Shin Satellite Public Co. Ltd, New Delhi v. DDIT International Taxation, New Delhi

ITA 2468/DEL/2008 | 2004-2005
Pronouncement Date: 11-03-2011 | Result: Allowed

Appeal Details

RSA Number 246820114 RSA 2008
Assessee PAN AAGCS4481E
Bench Delhi
Appeal Number ITA 2468/DEL/2008
Duration Of Justice 2 year(s) 8 month(s) 2 day(s)
Appellant Shin Satellite Public Co. Ltd, New Delhi
Respondent DDIT International Taxation, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 11-03-2011
Date Of Final Hearing 25-02-2011
Next Hearing Date 25-02-2011
Assessment Year 2004-2005
Appeal Filed On 09-07-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `D: NEW DELHI BEFORE SHRI C.L.SETHI JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER I.T. A. NOS.2598 2599 2600 & 2601/DEL/2004 ASSESSMENT YEARS : 1998-99 1999-2000 2000-01 & 2001-02 SHIN SATELLITE PUBLIC CO. LTD. DY. DIRECTOR OF IN COME-TAX C/O S.R. BATLIBOI & CO. VS. (INTERNATIONAL TAXATI ON)-2(2) 2 ND FLOOR THE CAPITAL COURT NEW DELHI. LSC PHASE III OLOF PALME MUNIRAKA NEW DELHI. PAN: AAGCS4481E I.T. A. NO.496/DEL/2006 ASSESSMENT YEAR : 2002-03 SHIN SATELLITE PUBLIC CO. LTD. ASSTT. DIRECTOR OF INCOME-TAX THAICOM SATELLITE STATION VS. (INTERNATIONAL TAXAT ION)-2(2) 41/103 RATTANATHIBET ROAD NEW DELHI. NONTHABURI 11000 THAILAND. PAN: AAGCS4481E I.T. A. NO.2467 & 2468/DEL/2008 ASSESSMENT YEARS : 2003-04 & 2004-05 SHIN SATELLITE PUBLIC CO. LTD. DY. DIRECTOR OF IN COME-TAX THAICOM SATELLITE STATION VS. (INTERNATIONAL TAXAT ION)-2(2) 41/103 RATTANATHIBET ROAD NEW DELHI. NONTHABURI 11000 THAILAND. PAN: AAGCS4481E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI F.V. IRANI SR. ADVOCATE. RESPONDENT BY: SHRI ASHWANI MA HAJAN CIT-DR. 2 O R D E R PER BENCH ALL THESE APPEALS ARE FILED BY THE ASSESSEE. APPEA LS PERTAINING TO THE ASSESSMENT YEARS 1998-99 1999-2000 2000-01 AND 20 01-02 ARE DIRECTED AGAINST COMMON ORDER DATED 22.03.2004 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). APPEAL FOR T HE ASSESSMENT YEAR 2002-03 FILED BY THE ASSESSEE IS DIRECTED AGAINST C IT(A)S ORDER DATED 02.11.2005. APPEALS FOR THE ASSESSMENT YEARS 2003- 04 AND 2004-05 ARE DIRECTED AGAINST COMMON ORDER DATED 28.03.2008 PASS ED BY THE LEARNED CIT(A). 2. IN THESE APPEALS A COMMON AND IDENTICAL ISSUE I S INVOLVED AS TO WHETHER THE SERVICE CHARGES RECEIVED BY THE ASSESSE E FROM VARIOUS T.V. CHANNELS ON ACCOUNT OF PROVIDING FACILITY OF BROADC ASTING THEIR PROGRAMMES THROUGH THE TRANSPONDERS LOCATED IN THE SATELLITES ARE TAXABLE IN INDIA. 3. IN THE COURSE OF HEARING OF THESE APPEALS THE L EARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET HAS SUBMITTED THAT THE FACTS OF THE PRESENT CASE ARE QUITE IDENTICAL AND SIMILAR TO THAT OF ASIA SATELLI TE TELECOMMUNICATIONS CO. LTD. AS SO CLEARLY AND EMPHATICALLY OBSERVED AND ST ATED BY THE REVENUE AUTHORITIES BELOW IN THEIR RESPECTIVE ORDERS. HE THEREFORE SUBMITTED THAT THE ISSUE INVOLVED IN THESE APPEALS BE DECIDED IN THE L IGHT OF THE DECISION 3 RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CAS E OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. IN ITA NOS.131 AND 134/ 2003 DATED 31 ST JANUARY 2011 WHEREBY THE DECISION OF THE DELHI BE NCH OF THE TRIBUNAL IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. L TD. (85 ITD 478 (DEL) HAS BEEN REVERSED. HE FURTHER POINTED OUT THAT THE AO AS WELL AS THE CIT(A) HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE MAINLY RELYING UPON THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD. HE FURTHER SUBMITTED THA T SINCE THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ASIA SAT ELLITE TELECOMMUNICATIONS CO. LTD. HAS BEEN REVERSED BY TH E HONBLE DELHI HIGH COURT VIDE THEIR LORDSHIPS ORDER DATED 31 ST JANUARY 2011 THE ISSUE INVOLVED IN THESE APPEALS BE DECIDED IN FAVOUR OF THE ASSESS EE BY HOLDING THAT THE SERVICE CHARGES RECEIVED BY THE ASSESSEE FOR PROVID ING FACILITY OF BROADCASTING THE PROGRAMMES THROUGH TRANSPONDERS LO CATED IN THE SATELLITE IS NOT TAXABLE IN INDIA AS ROYALTY. IN THIS CONNECTIO N THE ASSESSEE HAS FILED BRIEF SYNOPSIS OF THIS CASE WHICH READ AS UNDER:- 1. THE APPELLANT COMPANY IS A RESIDENT OF THAILAND AND IS THE LICENSEE OF CERTAIN SATELLITES OWNED BY THE GOVERNMENT OF THAILAND. 2. THE APPELLANT PROVIDES TV CHANNELS THE FACILITY OF BROADCASTING THEIR PROGRAMMES THROUGH THE TRANSPONDERS LOCATED IN THE AFORESAID SATELLITES. FOR THIS FACILITY THE APPELLANT RECEI VES SERVICE CHARGES FROM THE TV CHANNELS. 4 3. THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOM E-TAX (APPEALS) HAVE HELD THAT THE AFORESAID SERVICE CHARGES RECEIV ED BY THE APPELLANT ARE TAXABLE IN INDIA RELYING UPON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ASIA SATELLITE TELECOMM UNICATIONS CO. LTD. (ASIA SAT.). 4. IT IS THE UNDISPUTED POSITION THAT THE RELEVANT FAC TS OF THE APPELLANTS CASE ARE IDENTICAL TO THOSE OF ASIA SAT. THIS IS E STABLISHED INTER ALIA BY THE FOLLOWING OBSERVATIONS OF THE AO AND THE CIT (A): RELIANCE IS PLACED ON THE ORDER IN THE CASE OF ASIA SAT BY THE HONBLE ITAT DELHI BENCH WHICH IS THE JURISDICTIONAL TRIBUNAL. THE FACTS OF THE CASE OF THE ASSESSEE ARE SQUARELY COVERED BY THE SAID ORDER AND THE LEGAL PROVISIONS LAID DOWN BY THE DELHI ITAT THAT PAYMENT FOR THE USE OF TRANSPONDER IS COVERED UNDER EXPLANATION 2 TO SEC. 9(1)(VI) OF THE IT ACT. THE ASSESSEE WAS CONFRONTED TO THE FACT THAT HOW HIS CASE IS NOT COVERED BY THE JUDGMENT OF THE ITAT IN THE ABOVE SAID CASE. THE ASSESSEE HAS NOT FURNISHED ANY FACTS WHICH DISTINGUISHES HIS CASE FROM THE CASE OF ASIA SAT. THE CIT(A)S OBSERVATIONS (PAGE 8 AND PAGE 5 OF TH E CONSOLIDATED ORDER OF THE CIT(A) FOR ASSESSMENT YEA RS 1998-99 TO 2001-02): THEREFORE THE JUDGMENT OF ASIA SATELLITE TELECOMMUNICATIONS COMPANY LTD. IS FULLY APPLICABLE ON THE APPELLANT AND THE APPELLANTS RECEIPTS FROM VARIOUS CHANNELS IS ROYALTY UNDER THE INCOME TAX ACT AS WELL AS UNDER THE DTAA. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE FACTS OF THE CASE CAREFULLY. I F IND THAT SUBMISSIONS GIVEN BY THE APPELLANT ARE NOT BASED ON THE CORRECT LEGAL INTERPRETATION. THE ABOVE ISSUE HAS BEEN DECIDED BY THE JURISDICTIONAL ITAT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS COMPANY LTD. V/S. DCIT. 5 5. THE ABOVE DECISION OF THE HONBLE DELHI ITAT IN THE CASE OF ASIA SAT HAS BEEN REVERSED BY THE HONBLE DELHI HIGH COURT BY ITS JUDGMENT DATED 31 ST JANUARY 2011 IN ITA NOS.131 AND 134 OF 2003. THE HONBLE DELHI HIGH COURT HAS HELD THAT THE AMOUNTS RECEIVED BY ASIA SAT ARE NOT TAXABLE IN IND IA AT ALL. 6. AS ADMITTEDLY THE RELEVANT FACTS OF THE APPELLANT S CASE ARE IDENTICAL TO THOSE OF ASIA SAT IT FOLLOWS THE REFORE THAT THE ABOVE SERVICE CHARGES RECEIVED BY THE APPELLANT ARE NOT TAXABLE IN INDIA IN VIEW OF THE ABOVE DECISION OF THE HON BLE DELHI HIGH COURT. 