ACIT (IT) -4(1)(1), MUMBAI v. RELIANCE JIO INFOCOMM LTD., MUMBAI

ITA 6334/MUM/2018 | 2018-2019
Pronouncement Date: 15-11-2019 | Result: Dismissed

Appeal Details

RSA Number 633419914 RSA 2018
Assessee PAN AABCI6363G
Bench Mumbai
Appeal Number ITA 6334/MUM/2018
Duration Of Justice 1 year(s) 13 day(s)
Appellant ACIT (IT) -4(1)(1), MUMBAI
Respondent RELIANCE JIO INFOCOMM LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-11-2019
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 15-11-2019
Assessment Year 2018-2019
Appeal Filed On 02-11-2018
Judgment Text
ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 1 OF 21 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH MUMBAI [CORAM : PRAMOD KUMAR (VICE PRESIDENT) AND RAVISH SOOD (JUDICIAL MEMBER) ] ITA NO S . 6331 TO 6334 / MUM / 201 8 ASSESSMENT YEAR: 2018 - 19 ASSISTANT COMMISSIONER OF INCOME - TAX APPELLANT (IT) 4(1)(1) MUMBAI VS RELIANCE JIO INFO CO MM LTD .. RESPONDENT 3 RD FLOOR MAKER CHAMBERS IV 222 NARIMAN POINT MUMBAI MAHARASHTRA - 400021 [PAN: AABCI6363G] APPEARANCES BY AVANEESH TIWARI FOR T HE AP P ELLANT SUNIL M LALA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : SEPTEMBER 19 201 9 DATE OF PRONOUNC EMENT : NOVEMBER 1 5 201 9 O R D E R PER PRAMOD KUMAR VP : 1. BY WAY OF THESE FOUR APPEALS THE ASSESSING OFFICER HAS CHALLENGED THE CORRECTNESS OF THE ORDERS ALL DATED 10 TH AUGUST 2018 PASSED BY THE CIT(A) - 57 MUMBAI UPHOLDING THE APPEALS FILED BY THE ASSESSEE UNDER SECTION 248 OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) IN THE MATTER OF TAX WITHHOLDING LIABILITY UNDER SECTION 195 OF THE ACT FROM CERTAIN REMITTANCES MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2018 - 19 . 2. ALL THE APPEALS HAVE COMMON GRIEVANCES AND THESE GRIEVANCES ARISE OUT OF MATERIALLY SIMILAR FACTS OF THE CASE. THE MAIN ARGUMENT IN SUPPORT OF THIS PLEA AS EVIDENT FROM RATHER VERBOSE GROUNDS OF APPEAL IS THAT THE EXPLANATION 5 AND 6 TO SECTION 9(1)(VI ) MUST HOLD THE FIELD IN THE CONTEXT OF INTERPRETATION OF ARTICLE 12 OF INDIA SINGAPORE DOUBLE TAXATION AVOIDANCE AGREEMENT [(1994) 209 ITR (STATUTE) 1] (INDO SINGAPORE TAX TREATY IN SHORT) ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 2 OF 21 SO FAR CONNOTATIONS OF UNDEFINED EXPRESSIONS THEREIN ARE CONCE RNED. ALTHOUGH THE REFERENCE IS ALL ALONG MADE FOR EXPLANATION 5 AND EXPLANATION 6 THE WAY ARGUMENT IS ADVANCED THE EMPHASIS IS ONLY ON EXPLANATION 6. IT IS IN THIS CONTEXT THAT RELIANCE IS PLACED ON ARTICLE 3(2) OF THE INDO SINGAPORE TAX TREATY AND A RE FERENCE IS MADE TO HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS VATIKA TOWNSHIP PVT LTD [(2014) 367 ITR 466 (SC)] . 3. GROUND NOS. 1 TO 4 WHICH WE WILL TAKE UP TOGETHER RAISE THE FOLLOWING GRIEVANCES: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) HAS ERRED IN HOLDING THAT TAX WAS NOT REQUIRED TO B E DEDUCTED AT SOURCE ON THE PAYMENT MADE BY THE ASSESSEE TO RELIANCE JIO INFOCOMM PTE LIMITED SINGAPORE (RJIPL) FOR AVAILING BANDW IDTH SERVICES AS IT DID NOT AMOUNT TO INCOME OF THE PAYEE BY WAY OF ROYALTY U/S 9( 1 )(VI) OF THE IT ACT 1961 READ WITH ARTICLE 12 OF INDIA - SINGAPORE DTAA? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) HAS ERRED IN NOT TAK ING INTO ACCOUNT THAT IN ABSENCE OF A DEFINITION OF THE TERMS 'USE OF OR RIGHT TO USE' AND 'PROCESS' IN ARTICLE 12 OF THE INDIA - SINGAPORE DTAA IN RELATION TO ROYALTY ARTICLE 3(2) OF THE SAID DTAA ALLOWS FOR TAKING RECOURSE TO THE MEANING CONTAINED IN THE DOMESTIC LAW OF THE STATE APPLYING THE TREATY (THAT IS INDIA)? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) HAS ERRED IN NOT CONSIDERING EXPLANATION 5 AND 6 TO SECTION 9( 1 )(VI) OF THE ACT IN RELATION TO PAYMENT MADE BY THE ASSESSEE TO RJIPL SINGAPORE FOR BANDWIDTH SERVICES IN LIGHT OF DIRECT MANDATE PROVIDED BY ARTICLE 3(2) OF THE INDIA - SINGAPORE DTAA? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) HAS ERRED IN NOT CONSIDERING EXPLANATIO N 5 AND 6 TO SECTION 9( 1 )(VI) OF THE ACT AS BEING DECLARATORY AND CLARIFICATORY AMENDMENTS EXPLAINING THE LAW AS EXISTING FROM 01.06.1976 ONWARDS AS THEY SATISFY THE CONDITIONS LAID DOWN BY A CONSTITUTION BENCH OF HON'BLE SUPREME COURT IN THE CASE OF COM MISSIONER OF INCOME TAX (CENTRAL) - 1 NEW DELHI VS VATIKA TOWNSHIP PVT LTD (CIVIL APPEAL NO. 8750 OF 2014 ARISING OUT OF SLP (C) NO. 540 OF 2009 FOR BEING AS SUCH? 3. GRIEVANCE OF THE ASSESSEE IN SUBSTANCE IS THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE DID NOT HAVE TAX WITHHOLDING OBLIGATION IN RESPECT OF PAYMENTS OF BANDWIDTH SERVICES TO RELIANCE JIO INFOCOMM PTE LTD SINGAPORE. ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 3 OF 21 4. THE IS SUE IN APPEAL LIES IN A RATHER NARROW COMPASS OF MATERIAL FACTS. THE ASSESSEE BEFORE US IS AN INDIAN COMPANY AND IT HAS UNDER A BANDWIDTH SERVICES AGREEMENT WITH A SINGAPORE BASED ENTITY I.E. RELIANCE JIO INFOCOMM PTE LTD (RJ - S IN SHORT) PAID US $ 15 91 520. WHILE THE ASSESSEE INITIALLY DEDUCTED THE TAX AT SOU RCE @10% UNDER THE PROVISIONS OF ARTICLE 12 OF INDO SINGAPORE TAX TREATY AND GROSSED UP THE SAME UNDER SECTION 195A THE ASSESSEE SUBSEQUENTLY FILED AN APPEAL UNDER SECTION 248 PRAYING FOR A DECLARATION TO THE EFFECT THAT THE ASSESSEE WAS NOT LEGALLY LIABLE TO WITHHOLD THE TAX AS DETAILED ABOVE FROM THIS PAYMENT. IT WAS SUBMITTED BY THE ASSESSEE THAT RJ - S BEING FISCALLY DOMICILED IN INDIA IS ELIGIBLE TO THE BENEFITS OF INDIA SINGAPORE TAX TREATY THAT THE INCOME OF RJ - S ON ACCOUNT OF BANDWIDTH SERVICES SO PROVIDED IS PURELY IN THE NATURE OF ITS BUSINESS INCOME AND THAT IN TERMS OF THE REQUIREMENTS OF ARTICLE 7 OF INDO SINGAPORE TAX TREATY SUCH AN INCOME CANNOT BE TAXED I N INDIA. THE ASSESSEE FILED A COPY OF THE TAX RESIDENCY CERTIFICATE OF RJ - S AS ISSUED BY THE INLAND REVENUE SERVICE OF SINGAPORE A DECLARATION TO THE EFFECT THAT RJ - S DOES NOT HAVE A PERMANENT ESTABLISHMENT (PE) IN INDIA A COPY OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH RJ - S AND MADE ELABORATE SUBMISSIONS TO THE EFFECT THAT THESE PAYMENTS CANNOT BE BROUGHT TO TAX IN INDIA EITHER IN TERMS OF THE PROVISIONS OF THE INCOME TAX ACT 1961 OR EVEN IN TERMS OF THE PROVISIONS OF INDO SINGAPORE TAX TREAT Y. UPHOLDING THE PLEA OF THE ASSESSEE LEARNED CIT(A) OBSERVED INTER ALIA AS FOLLOWS: THE APPELLANT HAS ALSO MADE SUBMISSIONS THAT THE PAYMENTS TO RJIPL FOR BANDWIDTH SERVICES SHOULD NOT BE CONSIDERED AS ROYALTY UNDER THE ACT AS WELL AS UNDER THE INDIA - SINGAPORE DTAA. IT IS NOTED THAT BASED ON THE TERMS OF THE AGREEMENTS POINTED OUT BY THE APPELLANT AND AS CONFIRMED IN THE DETAILED SUBMISSIONS FILED BEFORE ME THE APPELLANT HAS ONLY RECEIVED AN ACCESS TO SERVICE AND NOT ANY ACCESS TO ANY EQUIPMENT OF R JIPL DEPLOYED BY IT FOR PROVISION OF SUCH SERVICES NOR ANY ACCESS TO ANY PROCESS WHICH HELP IN PROVIDING SUCH BANDWIDTH SERVICES. ALL INFRASTRUCTURE AND PROCESS REQUIRED FOR PROVISION OF BANDWIDTH SERVICES WAS ALWAYS USED AND UNDER THE CONTROL OF RJIPL AND SAME WAS NEVER GIVEN BY RJIPL TO THE APPELLANT OR TO ANY PERSON WHO ARE AVAILING THE BANDWIDTH SERVICES FROM RJIPL. FURTHER RELYING ON THE VARIOUS DECISIONS OF THE INDIAN COURTS AS CITED BY THE APPELLANT I AM OF THE VIEW THAT IF THE PROCESS INVOLVED TO PROVIDE THE SERVICE IS NOT 'SECRET' I.E. THE IPR IN THE PROCESS IS NOT OWNED / REGISTERED IN A SPECIFIC OWNER'S NAME BUT IS A STANDARD COMMERCIAL