Asia Satellite Telecommunications Co. Ltd., New Delhi v. ADIT, New Delhi

ITA 696/DEL/2011 | 2003-2004
Pronouncement Date: 16-12-2011 | Result: Dismissed

Appeal Details

RSA Number 69620114 RSA 2011
Assessee PAN AADCA8166F
Bench Delhi
Appeal Number ITA 696/DEL/2011
Duration Of Justice 10 month(s) 11 day(s)
Appellant Asia Satellite Telecommunications Co. Ltd., New Delhi
Respondent ADIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 16-12-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 16-12-2011
Date Of Final Hearing 01-12-2011
Next Hearing Date 01-12-2011
Assessment Year 2003-2004
Appeal Filed On 04-02-2011
Judgment Text
ITA NO. 696/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 696/DEL/2011 A.Y. : 2003-04 ASIA SETELLITE TELECOMMUNICATIONS CO. LTD. C/O PRICEWATERHOUSECOOPERS PVT. LTD. SUCHETA BHAVAN 11A VISHNU DIGAMBER MARG NEW DELHI -110002 (PAN : AADCA8166F) VS. ASSISTANT DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION CIRCLE1(1) NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : CA PAWAN KUMAR ARVIND RAJAN DEPARTMENT BY : SH. ASHWANI MAHAJAN C.I.T.(D.R.) ORDER ORDER ORDER ORDER PER PER PER PER BENCH BENCH BENCH BENCH THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 27.10. 2010 PERTAINING TO ASSESSMENT YEAR 2003-04. THE IMPUGNED ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS PURSUANT TO ASSESSEES APPEAL AGAINST THE ORDER OF THE ASSISTANT DIRECTOR O F INCOME TAX (INTERNATIONAL TAXATION) DATED 27.3.2006. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE ORDER PASSED BY THE LD. COMMISSIONER ITA NO. 696/DEL/2011 2 OF INCOME TAX (APPEALS) IS BAD IN LAW AND LIABLE TO BE QUASHED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISMISSING THE APPEAL FILED BY TH E APPELLANT EXPARTE ON THE PRETEXT THAT THE NOTICE FO R HEARING WAS RECEIVED BY THE APPELLANT AND THE APPELLANT PURPOSEFULLY DID NOT EITHER APPEAR NOR FI LED ANY WRITTEN SUBMISSIONS IN SUPPORT OF THE GROUNDS OF APPEAL RAISED. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISMISSING THE APPEAL WITHOUT TAKING RECOURSE TO HAVE THE NOTICE OF HEARING SERVE D THROUGH THE JURISDICTIONAL ASSESSING OFFICER WITH WHOM THE APPELLANT IS ASSESSED ON YEAR ON YEAR BASIS. 4. WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL AND ON MERITS OF THE CASE:- 4.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER WHILE HOLDING THAT THE ASSESSING OFFICER HAS CORRECTLY COMPUTED THE INCOME FROM NON-RESIDENT CUSTOMERS BY COMPUTING THE EXPENSES THEREOF @27.3%. ITA NO. 696/DEL/2011 3 4.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE FINDINGS GI VEN BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE APPELLANTS OWN CASE VIDE DECISION DATED NOVEMBER 1 2002 ON THE ASPECT OF ALLOWABILITY AND COMPUTATION O F EXPENSES ON REVENUES EARNED FROM NON-RESIDENT CUSTOMERS OF THE APPELLANT. 4.3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT ADJUDICATING THE GROUND ON LEVY OF INTEREST UNDER SECTION 220(2) OF THE ACT HO LDING THAT THE SAME IS CONSEQUENTIAL IN NATURE. 4.3.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT APPRECIATING THAT INTERE ST UNDER SECTION 220(2) OF THE ACT WAS NOT LEVIABLE. THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. THAT THE APPELLANT RESERVES ITS RIGHT TO ADD ALT ER AMEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFOR E OR AT THE TIME OF HEARING OF THIS APPEAL. 3. THE ASSESSEE IS A COMPANY INCORPORATED IN HONGKO NG. IT DERIVES INCOME FROM PROVISION OF SATELLITE TRANSPON DER CAPACITY. THE ASSESSEES INCOME IS SUBJECT TO HONGKONG PROFITS TAX . THE ASSESSEE FILED ITS NIL RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 WITHOUT ITA NO. 696/DEL/2011 4 PREJUDICE TO THE CLAIM THAT ITS INCOME IS NOT LIABLE TO TAX IN INDIA. THE RETURN WAS FILED WITHOUT PREJUDICE TO THE SUBMISSIO N THAT THE ASSESSEES INCOME IS NOT IN THE NATURE OF ROYALTY AS DEFINED IN SECTION 9(1)(VI) OF THE ACT. THE ASSESSING OFFICER PASSE D AN ORDER OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT FOR ASS ESSMENT YEAR 2003-04 HOLDING THAT THE ASSESSMENT OF THE YEAR UNDE R CONSIDERATION IS BASED ON THE ASSESSING LINES LAID DOWN BY THE I TAT FOR THE ASSESSMENT YEAR 1997-98 VIDE ITS ORDER DATED 2.11. 2002 (REPORTED IN 85 ITD 478). IT WAS HELD INTER ALIA THAT :- (A) THE FEE RECEIVED BY THE ASSESSEE FROM ITS CUSTO MERS IS ROYALTY AS DEFINED IN CLAUSE (III) READ WITH CLAUSE (VI) OF EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT; (B) THE PAYMENTS RECEIVED BY THE ASSESSEE FROM ITS N ON- RESIDENT CUSTOMERS IS TAXABLE AS ROYALTY UNDER S ECTION 9(1)(VI)(C) AND FROM ITS RESIDENT CUSTOMERS UNDER SE CTION 9(1)(VI)(B) AS THE PROCESS IN THE TRANSPONDER IS U SED BY THE ASSESSEES CUSTOMERS TO CARRY OUT THEIR BUSINESS IN INDIA AND TO EARN INCOME FROM INDIAN SOURCES; S.NO. NAME OF CUSTOMERS ATTRIBUTION RATE STATUS 1 STAR TV HONG KONG 33.11% NON-RESIDENT 2 EXPAND FAST HOLDINGS LIMITED MAURITIUS 100% NON-RESIDENT 3 SAHARA TV LTD. 100% NON-RESIDENT ITA NO. 696/DEL/2011 5 MAURITIUS 4 SABE TV MAURITIUS 100% NON-RESIDENT 5. SRI ADHIKARI BROTHERS LTD. 100% RESIDENT 6. SAHARA INDIA COMMERCIAL CORPORATION LIMITED 100% RESIDENT 3.1 THE ASSESSEE PREFERRED AN APPEAL AGAINST THE AS SESSMENT ORDER DATED 23.2.2004 BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PA SSED A CONSOLIDATED ORDER FOR THE ASSESSMENT YEARS 1998-99 TO 2005-06 HOLDING INTER ALIA THAT : (A) THE ASSESSEE HAS A BUSINESS CONNECTION IN IND IA. HOWEVER THE ASSESSEES INCOME COULD NOT BE COMPUTED U/S 9(1)( I) OF THE ACT AS THE ASSESSEE CARRIED OUT NO OPERATIONS IN INDIA; (B) CLAUSE (III) TO EXPLANATION 2 DOES NOT STIPUL ATE SECRET PROCESS AND THAT BROADCASTING OF ENCODED TV CHANN ELS IS A SECRET PROCESS; (C) THE INCOME OF THE ASSESSEE EARNED FROM ITS CUST OMERS IS IN THE NATURE OF ROYALTY AS PER THE PROVISIONS OF CLAU SE (III) READ WITH CLAUSE (VI) OF EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT; (D) SUCH ROYALTY IS PAYABLE BY THE CUSTOMERS FOR TH E PURPOSES OF THE BUSINESS CARRIED ON BY SUCH CUSTOMERS IN INDIA OR FOR THE PURPOSES ITA NO. 696/DEL/2011 6 OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE IN I NDIA HENCE CHARGEABLE TO TAX UNDER SECTION 9(1)(VI)(C) OF THE ACT FOR THE NON- RESIDENT CUSTOMERS AND UNDER SECTION 9(1)(VI)(B) OF THE ACT FOR THE RESIDENT CUSTOMERS; (E) AN AMOUNT EQUAL TO 33.11% (IN CASE OF STAR) AND 90% (IN CASE OF THE OTHER THREE NON-RESIDENT CUSTOMERS) WAS HELD TO BE ATTRIBUTABLE TO INDIA ON