7. THE COMPLETE SIMILARLY BETWEEN THE ASSESSEES FACTS AND THOSE OF ASIA SAT IS FURTHER SHOWN BY A COMPARISON BETWEEN THE FOLLOWING EXTRACT FROM PARAGRAPH 35 ON PAGE 28 OF T HE HONBLE DELHI HIGH COURTS JUDGMENT AND PARAGRAPH 4.4 AT PA GE 6 OF THE AOS ORDER FOR A.Y. 1998-99: HIGH COURTS JUDGMENT AOS OBSERVATIONS TO RECAPITULATE BRIEFLY THE PROCESS OF TRANSMISSION OF TV PROGRAMMES IT STARTS WITH TV CHANNELS (CUSTOMERS OF THE APPELLANT) UPLINKING THE SIGNALS CONTAINING THE TV PROGRAMMES; THEREAFTER THE SATELLITE RECEIVES THE SIGNALS AND AFTER AMPLIFYING AND CHANGING THEIR FREQUENCY RELAYS IT DOWN IN INDIA AND OTHER COUNTRIES WHERE THE CABLE OPERATORS CATCH THE SIGNALS AND THEREAFTER DISTRIBUTE THEM TO THE TO SUMMARISE THE ENTIRE PROCESS IT MAY BE SAID THAT THE PROCESS STARTS WITH THE RECEIPT OF UPLINKED BEAM BY THE ANTENNA OF THE SATELLITE AMPLIFICATION AND MODIFICATION OF THE BEAMS IN THE CIRCUIT AND DOWN LINKING OF THE AMPLIFIED AND MODIFIED BEAM THROUGH TRANSMITTING ANTENNA IN THE FOOT PRINT AREA. THE ENTIRE SET OF ACTION AS EXPLAINED IN DETAIL IN EARLIER PARAGRAPHS IS DONE TO ENSURE THAT THE SATELLITE PERFORMS THE 6 PUBLIC. IF ANY PERSON HAS GOT DISH ANTENNA HE CAN ALSO CATCH THE SIGNALS RELAYED FROM THESE SATELLITES. THE ROLE OF THE ASSESSEE IN THIS CYCLE IS THAT OF RECEIVING THE SIGNALS AMPLIFYING THEM AND AFTER CHANGING FREQUENCY RELAYING THEM ON THE EARTH. IT IS FOR THIS SERVICE THE TV CHANNELS MAKE PAYMENT TO THE ASSESSEE. BASIS FUNCTION IN THE TRANSMISSION CHAIN I.E. RECEIVING AN UPLINKED BEAM MODIFYING AMPLIFYING THE SAME TO MAKE IT ACCESSIBLE AND READABLE FOR THE CABLE OPERATORS AND FINALLY DOWN LINKING THE SAME TO BE RECEIVED BY CABLE OPERATORS FOR FURTHER DISTRIBUTION. 4. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND FIND THAT THE PAYMENT RECEIVED BY THE ASSESSEE FROM HIS CUSTOMERS HAS BEEN TAXED AS ROYALTY WITHIN THE MEANING OF SEC. 9(1)(VI) OF T HE INCOME-TAX ACT AS WELL AS WITHIN THE MEANING OF DTAA BETWEEN INDIA AND THA ILAND BY THE ASSESSING OFFICER AS WELL AS BY THE LEARNED CIT(A). THE FACTS OF THE CASE HAVE BEEN NARRATED BY THE AO IN HIS ORDER FOR THE A .Y. 1998-99 AS UNDER:- THE COMMUNICATION SATELLITES ARE PLACED IN AN ORB IT APPROXIMATELY 36 000 KMS ABOVE THE EARTH. THE SATE LLITE ROTATES IN THE SAME DIRECTION AND AT THE SAME SPEED AS THAT OF THE EARTH SO THAT THE SATELLITE REMAINS STATIC IN R ELATION TO A PARTICULAR SURFACE WHERE THE FOOTPRINT OF THE SATE LLITE IS. THE SATELLITE HOUSES AND POWERS THE MICROWAVE REPEATER AND INCLUDES THE SOLAR PANEL A BATTERY SYSTEM THAT STO RES THE ENERGY AND POWERS THE SATELLITE DURING THE PERIOD WHEN THE SUNLIGHT IS BLOCKED GYROS TO STABILIZE THE SATELLITE TO KEEP T HE FOOTPRINT PROPERLY ALIGNED ON THE GROUND. THE REPEATER SECTI ON CONSISTS OF AN ANTENNA SYSTEM (COMPRISING OF TWO REFLECTORS ONE FOR RECEIVING AND OTHER FOR TRANSMITTING) AND MICROWAVE USED TO 7 RECEIVE MODIFY IN FREQUENCY AMPLIFY MODIFY IN PO LARIZATION AND RETRANSMIT THE SIGNALS INVOLVED. THE PATH OF E ACH CHANNEL FROM RECEIVING ANTENNA TO THE TRANSMITTING ANTENNA IS CALLED A TRANSPONDER. THE SIGNALS UPLINKED BY THE TELECASTI NG COMPANIES ARE RECEIVED THOUGH THE RECEIVING ANTENNA. THIS AN TENNA LOCATED ON THE SATELLITE TRANSFORMS THE WIRELESS (ELECTROMAGNETIC) SIGNALS INTO AN ELECTRICAL FORM WHICH IS SUITABLE FOR AMPLIFICATION IN THE LOW NOISE RECEIVE R (LNR). DUE TO THE LONG DISTANCE OF THE SATELLITE I.E. 3600 0 KMS FROM THE EARTH THE SIGNALS RECEIVED BY THE TRANSPONDER ARE A T A VERY LOW POWER LEVEL. THE SIGNALS ARE THAN MODIFIED WITHIN THE LNR IN FREQUENCY TO CORRESPOND TO THE RELAY RANGE AND THEN AMPLIFIED AGAIN BEFORE THE INDIVIDUAL FILTERS. A MICROWAVE T YPE BOOSTS THE POWER OF THE SIGNAL WITHIN EACH TRANSPONDER TO A HI GH POWER LEVEL BEFORE APPLYING IT TO THE TRANSMITTING ANTENN A. THE TRANSMITTING ANTENNA TRANSFORMS THE ELECTRICAL SIGN AL FROM ALL THE TRANSPONDERS INTO AN EQUIVALENT ELECTROMAGNETIC FORM FOR RELATION INTO THE FOOTPRINT AREA. THE PROCESS OF A MPLIFICATION IS DONE BY A COMPLICATED PROCEDURE THROUGH TWT AMPLIFI ERS. TO SUMMARIZE THE ENTIRE PROCESS IT MAY BE SAID THA T THE PROCESS STARTS WITH THE RECEIPT OF UPLINKED BEAM BY THE ANTENNA OF THE SATELLITE AMPLIFICATION AND MODIFICATION OF THE BEAMS IN THE CIRCUIT AND DOWN LINKING OF THE AMPLIFIED AND M ODIFIED BEAM THROUGH TRANSMITTING ANTENNA IN THE FOOT PRINT AREA. THE ENTIRE SET OF ACTION AS EXPLAINED IN DETAIL IN EARL IER PARAGRAPHS IS DONE TO ENSURE THAT THE SATELLITE PERFORMS THE B ASIC FUNCTION IN THE TRANSMISSION CHAIN I.E. RECEIVING AN UP LINK ED BEAM MODIFYING AMPLIFYING THE SAME TO MAKE IT ACCESSIBL E AND READABLE FOR THE CABLE OPERATORS AND FINALLY DOWN L INKING THE SAME TO BE RECEIVED BY CABLE OPERATORS FOR FURTHER DISTRIBUTION. THUS THE SERIES OF ACTS OR ACTION UN DERTAKEN WITHIN THE TRANSPONDER ARE DONE TO ACHIEVE A PARTICULAR RE SULT I.E. TO MAKE THE SIGNALS VIEWABLE. THE ENTIRE DISCUSSION M AKES IT CLEAR THAT THE SERIES OF STEPS UNDERTAKEN WITHIN A SATELL ITE ARE NOTHING BUT A PROCESS AND ARE SQUARELY COVERS UNDER THE DEF INITION GIVEN IN EXPLANATION 2 OF SECTION 9(1)(VI) OF THE I .T. ACT. ANOTHER POINT THAT IS TO BE CONSIDERED IS WHETHER T HE PROCESS USED BY THE PAYEE COMPANIES HAS TO BE SECRET OR NOT AS PER THE PROVISIONS OF THE I.T. ACT. IN THIS CONNECTION TH E ORDER OF THE 8 DELHI BENCH OF THE ITAT IN THE CASE OF ASIA SATELLI TE TELECOMMUNICATION COMPANY LTD. IS RELIED UPON HERE IN IT HAS BEEN DECIDED THAT THE WORD `SECRET IN EXPLANATION 2 DOES NOT QUALIFY THE WORD PROCESS AND IS RESTRICTED TO FORMU LA ONLY. HENCE IT IS NOT FELT NECESSARY TO GO INTO THE FACT AS TO WHETHER THE PROCESS USED SHOULD BE SECRET OR NOT. HOWEVER THE SAME HAS BEEN CONSIDERED IN DETAIL IN THE SUCCEEDING PAR T OF THIS ORDER WHILE EXAMINING THE TAXABILITY OF THE RECEIPT S AS ROYALTY IN TERMS OF THE PROVISIONS OF THE DTAA BETWEEN INDI A AND THAILAND. THE TELECASTING COMPANIES HAVE ENTERED INTO AGREEM ENT WITH THE ASSESSEE IN ORDER TO MAKE SURE THAT THEIR PROGRAMMES ARE DOWNLINKED FROM THE SATELLITE IN A SUITABLE FOR M SO THAT THE CABLE OPERATORS CAN ACCESS THE SAME AND DISTRIBUTE IT TO THE END USER I.E. THE PUBLIC WHO VIEW THE PROGRAMME. THUS THERE IS NO DOUBT ABOUT THE FACT THAT THE SAID COMPANIES ARE US ING THE PROCESS IN THE TRANSPONDERS OF ASSESSEES SATELLITE AND THE PAYMENT BEING MADE BY THEM IS PRECISELY FOR THE USE OF THE SAID PROCESS ONLY. RELIANCE IS PLACED ON THE RULING OF THE AUTHORITY FOR ADVANCE RULING IN THE CASE OF Y REPORTED IN 238 ITR 296. IN THE SAID CASE THE AMERICAN COMPANY WAS OPERATING A WORDWIDE CREDIT CAR SYSTEM AND THE RELATED TRAVEL B USINESS AND WAS RECEIVING PAYMENTS FOR THE SAME. THE AMERICAN COMPANY WAS MAINTAINING A MAIN FRAME COMPUTER WHICH WAS CO NNECTED TO THE DATABASE IN HONGKONG. THE DATABASE WAS IN T URN CONNECTED TO A LOCATION IN INDIA WHICH WAS OWNED A ND CONTROLLED BY AN INDIAN COMPANY. THE INDIAN COMPAN Y RECEIVED INFORMATION ON COMPUTER ABOUT THE USE OF C REDIT CARDS AND TRAVELER CHEQUES FROM ALL OVER INDIA AND IN TUR N WAS MAKING PAYMENTS TO THE AMERICAN COMPANY FOR THE USE OF ITS SERVICES. IT WAS HELD THAT THE PAYMENT IS IN THE N ATURE OF ROYALTY UNDER CLAUSE (III) OF EXPLANATION 2 TO SECTION 9(1) (VI). THE ENTIRE DISCUSSION LEAVES NO DOUBT ABOUT THE FA CT THAT THE PAYMENTS RECEIVED BY THE ASSESSEE IS SQUARELY C OVERED UNDER THE TERM ROYALTY AS DEFINED IN THE EXP. 2 OF SEC. 9(1)(VI) OF THE I.T. ACT 1961. THE ONLY POINT THAT NOW NEE DS TO BE CONSIDERED IS AS TO WHETHER OR NOT THE PAYMENT REC EIVED BY THE 9 ASSESSEE FROM NON RESIDENTS IS ALSO COVERED UNDER R OYALTY AS PER SUB SECTION (C ) OF SEC. 9(1)(VI). 5. THE AFORESAID ACTION OF THE AO HAS BEEN UPHELD B Y THE LEARNED CIT(A) BY OBSERVING AND HOLDING THAT THE ISSUE HAS BEEN DE CIDED BY THE DELHI BENCH OF ITAT IN THE CASE OF ASIA SATELLITE TELECOMMUNICA TION CO. LTD. VS. DCIT (2003) 85 ITD 478 (DEL) AGAINST THE ASSESSEE AND HE THEREFORE RELYING UPON THE SAID DECISION HELD THAT THE INCOME OF THE ASSE SSEE FROM THE LEASE OF THE TRANSPONDERS FOR UTILIZING THE FOOTPRINT IN INDIA I S LIABLE TO BE TAXED AS ROYALTY IN INDIA. THE CIT(A) HAS FURTHER OBSERVED THAT THE JUDGMENT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD. (SUPRA) I S FULLY APPLICABLE TO THE ASSESSEES CASE AND THE ASSESSEES RECEIPT FROM VAR IOUS CHANNELS IS ROYALTY WITHIN THE MEANING OF INCOME-TAX ACT AS WELL AS DTA A. THE CIT(A) THEREFORE HELD THAT THE AO WAS JUSTIFIED IN TAXING THIS AMOUNT AS ROYALTY. 6. THE LEARNED DR HAS SUPPORTED THE ORDERS OF THE A UTHORITIES BELOW. IT WAS NOT THE CASE OF THE LEARNED DR THAT THE FACTS O F THE PRESENT CASE ARE NOT IDENTICAL TO THE CASE OF ASIA SATELLITE TELECOMMUN ICATION CO. LTD. VS. DCIT DECIDED BY THE DELHI BENCH OF THE TRIBUNAL WHICH HA S SINCE BEEN REVERSED BY THE HONBLE DELHI HIGH COURT. 7. AFTER HEARING BOTH THE PARTIES AND CONSIDERING T HE FACTS OF THE CASE IT IS BEYOND DOUBT THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. IT IS N OW CLEAR THAT THE DECISION 10 OF DELHI BENCH OF TRIBUNAL IN THE CASE OF ASIA SATE LLITE TELECOMMUNICATIONS CO. LTD. HAS BEEN REVERSED BY THE HONBLE DELHI HIG H COURT VIDE THEIR LORDSHIPS ORDER DATED 31 ST JANUARY 2011 IN ITA NOS.131 & 134 OF 2003. THE STATEMENT OF FACTS HAS BEEN NARRATED BY THE HON BLE DELHI HIGH COURT IN PARA 5 OF THEIR ORDER. THE ACTIVITY OF THAT ASSESS EE NAMELY ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. HAS BEEN DISCUSSED BY T HE HONBLE DELHI HIGH COURT IN PARA 5 TO 9 OF THEIR ORDER AS UNDER:- 5. THE APPELLANT/ASSESSEE VIZ. ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. IS A COMPANY INCORPORA TED IN HONG KONG AND CARRIES ON BUSINESS OF PRIVATE SATELL ITE COMMUNICATIONS AND BROADCASTING FACILITIES. THIS C OMPANY WAS FORMED IN 1988 AND IT CLAIMS THAT IT HAD NO OFFICE IN INDIA. APPEALS PERTAINS TO THE ASSESSMENT YEAR 1997-98 AND IT IS ALSO CLAIMED THAT DURING THE RELEVANT PREVIOUS ASSESSMEN T YEAR I.E. 1996-97 THE ASSESSEE HAD NO CUSTOMERS WHO ARE RES IDENTS OF INDIA. DURING THE PREVIOUS YEAR RELEVANT TO THE A SSESSMENT YEAR UNDER APPEAL THE APPELLANT WAS THE LESSEE OF A SATELLITE CALLED ASIA SAT I WHICH WAS LAUNCHED IN APRIL 1990 AND WAS THE OWNER OF A SATELLITE CALLED ASIA SAT 2 WHICH WAS LA UNCHED IN NOVEMBER 1995. THESE SATELLITES WERE LAUNCHED BY T HE APPELLANT AND WERE PLACED IN A GEOSTATIONARY ORBIT IN ORBITAL SLOTS WHICH INITIALLY WERE ALLOTTED BY THE INTERNA TIONAL TELECOMMUNICATION UNION TO UK AND SUBSEQUENTLY HAN DED OVER THE CHINA. THESE SATELLITES NEITHER USE INDIA N ORBITAL SLOTS NOR ARE THEY POSITIONED OVER INDIAN AIRSPACE. THE FOOTPRINTS OF ASIASAT 1 AND ASIASAT 2 EXTEND OVER FOUR CONTINENTS VIZ. ASIA AUSTRALIA EASTERN EUROPE AND NORTHERN AFRICA. THE FOOTPRINT IS THAT AREA OF THE EARTHS SURFACE OVER WHICH A SI GNAL RELAYED FROM THE APPELLANTS SATELLITE CAN BE RECEIVED. AS IASAT 1 COMPRISES OF A SOUTH BEAM AND A NORTH BEAM AND ASIA SAT 2 COMPRISES OF THE C BAND AND THE KU BAND. THE TERRI TORY OF INDIA FALLS WITHIN THE FOOTPRINT OF THE SOUTH BEAM OF ASIASAT 1 AND THE C BAND OF ASIASAT 2. 11 6. IT ENTERS INTO AN AGREEMENT WITH TV CHANNELS COMMUNICATION COMPANIES OR OTHER COMPANIES WHO DESI RE TO UTILIZE THE TRANSPONDER CAPACITY AVAILABLE ON THE A PPELLANTS SATELLITE TO RELAY THEIR SIGNALS. THE CUSTOMERS HA VE THEIR OWN RELAYING FACILITIES WHICH ARE NOT SITUATED IN INDI A. FROM THESE FACILITIES THE SIGNALS ARE BEAMED IN SPACE WHERE T HEY ARE RECEIVED BY A TRANSPONDER LOCATED IN THE APPELLANT S SATELLITE. THE TRANSPONDER RECEIVES THE SIGNALS AND ON ACCOUNT OF THE DISTANCE THE SIGNALS HAVE TRAVELED THEY ARE REQUIR ED TO BE AMPLIFIED. THE AMPLIFICATION IS A SIMPLE ELECTRICA L OPERATION. THEREAFTER THE FREQUENCY ON WHICH THE SIGNALS ARE TO BE DOWNLINKED IS CHANGED ONLY IN ORDER TO FACILITATE T HE TRANSMISSION OF SIGNALS SO THAT THERE IS NO DISTORT ION BETWEEN THE SIGNALS THAT ARE BEING RECEIVED AND THE SIGNALS THAT ARE BEING RELAYED FROM THE TRANSPONDER. THE TRANSPONDE R OPERATIONS ARE COMMONLY KNOWN WHICH ARE CARRIED OU T NOT ONLY IN SATELLITE TRANSMISSION BUT ALSO IN THE CASE OF TERRESTRIAL TRANSMISSION. THERE IS NO CHANGE IN THE CONTENT OF THE SIGNALS WHATSOEVER THAT IS CARRIED OUT BY THE APPELLANT IN THE TRANSPONDER. THEREAFTER THE SIGNALS LEAVE THE TRA NSPONDER AND ARE RELAYED OVER THE ENTIRE FOOTPRINT AREA WHERE TH EY CAN BE RECEIVED BY THE FACILITIES OF THE APPELLANTS CUSTO MERS OR THEIR CUSTOMERS. 7. IT IS THE CASE OF THE ASSESSEE THAT IT HAS NO RO LE WHATSOEVER TO PLAY EITHER IN THE UPLINKING ACTIVITY OR IN THE RECEIVING ACTIVITY. ITS ROLE IS CONFINED IN SPACE WHERE THE TRANSPONDER WHICH IT MAKES AVAILABLE TO ITS CUSTOME RS PERFORMS A FUNCTION WHICH IT IS DESIGNED TO PERFORM. THE ON LY ACTIVITY THAT IS PERFORMED BY THE APPELLANT ON EARTH IS THE TELEMETRY TRACKING AND CONTROL OF THE SATELLITE. THIS IS CAR RIED OUT FROM A CONTROL CENTRE AT HONG KONG. 8. FOR THIS REASON IT IS CLAIMED BY THE APPELLANT THAT NO PART OF THE INCOME GENERATED BY IT FROM THE CUSTOME RS TO WHOM THE AFORESAID SERVICES ARE PROVIDED WAS CHARGEABLE TO TAX IN INDIA AND FOR THIS REASON NO RETURN INCOME WAS FILE D IN INDIA. HOWEVER DEPUTY COMMISSIONER OF INCOME TAX (NON-RES IDENT CIRCLE) NEW DELHI AS ASSESSING OFFICER ISSUED A LE TTER NOTICE 12 DATED 20.10.1999 UNDER SECTION 142(1) STATING THAT THE ASSESSEE HAD ENTERED INTO AGREEMENTS WITH VARIOUS COMPANIES FOR LEASE OF TRANSPONDERS FOR DOWNLINKING PROGRAMMES TO VARIO US COUNTRIES INCLUDING INDIA AND THEREFORE INCOME OF THE ASSESSEE WAS CHARGEABLE IN INDIA. THE APPELLANT WAS ACCORDI NGLY CALLED UPON TO FILE ITS RETURN. THE ASSESSEE RESPONDED BY THE QUESTIONING THE AUTHORITY OF THE AO AND EXPLAINING AS TO WHY ITS INCOME WAS NOT CHARGEABLE TO TAX IN INDIA. IT ALSO SOUGHT SOME TIME TO FILE ITS RETURN OF INCOME. ULTIMATELY THE RETURN WAS FILED ON 30.12.1999 REITERATING THAT NO INCOME EARNED BY THE APPELLANT WAS CHARGEABLE TO TAX IN INDIA. 9. THE AO HOWEVER WENT AHEAD WITH THE ASSESSMENT PROCEEDINGS. THE ASSESSMENT ORDER DATED 29.03.2000 WAS PASSED ASSESSING THE INCOME OF THE ASSESSEE AT RS.160 28 03 316. ACCORDING TO THE AO THE APPELLA NT HAD A BUSINESS CONNECTION IN INDIA AND THEREFORE WAS CH ARGEABLE TO TAX IN INDIA. HE REJECTED THE APPELLANTS CONTENTI ON THAT ITS REVENUES OUGHT TO BE APPORTIONED HAVING REGARD TO T HE NUMBER OF COUNTRIES COVERED BY THE FOOTPRINT. ACCORDING T O HIM THE REVENUES WOULD HAVE TO BE APPORTIONED ON THE BASIS OF COUNTRIES TARGETED BY THE T.V. CHANNELS WHO WERE TH E APPELLANTS CUSTOMERS. ON THIS BASIS HE ESTIMATED THAT NINETY PERCENT OF THE APPELLANTS REVENUE WAS ATTRIBUTABLE TO INDIA. AFTER ARRIVING AT THE INCOME OF THE APPELLANT HE H ELD THAT EIGHTY PER CENT THEREOF WAS APPORTIONED TO INDIA AS MOST O F THE CHANNELS WERE INDIA SPECIFIC AND THEIR ADVERTISEMEN T REVENUE WAS FROM INDIA. 8. AFTER CONSIDERING THE FACTS OF THE CASE AND ORDE R OF THE CIT(A) AS WELL AS TRIBUNAL AND AFTER TAKING NOTE OF THE RELEVANT STATUTORY PROVISIONS OF SEC. 4 5 9 & 90 OF THE INCOME-TAX ACT 1961 AND PROVI SION OF DTAA HIGHLIGHTING FEATURES OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE CLIENT THE HONBLE HIGH COURT DID NOT AGREE TO THE VIEW TAKEN BY THE TRIBUNAL ON THE INTERPRETATION OF SEC. 9(1)(VI) OF THE ACT. ACCORDINGLY 13 QUESTION NO.3 WHETHER ON THE FACTS AND CIRCUMS TANCES OF THE CASE THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE AMOUNT P AID TO THE ASSESSEE BY ITS CUSTOMERS REPRESENTED INCOME BY WAY OF ROYALTY AS T HE SAID EXPRESSION IS DEFINED IN EXPLANATION 2 TO SEC. 9(1)(VI) OF THE AC T WAS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE HON BLE HIGH COURT AND SET ASIDE THE ORDER OF THE TRIBUNAL ON THIS ASPECT. 9. THE HONBLE HIGH COURT OF DELHI IN THE ABOVE REF ERRED CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD. IN ITA NOS. 13 1 TO 134/2003 HAS HELD THAT RECEIPTS EARNED FROM PROVIDING DATA TRANSMISSI ON SERVICES THROUGH PROVISION OF SPACE SEGMENT CAPACITY ON SATELLITES D OES NOT CONSTITUTE ROYALTY WITHIN THE MEANING OF SEC. 9(1)(VI) OF THE ACT. IN DOING SO THE HONBLE HIGH COURT HAS CONCLUSIVELY HELD THAT WHILE PROVIDI NG TRANSMISSION SERVICES TO ITS CUSTOMERS THE CONTROL OF THE SATELLITE OR T HE TRANSPONDER ALWAYS REMAINS WITH THE SATELLITE OPERATOR AND THE CUSTOME RS ARE MERELY GIVEN ACCESS TO THE TRANSPONDER CAPACITY. ACCORDINGLY SINCE TH E CUSTOMER DOES NOT UTILIZE THE PROCESS OR EQUIPMENT INVOLVED IN ITS OPERATIONS THE CHARGES PAID TO THE SATELLITE OPERATORS ARE NOT COVERED WITHIN THE MEAN ING OF ROYALTY AS PROVIDED UNDER EXPLANATION 2 TO SEC. 9(1)(VI) AND THEREFORE THE SAME CANNOT BE TREATED AS ROYALTY. IN THIS CASE THE REVENUE ALSO RAISED THE QUESTION REGARDING APPLICABILITY OF SEC. 9(1)(VII) FOR THE F IRST TIME BEFORE THE TRIBUNAL. 14 ALTHOUGH THIS GROUND WAS ADMITTED IT WAS NOT DECI DED AS THE RECEIPT WAS HELD TO BE ASSESSABLE UNDER SEC. 9(1)(VI) OF THE AC T BY THE TRIBUNAL. NO ARGUMENT WAS ADVANCED BY THE LEARNED COUNSEL FOR TH E REVENUE BEFORE THE HONBLE HIGH COURT IN THIS MATTER. THEREFORE THE SUBMISSION OF THE REVENUE REGARDING APPLICABILITY OF SEC. 9(1)(VII) WAS NOT A CCEPTED. THE RESULT OF THE DECISION OF THE HONBLE HIGH COURT IS THAT THE RECE IPT RECEIVED BY THE ASSESSEE IS NOT TAXABLE EITHER UNDER SEC. 9(1)(VI) OR SEC. 9(1)(VII) OF THE ACT. 10. AS A RESULT THE APPEAL PREFERRED BY THE ASSESS EE BEFORE THE HONBLE HIGH COURT WAS ALLOWED AND THE JUDGMENT OF THE TRIB UNAL WAS SET ASIDE. 11. THEREFORE IN THE LIGHT OF THE DISCUSSIONS MADE ABOVE AND IN THE LIGHT OF THE FACT THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THAT OF THE CASE DECIDED BY THE HONBLE HIGH COURT IN THE CASE OF AS IA SATELLITE TELECOMMUNICATION CO. LTD. (SUPRA) AND RESPECTFULLY FOLLOWING THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE ABOVE REFERRE D CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. WE HOLD THAT THE SERVI CE CHARGES RECEIVED BY THE ASSESSEE FROM VARIOUS TV CHANNELS ON ACCOUNT OF PROVIDING FACILITY OF BROADCASTING THEIR PROGRAMMES THROUGH THE TRANSPOND ERS LOCATED IN THE SATELLITES ARE NOT LIABLE TO BE TAXED AS ROYALTY IN INDIA. 12. AT THIS STAGE IT IS PERTINENT TO NOTE THAT A C OORDINATE BENCH OF INCOME- TAX APPELLATE TRIBUNAL I.E. DELHI BENCH `C NEW DE LHI IN THE CASE OF M/S. 15 INTEL SAT CORPORATION VS. ADIT IN ITA NO. 543/DEL/2 010 PERTAINING TO THE ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 04.03.2011 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AFTER FOLLOWING THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATI ONS PVT. LTD. (SUPRA). 13. WE THEREFORE SET ASIDE THE ORDERS OF THE AUTHO RITIES BELOW AND DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT. 14. IN THE RESULT ALL THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED IN THE MANNER AS INDICATED ABOVE. 15. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 11 TH MARCH 2011. SD/- SD/- (B.C. MEENA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH MARCH 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.