PROCESS FOLLOWED BY THE INDUSTRY PLAYERS THEN THE SAME CANNOT BE CLASSIFIED AS SECRET PROCESS AS REQUIRED UND ER THE INDIA - SINGAPORE DTAA FOR THE PAYMENTS TO CONSTITUTE ROYALTY. I AM ALSO OF THE VIEW THAT AMENDMENTS IN THE ACT CANNOT BE ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 4 OF 21 READ INTO TREATY PROVISIONS WITHOUT AMENDING THE TREATY ITSELF. THEREFORE THE ARGUMENTS CITED BY THE APPELLANT WOULD STILL HOLD GOOD UNDER THE INDIA - SINGAPORE DTAA EVEN PURSUANT TO THE AMENDMENTS MADE BY THE FINANCE ACT 2012 AND THE MEANING OF THE TERM PROCESS AS DEFINED IN THE ACT IS FOR LIMITED PURPOSE OF SECTION 9(L)(VI) AND CANNOT BE READ INTO THE DTAA. FURTHER BASED ON TE RMS OF THE AGREEMENTS POINTED OUT BY THE APPELLANT AND AS CONFIRMED IN THE DETAILED SUBMISSIONS FILED BEFORE ME THE APPELLANT MERELY RECEIVES SERVICES FROM RJIPL WHICH IS A STANDARD TELECOM SERVICE AND IS NOT IN ANY WAY CONCERNED OR OBLIGED WHETHER DIRECT LY OR INDIRECTLY N RELATION TO THE EQUIPMENT DEPLOYED BY RJIPL FOR PROVISION OF THE BANDWIDTH SERVICES. THE APPELLANT NEITHER USES NOR HAS ANY RIGHT TO USE ANY OF THE EQUIPMENTS DEPLOYED BY RJIPL. ANY EQUIPMENT DEPLOYED BY RJIPL MAY BE USED BY IT FOR PROVI DING BANDWIDTH SERVICES TO VARIOUS OTHER PERSONS AND NOT ONLY TO THE APPELLANT. THIS NECESSITATES THAT POSSESSION AND CONTROL OVER ANY EQUIPMENT REMAINS WITH KJIPL ONLY. THUS BASED ON THESE FACTS AS ALSO CONSIDERING THE DEFINITION OF 'ROYALTY' UNDER THE INDIA - SINGAPORE DTAA WHICH IS NARROWER IN SCOPE COMPARED TO THE DEFINITION UNDER THE ACT IT CAN BE CONCLUDED THAT THE AMOUNTS PAID BY THE APPELLANT TO RJIPL IS NEITHER TOWARDS USE OF (OR FOR OBTAINING RIGHT TO USE) INDUSTRIAL/COMMERCIAL/SCIENTIFIC EQUIPME NT NOR TOWARDS USE OF (OR FOR OBTAINING RIGHT TO USE) ANY PROCESS. IN LIGHT OF THE ABOVE DISCUSSION I HOLD THAT THE PAYMENTS MADE BY THE APPELLANT TO RJIPL FOR PROVISION OF BANDWIDTH SERVICES WILL BE IN THE NATURE OF BUSINESS PROFITS AND CANNOT BE CLASS IFIED AS FEES FOR TECHNICAL SERVICES OR ROYALTY EITHER UNDER THE ACT OR THE INDIA - SINGAPORE DTAA. FURTHER IN ABSENCE OF RJPLS BUSINESS CONNECTION OR A PE IN INDIA THE BUSINESS PROFITS WILL NOT BE TAXABLE IN INDIA. 5. THE ASSESSING OFFICER IS AGGRIEVED BY THE RELIEF SO GRANTED BY THE LEARNED CIT(A) AND IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. A COORDINATE BENCH OF THIS TRIBUNAL WHILE DEALING WITH THE SAME ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2016 - 17 AND IN THE JUDGMENT REPORTED AS DCIT VS RELIANCE ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 5 OF 21 JIO INFOCOMM LTD [(2019) 73 ITR (T) 194 (MUM)] HAS SPEAKING THROUGH ONE OF US (I.E. THE JUDICIAL MEMBER) OBSERVED INTER ALIA AS FOLLOWS: . WE FIND THAT OUR INDULGENCE IN THE PRESENT APPEAL HAS BEEN SOUGHT BY THE REVENUE TO ADJUDICATE AS TO WHETHER THE CIT(A) IS CORRECT IN CONCLUDING THAT THE AMOUNT PAID BY THE ASSESSEE FOR AVAILING BANDW IDTH SERVICES TO RJIPL DID NOT CONSTITUTE 'ROYALTY' AND WAS ITS 'BUSINESS PROFITS'. ADMITTEDLY AS THE REVENUE HAS NOT ASSAILED THE OBSERVATIONS OF THE CIT(A) THAT THE PAYMENTS MADE BY THE ASSESSEE TO RJIPL CANNOT BE HELD AS FTS THEREFORE WE CONFINE OURS ELVES TO THE ISSUE TO THE EXTENT THE SAME HAS BEEN ASSAILED BY THE REVENUE BEFORE US. AS IS DISCERNIBLE FROM THE RECORD THE ASSESSEE PURSUANT TO THE TERMS OF THE 'AGREEMENT' HAD ONLY RECEIVED STANDARD FACILITIES I.E BANDWIDTH SERVICES FROM RJIPL. IN FACT AS OBSERVED BY THE CIT(A) THE ASSESSEE ONLY HAD AN ACCESS TO SERVICES AND DID NOT HAVE ANY ACCESS TO ANY EQUIPMENT DEPLOYED BY RJIPL FOR PROVIDING THE BANDWIDTH SERVICES. APART THERE FROM THE ASSESSEE ALSO DID NOT HAVE ANY ACCESS TO ANY PROCESS WHICH HE LPED IN PROVIDING OF SUCH BANDWIDTH SERVICES BY RJIPL. AS A MATTER OF FACT ALL INFRASTRUCTURE AND PROCESS REQUIRED FOR PROVISION OF BANDWIDTH SERVICES WAS ALWAYS USED AND UNDER THE CONTROL OF RJIPL AND THE SAME WAS NEVER GIVEN EITHER TO THE ASSESSEE OR T O ANY OTHER PERSON AVAILING THE SAID SERVICES. WE ARE PERSUADED TO SUBSCRIBE TO THE OBSERVATIONS OF THE CIT(A) THAT AS THE PROCESS INVOLVED TO PROVIDE THE WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES PERUSED THE ORDERS OF THE LOWER AU THORITIES AND THE MATERIAL AVAILABLE ON RECORD AND THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THEM. WE FIND THAT OUR INDULGENCE IN THE PRESENT APPEAL HAS BEEN SOUGHT BY THE REVENUE TO ADJUDICATE AS TO WHETHER THE CIT(A) IS CORRECT IN CONCLUDING THAT THE AM OUNT PAID BY THE ASSESSEE FOR AVAILING BANDWI D TH SERVICES TO RJIPL DID NOT CONSTITUTE 'ROYALTY' AND WAS ITS 'BUSINESS PROFITS'. ADMITTEDLY AS THE REVENUE HAS NOT ASSAILED THE OBSERVATIONS OF THE CIT(A) THAT THE PAYMENTS MADE BY THE ASSESSEE TO RJIPL CANNO T BE HELD AS FTS THEREFORE WE CONFINE OURSELVES TO THE ISSUE TO THE EXTENT THE SAME HAS BEEN ASSAILED BY THE REVENUE BEFORE US. AS IS DISCERNIBLE FROM THE RECORD THE ASSESSEE PURSUANT TO THE TERMS OF THE 'AGREEMENT' HAD ONLY RECEIVED STANDARD FACILITIES I.E BANDWI D TH SERVICES FROM RJIPL. IN FACT AS OBSERVED BY THE CIT(A) THE ASSESSEE ONLY HAD AN ACCESS TO SERVICES AND DID NOT HAVE ANY ACCESS TO ANY EQUIPMENT DEPLOYED BY RJIPL FOR PROVIDING THE BANDWI D TH SERVICES. APART THERE FROM THE ASSESSEE ALSO DID NOT HAVE ANY ACCESS TO ANY PROCESS WHICH HELPED IN PROVIDING OF SUCH BANDWI D TH SERVICES BY RJIPL. AS A MATTER OF FACT ALL INFRASTRUCTURE AND PROCESS REQUIRED FOR PROVISION OF BANDWI D TH SERVICES WAS ALWAYS USED AND UNDER THE CONTROL OF RJIPL AND THE SAME WAS NEVER GIVEN EITHER TO THE ASSESSEE OR TO ANY OTHER PERSON AVAILING THE SAID SERVICES. WE ARE PERSUADED TO SUBSCRIBE TO THE OBSERVATIONS OF THE CIT(A) THAT AS THE PROCESS INVOLVED TO PROVIDE THE BANDWI D TH SERVICES WAS NOT A 'SECRET' I.E IPR IN THE PROC ESS WAS NOT OWNED/REGISTERED IN THE NAME OF RJIPL BUT WAS A STANDARD COMMERCIAL PROCESS THAT WAS FOLLOWED BY THE INDUSTRY PLAYERS THEREFORE THE SAME COULD NOT BE CLASSIFIED AS A 'SECRET PROCESS' WHICH WOULD HAVE BEEN REQUIRED FOR CHARACTERING THE AFORES AID PAYMENT MADE BY THE ASSESSEE TO RJIPL AS 'ROYALTY' UNDER THE INDIA - SINGAPORE DTAA. WE ARE FURTHER IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT AS THE AMOUNT PAID BY THE ASSESSEE TO RJIPL WAS NEITHER TOWARDS USE ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 6 OF 21 OF (OR FOR OBTAINING RIGHT TO USE) INDUSTRIAL COMMERCIAL OR SCIENTIFIC EQUIPMENT NOR TOWARDS USE OF (OR FOR OBTAINING RIGHT TO USE) ANY SECRET FORMULA OR PROCESS THEREFORE THE SAME COULD NOT BE CLASSIFIED AS PAYMENT OF 'ROYALTY' BY THE ASSESSEE. INSOFAR THE LD. D.R HAD TRIED TO PRESS I NTO SERVICE EXPLANATION 6 TO SEC. 9(1)(VI) IN ORDER TO DRIVE HOME HIS CONTENTION THAT THE PAYMENT MADE BY THE ASSESSEE TO RJIPL FOR AVAILING THE BANDWI D TH SERVICES WOULD FALL WITHIN THE SWEEP OF 'ROYALTY' IS CONCERNED WE ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THE SAME. IN OUR CONSIDERED VIEW THE AMENDMENT IN SEC. 9(1)(VI) WILL NOT HAVE ANY BEARING ON THE DEFINITION OF 'ROYALTY' AS CONTEMPLATED IN THE INDIA - SINGAPORE DTAA. OUR AFORESAID VIEW IS FORTIFIED BY THE ORDER OF THE HON'BLE HIGH COURT OF BOMBA Y IN THE CASE OF THE CIT V. RELIANCE INFOCOMM LTD. (IT APPEAL NO. 1395 OF 2016 DATED 05.02.2019). THE HON'BLE HIGH COURT IN ITS AFORESAID JUDGMENT HAD AFTER REFERRING TO THE JUDGMENTS OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF DIT V. NEW SKIES SATE LLITE BV [2016] 382 ITR 114/238 TAXMAN 577/68 TAXMANN.COM 8 AND CIT V. SIEMENS AKTIONGESELLSCHAFT [2009] 310 ITR 320 ( BOM )] HAD AFTER DELIBERATING ON THE AMENDMENT MADE AVAILABLE ON THE STATUTE BY THE EXPLANATION 6 TO SEC. 9(1)(VI) OBSERVED THAT MERE AMENDMENT IN THE I - T ACT WOULD NOT OVERRIDE THE PROVISIONS OF DTAA TREATIES. IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS WE SHALL NOW FURTHER DELIBERATE ON THE DEFINITION OF ROYALTY AS CONTEMPLATED IN THE INDIA - SINGAPORE TAX TREATY. IN OUR CONSIDERED VIEW THERE IS SUBSTANTIAL FORCE IN THE CONTENTION ADVANCED BY THE LD. A.R THAT THOUGH THE TERM 'ROYALTY' AS USED IN ARTICLE 12 OF INDIA - HUNGARY DTAA TAKES WITHIN ITS SWEEP '...TRANSMISSION BY SATELLITE CABLE OPTIC FIBRE OR SIMILAR TECHNOLOGY' HOWEVER THE DEFINITION OF 'ROYALTY' IN THE INDIA - SINGAPORE TAX TREATY WITH WHICH WE ARE CONCERNED HAS A NARROW MEANING. IN FACT WE FIND THAT DESPITE THE FACT THAT THE INDIA - SINGAPORE TAX TREATY WAS AMENDED BY NOTIFICATION NO. SO 935(E) DATED 23.03.2017 HOWEVER THE DEFINITION OF 'ROYALTY' THEREIN ENVISAGED HAD NOT BEEN TINKERED WITH AND REMAINS AS SUCH. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE AMOUNT RECEIVED BY RJIPL FROM THE ASSESSEE FOR PROVIDING STANDARD BANDWI D TH SERVICES COULD NOT BE CHARACTERISED AS 'ROYALTY' AS PER THE INDIA - SINGAPORE DTAA AND AS RIGHTLY OBSERVED BY THE CIT(A) WAS IN FA CT THE 'BUSINESS PROFITS' OF RJIPL. INSOFAR THE TAXABILITY OF THE AFORESAID 'BUSINESS PROFITS' IS CONCERNED WE FIND THAT AS RJIPL DID NOT HAVE ANY BUSINESS CONNECTION OR A PE IN INDIA THEREFORE THE SAME AS PER ARTICLE 7 OF THE INDIA - SINGAPORE DTAA COULD NOT HAVE BEEN BROUGHT TO TAX IN INDIA SERVICES WAS NOT A 'SECRET' I.E IPR IN THE PROCESS WAS NOT OWNED/REGISTERED IN THE NAME OF RJIPL BUT WAS A STANDARD COMMERCIAL PROCESS THAT WAS FOLLOWED BY THE INDUSTRY PLAYERS THEREFORE THE SAME COULD NOT BE CLASS IFIED AS A 'SECRET PROCESS' WHICH WOULD HAVE BEEN REQUIRED FOR CHARACTERING THE AFORESAID PAYMENT MADE BY THE ASSESSEE TO RJIPL AS 'ROYALTY' UNDER THE INDIA - SINGAPORE DTAA. WE ARE FURTHER IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT AS THE AMOUNT PA ID BY THE ASSESSEE TO RJIPL WAS NEITHER TOWARDS USE OF (OR FOR OBTAINING RIGHT TO USE) INDUSTRIAL COMMERCIAL OR SCIENTIFIC EQUIPMENT NOR TOWARDS USE OF (OR FOR OBTAINING RIGHT TO USE) ANY SECRET FORMULA OR PROCESS THEREFORE THE SAME COULD NOT BE CLASSI FIED AS PAYMENT OF 'ROYALTY' BY THE ASSESSEE. INSOFAR THE LD. D.R HAD TRIED TO PRESS INTO SERVICE EXPLANATION 6 TO SEC. 9(1)(VI) IN ORDER TO DRIVE HOME HIS CONTENTION THAT THE PAYMENT MADE BY THE ASSESSEE TO RJIPL FOR AVAILING THE BANDWIDTH SERVICES WOULD FALL WITHIN THE SWEEP OF 'ROYALTY' IS CONCERNED WE ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THE SAME. ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 7 OF 21 IN OUR CONSIDERED VIEW THE AMENDMENT IN SEC. 9(1)(VI) WILL NOT HAVE ANY BEARING ON THE DEFINITION OF 'ROYALTY' AS CONTEMPLATED IN THE INDIA - SINGAPORE DTAA. OUR AFORESAID VIEW IS FORTIFIED BY THE ORDER OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF THE CIT V. RELIANCE INFOCOMM LTD. (IT APPEAL NO. 1395 OF 2016 DATED 05.02.2019). THE HON'BLE HIGH COURT IN ITS AFORESAID JUDGMENT HAD AFTER REFERRING TO THE JUDGMENTS OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF DIT V. NEW SKIES SATELLITE BV [2016] 382 ITR 114/238 TAXMAN 577/68 TAXMANN.COM 8 AND CIT V. SIEMENS AKTIONGESELLSCHAFT [2009] 310 ITR 320/177 TAXMAN 8/(BOM.) HAD AFTER DELIBERATING ON THE AME NDMENT MADE AVAILABLE ON THE STATUTE BY THE EXPLANATION 6 TO SEC. 9(1)(VI) OBSERVED THAT MERE AMENDMENT IN THE I - T ACT WOULD NOT OVERRIDE THE PROVISIONS OF DTAA TREATIES. IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS WE SHALL NOW FURTHER DELIBERATE ON TH E DEFINITION OF ROYALTY AS CONTEMPLATED IN THE INDIA - SINGAPORE TAX TREATY. IN OUR CONSIDERED VIEW THERE IS SUBSTANTIAL FORCE IN THE CONTENTION ADVANCED BY THE LD. A.R THAT THOUGH THE TERM 'ROYALTY' AS USED IN ARTICLE 12 OF INDIA - HUNGARY DTAA TAKES WITHIN ITS SWEEP '...TRANSMISSION BY SATELLITE CABLE OPTIC FIBRE OR SIMILAR TECHNOLOGY' HOWEVER THE DEFINITION OF 'ROYALTY' IN THE INDIA - SINGAPORE TAX TREATY WITH WHICH WE ARE CONCERNED HAS A NARROW MEANING. IN FACT WE FIND THAT DESPITE THE FACT THAT THE IN DIA - SINGAPORE TAX TREATY WAS AMENDED BY NOTIFICATION NO. SO 935(E) DATED 23.03.2017 HOWEVER THE DEFINITION OF 'ROYALTY' THEREIN ENVISAGED HAD NOT BEEN TINKERED WITH AND REMAINS AS SUCH. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERE D VIEW THAT THE AMOUNT RECEIVED BY RJIPL FROM THE ASSESSEE FOR PROVIDING STANDARD BANDWIDTH SERVICES COULD NOT BE CHARACTERISED AS 'ROYALTY' AS PER THE INDIA - SINGAPORE DTAA AND AS RIGHTLY OBSERVED BY THE CIT(A) WAS IN FACT THE 'BUSINESS PROFITS' OF RJIPL . INSOFAR THE TAXABILITY OF THE AFORESAID 'BUSINESS PROFITS' IS CONCERNED WE FIND THAT AS RJIPL DID NOT HAVE ANY BUSINESS CONNECTION OR A PE IN INDIA THEREFORE THE SAME AS PER ARTICLE 7 OF THE INDIA - SINGAPORE DTAA COULD NOT HAVE BEEN BROUGHT TO TAX IN I NDIA 8. LEARNED DEPARTMENTAL REPRESENTATIVES ARMOURY IS HOWEVER NOT EXHAUSTED . 9. LEARNED DEPARTMENTAL REPRESENTATIVES BASIC STAND IS THAT THE SPECIFIC ISSUES RAISED IN THE GROUNDS OF APPEAL WHICH GO TO THE ROOT OF MATTER AND CONCLUSIVELY UPHOLD THE STAND OF THE ASSESSING OFFICER ARE NOT DEALT WITH IN THE JUDICIAL PRECEDENTS RELIED UPON . AS WE HAVE NOTED EARLIER AS WELL AND AS EVIDENT FROM THE SPECIFIC GROUNDS OF APPEAL THE SPECIFIC PLEA TAKEN IN THIS APPEAL IS THAT THE EXP LANATION 5 AND 6 TO SECTION 9(1)(VI) MUST HOLD THE FIELD IN THE CONTEXT OF INTERPRETATION OF ARTICLE 12 OF THE INDO SINGAPORE TAX TREATY SO FAR CONNOTATIONS OF UNDEFINED EXPRESSIONS THEREIN ARE CONCERNED IN VIEW OF THE SPECIFIC PROVISIONS OF ARTICLE 3(2 ) OF INDO SINGAPORE TAX TREATY ITSELF AND IN THE LIGHT OF AS THE GROUNDS OF APPEAL POINT OUT HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF VATIKA TOWNSHIP PVT LTD (SUPRA) . ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 8 OF 21 10 . IT IS ONLY IN EXCEPTIONAL CASES THAT THERE IS AN OCCASION TO DEVIATE F ROM THE DECISIONS OF THE COORDINATE BENCHES BUT THAT DOES NOT MEAN THAT IN THE COVERED CASES ALL DOORS ARE SHUT ON THE PARTIES. W HEN A COORDINATE BENCH JUDGMENT DOES NOT APPEAL TO ANOTHER COORDINATE BENCH OR WHEN THE COORDINATE BENCH DISCOVERS THAT THE JUDICIAL PRECEDENT IS RENDERED PER INCURIUM IT COULD INDEED BE OPEN TO THE COORDINATE BENCH TO REFER THE MATTER FOR THE CONSIDERATION OF A LARGER BENCH OR IN A FIT CASE HOLD THAT THE JUDICIAL PRECEDENT FOR THE SPECIFIC REASONS SET OUT IS NOT A BINDING JUDICIAL PRECEDENT. LET US ALSO NOT LOSE SIGHT OF THE FACT THAT AS POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THERE IS A DIRECT DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SIEMENS AKTIONGESELLSCHAFT [(2009) 310 ITR 320 (BOM)] UPHOLDING AMBULATORY APPROACH TO DOMESTIC LAW MEANING OF UNDEFINED TERMS UNDER ARTICLE 3(2) AND IF THE SAME APPROACH IS ADOPTED IN THE PRESENT CASE FOR CERTAIN EXPRESSIONS APPEARING IN THE DEFINITION IN THE ROYALTY THE PLEA OF THE REVENUE AT LEAST ON THE FACE OF IT DOES NOT SEEM TO BE TOTALLY DEVOID OF LEGALLY SUSTAINABLE MERITS. IN ANY EVENT EVEN THOUGH THE DECISION RELIED UPON REFERS TO THE AF ORESAID DECISION IT DOES NOT AT ALL DEAL WITH THE INTERPLAY OF DOMESTIC LAW DEFINITIONS UNDER ARTICLE 3(2) WITH UNDEFINED TREATY EXPRESSIONS. OF COURSE THAT IS ONLY ONE OF THE ASPECTS OF THE MATTER AND THERE ARE MANY OTHER NUANCES OF THE MATTE R WHICH N EED TO BE TAKEN NOTE OF ANALYSED AND TAKEN A CONSCIOUS CALL ON . LET US IN THIS BACKDROP NEATLY IDENTIFY AND THEN DEAL WITH THE CORE ISSUE AS BEING RAISED BEFORE US NOW A ND THAT CORE ISSUE IS THE INTERPRETATION TO BE ASSIGNED TO THE EXPRESSION PROCESS FOR THE PURPOSE OF ARTICLE 12(3)(A) WHICH PROVIDES THAT THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF OR THE RIGHT TO U SE: (A) ANY COPYRIGHT OF A LITERARY ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILM OR FILMS OR TAPES USED FOR RADIO OR TELEVISION BROADCASTING ANY PATENT TRADE MARK DESIGN OR MODEL PLAN SECRET FORMULA OR PROCESS (EMPHASIS BY UNDERLINING SUPPLIED BY US NOW) OR FOR INFORMATION CONCERNING INDUSTRIAL COMMERCIAL OR SCIENTIFIC EXPERIENCE INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT PROPERTY OR INFORMATION . THE EXPRESSION PROCESS WHICH FINDS MENTION IN THIS TREATY PROVI SION IS NOT DEFINED IN THE TREATY ITSELF. LEARNED DEPARTMENTAL REPRESENTATIVES CONTENTION IS THAT IN THE LIGHT OF ARTICLE 3(2) OF THE TREATY WHICH STATES THAT (A)S REGARDS THE APPLICATION OF THE AGREEMENT BY A CONTRACTING STATE ANY TERM NOT DEFINED THEREIN SHALL UNLESS THE CONTEXT OTHERWISE REQUIRES HAVE THE MEANING WHICH IT HAS UNDER THE LAW OF THAT STATE CONCERNING THE TAXES TO WHICH THE AGREEMENT APPLIES THE DOMESTIC LAW MEANING OF THE EXPRESSION PROCESS WHICH IS SET OUT IN EXPLAN ATION 6 TO ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 9 OF 21 SECTION 9(1)(VII) MUST HOLD THE FILED. EXPLANATION 6 TO SECTION 9(1)(VII) WHICH WAS INSERTED VIDE THE FINANCE ACT 2012 WITH RETROSPECTIVE EFFECT FROM 1 ST JUNE 1976 PROVIDES THAT ( F) OR THE REMOVAL OF DOUBTS IT IS HEREBY CLARIFIED THAT THE EX PRESSION 'PROCESS' INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE (INCLUDING UP - LINKING AMPLIFICATION CONVERSION FOR DOWN - LINKING OF ANY SIGNAL) CABLE OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY WHETHER OR NOT SUCH P ROCESS IS SECRET . IN PLAIN WORDS GOING BY THE COMPLEX WEB OF THIS LINE OF ARGUMENT THUS IN THE ABSENCE OF ANY SPECIFIC DEFINITION OF PROCESS IN THE INDO SINGAPORE TAX TREATY THE DOMESTIC LAW MEANING OF THIS EXPRESSION MUST LAW PREVAIL UNDER ARTICLE 3(2) AND GOING BY THE DOMESTIC LA W MEANING UNDER EXPLANATION 6 TO SECTION 9(1)(VII) ANY TRANSMISSION BY SATELLITE (INCLUDING (INCLUDING UP - LINKING AMPLIFICATION CONVERSION FOR DOWN - LINKING OF ANY SIGNAL) CABLE OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY WHETHER OR NOT SUCH PROCE SS IS SECRET IS COVERED BY THE DEFINITION OF ROYALTY UNDER ARTICLE 13(3)(A) OF THE INDO SINGAPORE TAX TREATY AND SINCE THE BANDWIDTH SERVICES ON THE FACTS OF THIS CASE ARE TRANSMITTED BY SATELLITE CABLE OPTIC FIBRE OR OTHER SIMILAR TECHNOLOGY THE BANDWIDTH SERVICES CONSTITUTES ROYALTY FOR THE PURPOSE OF ARTICLE 13(3)(A). AS FOR THE REFERENCE TO VATIKA TOWNSHIP DECISION (SUPRA) IT IS CONTENDED AS STATED IN SO MANY WORDS IN THE FOURTH GROUND OF APPEAL THE INSERTION OF EXPLANATION 5 AND 6 THOUGH BY THE VIRTUE OF FINANCE ACT 2012 IS ONLY A DECLARATORY AND CLARIFICATORY AMENDMENT EXPLAINING THE LAW AS EXISTING FROM 01.06.1976. A LOT OF EMPHASIS HAS BEEN PLACED ON THE INTERPLAY OF ARTICLE 3(2) WITH DOMESTIC LAW MEANING OF A TERM USED IN BUT NOT DEFINED IN THE INDO SINGAPORE TAX TREATY. T HE THRUST OF LEARNED DEPARTMENTAL REPRESENTATIVES ARGUMENT IS THAT IN SUCH A SITUATION I.E. WHEN A TERM USED IN A TREATY IS NOT DEFINED IN THE TREATY DOMESTIC LAW MEANING OF THE TERM MUST PREVAIL. THE EXPRESS ION PROCESS ON THE BASIS OF THIS ARGUMENT AND ON THE STRENGTH OF ARTICLE 3(2) OF TREATY ITSELF IS CLAIMED TO COVER TRANSMISSION BY SATELLITE (INCLUDING UP - LINKING AMPLIFICATION CONVERSION FOR DOWN - LINKING OF ANY SIGNAL) CABLE OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY WHETHER OR NOT SUCH PROCESS IS SECRET AS IS THE CASE OF BANDWIDTH SERVICES PROVIDED BY RJ - S . IT IS ALSO POINTED OUT THAT THE ADOPTION OF DOMESTIC LAW MEANING FOR TREATY PURPOSES AS IT IS MANDATED BY THE TREATY ITSELF VIDE ARTIC LE 3(2) REMAINS UNAFFECTED BY THE PROVISIONS OF SECTION 90(2) . THE QUESTION OF TREATY SUPERIORITY UNDER THE PROVISIONS OF THE INDIAN INCOME TAX ACT 1961 COMES INTO PLAY ONLY WHEN THE DOMESTIC LAW MEANING IS NOT ASSIGNED BY THE TREATY ITSELF. ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 10 OF 21 1 1 . THERE IS A FUNDAMENTAL FALLACY IN OUR HUMBLE UNDERSTANDING IN THIS A RGUMENT AND THE FALLACY LIES IN THE PROPOSITION THAT THE EXPRESSION PROCESS IS A TREATY TERM FOR WHICH ARTICLE 3(2) CAN BE INVOKED. OF COURSE EVEN WITHOUT ARTICLE 3(2) WHEN MEANINGS OF AN EXPRESSION WHETHER A TREATY TERM OR NOT ARE TO BE EXPLORED ALL SOURCES OF MEANINGS INCLUDING IN THE DOMESTIC LAW WILL BE RELEVANT BUT THEN IN SUCH A SITUATION THE BINDING FORCE OF ARTICLE 3(2) WILL BE MISSIN G IN THE SENSE THAT IT WILL N O T BE NECESSARY TO ESTABLISH BEFORE ADOPTING A MEANING OTHER THAN THE DO MESTIC LAW MEANING THAT ITS THE COMPULSION OF CONTEXT REQUIRING THAT THE DOMESTIC LAW MEANING IS TO BE DISCA RDED. 1 2 . ITS IMPORTANT TO NOTE THAT THE PROVISIONS OF ARTICLE 3(2) COME INTO PLAY FOR DOMESTIC LAW MEANING OF ANY TERM NOT DEFINED (EMPHASIS BY UNDERLINING SUPPLIED BY US) IN THE TAX TREATY. TO INVOKE THE PROVISIONS OF ARTICLE 3(2) THE FIRST THING TO BE SEEN IS WHETHER THE UNDEFINED EXPRESSION CAN BE SAID TO BE A TREATY TERM. THE EXPRESSION TERM IS DEFINE D AS A WORD OR PHRASE USED TO DESCRIBE A THING OR TO EXPRESS A CONCEPT ESPECIALLY IN A PARTICULAR KIND OF LANGUAGE OR BRANCH OF STUDY . A TERM IS THUS A WORD THAT HAS MEANING AND REFERS TO OBJECTS IDEAS EVENTS OR A STATE OF AFFAIR. A TERM IS THUS IN ADDITION TO BEING A WORD SOME KIND OF A POINT OF REFERENCE WHEREAS A WORD IS ONLY A CONSTITUENT OF LANGUAGE. AS A COROLLARY TO THESE DISCUSSIONS ARTI CLE 3(2) WILL COME INTO PLAY ONLY IN RESPECT OF THE UNDEFINED TREATY TERMS WHICH ARE IN THE NATURE OF REFERENCE POINTS AND WHICH HAVE SOME PECULIAR SIGNIFICANCE AS A TERM EMPLOYED IN THE TREATY AND NOT ALL THE UNDEFINED WORDS AND EXPRESSIONS USED IN A TREATY. TO PUT A QUESTION TO OURSELVES DOES THE EXPRESSION PROCESS IN ITS OWN RIGHT HAS ANY RELEVANCE FOR THE TAX TREATIES OR CAN PROCESS TO BE SAID TO BE A TERM EMPLOYED IN TAX TREATIES? THE ANSWER IS IN NEGATIVE. IF AT ALL THE EXPRESSION PROCESS HAS ANY RELEVANCE IT IS IN DEFINING A TR EATY TERM I.E. ROYALTY. TO LOOK FOR STATUTORY DEFINITIONS OF EACH WORD EMPLOYED IN A DEFINITION OF THE TREATY TERM AND THEN CONSTRUCT THE DEFINITION OF TREATY TERM AS AN ASSEMBLY OF THE STATUTORY DEFINITIONS OF ALL THESE WORDS TAKEN TOGETHER WILL BE TOO HYPER TECHNICAL AN APPROACH AND IN ANY CASE BEYOND THE MANDATE OF ARTICLE 3(2) . THAT DOE S NOT APPEAL TO US. IT IS EVEN MORE INAPPROPRIATE BECAUSE PROCESS IS JUDICIALLY EXPLAINED BUT THE STATUTORY DEFINITION IS BEING INVOKED UN DER ARTICLE 3(2) TO DISLODGE THE JUDICIAL INTERPRETATION . QUITE CLEARLY THEREFORE BUT FOR THE BINDING FORCE OF ARTICLE 3(2) THIS STATUTORY DEFINITION DOES NOT COME TO THE RESCUE OF ASSESSING OFFICERS CASE AND IT IS THIS BINDING FORCE OF ARTICLE 3(2) WHICH DOES NOT COME INTO PLAY IN EXPLAINING THE WORD PROCESS USED IN DEF INITION OF A TREATY TERM I.E. ROYALTY . OF COURSE ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 11 OF 21 ROYALTY IS A TREATY TERM BUT SINCE IT IS WELL DEFINED TERM IN THE TREATY ITS DOMESTIC LAW MEANING IS NOT RELEVANT FOR TREATY PURPOSES. THE EXPRESSION PROCESS IS DEFINED IN THE DOMESTIC LAW BUT THIS DEFINITION IS IN THE LIMITED CONTEXT OF EXPLAINING THE TERM ROYALTY UNDER THE DOMESTIC LAW IT CANNOT BE BORROWED IN THE TREATY FOR UNDERSTANDING CONNOTATIONS OF ROYALTY UNDER THE TREATY. IT CANNOT BE IN OUR HUMBLE UNDERSTANDING OPEN TO PICK UP A PART OF THE DEFINITION OF ROYALTY UNDER THE DOMESTIC LAW AND SUPPLY THE SAME TO AN UNDEFINED EXPRESSION IN THE DEFINITION OF ROYALTY UNDER THE TREATY. THE EXPRESSION PROCESS IS NOT A TREATY TERM PER SE OR A REFERENCE POINT USED IN THE TREATY RATHER IT IS AN EXPRESSION OR WORD USED IN DEFINING THE TREATY TERM ROYALTY. THE EXPRESSION PROCESS IS USED IN THE TREATY IN THAT LIMITED CONTEXT AND IT DOES NOT HAVE AN INDEPENDENT EXISTENCE. THE DEFINITION OF ROYALTY UNDER THE DOMESTIC LAW AS IT STANDS NOW IS MORE EXHAUSTIVE INASMUCH AS THE EXPRESSION PROCESS USED IN THE DEFINITION IS FURTHER ELABORATED UPON IN EXPLANATION 6 TO SECTION 9(1)(VI) WHICH DOES NOT IN ANY CASE PROVIDE A UNIVERSAL RULE AS IT IS IN THE CONTEXT OF THIS PARTICULAR SUB SECTI ON DEALING WITH THE INCOME BY WAY OF ROYALTY. THE DEFINITION OF EXPRESSION PROCESS IS THUS NOT A STANDALONE DEFINITION WHICH CAN BE IMPORTED IN TREATY UNDER ARTICLE 3(2) . 1 3 . THE DOMESTIC LAW MEANING UNDER ARTICLE 3(2) IS RELEVANT ONLY WHEN THE TREATY TERM ITSELF IS UNDEFINED AS NOTED BY HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS NEW SKIES SATELLITE BV [(2016) 328 ITR 114 (DEL)] . WHEN THE EXPRESSION ROYALTY IS A DEFINE D EXPRESSION UNDER THE APPLICABLE TAX TREATY THERE CANNOT BE ANY OCCASION TO INVOKE ARTICLE 3(2) FOR FURTHER DISSECTING THE ISSUE AND EXPLORE THE DOMESTIC LAW MEANING OF EACH EXPRESSION USED IN THIS DEFINITION FOR COMING AT THE CONCLUSIONS ABOUT CONNOTATI ONS OF ROYALTY. IT CANNOT THEREFORE BE OPEN TO INVOKE ARTICLE 3(2) TO IMPORT DOMESTIC LAW MEANING EVEN PARTLY WHEN THE TREATY TERM HAS RECEIVED A DEFINITION UNDER THE TREATY. IT IS FOR THIS REASON THAT EXPLANATION 6 TO SECTION 9(1)(VI) IN OUR HUMBLE UNDERSTANDING HAS NO ROLE UNDER ARTICLE 3(2) OF THE TREATY IN EXPLAINING THE EXPRESSION PROCESS IN THE CONTEXT OF DEFINING ROYALTY UNDER THE INDO SINGAPOREAN TAX TREATY. THIS STATUTORY PROVISION UNDER THE DOMESTIC LAW IS RELEVANT ONLY WHEN THE DEFI NITION OF ROYALTY UNDER SECTION 9(1)(VI) OF THE INCOME TAX ACT 1961 IS SUBJECT MATTER OF CONSIDERATION AS IT SPECIFICALLY STATES THAT SAID DEFINITION IS FOR THE PURPOSE OF FOR THE PURPOSE OF THIS CLAUSE [I.E. SECTION 9(I)(V)] . ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 12 OF 21 1 4 . EVEN IF WE PROCEED ON THE BASIS THAT PROCESS CAN BE TREATED AS AN UNDEFINED TREATY TERM WHICH IN OUR HUMBLE UNDERSTANDING IT IS NOT AND THAT EXPLANATION 6 TO SECTION 9(1)(VI) CAN HAVE A ROLE IN ASSIGNING DOMESTIC LAW MEANING TO THE EXPRESSION PROCESS T HE NE XT FUNDAMENTAL QUESTION HOWEVER THAT WE MUST CONSIDER IS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THIS CASE ASSIGNMENT OF THE DOMESTIC LAW MEANING UNDER ARTICLE 3(2) TO AN UNDEFINED TREATY TERM IS TO BE DONE BY WAY OF STATIC INTERPRETATION OR BY WAY OF DYNAMIC OR AMBULATORY INTERPRETATION . IN PLAIN WORDS THE MEANING TO BE ASSIGNED TO THE UNDEFINED TREATY TERMS SHOULD BE GIVEN IN THE LIGHT OF THE LAW AS IT STOOD AT THE POINT OF TIME WHEN TREATY WAS ENTERED INTO OR THE LAW AS IT STANDS AT THE P OINT OF TIME WHEN RELATED TAXES ARE LEVIED . IF THE STATIC INTERPRETATION IS TO BE GIVEN IT DOES NOT COME TO THE RESCUE OF THE REVENUES CASE. THE EXPRESSION PROCESS WAS NOT AT THE POINT OF TIME RELEVANT TO STATIC INTERPRETATION NOT STATUTORILY DEFINED AND IF THE JUDICIAL INTERPRETATION OF TERM PROCESS WITHOUT THE AID OF EXPLANATION 6 TO SECTION 9(1)(VI) IS TO BE TAKEN INTO ACCOUNT IT DOES NOT SUPPORT THE CASE OF THE REVENUE EITHER. THERE IS NO DISPUT E ON THIS FUNDAMENTAL POSITION. IT IS ALSO ELEMENTARY THAT WHEN HONBLE COURTS LAY DOWN THE LAW OR WHEN A JUDICIAL INTERPRETATION IS GIVEN IT IS NOT FROM PROSPECTIVE EFFECT AND IT RELATES BACK TO THE POINT OF TIME WHEN LAW WAS LEGISLATED. EFFECTIVELY T HEREFORE JUDICIAL RULING WITHOUT TAKING INTO ACCOUNT EXPLANATION 6 TO SECTION 9(1)(VI) WILL HOLD THE FIELD AND UNDISPUTEDLY THESE RULINGS DO NOT HELP THE CASE OF THE REVENUE. HOWEVER APART FROM EMPHASIS ON AMBULATORY INTERPRETATION IN MODEL CONVENTIONS AND THEIR COMMENTARIES AND CONCEPTUAL JUSTIFICATION FOR THAT APPROACH IN GENERAL T HERE ARE CERTAIN OBSERVATIONS MADE BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIEMENS AKTIONGESELLSCHAFT (SUPRA) WHICH GIVE AN IMPRESSION THAT SUCH AN EXERCISE C AN ONLY BE AMBULATORY EXERCISE. LET US THEREFORE DEAL WITH THIS JUDICIAL PRECEDENT IN SOME DETAIL. 15 . HONBLE JURISDICTIONAL HIGH COURT HAD IN THE CASE OF CIT VS SIEMENS AKTIONGESELLSCHAFT [(2009) 310 ITR 320 (BOM)] HAD AN OCCASION TO CONSIDER THE QUE STION WHETHER THE DOMESTIC LAW MEANING TO BE SUPPLIED TO A TREATY PROVISION SHOULD BE THE MEANING AS PREVAILING AT THE POINT OF TIME WHEN AGREEMENT WAS ENTERED INTO OR AS PREVAILING AT THE POINT OF TIME WHEN TAXES ARE LEVIED I.E. WHETHER SUCH AN INTERPRET ATION SHOULD BE STATIC INTERPRETATION OR AMBULATORY INTERP RETATION. REJECTING THE PLEA OF THE ASSESSEE SEEKING STATIC INTERPRETATION HONBLE HIGH COURT HAVING NOTED THE ARGUMENT AGAINST THE ASSESSEE THAT CONSIDERING ARTICLE II(2) THE EXPRESSION 'LAWS IN FORCE' [EMPHASIS BY UNDERLINING SUPPLIED BY US NOW] AS ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 13 OF 21 CONTAINED IN DTAA THE AMBULATORY INTERPRETATION WILL HAVE TO BE ACCEPTED HAS HELD THAT CONSIDERING THE EXPRESS LANGUAGE OF ARTICLE II(2) IT IS NOT POSSIBLE TO ACCEPT THE BROAD PROPOSITION URGED ON BEHALF OF THE ASSESSEE THAT THE LAW WOULD BE THE LAW AS WAS APPLICABLE OR AS DEFINED WHEN THE DTAA WAS ENTERED INTO. INTERESTINGLY THE WORDS EM PLOYED IN ARTICLE II(2) OF THE OLD INDO GERMAN TAX TREATY WHICH IS WHAT THEIR LORDSHIPS WERE DEALING WITH WERE TO THE EFFECT THAT IN THE APPLICATION OF THE PROVISIONS OF THIS AGREEMENT IN ONE OF THE TERRITORIES ANY TERM NOT OTHERWISE DEFINED IN THIS AGR EEMENT SHALL UNLESS THE CONTEXT OTHERWISE REQUIRES HAVE THE MEANING WHICH IT HAS UNDER THE LAWS IN FORCE IN THAT TERRITORY (EMPHASIS BY UNDERLINING SUPPLIED BY US NOW) RELATING TO THE TAXES WHICH ARE THE SUBJECT MATTER OF THIS AGREEMENT AND THESE WOR DS WERE SLIGHTLY DIFFERENT THAN THE WORDS EMPLOYED IN THE INDO SINGAPORE TAX TREATY THAT WE ARE DEALING WITH WHICH ARE AS FOLLOWS: AS REGARDS THE APPLICATION OF THE AGREEMENT BY A CONTRACTING STATE ANY TERM NOT DEFINED THEREIN SHALL UNLESS THE CONTEXT OTHERWISE REQUIRES HAVE THE MEANING WHICH IT HAS UNDER THE LAW OF THAT STATE CONCERNING THE TAXES TO WHICH THE AGREEMENT APPLIES . WHILE IN THE FORMER THERE IS EMPHASIS ON LAWS IN FORCE WHICH IS WHAT THEIR LORDSHIPS HAVE TAKEN VERY CAREFUL NOTE OF IN THE LATTER IT SIMPLY REFERS TO MEANING WHICH IT HAS UNDER THE LAW OF THAT STATE WITHOUT MAKING ANY SPECIFIC REFERENCE TO THE LAWS IN FORCE OR THE LAWS AS THEY PREVAILED AT ANY OTHER POINT OF TIME. WE MAY ALSO ADD THAT THEIR LORDSHIPS WERE DEALING WI TH OLD GERMAN ( I.E. IND IA - FEDERAL REPUBLIC OF GERMANY ) TAX TREATY [(1960) 40 ITR (ST) 21] IN WHICH THE EXPRESSION ROYALTY ITSELF WAS NOT DEFINED AND THE QUESTION THEREFORE AROSE WHETHER THE DEFINITION OF ROYALTY AS IT STOOD AT THE POINT OF TIME WHEN TAXES WERE LEVIED COULD BE ADOPTED. 16 . APART FROM THE FACT THAT ROYALTY IS A NEAT LY DEFINED EXPRESSION IN THE CURRENT INDO SINGAPORE TAX TREATY THAT WE ARE CONCERNED WITH THE EXPRESSION LAWS IN FORCE WHICH WAS SUBJECT MATTER OF FOCUS OF JUDICIAL ANALYSIS IN THE SAID CASE DOES NOT FIND PLACE IN THE TREATY BEFORE US. THAT IS HOWEVE R NOT REALLY TRUE OF ALL THE TAX TREATIES CURRENTLY IN FORCE. THERE ARE TAX TREATIES WHICH STILL USE THE SAME EXPRESSION. OUR ATTENTION WAS FOR EXAMPLE INVITED TO INDIA AUSTRALIA DOUBLE TAXATION AVOIDANCE AGREEMENT [(1992) 194 ITR (STATUTE) 91; INDO AUS TRALIAN TAX TREATY IN SHORT] WHICH ALSO SPECIFICALLY PROVIDE THAT THE ASSIGNMENT OF DOMESTIC LAW MEANING TO AN UNDEFINED TREATY TERM IS AN AMBULATORY EXERCISE INASMUCH AS ARTICLE 3(2) THEREIN SPECIFICALLY PROVIDES THAT (I )N THE APPLICATION OF THIS AGREEMENT BY A ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 14 OF 21 CONTRACTING STATE ANY TERM NOT DEFINED IN THIS AGREEMENT SHALL UNLESS THE CONTEXT OTHERWISE REQUIRES HAVE THE MEANING WHICH IT HAS UNDER THE LAWS OF THAT STATE FROM TIME TO TIME IN FORCE (EMPHASIS BY UNDERLININ G SUPPLIED BY US) RELATING TO THE TAXES TO WHICH THIS AGREEMENT APPLIES . WE ARE NOT REALLY CONCERNED WITH THIS TAX TREATY AT PRESENT AND WE MUST NOT THEREFORE GET INTO THE ACADEMIC DELIGHTS OF TAKING A CALL ON WHAT THE LEGAL POSITION WILL BE IN SUCH A CASE IN CASE ONE IS TO PROCEED ON THE BASIS THAT THE EXPRESSION PROCESS IS A TREATY TERM AND THE ARTICLE 3(2) CAN BE INVOKED IN RESPECT OF THE SAME. 17 . SO FAR AS OUR PURPOSES ARE CONCERNED IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT THE PROVISIONS OF ARTICLE 3(2) OF INDO SINGAPOREAN TAX TREATY ARE DIFFERENTLY WORDED VIS - - VIS THE OLD INDO GERMAN TAX TREATY THAT HONBLE JURISDICTIONAL HIGH COURT WERE DEALING WITH IN SIEMENS AKTIONGESELLSCHAFT S CASE (SUPRA) AND THE CRUCIAL WORDS LAWS IN FORCE O N WHICH SO MUCH EMPHASIS WAS PLACED IN JUDICIAL ANALYSIS BY HONBLE JURISDICTIONAL HIGH COURT DO NOT FIND PLACE IN THIS TREATY. STRICTLY SPEAKING THEREFORE THE JUDICIAL SANCTION FOR THE THEORY OF AMBULATORY INTERPRETATION FOR THE PURPO SE OF ARTICLE 3(2) DOES NOT THEREFORE NECESSARILY EXTEND TO INDO SINGAPOREAN TAX TREATY THAT WE ARE CONCERNED WITH. 18 . OF C OURSE EVEN WITHOUT THE WORDS MEANING WHICH IT HAS UNDER THE LAWS OF THAT STATE FROM TIME TO TIME IN FORCE ONE COULD STILL JUSTIFY THE AMBULATORY INTERPRETATION IN THE NORMAL COURSE OF INTERPRETATION - THOUGH WITHOUT THE BINDING FORCE OF JUDICIAL PRECEDENTS BUT THEN FOR THE REASONS WE WILL SET OUT NOW THERE IS A STRONG CONCEPTUAL BASIS F O R NOT ADOPTING THE AMBULATORY INTERPRETATION ON PECULIAR FACTS OF THIS CASE. 19 . WHILE IT IS INDEED TRUE AS HELD BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIEMENS AKTIONGESELLSCHAFTS THAT THE RULE OF REFERENTIAL INCORPORATION OR INCORPORATION CANNOT BE APPLIED WHEN WE ARE DEALING WITH A TREATY (DTAA) BETWEEN TWO SOVEREIGN NATIONS BECAUSE IT IS OPEN TO A SOVEREIGN LEGISLATURE TO AMEND ITS LAWS THEIR LORDSHIPS HAVE PUT IN A WORD OF CAUTION BY SUGGESTING AN ELEMENT OF REASONABLENESS IN CONSTRUING THE TREATY SUPERIORITY VIS - - VIS THE DOMESTIC LAW BY OBSERVING THAT A DTAA ENTERED INTO BY THE GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECTION 10(1) [SIC - SECTION 90(1)] WHILE CONSIDERING SECTION 10(2) [SIC - SECTION 90(2)] HAS TO BE REASONABLY CONSTRUED [EMPHASIS BY UNDERLINING SUPPLIED BY US NOW] . IN THE SIEMENS DECISION (SUPRA) ITSELF WHILE QUOTING WITH ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 15 OF 21 APPROVAL HONBLE SUPREME COURT OF CANADAS DECISION IN THE CASE OF HER MAJESTY THE QUEEN V. MELFORD DEVELOPMENTS INC. 82 DTC 6281 THEIR LORDSHIPS HAD ALSO OBSERVED THAT THE RATIO OF THAT JUDGMENT IN OUR OPINION WOULD MEAN THAT BY AN UNILATERAL AMENDMENT IT IS NOT POSSIBLE FOR ONE NATION WHICH IS PARTY TO AN AGREEMENT TO TAX INCOME WHICH OTHERWISE WAS NOT SUBJECT TO TAX . QUITE CLEARLY THEREFORE WHATEVER BE THE APPROACH ADOPTED FOR THE PURPOSE OF ARTICLE 3(2) I.E. STATIC OR AMBULATORY A UNILATERAL TREATY OVERRIDE HOWSOEVER SUBTLE IS NOT REALLY PERMISSIBLE. 2 0 . IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT THE INSERTION OF EXPLANATION 6 TO SECTION 9(1)(VII) WAS ADMITTEDLY TO NULLIFY CERTAIN JUDICIAL RULING S WHICH GAVE AN INTERPRETATION UNFAVOU RABLE TO THE TAX ADMINISTRATION TO THE EXPRESSION PROCESS. THE M EMORANDUM TO THE FINANCE BILL 2012 SPECIFICALLY STATED THAT CONSIDERING THE CONFLICTING DECISIONS OF VARIOUS COURTS IN RESPECT OF INCOME IN NATURE OF ROYALTY AND TO RESTATE THE LEGISLATIVE INTENT IT IS FURTHER PROPOSED TO AMEND . SECTION 9(1)(VI) TO CLARIFY THAT THE TERM PROCESS INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE (INCLUDING UP - LINKING AM PLIFICATION CONVERSION FOR DOWN - LINKING OF ANY SIGNAL) CABLE OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY WHETHER OR NOT SUCH PROCESS IS SECRET . 2 1 . LET US APPRECIATE THE NATURE OF DEVELOPMENT FROM THE TREATY PERSPECTIVE IN CASE ONE IS TO HOLD THAT THE RETROSPECTIVE AMENDMENTS DEFINING THE EXPRESSION PROCESS WOULD BE EQUALLY APPLICABLE FOR DEFINITION OF ROYALTIES UNDER THE TAX TREATY . THUS VIEWED SITUATION COULD BE LIKE THIS. THERE ARE JUDICIAL RULINGS WHICH DECIDE SOMETHING IN FAVOUR OF T HE RESIDENCE JURISDICTION AND THE SOURCE JURISDICTION IS NOT HAPPY WITH THAT OUTCOME AND ITS A COINCIDENCE COINCIDENCE IF IT IS THAT THE SOURCE JURISDICTION CHANGES THE DOMESTIC LAW IN A WAY THAT ONCE THAT AMENDED DOMESTIC LAW IS APPLIED IN THE CONTE XT OF ARTICLE 3(2) A DIFFERENT OUTCOME TO THE SAME TREATY PROVISION WHICH FAVOURS THE SOURCE JURISDICTION IS POSSIBLE. IN EFFECT THUS WHAT WAS NOT TAXABLE IN THE SOURCE JURISDICTION IN PRE DOMESTIC LAW AMENDMENT SITUATION BECOMES TAXABLE IN SOURCE JURISDICTION POST DOMESTIC LAW AMENDMENT. UNDOUBTEDLY LEGISLATION IS A SOVEREIGN FUNCTION AND I T IS INDEED OPEN TO ANY JURISDICTION TO AMEND EVEN RETROSPECTIVELY ITS DOMESTIC LAWS TO BRING NEW INCOMES TO TAXABILITY IN THE SOURCE JURISDICTION BUT SO FAR AS THE SOURCE JURISDICTION TAXABILITY UNDER THE TREATY PROVISIONS IS CONCERNED LEGAL AMENDMENTS SO AS TO INFLUENCE THE TAXABILITY EVEN UNDE R THE T REAT Y SITUATION BY THE SOURCE JURISDICTIONS ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 16 OF 21 UNILATERALLY ARE IMPERMISSIBLE. THAT IS A CLASSIC CASE OF A SUBTLE UNILATERAL TREATY OVERRIDE. WHILE IN INDIA THE EXPRESSION TREATY OVERRIDE IS OFTEN LOOSELY USED FOR THE SITUATIONS WHERE THE PROVISI ONS OF TAX TREATY PREVAILS OVER ANY INCONSISTENT PROVISIONS OF DOMESTIC LAW THIS APPROACH SEEMS TO BE AT VARIANCE WITH THE INTERNATIONAL PRACTICES WHEREIN CONNOTATIONS OF TREATY OVERRIDE REFER TO A SITUATION IN WHICH DOMESTIC LEGISLATION OF A TREATY PAR TNER JURISDICTION OVERRULES THE PROVISIONS OF A SINGLE TREATY OR ALL TREATIES HITHERTO HAVING HAD EFFECT IN THAT JURISDICTION. THAT WILL BE THE END RESULT OF A DOMESTIC LAW AMENDMENT OF AN UNDEFINED TREATY TERM IN DEPARTURE FROM THE CURRENT POSITION AND IMPORT SUCH AMENDED MEANING OF THAT TERM UNDER ARTICLE 3(2) IN THE TREATY SITUATIONS AS WELL. SUCH AN APPROACH ON THE FIRST PRINCIPLES IS UNSOUND INASMUCH AS IT IS WELL SETTLED IN LAW THAT THE