Inmarsat Solutions BV Vs ACIT (ITAT Delhi)
Held that the amounts received for the use of transponder of tele-communication service charges are not royalty under section 9(1)(vi) of the Income Tax Act and also under Article 12(8) of Indo Netherland DTAA.
Facts- The Assessee is a company incorporated and registered under the laws of the Netherlands. The Assessee derives income from transmission of satellite signals from ship to the customers and vice versa. An equipment is located on a ship which captures the satellite signals. During the year, the Assessee has earned receipt from various customers in India from resale of airtime. No assets or employees are deployed by the Assessee in India for provision of these services.
For provision of such services assessee purchased airtime on the satellite from Inmarsat Global Ltd., which is the group concern of the assessee and owns the satellite and is based in the UK. The assessee is a tax resident of Netherland and is eligible to claim treaty benefit as per Indo Netherland DTAA.
During the year under consideration assessee received Rs.30,21,79,450/- and claimed as business income. The assessee claimed that in the absence of a permanent establishment in India the income is not chargeable to tax in India.
AO did not accept the contentions of the assessee and proposed to assess Rs.38,05,85,665/- as royalty under section 9(1)(vi)(c) of the Act and Article 12(8) of the tax treaty. DRP disposed of the objections of the assessee.
Conclusion- Hon’ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd. and New Skies Satellite BV has held that receipts from lease of transponder capacity are not in the nature of ‘royalty’ under the Act as well as under the Tax Treaty.
Held that the amounts received by the assessee for the use of transponder of tele-communication service charges are not royalty under section 9(1)(vi) of the Act and also under Article 12(8) of Indo Netherland DTAA.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal is filed by the assessee against the order of the ld. Assessing Officer dated 31.05.2022 passed under section 143(3) read with section 144C(13) read with the directions of the DRP under section 144C of the Income Tax Act (the Act) dated 24.03.2022 for assessment year 2018-19.
2. The ld. Senior Counsel for the assessee, at the outset, submits that the issue in appeal is squarely covered by the decision of the Tribunal in assessee’s group cases in the case of Inmarsat Global Limited Vs. CIT for various assessment years right from 200102 to 2018-19 wherein the Tribunal following the decisions of the Hon’ble Delhi High Court in the case of DIT Vs. New Skies Satellite [(2016) 382 ITR 114 (Del)] and Asia Satellite Communication Co. Ltd. BV [(2011) 332 ITR 340 (Del)] held that the amounts received by the assessee company from providing satellite telecommunication services are not in the nature of royalty as per India UK DTAA. The ld. Counsel submits that the orders of the co-ordinate bench decision of the Mumbai Bench in the case of group company are placed at page Nos. 1 to 243 of the paper book. The ld. counsel for the assessee further inviting our attention to the DRP order page 68 and para 4.2.2 submits that the DRP confirmed the draft order of the Assessing Officer only for the reason that the Department did not accept the decisions of the Hon’ble Delhi High Court in the case of Asia Satellite Communication Co. Ltd. (supra) and New Skies Satellite (supra) and SLPs have been filed against the said judgements in the Hon’ble Supreme Court.
3. On the other hand, the ld. DR strongly relied on the orders of the Assessing Officer/DRP.
4. Heard rival submissions perused the orders of the authorities below. On perusal of the draft assessment order it is noticed that the assessee derived income from transmitting of satellite signals from ship to the customers and vice versa. An equipment is located on a ship which captures the satellite signals. For provision of such services assessee purchased airtime on the satellite from Inmarsat Global Ltd., which is the group concern of the assessee and owns the satellite and is based in UK. The assessee is a tax resident of Netherland and is eligible to claim treaty benefit as per Indo Netherland DTAA. Assessee furnished before the Assessing Officer a copy of the Tax Residency Certificate (TRC) obtained from the Netherland tax authorities. During the year under consideration assessee received Rs.30,21,79,450/- and claimed as business income. The assessee claimed that in the absence of a permanent establishment in India the income is not chargeable to tax in India. The Assessing Officer issued show cause as to why total consideration earned by the assessee should not be considered as royalty under section 9(1)(vi) of the Act and Article 13 of Indo Netherland DTAA. The assessee filed objections as under:-
