Case Law Details
DCIT (International taxation) Vs Thaicom Public Co. Ltd. (ITAT Delhi)
The issue under consideration is whether the CIT(A) is correct in holding that the payment for provision of transponder capacity is in the nature of Royalty?
In the given case, the assessee had claimed that the income earned by it from providing transponder services to customers in India is not taxable in its hands. According to the assessee, the income earned by it from providing transponder services is neither taxable as per provisions of the Act nor as per India-Thailand DTAA. The Assessing Officer held that the assessee to be in default and held that the transponder charges received by the assessee were taxable as royalty in the hands of the assessee under the provision of section 9(1)(vi) of the Act as well as corresponding provisions of DTAA between India and Thailand.
ITAT held that, 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(l)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well. Hence, ITAT hold that the income received by the assessee non-resident on account of transponder charges from the customers in India was not taxable as royalty in its hands. Consequently, appeal raised by the Revenue is dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
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