are consequential in nature and ground no. 6 is pre-mature. 6. In the result, appeal of the assessee is partly allowed as indicated above. Order pronounced in the open court on 23/05/2025 Sd/- Sd/- (AVDHESH KUMAR MISHRA) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23.05.2025 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "