ITO International Taxation) Vs Bennett Coleman & Co. Ltd. (ITAT Mumbai)
No TDS on Transponder Charges Under India-UK DTAA — ITAT Dismisses Revenue Appeals
The Mumbai Bench of the Income Tax Appellate Tribunal dismissed a batch of Revenue appeals and held that transponder service fees paid to Intelsat UK are not taxable in India, and consequently, no tax was required to be deducted at source under section 195.
The assessee, Bennett Coleman & Co. Ltd., had made payments to Intelsat UK for satellite transponder services used for uplinking and downlinking television signals. Though tax was withheld out of abundant caution, the assessee filed appeals under section 248 contending that such payments were not chargeable to tax in India under the India-UK DTAA. The CIT(A) accepted the claim, following binding precedents, and granted relief.
Before the Tribunal, the Revenue argued that by virtue of Explanation 6 to section 9(1)(vi) (inserted by Finance Act, 2012 with retrospective effect), transmission by satellite constitutes “process royalty” and, therefore, the payments were taxable. Rejecting this contention, the ITAT held that unilateral amendments in domestic law cannot override treaty provisions, unless the DTAA itself is amended by mutual agreement.
Relying heavily on the decisions of the Delhi High Court in Asia Satellite and New Skies Satellite and the Bombay High Court in Neo Sports Broadcast, the Tribunal held that under Article 13 of the India-UK DTAA, royalty must relate to a “secret process”, which is absent in standard transponder services. The Tribunal further noted that Intelsat UK had no permanent establishment in India, and the Revenue had not challenged findings on non-taxability as FTS or business income.
Accordingly, the ITAT upheld the CIT(A)’s orders passed under section 248 and dismissed all Revenue appeals, reaffirming that transponder charges are not royalty under tax treaties and do not attract TDS.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
