Case Law Details
Telstra Singapore Pte. Ltd. Vs DCIT (ITAT Delhi)
Conclusion: Income received on providing bandwidth services outside India was not taxable as ‘Royalty’ under India-Singapore Double Taxation Avoidance Agreement (DTAA) as mere receipt of service using equipment under the control, possession and operation of service provider would only be considered as transaction of a service and not to ‘use or right to use’ an equipment, and would not attract ‘Royalty’ under the Act or the Tax Treaty. Also, the consideration received by assessee company was not taxable as ‘Royalty’ in view of the beneficial provisions of DTAA between India and Singapore under which the definition of ‘Royalty’ had not been amended.
Held: Assessee company was incorporated in Singapore and was engaged in the business of providing digital transmission of data through international private line or multi-protocol label switching, etc. to facilitate high speed data connectivity (‘bandwidth services’). It provided bandwidth services outside India to its customers. It had entered into Global Business Service Agreement (‘GBSA’) with various customers. In case where services were provided by Indian telecom operator like Bharti Airtel in India and the services outside India were provided by assessee, it entered into One Stop Shopping Services Agreement(‘OSS’) with Bharti Airtel or any other Indian telecom operator, to facilitate single billing facility to the customer. Under the agreement with the customer, uninterrupted 24X7 services were available to it. In case, the services were unavailable or not available at the requisite speed, the customer should be entitled to rebate as per the rates agreed upon. Assessee for the year under consideration, had filed the return of income at Nil. AO was of the view that the amount received from Indian customers for the provisions of bandwidth services outside India was equipment/process royalty under section 9(1)(vi) of the Act read with Article 12(3) of the India Singapore Tax Treaty. It was held that mere receipt of service using equipment under the control, possession and operation of service provider would only be transaction of a service and not to “use or right to use” an equipment, and would not attract ‘Royalty’ under the Act or the Tax Treaty. As regarding the issue that the definition of ‘Royalty’ had not been amended in the Tax Treaty, was the receipt taxable as ‘Royalty’, Tribunal clarified that the Tax Treaty between India Singapore specifically did not include “transmission by satellite, cable, optic fiber or similar technology” in the definition of ‘Royalty’ under the Tax Treaty and also where the Tax Treaty had not undergone any amendment, the provisions of DTAA being more beneficial to assessee were attracted and assessee was not liable to be taxed on the amount received from Indian customers for the provision of bandwidth services outside India. Therefore, it was held that assessee company was a tax resident of Singapore, which was providing band width services to the various Indian Telecom Operators like Bharti Airtel in India and the services were being provided outside India and the consideration received by assessee company was not taxable as ‘Royalty’ in view of the beneficial provisions of DTAA between India and Singapore under which the definition of ‘Royalty’ had not been amended.
FULL TEXT OF THE ITAT JUDGEMENT
The present bunch of appeals filed by assessee and the Revenue are against respective orders of Assessing Officer dated 01.01.2015; 16.11.2015 and 30.11.2016 relating to assessment years 2011-12, 2012-13 and 2014-15 respectively against the order/s passed under section 144(3) r.w.s 144C of the Income-tax Act, 1961 (in short ‘the Act’).
Please become a Premium member. If you are already a Premium member, login here to access the full content.