TREATY PARTNERS OUGHT TO OBSERVE THEIR TREATIES INCLUDING THEIR TAX TREATIES IN GOOD FAITH. ARTICLE 26 OF VIENNA CONVENTION ON LAW OF TREATIES PROVIDES THAT PACTA SUNT SERVANDA : EVERY TREATY IN FORCE IS BINDING ON THE PARTIES TO IT AND MUST BE PERFORMED BY THEM IN GOOD FAITH . WHAT IT IMPLIES IS THAT WHATEVER BE THE PROVISIONS OF THE TREATIES THESE PROVISIONS ARE TO BE GIVEN EFFECT IN GOOD FAITH. THEREFORE NO MATTER HOW DESIRABLE OR EXPEDIENT IT MAY BE FROM THE PERSPECTIVE OF THE TAX ADMINISTRATION WHEN A TAX JURISDICTION IS ALLOWED TO AMEND THE SETTLED POSITION WITH RESPECT TO A TREATY PROVISION BY A N AMENDMENT IN THE DOMESTIC LAW AND ADMITTEDLY TO NULLIFY THE JUDICIAL RULINGS IT CANNOT BE TREATED AS PERFORMANCE OF TREATIES IN GOOD FAITH. THAT IS IN EFFECT A UNILATERAL TREATY OVER - RIDE WHICH IS CONTRARY TO THE SCHEME OF ARTICLE 26 OF VIENNA CONVENTION ON LAW OF TREATIES. AS OBSERVED BY HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS NEW SKIES SATELLITE BV [(2016) 328 ITR 114 (DEL)] THE VIENNA CONVENTION ON THE LAW OF TREATIES 1969 ('VCLT ') IS UNIVERSALLY ACCEPTED AS AUTHORITATIVELY LAYING DOWN THE PRINCIPLES GOVERNING THE LAW OF TREATIES . EVEN THOUGH INDIA IS NOT A SIGNATORY TO THE VIENNA CONVENTION HONBLE SUPREME COURT HAS REFERRED TO THE SAME TIME AND AGAIN AND I N THE C ASE OF RAM JE THMALANI VS UNION OF INDIA [(2011) 339 ITR 107 (SC)] OBSERVED THAT IT CONTAINS MANY PRINCIPLES OF CUSTOMARY INTERNATIONAL LAW AND THE RULES SET OUT THEREIN PROVIDES A BROAD GUIDELINE AS TO WHAT COULD BE AN APPROPRIATE MANNER OF INTERPRETING A TREATY IN THE INDIAN CONTEXT ALSO . IN OUR HUMBLE UNDERSTANDING THEREFORE THE ADDITIONAL TEST THAT IS REQUIRED TO BE PUT WHILE ADOPTING THE AMBULATORY INTERPRETATION IN SUCH A SITUATION IS WHETHER THE AMENDMENT IS DOMESTIC LAW ENDS UP UNSETTLING A CON CLUSION ARRIVED AT UNDER THE PRE DOMESTIC LAW AMENDMENT POSITION I.E. REVERSING THE JUDICIAL RULINGS IN FAVOUR OF THE RESIDENCE JURISDICTION AND IF THE ANSWER IS IN THE POSITIVE THE AMBULATORY INTERPRETATION IS TO BE DISCARDED BECAUSE THAT APPROACH ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 17 OF 21 WOUL D PATRONISE AND LEGITIMISE A UNILATERAL TREATY OVERRIDE AND THE OUTCOME OF AMBULATORY INTERPRETATION IN SUCH A CASE WILL BE INCOMPATIBLE WITH THE FUNDAMENTAL PRINCIPLES OF TREATY INTERPRETATION UNDER THE VIENNA CONVENTION. THE APPROACH IS JUSTIFIED ON THE FIRST PRINCIPLES ON THE GROUND THAT WHEN TWO APPROACHES ARE POSSIBLE FOR INCORPORATION OF DOMESTIC LAW PROVISIONS IN THE TAX TREATIES AND ONE OF THESE APPROACHES IS COMPATIBLE WITH ARTICLE 26 OF THE VCLT WHILE THE OTHER IS INCOMPATIBLE WITH THE SAME THE APPROACH COMPATIBLE WITH THE VCLT PROVISIONS IS TO BE ADOPTED . 2 2 . IN VIEW OF THESE DISCUSSIONS AND BEARING IN MIND ENTIRETY OF THE CASE WE FIND NO LEGALLY SUSTAINABLE MERITS IN THE GRIEVANCES RAISED BEFORE US. THE ARGUMENTS RAISED BEFORE US DO NOT LEAD US TO A DIFFERENT CONCLUSION EITHER. CONCURRING WITH THE COORDINATE BENCH DECISIONS THEREFORE WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. AS WE HOLD SO WE MAY ADD THAT THESE OBSERVATIONS REGARDING AMBULATORY OR DYNAMIC APPROACH BEING INAPPROPRIATE IN THE CONTEXT OF ARTICLE 3(2) IS CONFINED TO THE PECULIAR FACTS DISCUSSED ABOVE AND ARE NOT THEREFORE OF GENERAL APPLICATION. 23 . GROUND NOS. 1 TO 4 AS COMMON TO ALL THE APPEALS ARE THEREFORE DISMISSED. 24 . IN GROUND NO. 5 THE ASSESSING OFFICER APPELLANT H AS RAISED THE FOLLOWING GRIEVANCE: 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) HAS ERRED IN HOLDING THAT THE PAYMENTS MADE BY ASSESSEE TO RJIPL SINGAPORE FOR PROVIDING OPERATIONS AND MAINTENANCE (O&M) SERVICES IS NOT IN THE NATURE OF FEES FOR T ECHNICAL SERVICES UNDER SECTION 9( 1 )(VII) OF THE ACT READ WITH ARTICLE 12 OF THE INDIA - SINGAPORE DTAA? 25. AS FAR AS THIS GRIEVANCE OF THE APPELLANT ASSESSING OFFICER IS CONCERNED IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT THE ASSESSEE TAX MADE PAYMENTS FOR OPERATI ONS AND MAINTENANCE SERVICES IN RESPECT OF BANDWIDTH SERVICES INFRASTRUCTURE SUCH AS CABLE LANDING STATIONS AND EQUIPMENT USED TO AVAIL THE BANDWIDTH SERVICES. THESE PAYMENTS ARE MADE BY THE ASSESSEE TO ITS SINGAPORE AFFILIATE RJ - S. THE SHORT CASE OF THE ASSESSEE IS THAT UNDER INDO SINGAPORE TAX TREATY AN AMOUNT PAID AS FEES FOR TECHNICAL SERVICES CA N BE TAXED IN THE SOURCE JURISDICTION ONLY WHEN IT SATISFIES THE MAKE AVAILABLE CONDITION I.E. WHEN THE RECIPIENT OF SERVICES WAS ENABLED TO APPLY TECHNOLOG Y CONTAINED THEREIN AND THAT SINCE ITS A CASE OF REPAIRS AND MAINTENANCE ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 18 OF 21 SIMPLICTOR THERE CANNOT BE ANY OCCASION OF TRANSFER OF TECHNOLOGY IN THE COURSE OF RENDITION OF THESE MAINTENANCE SERVICES. LEARNED CIT(A) HAS UPHELD THIS PLEA AND OBSERVED AS FOLLOWS: B) NON - TAXABILITY OF PAYMENTS FOR O&M SERVICES THE O&M SERVICES INCLUDES ROUTINE AND REGULAR UPKEEP OF THE INFRASTRUCTURE SUCH AS MAINTENANCE OF THE CABLE LANDING STATION EQUIPMENT USED BY RJIPL TO PROVIDE THE BANDWIDTH SERVICES. THESE KIND OF ROUTINE O&M IS REQUIRED TO ENSURE SMOOTH AND UNINTERRUPTED PROVISION OF THE BANDWIDTH SERVICES BY RJIPL TO THE APPELLANT. IN NOTE II TO SL. NO.L ('BANDWIDTH SERVICES REQUIREMENTS ACTIVATION TIMELINES AND PAYMENT OBLIGATIONS) IN SCHEDULE I OF THE AGREEMENT IT IS MENTIONED THAT: 'IT IS HEREBY CLARIFIED THAT SER VICE CHARGES ARE REMUNERATION FOR PROVISION OF BANDWIDTH SERVICES BY RJIPL. THE OBLIGATION AND LIABILITY FOR OPERATION AND MAINTENANCE IS THAT OF RJIPL.' THE O&M SERVICES BEING ROUTINE SERVICES THE PAYMENT MADE FOR THE SAME WILL NOT CONSTITUTE FTS AS PER EXPLANATION 2 TO SECTION 9(L)(VII) OF THE ACT. I ALSO AGREE WITH THE APPELLANT'S CONTENTION THAT THE PAYMENTS / CREDITS UNDER THE AGREEMENT BY THE APPELLANT TO RJIPL FOR T HE O&M SERVICES ALSO CANNOT BE REGARDED AS FTS UNDER ARTICLE 12 OF THE INDIA - SINGA PORE DTAA SINCE THE O&M SERVICES DO NOT MAKE AVAILABLE TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW - HOW OR PROCESSES WHICH ENABLES THE APPELLANT TO APPLY THE TECHNOLOGY CONTAINED THEREIN. ARTICLE 12(4) OF THE INDIA - SINGAPORE DTAA DEFINES FEES FOR TECHNICAL SERVICES AS: 'THE TERM 'FEES FOR TECHNICAL SERVICES' AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR SERVICES OF A MANAGERIAL TECHNICAL OR CONSULTANCY NATURE (INCLUDING THE PROVISION OF SUCH SERVICES OF TECH NICAL OR OTHER PERSONNEL) IF SUCH SERVICES: (A) ..... (B) MAKE AVAILABLE TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW - HOW OR PROCESSES WHICH ENABLES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN.' (C) .....' IT WOULD BE WORTHWHILE 10 REFER TO THE JURISDICTIONAL TRIBUNAL DECISION IN THE CASE OF EXXONMOBIL COMPANY INDIA (P.) LTD VS. ACIT [20181 (92 TAXMANN.COM 5) WHEREIN IT HAS HELD THAT THE EXPRESSION 'MAKE AVAILABLE' WHICH ALSO APPEARS IN ARTICLE 12(41(B) OF T HE INDIA - US TAX TREATY WOULD MEAN THE RECIPIENT OF SUCH SERVICE IS ABLE TO APPLY OR MAKE USE OF THE TECHNICAL KNOWLEDGE KNOWHOW. ETC.. BY HIMSELF IN HIS BUSINESS OR FOR HIS OWN BENEFIT AND WITHOUT RECOURSE TO THE SERVICE PROVIDER IN FUTURE AND FOR THIS PU RPOSE A TRANSACTION OF THE TECHNICAL KNOWLEDGE EXPERIENCE SKILLS ETC.. FROM THE SERVICE PROVIDER TO THE SERVICE RECIPIENT IS NECESSARY. SOME SORT OF DURABILITY OR PERMANENCY OF THE RESULT OF THE RENDERING OF SERVICES IS ENVISAGED