Asia Satellite Telecommunications Company Limited Vs ACIT (ITAT Delhi)
Satellite Transponder Fees Not ‘Royalty’ Under DTAA: Delhi ITAT Applies New Skies & Engineering Analysis to India–Hong Kong Treaty
Delhi ITAT, Delhi Bench ‘D’, in Asia Satellite Telecommunications Company Ltd. Vs ACIT (International Taxation) (ITA Nos.2353 & 2674/Del/2023; AYs 2020-21 & 2021-22; order dated 19-12-2025), held that fees received for satellite transmission/transponder services from Indian customers are not taxable as ‘royalty’ in India under Article 12 of the India–Hong Kong DTAA.
The Tribunal noted that the assessee, a Hong Kong tax resident, provided satellite transmission services using satellites, transponders and infrastructure located entirely outside India, with no equipment, office or permanent establishment in India. Relying on the Delhi High Court’s rulings in Asia Satellite and DIT vs New Skies Satellite BV, as affirmed by the Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd., the Tribunal reiterated that unilateral amendments to domestic law (Finance Act, 2012 inserting Explanations 4–6 to section 9(1)(vi)) cannot be read into or override DTAA provisions.
Rejecting the Revenue’s arguments on chronology (DTAA signed post-2012 amendment), ambulatory interpretation under Article 3(2), and sovereign supremacy based on Gramophone Co., the Tribunal held that treaty terms prevail unless amended bilaterally. Since Article 12 of the India–Hong Kong DTAA defines ‘royalty’ narrowly and does not cover mere use of satellite transmission services, the receipts could not be taxed as process royalty or equipment royalty. Applying section 90(2), the Tribunal allowed the assessee’s grounds, directed re-examination of the refund claim, and dismissed the challenge to penalty initiation as premature. Appeals for both years were partly allowed in favour of the assessee
FULL TEXT OF THE ORDER OF ITAT DELHI
