CIT International Taxation -3 Vs Telstra Singapore Pte Ltd. (Delhi High Court)
Delhi High Court held that the receipts from Indian customers for services provided outside Indian Territory, in connection with use or right to use of process or equipment by the assessee company, cannot be taxed as royalty as per section 9(l)(vi) of the Income Tax Act.
Facts- Vide the present appeal the appellant seeks our opinion on whether the receipts from Indian customers for services provided outside the territory of India would be taxable under Section 9(1)(vi) of the Income Tax Act read along with Article 12 of the Double Taxation Avoidance Agreement between India and Singapore.
Conclusion- Since there was no transfer or conferment of a right in respect of a patent, invention or process. Customers and those availing of the services provided by Telstra were not accorded a right over the technology possessed or infrastructure by it. The underlying technology and infrastructure remained under the direct and exclusive control of Telstra. Parties availing of Telstra‘s services were not provided a corresponding general or effective control over any intellectual property or equipment. The agreements merely enabled them to avail of the services offered by it.
Held that the service recipient pays also cannot possibly be recognised as being intended to acquire a right in respect of a patent, invention, process or equipment. The word ―process‖ being liable to be construed ejusdem generis is lent added credence by clause (iii) employing the expression “or similar property” which follows. It thus clearly appears to be intended to extend to a host of intellectual properties. This we observe only as an aside since the question raised in these appeals stands conclusively answered in any case in light of our conclusions rendered in the context of the extent of the applicability of Section 9 of the Act and the scope of Article 12 of the DTAA.
