Intelsat Corporation Vs DCIT (ITAT Delhi)
At the outset, it is brought to our notice by the learned AR that in assessee’s own case for the AYs 2005-06 and 2009-10 to 2011-12 in ITA Nos.2234/Del/2009, 6041/Del/2012, 451 & 6312/Del/2014, after considering the circumstances and contentions of the parties, a Coordinate Bench of this Tribunal decided the issue in favour of the assessee. The Tribunal followed the decision of the Hon’ble jurisdictional High Court in the case of Asia Satellites (supra) and DIT vs New Skies Satellite BV, 382 ITR 114 (Del). Learned AR further submitted that since there is no change in the fundamental facts permeating all these years including the Asstt. Year 2012-13, the consistent view taken by the Tribunal as well as the Hon’ble High Court has to be followed and the issue has to be answered in favour of the assessee.
ITAT held that Satellite transmission services provided by USA based company in India could not be brought to tax by treating the same as royalty income and amendment to the Income Tax Act, 1961 with a retrospective or prospective effect, cannot be read in a manner so as to extend the operation to the terms of international treaty.
FULL TEXT OF THE ITAT JUDGEMENT
Challenging the order dated 18.12.2015 u/s 143(3) read with Section 144C(13) of the Income-tax Act, 1961 (“the Act”) passed by the learned AO pursuant to the directions dated 9.10.2015 issued by the Dispute Resolution Panel (DRP), assessee preferred this appeal aggrieved by the action of the authorities below to bring the receipts as royalty in India.
2. Brief facts of the case are that the Intelsat Corporation (IC)(assessee) is a tax resident of USA with its registered office in Washington. Assessee qualifies as a tax resident of USA in terms of Article 4 of the Double Taxation Avoidance Agreement (DTAA) and the provisions of such DTAA are applicable to the case of the assessee.
3. Assessee is the owner and operator of global network of telecommunication satellites located in outer space and is engaged in active business of transmitting telecommunication signals to/from its customers and various TV channels, NICNET and Internet Service providers are using the satellites for various purposes including telecommunication, broadcasting etc; that for such purpose the assessee enters into contract with various parties around the world; and that during the FY 2011-12, the assessee leased out the transponders/bandwidth to various customers in India and customers outside India, who are using the transponder for their business in India and they as a part of their business, the assessee provided capacity on its existing satellites in order to enable the customers to upload and download information. For the AY 2012-13, the assessee filed their return of income on 28.9.2012 declaring an income of Rs.18,24,926/-and claiming a refund on account of claim of TDS amounting to Rs.65,90,960/-.
4. Learned AO after recording the assessment history of the assessee from AY 1996-97 to 2011-12 and also while referring to the provisions of OECD Commentary on Article 12 and also the decision of PanAm Sat International Systems Inc.(7 Intl. Tax Law Report 419) held that the consideration received by the assessee from the provision of satellite transmission services to its customers fall under the royalty definition as given in Section 9(1)(vi) of the Act and Article 12 of the India USA tax treaty and hence taxable in India and accordingly found that incomes of the assessee are taxable as royalty both under the Act and the DTAA after insertion of retrospective clarificatory explanations to Section 9(1)(vi) of the Act. He also recorded a finding that since the Department had not accepted the order of the Hon’ble High Court in the case of Asia Satellite , 332 ITR 340 (Del), held that the payments received by the assessee are taxable in India as royalty both as per the provisions of the Act as well as the tax treaty and at the same time payments made by way of non resident were also considered as deemed to accrue or arise in India as per the provisions of Section 9(1)(vi)(c) of the Act and Article 12(7)(b) of the tax treaty and are taxable @ 10% of the gross amount. On this premise, learned AO summarized the following amounts to tax:
