iSAT Africa Limited FZC Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that payment towards bandwidth service without transfer of right to use equipment or process could not be characterized as ‘royalty’ under section 9(1)(vi) or Article 12 of India-UAE DTAA. Thus, appeal decided in favour of assessee.
Facts- The assessee [ISAT Africa Ltd FZC] is a Non-Resident entity, tax resident in UAE. It is noticed that M/s. BT Global Communication (BTGC) India Pvt. Ltd. had made various remittances to non-resident entities, including ISAT Africa Ltd FZC, on which it had not deducted any TDS. M/s. BTGC had entered into an agreement with the assessee on 01.04.2016 wherein the assessee was to provide services related to communication technology, which included provisioning of network on VSAT medium, providing separate router at the customer premises, provisioning of network bandwidth etc. It was noticed that the payment under consideration is for the use or right to use of the equipment for bandwidth, and hence it qualified as royalty for the use of the process. M/s. BTGC has paid the total amount of Rs. 1,55,55,344/- which was liable to be taxed in the hands of the assessee as its Royalty income.
Conclusion- The Hon‟ble Delhi High Court in case of M/s B.T. Global Communications India Pvt. Ltd has held that there is a difference between an agreement that gives “Right to use equipment” and an agreement which involves provisions of services through use of equipment by service provider.‟ As per the contents of “The Contract” as extracted and discussed above shows that the facility provided by the assessee to the BTGC was in the form of provision of services through use of equipment of service provider and it is argued on behalf of the assessee that the contract does not give the right to use the equipment in any manner to the Indian entity.