A NET INCOME BASIS. FURTHE R DIRECTED THE ASSESSING OFFICER TO RECOMPUTED INCOME AFTER CORREC TLY APPORTIONING THE ENTIRE EXPENSES FOR ASSESSMENT YEAR 2003-04. (P AGE 91 PARA 12.1.6). THE ASSESSING OFFICER ISSUED AN ORDER G IVING EFFECT TO THE AFORESAID ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 29.2.2008 RECOMPUTING THE ASSESSED INCOME AT ` 61 19 71 423/-. AGAINST THIS ORDER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PRIMARILY RAISIN G GROUNDS RELATING TO QUANTIFICATION OF INCOME PERTAINING TO THE NON-RESIDENT CUSTOMERS OF THE ASSESSEE. THAT THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) VIDE THIS EXPARTE ORDER AFFIRMED THE ORDE R OF THE ASSESSING OFFICER DATED 17.7.2008 IN ITS ENTIRETY DISMISSING ALL GROUNDS RAISED BY THE ASSESSEE. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT HONBLE JURISDICTIONAL HIGH COURT HAS CONSIDERED THE ISSUE IN ITA NO. 2028 2031 AND 2040 2043/2010 FOR THE ASSESSMENT YEARS 1998-99 TO 2005-06. IN THE ORDER DATED 10.3.2011 THE QUESTIO N FRAMED AND HIGH COURTS ADJUDICATION THEREUPON READ AS UNDER:- ITA NO. 696/DEL/2011 7 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE AMOUN T PAID TO THE APPELLANT BY ITS CUSTOMERS REPRESENTED INCOME B Y WAY OF ROYALTY AS THE SAID EXPRESSION IS DEFINED IN EXP LANATION 2 TO SECTION 9(1)(C)(VI) OF THE INCOME TAX ACT? WITH THE CONSENT OF THE LD. COUNSEL FOR THE PART IES THESE APPEALS ARE TAKEN UP FOR FINAL DISPOSAL AT THIS STAGE. THIS VERY QUESTION HAD CROPPED UP FOR CONSIDERATIO N IN THE CASE OF THE APPELLANT/ ASSESSEE ITSELF TITLED ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. VS. DIRECTOR OF INCOME TAX (ITA 131/2003 AND ITA 134/2003) AND HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE VIDE JUDGEMENT DAT ED 31 ST JANUARY 2011 WHEREIN IT IS SPECIFICALLY HELD THA T THE AMOUNT PAID TO THE APPELLANT BY ITS CUSTOMERS WOUL D NOT AMOUNT TO THE ROYALTY AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VI) OF THE INCOME TAX ACT. WE MAY NOTE THAT THE LEARNED COUNSEL FOR THE REVENUE HAD ARGUED THAT THERE WAS AN AMENDMENT TO SECTION 9 OF THE ACT BY FINANCE ACT 2001 W.E.F. 1 ST APRIL 2001 VIDE WHICH CLAUSE (IVA) HAS BEEN ADDED TO EXPL ANATION 2 OF THE ACT WHICH READS AS UNDER:- THE USE OR RIGHT TO USE ANY INDUSTRIAL COMMERCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44BB. ITA NO. 696/DEL/2011 8 PREDICATED ON THAT SUBMISSION OF MR. SANJEEV SABHARWAL LEARNED COUNSEL FOR THE REVENUE IS THAT IN SO FAR AS THESE APPEALS RELATING TO THE ASSESSMENT YEARS 2002-03 ONWARDS ARE CONCERNED EVEN MERE USE OF ANY INDUST RIAL COMMERCIAL OR SCIENTIFIC EQUIPMENT WOULD BE COVERED BY THE TERM ROYALTY. MR. SALVE LEARNED SR. COUNSEL APPEARING FOR THE APPELLANT HAS POINTED OUT THAT THE ASSESSING OFFICE R DID NOT BASE HIS CONCLUSION APPLYING THE AFORESAID PROVISIO N IN THE ASSESSMENT ORDER PASSED AND THIS ISSUE WAS NEVER RA ISED TILL THE INCOME TAX APPELLATE TRIBUNAL AND BECAUSE OF TH IS REASON THERE IS NO DISCUSSION ON THIS ASPECT. HE THUS ARGUED THAT IN THIS COURT FOR THE FIRST TIME THE REVENUE CANNOT RAISE THIS ARGUMENT THAT THE DEDUCTION COULD HAVE BEEN LEVIED UPON THE ASSESSEE ON THE BASIS OF THE AFORESAID CLAUSE. THAT PART IT IS ARGUED THAT EVEN THIS AS PECT IS COVERED BY THE AFORESAID JUDGEMENT DATED 31 ST JANUARY 2011 IN THE CASE OF THE ASSESSEE ITSELF. HE HAS D RAWN OUR ATTENTION TO THE DETAILED DISCUSSION CONTAINED IN T HE SAID JUDGEMENT WHEREIN IT IS SPECIFICALLY HELD THAT THE A SSESSEE HAD NOT ALLOWED ITS CUSTOMERS TO USE OR GIVE RIGHT TO USE THE SATELLITE OR THE PROCESS IN THE SATELLITE. WE FIND SUFFICIENT FORCE IN THE ARGUMENT OF MR. SALVE ON BOTH THE COUNT S. FOLLOWING THE AFORESAID JUDGEMENT THIS ISSUE IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST TH E REVENUE. ACCORDINGLY ORDERS OF THE TRIBUNAL IN RES PECT OF ITA NO. 696/DEL/2011 9 THESE ASSESSMENT YEARS ARE SET ASIDE AND THESE APPE ALS ARE ALLOWED. 7. IN PURSUANCE OF THE AFORESAID HONBLE HIGH COUR T ORDER THE ASSESSING OFFICER HAS PASSED THE FOLLOWING ORDER:- 1. ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. (HER EINAFTER : ASSESSEE/ASIA SAT/COMPANY) FILED ITS RETURN OF INCOME ON 31.10.2003 AT NIL INCOME. ASSESSMENT WAS COMPLETED ON 27.3.2006 ASSESSING THE INCOME AT ` 64 99 26 627/-. THE ASSESSEE HAD FILED AN APPEAL AGAINST THE ASSESSMENT ORDER BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD DECIDED THE APPEAL OF THE ASSESSEE BY PASSING A COMBINED ORDER DATED 29.2.2008 FOR A.Y.S 1998-99 TO 2005-06. 2. AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE FILED AN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. THE ITAT HAD DECIDED THE APPEAL OF THE ASSESSEE BY PASSING A COMBINED ORDER DATED 23.3.2010 W.R.T. ITA NOS. 1484 TO 1491. BEING AGGRIEVED BY THE SAID ORDER THE ASSESSEE APPROACHED THE HONBLE DELHI HIGH COURT. ITA NO. 696/DEL/2011 10 3. IT IS PERTINENT TO NOTE THAT THE HONBLE DELHI HI GH COURT IN THE ASSESSEES OWN CASE FOR THE A.Y. 1997-98 VI DE ORDER DATED 31.1.2011 HELD THAT THE REVENUE EARNED FROM SATELLITE TRANSMISSION SERVICES ARE NOT LIABLE T O TAX IN INDIA UNDER THE PROVISIONS OF SECTION 9 OF THE IT ACT. FOLLOWING THE SAID ORDER FOR ASSESSMENT YEAR 1997-98 THE HONBLE HIGH COURT DECIDED THE APPEALS FOR AYS 1998-99 TO 2005-06 (IN ITA 2028 TO 2031 A ND 2040 TO 2043 OF 2010) VIDE ORDER DATED 10.3.2011 IN FAVOUR OF THE ASSESSEE HOLDING THAT THE REVENUES EARNED BY THE ASSESSEE ARE NOT LIABLE TO TAX IN IND IA. FURTHERMORE THE ITAT WHILE PASSING THE ORDER FOR ASSESSMENT YEAR 1998-99 TO 2005-06 DIRECTED RECOMPUTATION OF TOTAL INCOME AS PER THE EVIDENCE TO BE PROVIDED. HOWEVER GIVEN THE ORDER OF THE HIGH COURT HOLDING THAT INCOME IS NOT CHARGEABLE TO TAX THE RECOMPUTATION OF INCOME AS PER THE DIRECTIONS OF TH E ITAT IS NOT BEING CARRIED OUT AT THIS STAGE. IN CA SE THE SUPREME COURT REVERSES THE ORDER OF HIGH COURT FRE SH COMPUTATION SHALL BE UNDERTAKEN AS PER INFORMATION PROVIDED BY THE ASSESSEE. ITA NO. 696/DEL/2011 11 ACCORDINGLY IN VIEW OF THE ABOVE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AT NIL. 8. IN LIGHT OF THE ABOVE ORDER OF THE ASSESSING OFF ICER WE FIND THAT ASSESSEES APPEAL HAS BECOME INFRUCTUOUS. ACCORDING LY THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED AS INFRUCTUOU S. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/12/2011. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 16/12/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT DELHI BENCHES