WHICH WILL REMAIN AT TH E DISPOSAL OF THE SERVICE RECIPIENT. IN OTHER WORDS THE ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 19 OF 21 TECHNICAL KNOWLEDGE EXPERIENCE SKILL ETC.. MUST REMAIN WITH THE SERVICE RECIPIENT EVEN AFTER THE RENDERING OF THE SERVICES HAS COME TO AN END. IN CONTRAST TO ARTICLE - 12(4)(B) OF THE INDIA - U.S. TAX TREATY ARTICLE - 12(4)(B) OF INDIA - SINGAPORE TAX TREATY HAS MADE IT MORE SPECIFIC BY PROVIDING THAT TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOWHOW OR PROCESS WOULD NOT AMOUNT TO FEES FOR TECHNICAL SERVICE UNLESS IT ENABLES THE PERSON ACQUIRING THE SERVICE TO APPLY THE TECHNOLOGY THEREIN. I ALSO AGREE WITH ALL THE OTHER DECISIONS RELIED ON BY THE APPELLANT WHICH EXPLAINS THE CONCEPT OF 'MAKE AVAILABLE'. FURTHER I ALSO AGREE WITH THE BELOW DECISIONS RELIED ON BY THE APPELLANT WHEREIN THE COURTS HAVE HELD THAT REPAIRS AND MAINTENANCE SERVICES DO NOT MAKE AVAILABLE TECHNICAL KNOWLEDGE SKILLS ETC AND THEREFORE ARE NOT FTS UNDER THE DTAA: DCIT V VSNL BROAD BAND LTD [2013] 38 TAXMANN.COM 287 (MUMBAI ITAT) SANDVIK AUSTRALIA PTY. LTD. [2013] 31 TAXMANN.COM 256 (PUNE ITAT) ACIT V M/S HCL COMNET LTD (ITA NO. 321/DEI/2012) (DELHI ITAT) SOLAR TURBINES INTERNATIONAL COMPANY IN RE [2012] 21 TAXMANN.COM 548 (AAR) ADIT V ROLLS ROYCE INDUSTRIAL POWER (INDIA) LTD [2013] 33 TAXMANN.COM 423 (DEL HI ITAT) NO TECHNOLOGY IS MADE AVAILABLE BY RJIPL TO THE APPELLANT IN THE COURSE OF PROVIDING THE O&M SERVICES. AS MENTIONED IN THE AGREEMENT THE OBLIGATION AND LIABILITY FOR OPERATION AND MAINTENANCE IS THAT OF RJI PL. THE APPELLANT IS ONLY INTERESTED IN AVAILING THE BANDWIDTH SERVICES AND IS NOT CONCERNED OR OBLIGED IN ANY MANNER WITH THE INFRASTRUCTURE DEPLOYED BY RJIPL. THUS IN VIEW OF THE FACTS OF THE CASE AND RELYING ON THE ABOVE DECISIONS I AM OF THE VIEW THAT THE PROVISION OF O&M SERVICES BY RJIPL TO THE APPELLANT CANNOT BE REGARDED AS FEES FOR TECHNICAL SERVICES UNDER THE INDIE - SINGAPORE DTAA AS THERE IS NO TRANSFER OF TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW - HOW OR PROCESSES FROM RJIPL TO THE APPELLANT. IN LIGHT OF THE ABOVE DISCUSSION. I HOLD THAT THE PAYMENTS MADE BY THE APPELLANT TO RJIPL FOR RENDITION OF O&M SERVICES WILL BE IN THE NATURE OF BUSINESS PROFITS AND CANNOT BE CLASSIFIED AS FEES FOR TECHNICAL SERVICES EITHER UNDER THE ACT OR THE INDIA - SINGAPORE DTAA. FURTHER IN ABSENCE OF RJIPL'S BUSINESS CONNECTION OR A PE IN INDIA THE BUSINESS PROFITS WILL NOT BE TAXABLE IN INDIA. 26. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 27. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 20 OF 21 28. WE FIND THAT THERE IS NO DISPUTE WITH THE FACTUAL POSITION THAT THE RJ - S DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA AND WITH THE LEGAL PRINCIPLE LAID DOWN IN THE APPLICABLE TAX TREATY THAT IN THE ABSENCE OF THE PE OF RJ - S ITS BUSINESS PROFITS COULD NOT BE TAXED IN INDIA. THE TAXABILITY UNDER THE SOURCE STATE UNDER ARTICLE 7 OF THE APPLICABLE TAX TREATY THEREFORE C LEARLY FAILS. WE FURTHER FIND THAT SO FAR AS TAXABILITY UNDER ARTICLE 12 I.E. WITH RESPECT TO 'ROYALTIES AND FEES FOR TECHNICAL SERVICES' IS CONCERNED WE FIND THAT ARTICLE 12(4) PROVIDES THAT 'THE TERM 'FEES FOR TECHNICAL SERVICES' AS USED IN THIS ARTIC LE MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR SERVICES OF A MANAGERIAL TECHNICAL OR CONSULTANCY NATURE (INCLUDING THE PROVISION OF SUCH SERVICES THROUGH TECHNICAL OR OTHER PERSONNEL) IF SUCH SERVICES : (A) ARE ANCILLARY AND SUBSIDIARY T O THE APPLICATION OR ENJOYMENT OF THE RIGHT PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3 IS RECEIVED ; OR (B) MAKE AVAILABLE TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW - HOW OR PROCESSES WHICH ENABLES THE PERSON ACQUIRING THE SERV ICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN ; OR (C) CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN BUT EXCLUDES ANY SERVICE THAT DOES NOT ENABLE THE PERSON ACQUIRING THE SERVICE TO APPLY THE TECHNOLOGY CONTAINED THEREI N.' SO FAR AS 12(4)(A) IS CONCERNED THAT COMES INTO PLAY ONLY WHEN THE SERVICES ARE INCIDENTAL TO ENJOYMENT OF RIGHT PROPERTY OR INFORMATION HELD TO BE IN THE NATURE OF ROYALTY. VIDE OUR DISCUSSIONS EARLIER IN THIS ORDER WE HAVE ALREADY HELD THAT THE PAYMENTS MADE TO RJ - S FOR AVAILING BANDWIDTH SERVICES ARE NOT IN THE NATURE OF ROYALTY. ONCE THE TAXABILITY OF PAYMENT FOR THE MAIN SERVICES AS ROYALTY IS RULED OUT ARTICLE 12(4)(A) CEASES TO BE APPLICABLE FOR THIS SHORT REASON ALONE. AS REGARDS THE SC OPE OF ARTICLE 12(4)(B) IS CONCERNED IT CAN INDEED BE INVOKED FOR THE PAYMENTS FOR FEES OF TECHNICAL SERVICES BUT EVEN IT IS A CONDITION PRECEDENT THAT THE SERVICES SHOULD ENABLE THE PERSON ACQUIRING THE SERVICES TO APPLY TECHNOLOGY CONTAINED THEREIN BUT THEN IT IS NOBODY'S CASE THAT SERVICES RENDERED BY RJ - S WERE SUCH THAT THE ASSESSEE WAS ENABLED TO APPLY TECHNOLOGY CONTAINED THEREIN. THE SERVICES WERE SIMPLY MAINTENANCE SERVICES WHICH DID NOT INVOLVE ANY TRANSFER OF TECHNOLOGY. IN RESPONSE TO OUR S PECIFIC QUESTION LEARNED DR COULD NOT ENLIGHTEN US ABOUT WHAT WAS THE NATURE OF TECHNOLOGY TRANSFERRED UNDER THESE ARRANGEMENTS. THE AMOUNTS RECEIVED BY RJ - S COULD NOT THEREFORE BE TAXED AS 'FEES FOR TECHNICAL SERVICES EITHER. THERE ARE AT LEAST TWO N ON - JURISDICTIONAL HIGH COURT DECISIONS NAMELY HON'BLE DELHI HIGH COURT IN THE CASE OF DIT VS GUY CARPENTER & CO LTD [ (20 12) 346 ITR 504 (DEL)] AND HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS DE BEERS INDIA PVT LTD [(2012) 346 ITR 467 (KAR)] IN FAV OUR OF THE ASSESSEE AND THERE IS NO CONTRARY ITA NOS. 6331 TO 6334/MUM/2018 ACIT VS. RELIANCE JIO INFOCOMM LTD ASSESSMENT YEAR: 2018 - 19 PAGE 21 OF 21 DECISION BY HON'BLE JURISDICTIONAL HIGH COURT OR BY HON'BLE SUPREME COURT. WE BOW BEFORE HIGHER WISDOM OF HON'BLE COURTS ABOVE AND HOLD THAT UNLESS THERE IS A TRANSFER OF TECHNOLOGY INVOLVED IN TECHNICAL SERVIC ES EXTENDED BY SINGAPORE COMPANY THE 'MAKE AVAILABLE' CLAUSE IS NOT SATISFIED AND ACCORDINGLY THE CONSIDERATION FOR SUCH SERVICES CANNOT BE TAXED UNDER ARTICLE 12(4) (B) OF INDIA SINGAPORE TAX TREATY. AS REGARDS THE TAXABILITY UNDER ARTICLE 12(4)(C) I T IS NOBODYS CASE THAT THERE IS ANY DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIG N AND THEREFORE THIS PROVISION DOES NO COME INTO PLAY EITHER. ONCE WE COME TO THE CONCLUSION THAT THE PAYMENT FOR THESE SERVICES IS NOT TAXABLE AS FEES F OR TECHNICAL SERVICES UNDER ARTICLE 12(4) IT IS IMMATERIAL WHETHER IT COULD BE TAXABLE UNDER SECTION 9(1)(VII) FOR THE SIMPLE REASON THAT THIS BEING A TREATY SITUATION THE PROVISIONS OF THE INCOME TAX ACT 1961 COULD COME INTO PLAY ONLY WHEN FAVOURABLE TO THE ASSESSEE. 29. IN VIEW OF THESE DISCUSSIONS AS ALSO BEARING IN MIND ENTIRETY OF THE CASE WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) ON THIS ISSUE AS WELL. WE THEREFORE CONFIRM THE STAND OF THE LEARNED CIT(A) AND DECLINE TO INTE RFERE IN THE MATTER. 30. GROUND NO. 5 AS COMMON TO ALL THE APPEALS IS ALSO THUS DISMISSED. 31 . IN THE RESULT ALL THE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 15 TH DAY OF NOVEMBER 2019 SD/ - SD/ - SD/XX SD/XX RAVISH SOOD PRAMOD KUM AR (JUDICIAL MEMBER) ( VICE PRESIDENT ) MUMBAI D ATED THE 1 5 H D AY O F NOVEMBER 2019 COPIES TO : (1) THE AP P ELLAN T (2) THE RESPONDEN T (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI