INMARSAT GLOBAL LTD., MUMBAI v. DY CIT (IT)-2(1)92), MUMBAI

ITA 7485/MUM/2019 | 2016-2017
Pronouncement Date: 24-03-2021 | Result: Allowed

Appeal Details

RSA Number 748519914 RSA 2019
Assessee PAN AAACI6098K
Bench Mumbai
Appeal Number ITA 7485/MUM/2019
Duration Of Justice 1 year(s) 3 month(s) 19 day(s)
Appellant INMARSAT GLOBAL LTD., MUMBAI
Respondent DY CIT (IT)-2(1)92), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 24-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 24-03-2021
Last Hearing Date 05-01-2021
First Hearing Date 05-01-2021
Assessment Year 2016-2017
Appeal Filed On 05-12-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH MUMBAI BEFORE SHRI PAVAN KUMAR GADALE JUDICIAL MEMBER & SHREE MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER ITA NO. 7485/MUM/2019 (A.Y: 2016-17) INMARSAT GLO B AL LTD. ERNST & YOUNG LLP 14 TH FLOOR RUBY-29 SENAPATI BAPAT MARG DADAR(W) MUMBAI 400002. VS. DY. CIT(IT) - 2(1)(2) R.NO.1612 17 TH FLOOR AIR INDIA BLDG NARIMAN POINT MUMBAI ./ ./ PAN/GIR NO. : AAACI6098K APPELLANT .. RESPONDENT APPELLANT BY : MS. AARATI SATHE AR RESPONDENT BY : SHRI VIJAY KUMAR SUBRAMANIAYN SR.DR DATE OF HEARING 1 1.03 .2021 DATE OF PRONOUNCEMENT 24 .0 3 .2021 / O R D E R PER PAVAN KUMAR GADALE JM: THE ASSESSEE COMPANY HAS FILED THE APPEAL AGAINST THE ASSESSMENT ORDER U/S 143(3) R.W.S 144C(13) OF THE ACT DATED 17.10.2019 PASSED IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUT ION PANEL-1 (WZ) MUMBAI ORDER DATED 23.08.2019. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 2 - GROUND NUMBER 1 ERRED IN DETERMINING THE TOTAL INCOME OF THE APPELL ANT AT RS. 6 18 98 220/- INSTEAD OF 'NIL' INCOME AS DECLARED B Y THE APPELLANT IN THE RETURN OF INCOME; GROUND NUMBER 2 ERRED IN HOLDING THE AMOUNTS RECEIVED BY THE APPEL LANT FROM TATA COMMUNICATIONS LIMITED ('TCL') [EARLIER KNOWN AS VIDESH SANCHAR NIGAM LIMITED] TO BE 'ROYALTY' AS DEFINED U NDER SECTION 9(1)(VI) OF THE ACT AS WELL AS UNDER ARTICL E 13(3)(A) OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN IND IA AND UNITED KINGDOM ('INDIA-UK TAX TREATY'); GROUND NUMBER 3 ERRED IN NOT FOLLOWING THE DECISION OF THE JURISDIC TIONAL MUMBAI TRIBUNAL IN THE APPELLANT'S OWN CASE FOR PREVIOUS A SSESSMENT YEARS 2000-01 TO AY 2005-06 AND ASSESSMENT YEAR 200 7-08 TO A.Y 2012-13 WHEREIN IT HAS BEEN HELD THAT RECEIP TS OF THE APPELLANT FROM TCS ARE NOT IN THE NATURE OF ROYALTY UNDER THE ACT AS WELL AS UNDER THE INDIA-UK TAX TREATY. GROUND NUMBER 4 THE LEARNED AO HAS ERRED IN NOT FOLLOWING THE ADVAN CE RULING (AS AFFIRMED BY HON'BLE SUPREME COURT) OBTAINED BY INDIAN SPACE RESEARCH ORGANISATION ('ISRO') (A CUSTOMER OF INMARSAT) AND TAXING THE RECEIPTS FROM TCL AS 'ROYALTY' PURSU ANT TO THE RETROSPECTIVE AMENDMENT INSERTED VIDE EXPLANATION 5 / 6 TO SECTION 9(1)(VI) OF THE ACT BY FINANCE ACT 2012 AS WELL AS ARTICLE 13(3)(A) OF THE INDIA-UK TAX TREATY; GROUND NUMBER 5 ERRED IN HOLDING THAT A UNILATERAL AMENDMENT OF THE TERM PROCESS UNDER THE ACT WOULD GET IMPORTED INTO THE D EFINITION OF ROYALTY GIVEN UNDER ARTICLE 12 OF INDIA-UK TREATY GROUND NUMBER 6 THE HON'BLE DRIP HAS ERRED IN CONCLUDING THAT THE L IAISON OFFICE (LO) CONSTITUTES A PERMANENT ESTABLISHMENT I N INDIA ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 3 - WITHOUT APPRECIATING THE FACT THERE ARE NO ACTIVITI ES THAT ARE CARRIED OUT BY THE LO IN INDIA; GROUND NUMBER 7 THE HON'BLE DRIP HAS ERRED IN CONCLUDING THAT THE L AND EARTH STATION ('LES') CONSTITUTES A PERMANENT ESTABLISHME NT OF THE APPELLANT IN INDIA WITHOUT APPRECIATING THE FACT T HAT THE SAID LES WAS OWNED AND OPERATED BY TCL AND NOT APPELLANT THEREBY NOT APPRECIATING THE FACTS APPROPRIATELY; GROUND NUMBER 8 THE LEARNED AO HAS ERRED IN CONSIDERING THE PROFITA BILITY ON AN AD-HOC BASIS AT 30 PERCENT OF THE GROSS RECEIPTS FR OM TCL BY APPLYING RULE 10 OF THE INCOME-TAX RULES 1962 ('RU LES') WITHOUT APPRECIATING THE FACT THAT: THE AO DID NOT CARRY OUT ANY ACTIVITIES IN INDIA AND DID NOT HAVE ANY EMPLOYEE DURING THE RELEVANT ASSESSMENT YEAR; AND THE LES IN INDIA WAS NOT OWNED OR CONTROLLED BY THE APPELLANT. GROUND NUMBER 9 THE A.O HAS ERRED IN COMPUTING THE TAX ON THE IMPUG NED INCOME OF RS. 6 18 98 220/- AT THE RATE OF 40% AS P ER THE PROVISIONS OF THE ACT INSTEAD OF 10% AS PER ARTICL E 12 OF INDIA- UK TAX TREATY. GROUND NUMBER 10 THE LEARNED AO HAS ERRED IN LEVYING SURCHARGE SECO NDARY EDUCATION CESS AND HIGHER SECONDARY EDUCATION CESS OVER AND ABOVE THE TAX COMPUTED AT THE RATE PRESCRIBED UNDER THE INDIA- UK TAX TREATY ON THE RECEIPTS OF THE APPELLANT WHIL E CALCULATING INCOME TAX LIABILITY FOR THE YEAR UNDER CONSIDERATION; GROUND NUMBER 11 ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 4 - THE LEARNED AO HAS ERRED IN GRANTING THE TDS CREDIT CLAIMED BY THE APPELLANT OF RS.61 89 852/-; GROUND NUMBER 12 THE LEARNED AO HAS ERRED IN LEVYING INTEREST AMOUNT ING TO RS.1 11 85 203/- UNDER SECTION 234B OF THE ACT: GROUND NUMBER 13 THE LEARNED AO HAS ERRED IN INITIATING PENALTY PROC EEDINGS UNDER SECTION 271 (1)(C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD ALTER OMIT OR S UBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AT ANY T IME BEFORE OR AT THE TIME OF THE APPEAL TO ENABLE THE HON'BLE ITAT TO DECIDE THE APPEAL IN ACCORDANCE WITH LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY IS INCORPORATED AND REGISTERED UNDER LAWS O F UNITED KINGDOM AND IS ENGAGED IN THE BUSINESS OF PROVIDING TELECOMMUNICATION SERVICES.THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 17.10.2016 WITH T HE TOTAL INCOME OF RS. NIL. SUBSEQUENTLY THE CASE WA S SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) AND 142 (1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED. IN COMPLIANCE THE ASSESSEE HAS FILED THE DETAILS ON 16.11.2018.THE A.O ON PERUSAL OF THE INFORMATION SUBMITTED FOUND THAT THE ASSESSEE HAS RECEIVED CERTAIN RECEIPTS FROM TATA COMMUNICATIONS LTD. (IN SHORT TCL) (EARLIER KNOWN AS VSNL) THEREFORE TH E A.O IS OF THE OPINION THAT THE INCOME RECEIVED FROM ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 5 - TCL SHOULD BE TAXED AS A ROYALTY AS IN EARLIER YEAR S. WHEREAS THE ASSESSEE HAS FILED A DETAILED REPLY O N 22.11.2017 REFERRED AT PARA 4 OF THE ORDER. THE A. O CONSIDERED THE SUBMISSIONS AND ADVANCE RULINGS AND THE ASSESSEES OWN CASES FOR THE EARLIER YEARS AND OBSERVED THAT THE INTENTION OF THE AGREEMENT IS RENDERING OF TELECOMMUNICATION SERVICES BY THE ASSESSEE TO THE TCL. THE ASSESSEE MADE SUBMISSIONS ON THE CLAIM U/S 80IA OF THE ACT AND APPLICABILITY OF PROVISIONS UNDER INDIA-UK TAX TREATY. THE A.O DEAL T ON THE BASIC PRINCIPLES AND GOVERNING OF ROYALTY AND THE SUBMISSIONS OF THE ASSESSEE AND DTAA BETWEEN THE INDIA AND UK. BUT THE A.O. HAS RELIED ON THE EARLIER YEARS DECISIONS AND OBSERVED THAT NO DETAI LS ARE AVAILABLE OR PROVIDED BY THE ASSESSEE. THEREFOR E ON APPLYING THE RULE 10 OF THE IT RULES 1962 A.O INVOKED EXPENSES @30%WHICH WORKED OUT TO 1 85 69 467/- AND THE BALANCE RECEIPTS ARE TREATED AS ROYALTY INCOME AND NOT BUSINESS INCOME AND TAXABLE @10% UNDER INDIA-UK TAX TREATY AND ASSESSED THE TOTAL INCOME OF RS. 6 18 98 220/-AND PASSED THE DRA FT ASSESSMENT ORDER U/S 144C OF THE ACT DATED 10.12.2018. ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 6 - 3. AGGRIEVED BY THE ORDER THE ASSESSEE HAS FILED OBJECTIONS BEFORE THE DRP WHEREAS THE HONBLE DRP HAS CONSIDERED THE OBJECTIONS OBSERVATIONS OF THE A.O AND DEALT ON THE ISSUES AND FINALLY CONFIRMED THE ACTION OF THE A.O AND DEALT AT PARA 6.12 OF ORDER PASSED U/S 144C(5) OF THE ACT DATED 23.08.2019: DISCUSSION AND DIRECTIONS OF THE DRP: THE CONTENTIONS RAISED BY THE ASSESSEE HAVE BEEN CO NSIDERED. WE FIND THESE TO BE NOT ACCEPTABLE FOR FOLLOWING RE ASONS: I) NOTHING HAS BEEN BROUGHT OUT BY THE ASSESSEE TO SHO W THAT IT HAS MAINTAINED INDIA SPECIFIC ACCOUNTS. II) THE SERVICES BEING PROVIDED BY THE UK SERVICE PROVI DER THAT TOO THROUGH THE SATELLITES FOR USE OF CLIENTS IN INDIA FURTHER THE END USERS BEING NUMEROUS INDIVIDUALS / CORPORATIONS/BODIES RESIDENT AS WELL NON-RESIDENT ALL THESE FACTORS AND SPECIALLY WHEN INDIA SPECIFIC ACC OUNTS ARE NOT MAINTAINED MADE THE INCOME ASCERTAINMENT V ERY DIFFICULT. III) CONSIDERING ABOVE FACTS AND OF THE FACT THAT DESPIT E BEING ASKED BY THE A.O FOR THE PROFITABILITY/INDIA SPECIFIC ACCOUNTS THE ASSESSEE HAS FAILED TO PRODU CE ANYTHING IN ITS SUPPORT. IN THESE CIRCUMSTANCES T HE AO HAS NO OPTION BUT TO ESTIMATE THE INCOME BY APPLYIN G RULE 10 OF THE INCOME TAX RULES. HENCE THE AO ACT ION OF ADOPTING RULE 10 CANNOT BE ERRONEOUS AND IN FACT HE ADOPTED THE ONLY OPTION AVAILABLE TO HIM. IV) IT HAS NEVER BEEN CHALLENGED THAT PE HAS A TURNOVER IN INDIA. REGARDING INCOME ATTRIBUTION TO PE IT IS N OTED THAT REVENUE GETS GENERATED IN INDIA THE SERVICE RECIPITIENTS ARE IN INDIA THE NECESSARY APPROVALS HAVE COME FROM INDIA; THE END USERS ARE IN INDIA. THE S ERVICE PROVIDER THOUGH IN UK IS PROVIDING SERVICE THROUG H THE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 7 - SATELLITE BASED TRANSPONDER AND GROUND STATIONS BAS ED IN INDIA. V) NO INDIA SPECIFIC ACCOUNTS DETAILS EXPENSE RATIO S ARGUMENTS/ CLAIMS/PROPOSITIONS HAVE BEEN PROVIDED B Y THE ASSESSEE. VI) CONSIDERING ALL THE ABOVE FACTORS AND IN ABSENCE OF RELUCTANT INFORMATION RATE OF 30% FOR INCOME ADOPT ION CANNOT BE FAULTED WITH. THE ASSESSEES OBJECTION NUMBER 7 IS THEREFORE REJE CTED. 4. SUBSEQUENTLY THE A.O. HAS PASSED THE ASSESSMENT ORDER U/S 143(3) R.W.S 144C(13) OF THE ACT DATED 17.10.2019 ASSESSING THE TOTAL INCOME OF RS. 6 18 98 220/-. AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE HAS FILED THE APPEAL WITH THE HONBLE TRIBUNAL. 5. AT THE TIME OF HEARING THE LD. AR SUBMITTED THA T THE ORDER OF THE A.O IS CONTRARY TO THE FACTS AND PROVISIONS OF LAW. FURTHER IN THE ASSESSEES OWN CA SE FOR THE EARLIER ASSESSMENT YEARS THE HONBLE TRIB UNAL HAS GRANTED THE RELIEF AND PRAYED FOR ALLOWING THE APPEAL. CONTRA THE LD.DR RELIED ON THE ORDER OF TH E A.O AND SUBMITTED THAT THE FACTS ARE DIFFERENT AND THE REVENUE IS CONTESTING THE DECISION OF THE HONBLE TRIBUNAL WITH THE HIGHER FORUMS. ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 8 - 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE CRUX OF DISPUTED ISSU E AS ENVISAGED BY THE LD. AR THAT THE A.O ERRED IN TREAT ING THE RECEIPTS FROM TCL AS ROYALTY AND TAXED UNDER INDIA-UK TAX TREATY. THE LD. AR SUBMITTED THAT THE LOWER FORUMS AND THE DRP HAS TREATED THE RECEIPTS FROM TCL AS ROYALTY AND MADE TAXABLE AT 10% UNDER INDIA-UK TAX TREATY. THEREFORE THE ACTION OF THE A. O AND LOWER FORUMS ARE NOT IN ACCORDANCE WITH LAW AND THE HONBLE TRIBUNAL IN ASSESSEES OWN CASE IN EARL IER YEARS HAS GRANTED RELIEF TO THE ASSESSEE. WE FIND T HE SUBMISSIONS OF THE LD. AR ARE REALISTIC AND THE LD. AR ALSO REFERRED TO THE DTTA BETWEEN INDIA-UK TAX TREATY AND DECISION OF THE HONBLE TRIBUNAL FOR THE A.Y 2015-16 WHEREIN THIS DISPUTED ISSUES HAVE BEEN DEALT. THE HONBLE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 7025/MUM/2018 FOR THE A.Y 2015-16 DATED 23.10.2020 HAS OBSERVED AT PAGE 31 TO 41 PARA 8 TO 11 OF THE ORDER AS UNDER: 8. WE SHALL FIRST DEAL WITH THE CLAIM OF THE ASSES SEE THAT THE AMOUNTS RECEIVED FROM PROVIDING SATELLITE TELECOMMUNICATION SERVICES TO TCL (EARLIER KNOWN AS VIDHESH SANCHAR NIGAM LIMITED) (VSNL) WERE NOT TO BE TREATE D AS ROYALTY UNDER SEC.9(1)(VI) OF THE ACT AND ARTICLE 1 3 OF THE INDIA-U.K. TAX TREATY. AS OBSERVED BY US HEREINABOV E IT WAS ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 9 - THE CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORIT IES THAT THE ISSUE THAT THE AMOUNTS RECEIVED BY IT FROM TCL WERE NOT TO BE HELD AS ROYALTY WAS SQUARELY COVERED BY THE ORDER P ASSED BY THE TRIBUNAL IN ITS OWN CASE FOR A.Y. 2000-01 TO A. Y. 2005-06 VIDE ITS CONSOLIDATED ORDER DATED 14.07.2017. IN TH E COURSE OF THE HEARING OF THE APPEAL THE LD. AUTHORIZED REPRES ENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE TOOK US THROUGH THE CONSOLIDATED ORDER PASSED BY THE TRIBUNAL WHILE DIS POSING OFF THE ASSESSEES APPEALS FOR A.Y. 2000-01 TO A.Y. 200 5-06 DATED 14.07.2017. IT WAS FURTHER SUBMITTED BY THE L D. A.R THAT THE ISSUE PERTAINING TO TREATING OF THE AMOUNT S RECEIVED BY THE ASSESSEE FROM TCL FOR PROVIDING SATELLITE TELECOMMUNICATION SERVICES AS ROYALTY BY THE A.O/ DRP HAD AGAIN CAME UP BEFORE THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2007-08 TO A.Y. 2012-13 WHEREIN AFTER EXH AUSTIVE DELIBERATIONS AND RELYING ON ITS EARLIER ORDER THE TRIBUNAL HAD CONCLUDED THAT THE SAME WAS NOT TO BE TREATED AS RO YALTY. 9. PER CONTRA THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTH ORITIES. HOWEVER THE LD. D.R COULD NOT CONTROVERT THE CLAIM OF THE ASSESSEES COUNSEL THAT THE ISSUE WAS SQUARELY COVE RED BY THE ORDERS PASSED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE PRECEDING YEARS. 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID ISSUE AND FIND THAT THE TRIBUNAL WHILE DISPOSING OFF THE ASSESSEES APPEALS FOR A.Y. 2007-08 TO A.Y. 2012-13 VIDE ITS CONSOLIDATED ORDER DATED 12.12.2018 HAD H ELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE COMPANY FROM PR OVIDING SATELLITE TELECOMMUNICATION SERVICES TO TCL WAS NOT TO BE TREATED AS ROYALTY. THE TRIBUNAL WHILE DEALING WITH THE AFORESAID ISSUE HAD FOLLOWED ITS EARLIER VIEW THAT WAS TAKEN WHILE DISPOSING OFF THE ASSESSEES APPEALS FOR A.Y. 2000-01 TO A.Y. 2005-06 AND VIDE ITS ORDER DATED 14.07.2017 H AD OBSERVED AS UNDER : 5. IN ORDER TO APPRECIATE THE CONTROVERSY THE FOL LOWING DISCUSSION IS RELEVANT. THE APPELLANT IS A COMPANY INCORPORATED IN UNITED KINGDOM AND IS ALSO A TAX RE SIDENT OF UNITED KINGDOM. THE APPELLANT IS ENGAGED IN THE BUS INESS OF ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 10 - PROVIDING TELECOMMUNICATION SERVICES AND FOR ASSESS MENT YEAR 2007-08 IT FILED ITS RETURN OF INCOME DECLARING NI L INCOME INTER-ALIA CONTENDING THAT ITS INCOME WAS NOT TAXA BLE IN INDIA. SO FAR AS THE INCOME EARNED BY THE ASSESSEE IN THIS YEAR IS CONCERNED THE SAME STANDS ON SIMILAR FOOTING AS IN THE PAST YEARS NAMELY FROM RENDERING OF TELECOMMUNICATION SERVICES TO VIDESH SANCHAR NIGAM LTD. (IN SHORT VSNL) WHO SE NAME HAS SUBSEQUENTLY BEEN CHANGED TO TATA COMMUNICATION LTD. (IN SHORT TCL). THE RECEIPTS FROM RENDERING OF TELECOMMUNICATION SERVICES TO TCL WERE CLAIMED TO BE NOT TAXABLE IN INDIA; HOWEVER THE ASSESSING OFFICER HAS TAXED THE SAME AS ROYALTY UNDER THE ACT AS WELL AS IN TERMS OF THE INDIA-UK DOUBLE TAXATION AVOIDANCE AGREEMENT (IN SHORT INDIA-UK DTAA). THE STAND OF THE ASSESSEE H AS BEEN THAT ITS RECEIPTS FROM TCL ARE IN THE NATURE OF BU SINESS PROFITS COVERED BY ARTICLE 7 OF THE INDIA-UK DTAA AND IN THE ABSENCE OF ANY PE IN INDIA THE SAME ARE NOT TAXABL E IN INDIA. IT WAS A COMMON GROUND BETWEEN THE PARTIES THAT THE MANNER IN WHICH THE SERVICES HAVE BEEN RENDERED BY THE ASS ESSEE IN THE INSTANT YEAR IS SIMILAR TO THE MANNER IN WHICH THE SERVICES HAVE BEEN RENDERED IN THE PAST YEARS. BROADLY SPEAK ING THE FOLLOWING FACT-SITUATION ASSERTED BY THE ASSESSEE B EFORE THE ASSESSING OFFICER BRINGS OUT THE MECHANICS OF THE M ANNER IN WHICH THE ASSESSEE IS PROVIDING TELECOMMUNICATION S ERVICES FROM OUTSIDE INDIA AND DERIVING ITS EARNING FROM TC L THE SAME IS REPRODUCED BELOW :- 2.1 BACKGROUND INMARSAT IS ENGAGED IN THE BUSINESS OF PROVIDING TELECOMMUNICATION SERVICES FROM OUTSIDE INDIA. THE AFORESAID NATURE OF SERVICES ESSENTIALLY INVOLVES M AKING AVAILABLE A CHANNEL (FREQUENCY) IN AIR THROUGH WHIC H THE COMMUNICATION SIGNALS ARE TRANSMITTED. THIS FREQUEN CY IS MADE AVAILABLE BY A NETWORK WHICH INCLUDES THE FOLLOWING RESOURCES : ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 11 - SATELLITE NETWORK CO-ORDINATING STATION (NCS) NETWORK OPERATION CENTRE (NOC) SATELLITE CONTROL CENTRE OTHER INFRASTRUCTURE INMARSAT PROVIDES A TELECOMMUNICATION LINK BETWEEN THE USER OF MOBILE TELEPHONE SYSTEM KNOWN AS MOBILE EAR TH STATION (MES) AND LAND EARTH STATION (LES). MES IS AN EQUIPMENT LOCATED ON A SHIP AIRCRAFT OR VEHICLE OR CARRIED IN HAND HELD CASE. THE USERS OF THE EQUIPME NT ARE THIRD PARTIES WHO ARE NOT CONNECTED WITH INMARS AT. THE LES IS A FIXED SITE (WITH LARGE SATELLITE DISHE S AND RELATED EQUIPMENT) WHICH IS OPERATED BY A THIRD PA RTY I.E A LAND EARTH SERVICE OPERATOR (LESO). INMARSAT IS ENGAGED IN RENDERING VARIOUS TELECOMMUNICATION SERVICES INCLUDING THE FOLLOWING : VOICE TRANSMISSION SERVICES FAX TRANSMISSION SERVICE DATA TRANSMISSION SERVICE E-MAIL TRANSMISSION PRIVATE/CORPORATE NETWORKS VALUE ADDED NETWORKS TRANSMISSION INTERNET ACCESS-BROWSING E-MAIL VIDEO CONFERENCING-STORE AND FORWARD VIDEO REAL T IME ETC. IN THIS CONNECTION WE ENCLOSE HEREWITH IN ANNEXURE 7 A DIAGRAMMATIC REPRESENTATION WHICH DESCRIBES THE ABOVE MENTIONED ACTIVITIES. THE LESO IN INDIA IS VSNL. INMARSAT HAS ENTERED INT O A LESO AGREEMENT WITH VSNL FOR PROVIDING SATELLITE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 12 - TELECOMMUNICATION SERVICES. WE HAVE ENCLOSED HEREWI TH IN ANNEXURE 8 A COPY OF THE LESO AGREEMENT DATED 12 APRIL 1999 ENTERED INTO BY INMARSAT WITH VSNL FOR PROVISION OF TELECOMMUNICATION SERVICES. THE LES IS LINKED ON THE GROUND TO THE LOCAL PUBLIC TELECOMMUNICATION NETWORK. THIS SYSTEM ENABLES COMMUNICATION TO TAKE PLACE BETWEEN USERS OF THE ME S EQUIPMENT AND EITHER OTHER USERS OF SIMILAR EQUIPME NT OR USERS OF THE PUBLIC TELEPHONE NETWORK. IN EACH CASE THE COMMUNICATION PASSES VIA AN INMARSAT SATELLITE AND IS CO-ORDINATED AND CONNECTED BY THE LESO. 6. THE ASSESSING OFFICER HOWEVER TOOK THE STAND FOLLOWING THE STAND OF THE ASSESSING AUTHORITIES OF THE PAST YEARS THAT THE IMPUGNED RECEIPTS EARNED BY THE ASSE SSEE FROM TCL ARE IN THE NATURE OF ROYALTY. WE FIND THAT TH E DRP HAS ALSO AFFIRMED THE DECISION OF THE ASSESSING OFFICER . 7. ON THIS ASPECT OF THE ROYALTY ISSUE CONTROVERSY IT HAS BEEN POINTED OUT BEFORE US THAT THE TRIBUNAL VIDE I TS ORDER IN ITA NOS. 5102/MUM/2004 & OTHERS DATED 14.07.2017 IN THE CONTEXT OF ASSESSMENT YEARS 2000-01 TO 2005-06 HAS EVALUATED THE RIVAL STANDS AND HAVE DISAGREED WITH THE STAND OF THE REVENUE THAT THE NATURE OF RECEIPT WAS ROYAL TY. AT THE TIME OF HEARING THE LEARNED REPRESENTATIVE FOR THE ASSESSEE HAS TAKEN US THROUGH THE DETAILED DECISION MADE BY THE TRIBUNAL IN ITS ORDER DATED 14.07.2017 (SUPRA) WHO SE RELEVANT PORTION WE ARE TEMPTED TO REPRODUCE AS UNDER :- 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE MATERIAL FACT S OF THE PRESENT CASE ARE LARGELY IDENTICAL TO THE FACTS AS CONSIDERED BY AAR IN THE RULING IN THE CASE OF ISRO SATELLITE CENTRE(2008) 307 ITR 59 (AAR). WE NOTE THAT THE REASONING AND CONCLUSION ON FACTS SIM ILAR ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 13 - TO THE FACTS IN THE PRESENT PROCEEDINGS WITH ISRO W HICH HAS BEEN FOLLOWED AFTER A DETAILED DISCUSSION AND I N FACT EXTRACTED BY THE HON'BLE DELHI HIGH COURT IN T HE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. (2011) 332 ITR 340(DEL.). WE NOTE THAT NO ARGUMENTS HAVE BEEN ADVANCED BY THE REVENUE TO REBUT THE ASSESSEES ARGUMENTS THAT FACTS AS CONSIDERED IN IS RO SATELLITE CENTRE ARE IDENTICAL IN THE PRESENT PROCE EDINGS ALSO. WE HAVE TAKEN INTO CONSIDERATION THAT THE LEARNED CIT-DR HAS PLACED RELIANCE ON THE DECISIONS OF THE HON'BLE MADRAS HIGH COURT IN THE C ASE OF VERIZON COMMUNICATIONS SINGAPORE PTE LTD. VS. INCOME TAX OFFICER (IT) (2014) 361 ITR 575 (MAD) T HE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTANTS (P) LTD. AND THE DECISION OF THE HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SI EMENS AKTIONGESWELLSCHAFT (2009) 310 ITR 320 (BOM). RELIA NCE HAS BEEN PLACED ON THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VIACOM 18 MEDIA P. LTD. VS. ADIT (INTERNATIONAL TAXATION)-2(2) MUMBAI(2014) 44 TAXMANN.COM 1 (MUM-TRIB) IN SUPPORT OF THE ARGUMENT THAT THIS IS THE VIEW TAKEN BY THE MUMBAI BENCH OF THE TRIBUNAL. NOTWITHSTANDING THE FACT THAT AT THAT POINT OF TIME THE COORDINATE BENCH DID NOT HAVE THE BENEFIT OF THE OR DERS OF THE HON'BLE DELHI HIGH COURT IN ASIA SATELLITE COMMUNICATION CO. LTD. WE ALSO NOTE THAT CONSISTENT LY THE MUMBAI BENCH OF THE TRIBUNAL HAS TAKEN INTO THE CONSIDERATION THE DISTINCTION IN FACTS LAW AND THE ISSUE WHICH WAS POSED BEFORE DIFFERENT FORUMS FOR CONSIDERATION AND FIND THAT IT HAS BEEN CONSISTENTL Y HELD RELYING UPON THE DECISIONS OF THE HON'BLE DELHI HIG H COURT IN THE CASES OF NEW SKIES SATELLITE(2016) 382 ITR 1 DIT VS. NOKIA NETWORKS OY (2013) 358 ITR 259 AND ASIA SATELLITE COMMUNICATIONS CO. LTD. (SUPRA) IN T HE DECISIONS OF ALCATEL-LUCENT USA INC. DATED 25.04.20 07 IN ITA NOS. 7299 & 7300/ MUM/2010 FOR A.Y. 2005-06 AND ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 14 - 2007-08 DDIT VS. SHELL INFORMATION TECHNOLOGY INTERNATIONAL BV DATED 15.03.2017 IN ITA NO. 5051/MUM/ 2009 & OTHERS FOR A.Y. 2006-07 TO 2008-09 AND ADIT VS. TAJ TV LTD. DATED 05.07.2016 IN ITA NO . 4678/MUM2007 FOR A.Y. 2003-04 TO 2005-06. WE HAVE ALSO NOTED THAT RELIANCE PLACED BY THE LEARNED CIT- DR ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COU RT IN SIEMENS AKTIONGES WELLSCHAFT (SUPRA) SUPPORTS ITS C ASE IS MISPLACED. SPECIFIC MENTION MAY BE MADE TO PARA 20 OF THE SAID DECISION. REFERENCE THEREIN HAS BEEN MA DE TO A DECISION OF THE CANADIAN COURT IN THE CASE OF HER MAJESTY THE QUEEN VS. MELFORD DEVELOPMENT INC. 82 D TC 6281 AND THE CATEGORIC OBSERVATION ON UNILATERAL AMENDMENT BY A NATION WHICH IS PARTY TO THE AGREEME NT LEAVES THE ISSUE IN NO DOUBT ABOUT THE VIEW FAVOURE D. ACCORDINGLY WE QUOTE HERE THE DECISION OF THE HON'B LE DELHI HIGH COURT IN DIT VS. NEW SKIES SATELLITE BV CITED SUPRA TO SUPPORT THE CONCLUSION WHY THE CONSISTENT ORDERS OF THE ITAT ON THE ISSUE ARE BEING FOLLOWED: - 48. IN COMMISSIONER OF INCOME TAX V. SEIMENS AKTIONGESSELLSCHAFT [2009] 310 ITR 320 (BOM) THE BOMBAY HIGH COURT CITING R V. MELFORD DEVELOPMENTS INC. HELD THAT THE RATIO OF THE JUDGMENT IN OUR OPINION WOULD M EAN THAT BY A UNILATERAL AMENDMENT IT IS NOT POSSIBLE F OR ONE NATION WHICH IS PARTY TO AN AGREEMENT TO TAX INCOME WHICH OTHERWISE WAS NOT SUBJECT TO TAX. SUCH INCOME WOULD NOT BE SUBJECT TO TAX UNDER THE EXPRESSION L AWS IN FORCE. *** ** ** WHILE CONSIDERING THE DOUBLE TAX AVOIDANCE AGREEMEN T THE EXPRESSION LAWS IN FORCE WOULD NOT ONLY INCLU DE A TAX ALREADY COVERED BY THE TREATY BUT WOULD ALSO IN CLUDE ANY OTHER TAX AS TAXES OF A SUBSTANTIALLY SIMILAR ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 15 - CHARACTER SUBSEQUENT TO THE DATE OF THE AGREEMENT A S SET OUT IN ARTICLE I(2). CONSIDERING THE EXPRESS LANGUA GE OF ARTICLE I(2) IT IS NOT POSSIBLE TO ACCEPT THE BR OAD PROPOSITION URGED ON BEHALF OF THE ASSESSEE THAT TH E LAW WOULD BE THE LAW AS APPLICABLE OR AS DEFINE WHEN TH E DOUBLE TAX AVOIDANCE AGREEMENT WAS ENTERED INTO. 49. IT IS ESSENTIAL TO NOTE THE CONTEXT IN WHICH TH IS JUDGMENT WAS DELIVERED. THERE THE COURT WAS CONFRO NTED WITH A SITUATION WHERE THE WORD ROYALTY WAS NOT DEF INED IN THE GERMAN DTAA. FOLLOWING FROM OUR PREVIOUS DISCUSSION ON THE BIFURCATION OF TERMS WITHIN THE T REATY IN SITUATIONS WHERE WORDS REMAIN UNDEFINED ASSISTA NCE IS TO BE DRAWN FROM THE DEFINITION AND IMPORT OF TH E WORDS AS THEY EXIST IN THE DOMESTIC LAWS IN FORCE. IT W AS IN THIS CONTEXT THAT THE BOMBAY HIGH COURT HELD THAT T HEY WERE UNABLE TO ACCEPT THE ASSESSES CONTENTION THAT THE LAW APPLICABLE WOULD BE THE LAW AS IT EXISTED AT TH E TIME THE DOUBLE TAX AVOIDANCE AGREEMENT WAS ENTERED INTO . THIS IS THE CONTEXT IN WHICH THE AMBULATORY APPROAC H TO TAX TREATY INTERPRETATION WAS NOT REJECTED. THE SIT UATION BEFORE THIS COURT HOWEVER IS MATERIALLY DIFFERENT A S THERE IS IN FACT A DEFINITION OF THE WORD ROYALTY UNDER A RTICLE 12 OF BOTH DTAA THUS DISPENSING WITH THE NEED FOR REC OURSE TO ARTICLE 3. 50. THERE ARE THEREFORE TWO SETS OF CIRCUMSTANCES. FIRST WHERE THERE EXISTS NO DEFINITION OF A WORD IN ISSUE WITHIN THE DTAA ITSELF REGARD IS TO BE HAD TO THE LAWS IN FORCE IN THE JURISDICTION OF THE STATE CALLED UPON TO INTERP RET THE WORD. THE BOMBAY HIGH COURT SEEMS TO ACCEPT THE AMBULATORY APPROACH IN SUCH A SITUATION THUS ALLOW ING FOR SUCCESSIVE AMENDMENTS INTO THE REALM OF LAWS I N FORCE. WE EXPRESS NO OPINION IN THIS REGARD SINCE IT IS NOT IN ISSUE BEFORE THIS COURT. THIS COURTS FINDING IS IN THE CONTEXT OF THE SECOND SITUATION WHERE THERE DOES E XIST A DEFINITION OF A TERM WITHIN THE DTAA. WHEN THAT IS THE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 16 - CASE THERE IS NO NEED TO REFER TO THE LAWS IN FORC E IN THE CONTRACTING STATES ESPECIALLY TO DEDUCE THE MEANIN G OF THE DEFINITION UNDER THE DTAA AND THE ULTIMATE TAXA BILITY OF THE INCOME UNDER THE AGREEMENT. THAT IS NOT TO S AY THAT THE COURT MAY BE INCONSISTENT IN ITS INTERPRETATION OF SIMILAR DEFINITIONS. WHAT THAT DOES IMPLY HOWEVER IS THAT JUST BECAUSE THERE IS A DOMESTIC DEFINITION SIMILAR TO THE ONE UNDER THE DTAA AMENDMENTS TO THE DOMESTIC LAW IN AN ATTEMPT TO CONTOUR RESTRICT OR EXPAND THE DEFIN ITION UNDER ITS STATUTE CANNOT EXTEND TO THE DEFINITION UNDER THE DTAA. IN OTHER WORDS THE DOMESTIC LAW REMAINS STATIC FOR THE PURPOSES OF THE DTAA. THE COURT IN S ANOFI (SUPRA) HAD ALSO HELD SIMILARLY: WE ARE IN AGREEMENT WITH THE PETITIONERS AND IN TH E LIGHT OF OUR PRECEDING ANALYSES DISCERN NO TEXTUAL GRAMMATICAL OR SYNTACTIC AMBIGUITY IN ARTICLE 14(5) WARRANTING AN INTERPRETIVE RECOURSE. IN THE CIRCUMS TANCES INVOKING PROVISIONS OF ARTICLE 3(2) BY AN ARTIFICIA L INSEMINATION OF AMBIGUITY (TO ACCOMMODATE AN EXPAND ED MEANING TO THE DTAA PROVISION) WOULD BE CONTRARY T O GOOD FAITH INTERPRETATION. A FURTHER PROBLEMATIC OF CONTRIVING AN AMBIGUITY TO UNWARRANTEDLY INVITE APPLICATION OF DOMESTIC LAW OF A CONTRACTING STATE WOULD BE THAT WHILE INDIA WOULD INTERPRET AN UNDEFINED DT AA PROVISION ACCORDING TO THE PROVISIONS OF THE ACT F RANCE COULD DO SO BY REFERENCE TO ITS TAX CODE. AS A CONSEQUENCE THE PURPOSE OF ENTERING INTO A TREATY WITH A VIEW TO AVOIDING DOUBLE-TAXATION OF CROSS-BORDER TRANSACTIONS WOULD BE FRUSTRATED. 51. PERTINENTLY THIS COURT IN DIRECTOR OF INCOME T AX V NOKIA NETWORKS 2013 (358) ITR 259 SPECIFICALLY DEA LT WITH THE QUESTION OF THE EFFECT OF AMENDMENTS TO DOMESTIC LAW AND THE MANNER OF THEIR OPERATION ON PARALLEL TREATIES. THE COURT DELIVERED ITS JUDGMENT IN THE CONTEXT OF THE VERY AMENDMENTS THAT ARE IN QUESTION TODAY; THE EXPLANATIONS TO SECTION 9(1)(VI) VIS A V IS THE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 17 - INTERPRETATION OF A DOUBLE TAX AVOIDANCE AGREEMENT. THIS COURT REJECTED THAT ANY AMENDMENT COULD CHANGE THE SITUATION AND RENDER THE SERVICE OR ACTIVITY TA XABLE IN THE FOLLOWING OBSERVATIONS: HE THUS SUBMITTED THAT THE QUESTION OF COPYRIGHTE D ARTICLE OR ACTUAL COPYRIGHT DOES NOT ARISE IN THE CONTEXT OF SOFTWARE BOTH IN THE DTAA AND IN THE INCOME TAX ACT SINCE THE RIGHT TO USE SIMPLICITER OF A SOFTWARE PR OGRAM ITSELF IS A PART OF THE COPYRIGHT IN THE SOFTWARE IRRESPECTIVE OF WHETHER OR NOT A FURTHER RIGHT TO M AKE COPIES IS GRANTED. THE DECISION OF THE DELHI BENCH OF THE ITAT HAS DEALT WITH THIS ASPECT IN ITS JUDGMENT IN GRACEMAC CO. VS. ADIT 134 TTJ (DELHI) 257 POINTING OUT THAT EVEN SOFTWARE BOUGHT OFF THE SHELF DOES NOT CONSTITUTE A COPYRIGHTED ARTICLE AS SOUGHT TO BE MADE OUT BY THE SPECIAL BENCH OF THE ITAT IN THE PRESENT CASE. HOWEVER THE ABOVE ARGUMENT MISSES THE VITAL POINT NAMELY THE ASSESSEE HAS OPTED TO BE GOVERNED BY THE TREATY AND THE LANGUAGE OF THE SAID TREATY DIFFERS FROM THE AMENDED SECTION 9 OF THE ACT. IT IS CATEGORICAL LY HELD IN CIT VS. SIEMENS AKTIONGESELLSCHAFT 310 ITR 320 (BOM) THAT THE AMENDMENTS CANNOT BE READ INTO THE TREATY. ON THE WORDING OF THE TREATY WE HAVE ALREA DY HELD IN ERICSSON (SUPRA) THAT A COPYRIGHTED ARTICLE DOES NOT FALL WITHIN THE PURVIEW OF ROYALTY. THEREFORE WE DECIDE QUESTION OF LAW NO.1 & 2 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 52. THUS AN INTERPRETIVE EXERCISE BY THE PARLIAMEN T CANNOT BE TAKEN SO FAR AS TO CONTROL THE MEANING OF A WORD EXPRESSLY DEFINED IN A TREATY. PARLIAMENT SUP REME AS IT MAY BE IS NOT EQUIPPED WITH THE POWER TO AM END A TREATY. IT IS CERTAINLY TRUE THAT LAW LAID DOWN B Y THE PARLIAMENT IN OUR DOMESTIC CONTEXT EVEN IF IT WERE IN VIOLATION OF TREATY PRINCIPLES IS TO BE GIVEN EFFE CT TO; BUT WHERE THE STATE UNILATERALLY SEEKS TO AMEND A TREAT Y THROUGH ITS LEGISLATURE THE SITUATION BECOMES ONE QUITE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 18 - DIFFERENT FROM WHEN IT BREACHES THE TREATY. IN THE LATTER CASE WHILE INTERNATIONALLY CONDEMNABLE THE STATE S POWER TO BREACH VERY MUCH EXISTS; COURTS IN INDIA H AVE NO JURISDICTION IN THE MATTER BECAUSE IN THE ABSEN CE OF ENACTMENT THROUGH APPROPRIATE LEGISLATION IN ACCORD ANCE WITH ARTICLE 253 OF THE CONSTITUTION COURTS DO NOT POSSESS ANY POWER TO PRONOUNCE ON THE POWER OF THE STATE TO ENACT A LAW CONTRARY TO ITS TREATY OBLIGAT IONS. THE DOMESTIC COURTS IN OTHER WORDS ARE NOT EMPOWE RED TO LEGALLY STRIKE DOWN SUCH ACTION AS THEY CANNOT DICTATE THE EXECUTIVE ACTION OF THE STATE IN THE CO NTEXT OF AN INTERNATIONAL TREATY UNLESS OF COURSE THE CONSTITUTION ENABLES THEM TO. THAT BEING SAID THE AMENDMENT TO A TREATY IS NOT ON THE SAME FOOTING. T HE PARLIAMENT IS SIMPLY NOT EQUIPPED WITH THE POWER T O THROUGH DOMESTIC LAW CHANGE THE TERMS OF A TREATY. A TREATY TO BEGIN WITH IS NOT DRAFTED BY THE PARLIAM ENT; IT IS AN ACT OF THE EXECUTIVE. LOGICALLY THEREFORE THE EXECUTIVE CANNOT EMPLOY AN AMENDMENT WITHIN THE DOMESTIC LAWS OF THE STATE TO IMPLY AN AMENDMENT WITHIN THE TREATY. MOREOVER A TREATY OF THIS NATURE IS A CAREFULLY NEGOTIATED ECO NOMIC BARGAIN BETWEEN TWO STATES. NO ONE PARTY TO THE TRE ATY CAN ASCRIBE TO ITSELF THE POWER TO UNILATERALLY CHA NGE THE TERMS OF THE TREATY AND ANNUL THIS ECONOMIC BARGAIN . IT MAY DECIDE TO NOT FOLLOW THE TREATY IT MAY CHOSE T O RENEGE FROM ITS OBLIGATIONS UNDER IT AND EXIT IT B UT IT CANNOT AMEND THE TREATY ESPECIALLY BY EMPLOYING DOMESTIC LAW. THE PRINCIPLE IS RECIPROCAL. EVERY TR EATY ENTERED INTO BE THE INDIAN STATE UNLESS SELF-EXECU TORY BECOMES OPERATIVE WITHIN THE STATE ONCE PARLIAMENT PASSES A LAW TO SUCH EFFECT WHICH GOVERNS THE RELATIONSHIP BETWEEN THE TREATY TERMS AND THE OTHER LAWS OF THE STATE. IT THEN BECOMES PART OF THE GENE RAL CONSPECTUS OF DOMESTIC LAW. NOW IF AN AMENDMENT WE RE TO BE EFFECTED TO THE TERMS OF SUCH TREATY UNLESS THE EXISTING OPERATIONALIZING DOMESTIC LAW STATES THAT SUCH ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 19 - AMENDMENTS ARE TO BECOME AUTOMATICALLY APPLICABLE PARLIAMENT WILL HAVE TO BY EITHER A SEPARATE LAW O R THROUGH AN AMENDMENT TO THE ORIGINAL LAW MAKE THE AMENDMENT EFFECTIVE. SIMILARLY AMENDMENTS TO DOMES TIC LAW CANNOT BE READ INTO TREATY PROVISIONS WITHOUT AMENDING THE TREATY ITSELF. 53. FINALLY STATES ARE EXPECTED TO FULFILL THEIR OBLIGATIONS UNDER A TREATY IN GOOD FAITH. THIS INCL UDES THE OBLIGATION TO NOT DEFEAT THE PURPOSE AND OBJECT OF THE TREATY. THESE OBLIGATIONS ARE ROOTED IN CUSTOMARY INTERNATIONAL LAW CODIFIED BY THE VCLT ESPECIALLY ARTICLE 26 (BINDING NATURE OF TREATIES AND THE OBLI GATION TO PERFORM THEM IN GOOD FAITH); ARTICLE 27 (INTERNA L LAW AND OBSERVANCE OF TREATIES I.E PROVISIONS OF INTER NAL OR MUNICIPAL LAW OF A NATION CANNOT BE USED TO JUSTIFY OMISSION TO PERFORM A TREATY); GENERAL RULE OF INTERPRETATION UNDER ARTICLE 31 (1) (I.E THAT IT SH ALL BE INTERPRETED IN GOOD FAITH IN ACCORDANCE WITH ORDIN ARY MEANING TO BE GIVEN TO THE TERMS OF A TREATY) AND ARTICLE 31 (4) (A SPECIAL MEANING SHALL BE GIVEN TO A TERM IF IT IS ESTABLISHED THAT THE PARTI ES SO INTENDED). THE EXPRESSION PROCESS AND TREATY INTERPRETATION IN THIS CASE. 10.1 THE NEXT DECISION ALSO CITED BY THE CIT-DR IS THE CASE OF FORMULA ONE WORLD CHAMPIONSHIP LTD. VS. CIT (INTERNATIONAL TAXATION) FOR THE PROPOSITION THAT T HE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF ASIA SATELLITE COMMUNICATION CO. LTD. AND NEW SKIES SATELLITE IS OVERRULED. ON A READING OF THE SAID DE CISION WE NOTE THAT THE RELIANCE IS MISPLACED. THE ISSUE F OR CONSIDERATION BEFORE THE HON'BLE APEX COURT WAS ON AN ENTIRELY DIFFERENT SET OF FACTS AND CIRCUMSTANCES A ND AN ENTIRELY DIFFERENT ISSUE WAS BEING CONSIDERED. THE SAID DECISIONS WERE NEITHER CITED BEFORE THE COURT NOR ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 20 - REFERRED TO BY IT NOR CONSIDERED IN THE SAID JUDGEM ENT. ACCORDINGLY ON A READING OF THE DECISIONS RENDERED ON PECULIAR FACTS OF THE PRESENT CASE WHICH WE HAVE BROUGHT OUT IN DETAIL IN THE EARLIER PART OF THIS O RDER WE FIND OURSELVES IN AGREEMENT WITH THE DETAILED FINDI NG AND CONCLUSION DRAWN BY THE COORDINATE BENCHES AND RESPECTFULLY FOLLOWING THE SAME CONCLUDE THAT THE APPEALS OF THE ASSESSEE ARE TO BE ALLOWED. FOR READ Y REFERENCE WE EXTRACT FROM ONE OF THE DECISIONS CITE D BEFORE US. WE REPRODUCE THE RELEVANT EXTRACT FROM T HE DECISION IN THE CASE OF ALCATEL LUCENT USA INC. BEI NG THE MOST LATEST IN POINT OF TIME HEREUNDER: - 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE BASIC ISSU E TO BE DECIDED IS AS TO WHETHER THE PAYMENTS RECEIVED BY T HE ASSESSEE FROM RELIANCE CAN BE TAXED AS ROYALTY IN V IEW OF THE AMENDMENT TO SECTION 9(1)OF THE ACT. IT IS S AID THAT A DTAA IS A RESULT OF NEGOTIATIONS BETWEEN TWO COUNTRIES AS TO THE EXTENT TO WHICH SPECIAL CONCESS IONAL TAX PROVISIONS CAN BE MADE NOTWITHSTANDING THAT THE RE MIGHT BE A LOSS OF REVENUE. A PLAIN READING OF SECT ION 90(2) OF THE ACT MAKES IT CLEAR THAT THE PROVISIONS OF THE DTAA WOULD PREVAIL OVER THE ACT UNLESS THE ACT IS M ORE BENEFICIAL TO THE ASSESSEE. THEREFORE EXCEPT TO TH E EXTENT A PROVISION OF THE ACT IS MORE BENEFICIAL TO IT THE DTAA WILL OVERRIDE THE ACT. THIS IS IRRESPECTIVE OF WHETHER THE ACT CONTAINS A PROVISION THAT CORRESPON DS TO THE TREATY PROVISION. IN OUR OPINION INTERNATIONAL - TAXATION ISSUES HAVE TO BE DECIDED KEEPING IN MIND THE ABOVE BROAD PRINCIPLES. 5.1. IT IS FOUND THAT ALL THE ISSUES RAISED BY THE DR BEFORE US HAVE BEEN DEALT WITH BY THE TRIBUNAL IN THE CASE OF ANTWERP DIAMOND (SUPRA). WE ARE REPRODUCING THE ARGUMENTS OF THE REPRESENTATIVES OF BOTH THE SI DES AND THE RELEVANT PORTION OF THAT ORDER AND IT READS AS UNDER: ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 21 - 2. AT THE OUTSET THE LD. COUNSEL MR. K. K. VED SUBMITTED THAT SIMILAR ISSUE HAS BEEN DECIDED BY TH E TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ASSESSEES OW N CASE RIGHT FROM THE ASSESSMENT YEARS 2004-05 2005- 06 AND 2008-09. THE SECOND ISSUE RELATING TO DISALLOWA NCE OF INTEREST PAID TO THE HEAD OFFICE ALSO HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE SPECIAL BE NCH IN SUMITOMO MITSUI BANKING CORPN. WHEREIN THE ASSESSEE WAS ONE OF THE PARTY. 3. ON THE OTHER HAND LD. DR STRONGLY RELIED UPON T HE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT SO FAR AS DATA PROCESSING COST IS CONCERNED THE SAME IS I N THE NATURE OF ROYALTY AND IN SUPPORT HE HAS STRONGLY RELIED UPON THE TWO KARNATAKA HIGH COURT DECISIONS IN THE CASE OF:- I) CIT VS. WIPRO LTD. REPORTED IN 355 IT R 284; II) CIT VS. CGI INFORMATION SYSTEMS & MANAGEMENT CONSULTANTS (P) LTD. 226 TAXMAN 319 THE ISSUE WHET HER THE AMENDMENT BROUGHT BY FINANCE ACT 2012 IN SECTIO N 9(1)(VI) BY WAY OF EXPLANATIONS INSERTED IN THE INC OME- TAX ACT WITH RETROSPECTIVE EFFECT CAN BE READ INTO DTAA OR NOT HAS TO BE SEEN IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V SIEM ENS AKTIONGESELLSCHAFT REPORTED IN 310 ITR 320 (BOM HC ) ACCORDINGLY HE SUBMITTED THAT OTHER DECISIONS REND ERED BY THE DELHI HIGH COURT AND THE TRIBUNAL MAY NOT BE APPLICABLE. WHILE APPRECIATING THE SIEMENS AG (SUPR A) HE SUBMITTED THAT IT MAY KIND BE BORNE IN MIND THA T: I) THE QUESTION OF LAW BEFORE THE HONBLE HIGH COURT W AS NOT THAT WHETHER AMENDMENTS IN THE INCOME-TAX ACT C AN BE READ INTO THE DTAA OR NOT; II) IN THE SAID CASE OLD DTAA (1960) BETWEEN INDIA AND GERMANY WAS UNDER CONSIDERATION; III) THE SAID DECISION WAS RENDERED IN 20008 WHEN THE ONLY CLARIFICATORY PROVISION BY WAY OF EXPLANATION IN SECTION 9 WAS THE EXPLANATION BELOW S.9(2) INSERTED BY THE FINANCE ACT 2007 DOING WITH THE REQUIREMENT OF PE FOR ROYALTY; IV) THAT AMENDMENTS / ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 22 - EXPLANATIONS IN THE INCOMETAX ACT ARE BEING SOUGHT TO BE READ INTO DTAA BY VIRTUE OF ARTICLE 3(12) OF THE MO DERN TREATIES; V)SECTION 9(1)(VI) UP TO AND INCLUDING EXPLANATION 2 ARE SUBSTANTIVE PROVISIONS AS INSERTE D BY FINANCE ACT 1976 AND THEREAFTER EXPLANATION 3 TO 6 ARE ONLY CLARIFICATORY PROVISIONS INSERTED SUBSEQUENTLY ; AND VI) IT IS NOT DISPUTED BY THE REVENUE THAT THE PROV ISIONS OF DTAA IF BENEFICIAL TO THE ASSESSEE SHALL BE PREF ERRED OVER THE PROVISIONS OF THE INCOME-TAX ACT. HE FURTH ER SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT DECIS ION IN THE CASE OF SIEMENS AKTIONGESELLSCHAFT (SUPRA) W OULD REVEAL THAT I) NOWHERE IN THE SAID ORDER THE HIGH COURT HAS HELD THAT AMENDMENTS/EXPLANATIONS CANNOT BE REA D INTO DTAA AS IT WAS NOT QUESTION BEFORE THE HONBLE HIGH COURT; II) THE NATURES OF SERVICES RENDERED IN THE SAID CASE WERE FOUND TO BE NOT ROYALTY UNDER THE DT AA THOUGH FOUND TO BE ROYALTY UNDER THE ACT. THOSE SERVICES WERE FOUND TO FALL UNDER THE EXPRESSION COMMERCIAL OR INDUSTRIAL PROFITS AS PER THE THEN DTAA (OLD) AND THEREFORE COULD NOT BE TAXED IN INDIA IN ABSENCE OF PE. THE PROVISIONS OF DTAA BEING THE BENEFICIAL TO THE ASSESSEE WERE PREFERRED OVER THE PROVISIONS OF THE INCOME-TAX ACT; III) IN PARAS 13 22 AND 28 OF ITS ORDER THE HONBLE HIGH COURT HAS APPROVE D THE INSERTION OF EXPLANATION BELOW SECTION 9(2) INSERTE D BY THE FINANCE ACT 2007 THEREBY IMPLYING THAT THE EXPLANATIONS INSERTED BY FA 2007 COULD BE READ INTO MODERN DTAAS; IV) MUMBAI TRIBUNAL IN THE CASE OF VIACOM 18 MEDIA (P.) LTD. [2014] 162 TTJ 336 (MUM) HAS EXPLAINED THE IMPORT OF BOMBAY HIGH COURT DECISION IN RIGHT PERSPECTIVE IN PARAS 16 AND 17 OF ITS ORDER W HILE REJECTING THE ASSESSEES ARGUMENT THAT THE HC HAS H ELD THAT AMENDMENTS IN THE ACT CANNOT BE READ INTO DTAA S; AND V) THE BOMBAY HIGH COURT HAS APPROVED AMBULATOR Y APPROACH (PARA 22)TO INTERPRETATION OF TREATIES AGA INST STATIC APPROACH ADOPTED BY THE DELHI HIGH COURT. SO FAR AS THE INTEREST PAID BY THE BRANCH OFFICE TO THE HE AD OFFICE INCOME OF HEADQUARTER HE SUBMITTED THAT ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 23 - EXPENDITURE INCLUDING INTEREST ATTRIBUTABLE OF EARN ING OF INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME HAS TO BE DISALLOWED UNDER SECTION14A IF IT HAS TO BE H ELD THAT IN VIEW OF THE SPECIAL BENCH DECISION IN THE C ASE OF THE ASSESSEE THE INTEREST PAID BY THE BRANCH OFFIC E TO THE HEAD OFFICE IS NOT THE COMMISSION OF THE HEAD OFFICE. IN SUPPORT HE RELIED UPON THE DECISION OF OMAN INTERNATIONAL BANK AG ON THE ADMISSIBILITY OF THE B ELIEF HE RELIED UPON THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF NTPC VS. CIT REPORTED IN 229 ITR 383. 4. AFTER CONSIDERING THE AFORESAID SUBMISSIONS AND ON PERUSAL OF THE IMPUGNED ORDERS WE FIND THAT SO FAR AS THE ISSUE RAISED VIDE GROUND NO.1 TO 3 IS CONCERNED IT IS A RECURRING ISSUE IN THE CASE OF THE ASSESSEE RIGHT FROM THE EARLIER YEARS. THE LD.CIT (A) TOO HAS FOLLOWED THE CIT(A)S ORDERS FOR THE ASSESSMENT YEARS 2003-04 TO 2004-05 2005-06 AND 2008-09. THE TRIBUNAL IN THE ASSESSMENT YEAR 2004-05 IN ITA NO.7347/MUM/2007 ON THE ISSUE OF DISALLOWANCE OF DATA PROCESSING COST H AS DEALT AND DECIDED THIS ISSUE IN THE FOLLOWING MANNE R:- 15. NOW COMING TO THE MAIN ISSUE I.E. WHETHER TH E REIMBURSEMENT OF DATA PROCESSING COST OF RS.34 03 7 34 AMOUNTS TO ROYALTY OR NOT WE FIND FROM THE RECORD THAT THE ASSESSEE IS ENGAGED IN THE BANKING BUSINESS AND OPERATES IN INDIA THROUGH BRANCH IN MUMBAI. IT HAS ACQUIRED BANKING APPLICATION SOFTWARE NAMED AS FLEXCUBE FROM AN INDIAN SOFTWARE COMPANY WHICH IS EXCLUSIVELY USED FOR THE BANKING PURPOSE BY THE ASSESSEE ALL OVER THE WORLD. WHEN THE MUMBAI BRANCH WAS SETUP THE BRANCH WAS ALLOWED TO USE THE SAID SOFTWARE BY MAKING IT ASSESSABLE THROUGH SERVERS LOCATED AT BELGIUM. THE BRANCH SENDS ITS DATA TO TH E BELGIUM SERVER FROM WHERE THE DATA GETS PROCESSED A S PER THE REQUIREMENT OF THE BANKING OPERATIONS. AS P ER THE TERMS OF AGREEMENT BETWEEN THE BRANCH AND THE HEAD OFFICE FOR THE USAGE OF SOFTWARE BY THE BRANCH ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 24 - WHICH HAS BEEN INCORPORATED ABOVE IT IS EVIDENT TH AT THE HEAD OFFICE ONLY HAS THE NONEXCLUSIVE NON TRANSFERRABLE RIGHTS TO USE THE COMPUTER SOFTWARE BROUGHT FOR PERSONAL USE AND CLAUSE 16 OF THE SAID AGREEMENT SPECIFICALLY PROVIDES THAT THE HEAD OFFIC E DOES NOT HAVE ANY RIGHT TO ASSIGN SUBLICENSE OR OTHERWISE TRANSFER THE LICENSE OF THIS AGREEMENT. T HUS THE PAYMENT BY THE BRANCH FOR USE OF COMPUTER SOFTW ARE IS NOT THE RIGHT IN THE COPY RIGHT BUT ONLY FOR DOI NG THE WORK FROM THE SAID SOFTWARE WHICH SUBSIST IN THE CO PY RIGHT OF THE SOFTWARE. THE BRANCH IS USING THE COMP UTER SOFTWARE AND THE I.T. RESOURCES INSTALLED AT BELGIU M FOR WHICH THE PAYMENT IS MADE BY THE HEAD OFFICE TOWARD S THE USE OF SUCH SOFTWARE LICENSE. SINCE THE BRANCH IS USING THE SAME SOFTWARE FOR THE PURPOSE OF BUSINESS OPERATIONS THE HEAD OFFICE ALLOCATES THE SAID EXPENDITURE ON A PRORATA BASIS FOR THE USE OF THE S AID RESOURCES WHICH IS BEING REIMBURSED BY THE BRANCH T O THE HEAD OFFICE. IT IS NOT IN DISPUTE THAT THE ASSE SSEE HAS SOUGHT THE BENEFIT OF TREATY BETWEEN INDIA AND BELGIUM AND HAD SPECIFICALLY RELIED UPON THE DEFINI TION OF ROYALTY AS GIVEN IN THE ARTICLE 12. CLAUSE (A) OF PARA3 OF ARTICLE12 WHICH DEFINES THE TERM ROYAL TY IN THE FOLLOWING MANNER: 3(A) 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 USE ANY COPYRIGHT OF LITERARY ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS ANY PATENT TRADEMARK DESIGN OR MODEL PLAN SECRET FORMULA OR PROCESS OR FOR INFO RMATION CONCERNING INDUSTRIAL COMMERCIAL OR SCIENTIFIC EXPERIENCE. 16. THE ABOVE DEFINITION OF ROYALTY T HUS PROVIDES THAT WHEN THE PAYMENT OF ANY KIND IS RECE IVED AS A CONSIDERATION FOR USE OF OR THE RIGHT TO US E OF ANY OF THE COPY RIGHT OF ANY ITEM OR FOR VARIOUS TE RMS USED IN THE SAID ARTICLE THEN ONLY IT CAN BE HELD TO BE FOR THE PURPOSE OF ROYALTY. THE SAID DEFINITION O F ROYALTY IS EXHAUSTIVE AND NOT INCLUSIVE AND THER EFORE IT HAS TO BE GIVEN THE MEANING AS CONTAINED IN THE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 25 - ARTICLE ITSELF AND NO OTHER MEANING SHOULD BE LOOKE D UPON. IF THE ASSESSEE IS CLAIMING THE APPLICATION O F THE DTAA THEN THE DEFINITION AND SCOPE OF ROYALTY GI VEN IN THE DOMESTIC LAW IN THE PRESENT CASE SECTION 9(1) (VI) SHOULD NOT BE READ INTO OR LOOKED UPON. THE CHARACT ER OF PAYMENT TOWARDS ROYALTY DEPENDS UPON THE INDEPENDEN T USE OR THE RIGHT TO USE OF THE COMPUTER SOFTWAR E WHICH IS A KIND OF COPY RIGHT. IN THE PRESENT CASE THE PAYMENT MADE BY THE BRANCH IS NOT FOR USE OF OR RIGHT TO USE OF SOFTWARE WHICH IS BEING EXCLUSIVELY DONE BY THE HEAD OFFICE ONLY INSTALLED IN BELGIUM. THE BRA NCH DOES NOT HAVE ANY INDEPENDENT RIGHT TO USE OR CONTR OL OVER SUCH MAIN FRAME OF THE COMPUTER SOFTWARE INSTA LLED IN BELGIUM BUT IT SIMPLY SENDS THE DATA TO THE HEA D OFFICE FOR GETTING IT PROCESSED. INSOFAR AS THE BRA NCH IS CONCERNED IT IS ONLY REIMBURSING THE COST OF PROCE SSING OF SUCH DATA TO THE HEAD OFFICE WHICH HAS BEEN ALLOCATED ON PRORATA BASIS. SUCH REIMBURSEMENT OF PAYMENT DOES NOT FALL WITHIN THE AMBIT OF DEFINITIO N OF ROYALTY WITHIN THE ARTICLE 12(3)(A). TO FALL WITH IN ITS AMBIT THE BRANCH SHOULD HAVE EXCLUSIVE AND INDEPENDENT USE OR RIGHT TO USE THE SOFTWARE AND FO R SUCH USAGE PAYMENT HAS TO BE MADE IN CONSIDERATION THEREOF. IT IS NOT THE CASE OF THE REVENUE THAT THE HEAD OFFICE HAS PROVIDED ANY COPY RIGHT OF SOFTWARE OR A NY COPYRIGHTED ARTICLE DEVELOPED BY THE HEAD OFFICE FO R THE EXCLUSIVE USE OF THE ASSESSEE FOR WHICH THE ASSESS EE IS MAKING THE PAYMENT ALONG WITH THE MARKUP EXCLUSIVE LY FOR THE PURPOSE OF ROYALTY. IF THE PAYMENT FOR LICE NSE FOR THE SOFTWARE WHICH IS INSTALLED IN THE HEAD OFFICE IS BEING MADE BY THE HEAD OFFICE THEN ANY ALLOCATION OF COST AND REIMBURSEMENT THEREOF BY THE BRANCH TO THE HEAD OFFICE CANNOT BE TERMED AS INDEPENDENT PAYMENT FOR THE PURPOSE OF ROYALTY. TO FALL WITHIN THE AMBI T OF ROYALTY UNDER ARTICLE THE PAYMENT SHOULD BE EXCLUSIVELY QUA THE USE OR THE RIGHT TO USE THE SOF TWARE EXCLUSIVELY BY THE BRANCH. THE CHARACTER OF THE PAY MENT UNDER THE ROYALTY TRANSACTIONS DEPENDS UPON THE RIG HTS ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 26 - THAT THE TRANSFEREE ACQUIRES IN RELATION TO THE USE AND EXPLOITATION OF THE SOFTWARE PROGRAMME. HERE THERE IS NO SUCH RIGHT WHICH HAS BEEN ACQUIRED BY THE BRANCH IN RELATION TO THE USAGE OF SOFTWARE BECAUSE THE HEAD OFFICE ALONE HAS THE EXCLUSIVE RIGHT OF THE LICENSE TO USE THE SOFTWARE. THUS THE REIMBURSEMENT OF THE DATA PROCESSING COST TO THE HEAD OFFICE DOES NOT FALL WI THIN THE AMBIT OF DEFINITION OF ROYALTY UNDER ARTICLE 12(3)(A). 17. THE LEARNED COMMISSIONER (APPEALS) AND THE LEAR NED SENIOR COUNSEL HAVE STRONGLY RELIED UPON THE DECISI ON OF THE COORDINATE BENCH OF THE TRIBUNAL IN KOTAK MAHI NDRA PRIMUS LTD. (SUPRA). ON A PERUSAL OF THE SAID DECIS ION IT IS SEEN THAT THE CONCLUSION DRAWN BY THE TRIBUNAL IS DIRECTLY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE ALSO WHICH IS EVIDENT FROM THE FOLLOWING OBSERVATI ONS AND CONCLUSIONS DRAWN BY THE TRIBUNAL: 11. THE CONSIDERATION OF PAYMENT IS ONLY THIS DATA PROCESS WORK. NO PART OF THIS PAYMENT CAN BE SAID T O BE FOR THE USE OF SPECIALIZED SOFTWARE ON WHICH DATA I S PROCESSED OR FOR THE USE OF MAINFRAME COMPUTER BECA USE THE INDIAN COMPANY DOES NOT HAVE ANY INDEPENDENT RIGHT TO USE THE COMPUTER OR EVEN PHYSICAL ACCESS TO THE MAINFRAME COMPUTER SO AS TO USE THE MAINFRAME COMPUTER OR THE SPECIALIZED SOFTWARE. ALL THAT THE RIGHT IS FOR PROCESSING OF D ATA AND THE USE OF MAINFRAME COMPUTER IS PERMITTED ONLY FOR THAT PURPOSE. THE INDIAN COMPANY CAN FEED THE RAW DATA I N THE MAINFRAME COMPUTER IN AUSTRALIA WITH THE HELP OF THE TELECOMMUNICATION LINK AND THE OUTPUT DATA AF TER DUE PROCESSING IS TRANSMITTED BACK TO THE INDIAN COMPANY. THERE IS NO PRIVILEGE OR RIGHT GRANTED TO THE INDIAN COMPANY BY THE AUSTRALIAN COMPANY. THE CONTR OL OF THE INDIAN COMPANY IS ONLY ON THE INPUT TRANSMIS SION AND THE RIGHT IS TO GET THE OUTPUT PROCESSED DATA B ACK. THE ACTUAL PROCESSING OF DATA IS THE EXCLUSIVE CONT ROL OF THE AUSTRALIAN COMPANY AND IT IS FOR THIS WORK THAT THE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 27 - AUSTRALIAN COMPANY GETS PAID. IN OUR CONSIDERED VIE W THEREFORE IN ESSENCE THE IMPUGNED PAYMENT IS MADE TO THE AUSTRALIAN COMPANY INCONSIDERATION OF ITS PROCE SSING OF DATA BELONGING TO THE INDIAN COMPANY. AS FAR AS THE SCOPE OF ARTICLE 12(3)(A) IS CONCERNED WE FIND THA T IT COVERS ONLY A PAYMENT FOR THE USE OF OR THE RIGHT TO USE OF ANY COPYRIGHT PATENT DESIGN OR MODEL PLAN S ECRET FORMULA OR PROCESS TRADEMARK OR OTHER LIKE PROPER TY OR RIGHT. THE CASE OF THE REVENUE IS THAT THE PAYMENT IS MADE FOR THE USE OF SPECIALIZED SOFTWARE WITH THE H ELP OF WHICH DATA IS PROCESSED. WE ARE NOT PERSUADED. AS W E HAVE CONCLUDED EARLIER IN THIS ORDER ON THE FACTS OF THIS CASE THE PAYMENT MADE BY THE INDIAN COMPANY IS NOT FOR THE USE OF OR RIGHT TO USE OF SOFTWARE THE P AYMENT IS FOR DATA PROCESSING. BE THAT AS IT MAY EVEN IF STAND OF THE REVENUE IS TO BE UPHELD AND IT IS TO BE CONC LUDED THAT THE PAYMENT IS MADE FOR SOFTWARE PER SE THAT DOES NOT LEAD TO TAXABILITY OF RECEIPT IN THE HANDS OF T HE AUSTRALIAN COMPANY EITHER. IT IS ALSO BY NOW SETTLE D THAT THE PAYMENT FOR SOFTWARE IS FOR A COPYRIGHTED ARTIC LE AND NOT COPYRIGHT PER SE AND THEREFORE IS NOT COVERE D BY THE SCOPE OF PAYMENT FOR COPYRIGHT. THE AUTHORITY F OR THIS PROPOSITION IS CONTAINED IN SPECIAL BENCH DECISION IN THE CASE OF MOTOROLA INC. V. DY. CIT (2005) 95 ITD 269 (DEL)(SB) SAMSUNG ELECTRONICS COMPANY LTD. V. ITO (2005) 94 ITD 91 (BANG) AND LUCENT TECHNOLOGIES HINDUSTAN LTD. V. ITO (2005) 92 ITD 366 (BANG). IT IS NOT EVEN THE REVENUES CASE THAT THE PAYMENT IN QUESTION IS NOT (SIC) FOR THE USE OF OR RIGHT TO USE OF PATEN T DESIGN OR MODEL PLAN SECRET FORMULA OR PROCESS OR TRADE MARK. IN ANY EVENT HAVING PERUSED THESE CLASSIFICATIONS AND HAVING CONSIDERED THE FACTS BEFORE US WE ARE OF TH E CONSIDERED VIEW THAT THE PAYMENT DOES NOT FIT INTO ANY OF THESE CLASSIFICATIONS. IT IS HOWEVER CONTENDED THAT THE IMPUGNED PAYMENT IS COVERED BY THE RESIDUARY CLAUSE I.E. OTHER LIKE PROPERTY OR RIGHT. IT IS CONTENDED THAT BY MAKING PAYMENT OF US $ 60 000 PER ANNUM TH E INDIAN COMPANY GETS A VALUABLE PROPERTY AND RIGHT A S ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 28 - THE PAYMENT CANNOT BE SAID TO HAVE BEEN MADE IN VACUUM AND WITHOUT ANY CONSIDERATION. THIS PLEA ALS O DOES NOT IMPRESS US. IT IS NOT EVERY PROPERTY OR RI GHT WHICH CAN BE COVERED BY THESE EXPRESSIONS APPEARING IN THE END OF ARTICLE 12(3)(A) BECAUSE FOLLOWING THE PRINCIPLES OF EJUSDEM GENERIS MEANING OF THE GENERA L WORDS FOLLOWING THE SPECIFIC WORDS HAVE TO TAKE COL OUR FROM THE SPECIFIC WORDS PRECEDING IT. WHEN THAT PRO PERTY OR RIGHT EVEN IF IT SO EXISTS IS NOT OF THE NATUR E OF ANY OF THE SPECIFIC CATEGORIES SET OUT IN ARTICLE 12(3)(A) IT CANNOT BE COVERED BY THE GENERAL WORDS FOLLOWING TH OSE CATEGORIES EITHER. FOR ALL THESE REASONS WE ARE OF THE CONSIDERED VIEW THAT PROVISIONS OF ARTICLE 12(3)(A) CANNOT BE INVOKED ON THE FACTS OF THE CASE BEFORE US. THAT TAKES US TO THE QUESTION WHETHER THE PROVISIONS OF ARTICL E 12(3)(B) AS RELIED UPON BY THE REVENUE AUTHORITIES CAN BE INVOKED ON THE FACTS OF THE PRESENT CASE. ARTICL E 12(3)(B) CAN APPLY ONLY WHEN THE PAYMENT IN QUESTIO N CAN BE HELD TO BE PAYMENT FOR THE USE OF OR THE R IGHT TO USE ANY INDUSTRIAL COMMERCIAL OR SCIENTIFIC EQUIP MENT. THIS CONDITION CAN ONLY BE SATISFIED WHEN IT IS ESTABLISHED THAT THE IMPUGNED PAYMENT IS MADE FOR T HE USE OF OR RIGHT TO USE OF MAINFRAME COMPUTER. THE INDIAN COMPANY DOES NOT HAVE ANY CONTROL OVER OR PHYSICAL ACCESS TO THE MAINFRAME COMPUTER IN AUSTR ALIA. THERE CANNOT THEREFORE BE ANY QUESTION OF PAYMENT FOR USE OF THE MAINFRAME COMPUTER. IT IS INDEED TRUE TH AT THE USE OF MAINFRAME COMPUTER IS INTEGRAL TO THE DATA PROCESSING BUT WHAT IS IMPORTANT TO BEAR IN MIND IS THE FACT THAT THE PAYMENT IS NOT FOR THE USE OF MAINFRA ME COMPUTER PER SE THAT THE INDIAN COMPANY DOES NOT H AVE ANY CONTROL OVER THE MAINFRAME COMPUTER OR PHYSICAL ACCESS TO THE MAINFRAME COMPUTER AND THAT THE PAYM ENT IS FOR ACT OF SPECIALIZED DATA PROCESSING BY THE AUSTRALIAN COMPANY. USE OF MAINFRAME COMPUTER IN TH E COURSE OF PROCESSING OF DATA IS ONE OF THE IMPORTAN T ASPECTS OF THE WHOLE ACTIVITY BUT THAT IS NOT THE P URPOSE OF AND CONSIDERATION FOR THE IMPUGNED PAYMENT BEI NG ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 29 - MADE TO AUSTRALIAN COMPANY. THE PAYMENT AS WE HAVE OBSERVED EARLIER IS FOR THE ACTIVITY OF SPECIALIZE D DATA PROCESSING. IT IS NEITHER PRACTICABLE NOR PERMISSI BLE TO ASSIGN MONETARY VALUE TO EACH OF THE SEGMENT OF THI S ECONOMIC ACTIVITY AND CONSIDER THAT AMOUNT IN ISOLA TION FOR THE PURPOSE OF DECIDING CHARACTER OF THAT AMOUN T. THEREFORE NEITHER THE IMPUGNED PAYMENT CAN BE SAID TO BE TOWARDS USE OF OR RIGHT TO USE OF THE MAINFRAM E COMPUTER NOR IS IT PERMISSIBLE TO ALLOCATE APART O F THE IMPUGNED PAYMENT AS ATTRIBUTABLE TO USE OF OR RIG HT TO USE OF MAINFRAME COMPUTER. ACCORDINGLY THE PROVIS IONS OF ARTICLE 12(3)(B) CANNOT HAVE ANY APPLICATION IN THE MATTER. 18. INSOFAR AS THE RELIANCE PLACED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE DECISIONS OF THE MADRAS HIGH COURT AND ALSO THE SCOPE OF ROYALTY A S GIVEN IN EXPLANATION 4 AND 5 TO SECTION 9(1)(VI) BR OUGHT IN STATUTE BY THE FINANCE ACT 2012 ARE CONCERNED WE FIND THAT THE SAME IS NOT TENABLE FOR THE REASON TH AT ONCE THE ASSESSEE HAS OPTED FOR THE BENEFIT OF THE DTAA THEN THERE IS NO REQUIREMENT FOR RESORTING TO THE DEFINI TION AND THE SCOPE OF ROYALTY AS GIVEN IN SECTION 9(1)(VI) .THE SAID AMENDMENT CANNOT BE READ INTO THE TREATY AND W ILL NOT INFLUENCE THE DEFINITION OF ROYALTY AS GIVEN IN ARTICLE 12(3). THIS PROPOSITION IS SQUARELY COVERED BY THE DECISION OF THE BOMBAY HIGH COURT IN SIEMENS AKTIONGESELLSCHAFT (SUPRA) THE DECISION OF DELHI H IGH COURT IN NOKIA NETWORK (SUPRA) AND DIT V/S ERICSON AB [2012] 343 ITR 470. EVEN THE DECISIONS OF MADRAS HI GH COURT AS RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IS NOT APPLICABLE WHICH IS EVIDENT F ROM THE ISSUE INVOLVED AS IS EVIDENT FROM THE SUBSTANTI AL QUESTION OF LAW WHICH WERE FORMULATED BY THE HIGH COURT FOR ADJUDICATION. HENCE THE SAID DECISIONS A RE NOT APPLICABLE. 19. THUS IN VIEW OF THE AFORESAID REASONS WE HOLD THAT ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 30 - THE IMPUGNED PAYMENT MADE BY THE BRANCH TO THE H.O. TOWARDS REIMBURSEMENT OF COST OF DATA PROCESSING CANNOT BE HELD TO BE COVERED WITHIN THE SCOPE OF EXPRESSION ROYALTY UNDER ARTICLE12(3)(A) OF THE I NDIA BELGIUM DTAA. ACCORDINGLY THE CONCLUSION DRAWN BY THE LEARNED COMMISSIONER (APPEALS) IS AFFIRMED. 20. SIN CE WE HAVE ALREADY HELD THAT THE DATA PROCESSING COST PAID BY THE ASSESSEE DOES NOT AMOUNT TO ROYALTY CONSEQUENTLY THERE IS NO REQUIREMENT FOR DEDUCTING TAX AT SOURCE ON SUCH PAYMENT. THEREFORE THE PROVISION S OF SECTION 40(A)(I) WILL NOT APPLY. ACCORDINGLY THE I SSUE ARISING OUT OF GROUND NO.1 AND 2 IS DISMISSED. THI S DECISION OF THE TRIBUNAL HAVE BEEN FOLLOWED IN THE SUBSEQUENT YEARS BY THE TRIBUNAL I.E. IN AY2006-0 7 AND 2007-08. IN THE AFORESAID DECISION OF THE TRIBU NAL THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF SIEMENS AKTIONGESELLSCHAFT (SUPRA) AND DELHI HIGH C OURT DECISION IN THE CASE OF NOKIA NETWORK REPORTED IN [2012] 253 CTR (DE) 417 AND DIT V SONY ERICSON AB REPORTE D IN [2012] 343 ITR 470 HAVE BEEN TAKEN NOTE OF. THUS THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE AFTER DETAIL ANALYSIS AND DISCUSSION. MOREOVER WE FIND THAT IN THE LATEST DECISION OF HONBLE DELHI HIGH C OURT IN THE CASE OF DIT VS. NEWS SKY SATELLITE BV PASSED IN ITA 473/2012 ORDER DATED 8.02.2016 HAVE EXPLAINED THE RATIO AND PRINCIPLE OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SIEMENS AKTIONGESELLSCHAFT (SUPRA). THE REL EVANT OBSERVATION OF THE HONBLE DELHI HIGH COURT IN THE SAID CASE READS AS UNDER:- 48 IN COMMISSIONER OF INCOME TAX V. SEIMENS AKTIONGESSELLSCHAFT [2009] 310 ITR 320 (BOM) THE BOMBAY HIGH COURT CITING R V. MELFORD DEVELOPMENTS INC. HELD THAT THE RATIO OF THE JUDGMENT IN OUR OPINIO N WOULD MEAN THAT BY A UNILATERAL AMENDMENT IT IS NOT POSSIBLE FOR ONE NATION WHICH IS PARTY TO AN AGREEM ENT TO TAX INCOME WHICH OTHERWISE WAS NOT SUBJECT TO TAX. SUCH INCOME WOULD NOT BE SUBJECT TO TAX UNDER THE EXPRES SION ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 31 - LAWS IN FORCE. WHILE CONSIDERING THE DOUBLE TAX AVOIDANCE AGREEMENT THE EXPRESSION LAWS IN FORCE WOULD NOT ONLY INCLUDE A TAX ALREADY COVERED BY THE TREATY BUT WOULD ALSO INCLUDE ANY OTHER TAX AS TAXE S OF A SUBSTANTIALLY SIMILAR CHARACTER SUBSEQUENT TO THE D ATE OF THE AGREEMENT AS SET OUT IN ARTICLE 1(2). CONSIDERI NG THE EXPRESS LANGUAGE OF ARTICLE 1(2) IT IS NOT POSSIBLE TO ACCEPT THE BROAD PROPOSITION URGED ON BEHALF OF THE ASSESSEE THAT THE LAW WOULD BE THE LAW AS APPLICABL E OR AS DEFINE WHEN THE DOUBLE TAX AVOIDANCE AGREEMENT WAS ENTERED INTO. 49. IT IS ESSENTIAL TO NOTE THE CONTEXT IN WHICH TH IS JUDGMENT WAS DELIVERED. THERE THE COURT WAS CONFRONTED WITH A SITUATION WHERE THE WORD ROYALTY WAS NOT DEFINED IN THE GERMAN DTAA. FOLLOWING FROM OUR PREVIOUS DISCUSSION ON THE BIFURCATION OF TERMS WIT HIN THE TREATY IN SITUATIONS WHERE WORDS REMAIN UNDEFI NED ASSISTANCE IS TO BE DRAWN FROM THE DEFINITION AND I MPORT OF THE WORDS AS THEY EXIST IN THE DOMESTIC LAWS IN FORCE. IT WAS IN THIS CONTEXT THAT THE BOMBAY HIGH COURT HELD THAT THEY WERE UNABLE TO ACCEPT THE ASSESSES CONTENTION THAT THE LAW APPLICABLE WOULD BE THE LAW AS IT EXISTED AT THE TIME THE DOUBLE TAX AVOIDANCE AGREEM ENT WAS ENTERED INTO. THIS IS THE CONTEXT IN WHICH THE AMBULATORY APPROACH TO TAX TREATY INTERPRETATION WA S NOT REJECTED. THE SITUATION BEFORE THIS COURT HOWEVER I S MATERIALLY DIFFERENT AS THERE IS IN FACT A DEFINITI ON OF THE WORD ROYALTY UNDER ARTICLE 12 OF BOTH DTAA THUS DISPENSING WITH THE NEED FOR RECOURSE TO ARTICLE 3. 50. THERE ARE THEREFORE TWO SETS OF CIRCUMSTANCES. FIRST WHERE THERE EXISTS NO DEFINITION OF A WORD IN ISSUE WITHIN THE DTAA ITSELF REGARD IS TO BE HAD TO THE LAWS IN FORCE IN THE JURISDICTION OF THE STATE CALLED UPON TO INTERPRET THE WORD. THE BOMBAY HIGH COURT SEEMS TO ACCEPT THE AMBULATORY APPROACH IN SUCH A SITUATION THUS ALLOWING FOR SUCCESSIVE AMENDMENTS INTO THE REALM O F ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 32 - LAWS IN FORCE. WE EXPRESS NO OPINION IN THIS REGA RD SINCE IT IS NOT IN ISSUE BEFORE THIS COURT. THIS CO URTS FINDING IS IN THE CONTEXT OF THE SECOND SITUATION WHERE THERE DOES EXIST A DEFINITION OF A TERM WITHIN THE DTAA. WHEN THAT IS THE CASE THERE IS NO NEED TO REFER TO THE LAWS IN FORCE IN THE CONTRACTING STATES ESPECIALLY TO DEDUCE THE MEANING OF THE DEFINITION UNDER THE DTAA AND THE ULTIMATE TAXABILITY OF THE INCOME UNDER THE AGREEMENT. THAT IS NOT TO SAY THAT THE COURT MAY BE INCONSISTENT IN ITS INTERPRETATION OF SIMILAR DEFIN ITIONS. WHAT THAT DOES IMPLY HOWEVER IS THAT JUST BECAUSE THERE IS A DOMESTIC DEFINITION SIMILAR TO THE ONE UNDER T HE DTAA AMENDMENTS TO THE DOMESTIC LAW IN AN ATTEMPT TO CONTOUR RESTRICT OR EXPAND THE DEFINITION UNDER IT S STATUTE CANNOT EXTEND TO THE DEFINITION UNDER THE DTAA. IN OTHER WORDS THE DOMESTIC LAW REMAINS STATIC FOR THE PURPOSES OF THE DTAA. 5. THUS ON THE FACTS OF THE PRESENT CASE WE ARE B OUND TO FOLLOW THE JUDICIAL PRECEDENCE IN ASSESSEES OWN CASE FOR THE EARLIER YEARS AND IN VIEW OF THE FINDING GI VEN THEREIN WE UPHELD THE ORDER OF THE CIT (A) AND DIS MISS THE GROUNDS RAISED BY THE REVENUE. ACCORDINGLY GRO UNDS NO.1 2 & 3 ARE DISMISSED. 5.2. AS FAR AS FILING OF WRIT PETITION TO BE FILED BEFORE THE HONBLE HIGH COURT IS CONCERNED IF WOULD BE SUFFICI ENT TO MENTION THAT NOTHING WAS BROUGHT ON RECORD TO PROVE THAT WRIT HAD BEEN FILED AND HEARD. HAD THE FINAL HEARIN G TAKEN PLACE IT WOULD HAVE BEEN A DIFFERENT SITUATI ON. SO IN ANTICIPATION OF FILING OF A WRIT-PETITION WE AR E NOT INCLINED TO DEFER THE DECISION ESPECIALLY WHEN SAME IS COVERED BY THE ORDERS FOR THE EARLIER YEARS. CONSIDERING THE ABOVE AND RESPECTFULLY FOLLOWING TH E ORDERS OF THE TRIBUNAL IN THE CASES OF ANTWERP DIAM OND BANK NV ENGINEERING CENTRE (SUPRA) AND ANTWERP ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 33 - DIAMOND BANK NV(SUPRA) WE DECIDE THE EFFECTIVE GRO UND OF APPEAL IN FAVOUR OF THE ASSESSEE. 10.2 IN VIEW OF THE ABOVE REASONING ON FACTS AND LA W WE FIND THAT THE JUDICIAL PRECEDENT AS CITED BEFORE US AND AS DISCUSSED AND CONSIDERED AT LENGTH BY THE HON'BLE D ELHI HIGH COURT IN FACTS AS UPHELD IN THE RULING OF AAR IN THE CASE OF ISRO (SUPRA) IS ALSO FOUND SUPPORTED BY THE HON'BLE JURISDICTIONAL HIGH COURT SUPPORTS THE VIEW TAKEN AND THE DECISION OF THE HON'BLE MADRAS HIGH C OURT STANDS CONSIDERED AND THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IT IS NOTED HAVING BEE N RENDERED ON 9 TH JUNE 2014 DID NOT HAVE THE BENEFIT OF THE VIEW TAKEN BY THE HON'BLE DELHI HIGH COURT IN T HE ORDER OF THE COORDINATE BENCH IN VIACOM 18 THE BENE FIT OF THE SAID DECISIONS WAS NOT AVAILABLE AND IN THE SAID DECISIONS RELIED UPON BY THE REVENUE THE SIMILARIT Y OF THE PECULIAR FACTS WITH THE FACTS OF AARS RULING I N ISRO AS CONSIDERED BY THE HON'BLE DELHI HIGH COURT WAS N OT CONSIDERED. THUS THE LONE ITAT DECISION CITED BY TH E LEARNED CIT-DR OF THE MUMBAI TRIBUNAL IT HAS BEEN NOTICED DID NOT HAVE THE BENEFIT OF THE DECISIONS O F THE HON'BLE DELHI HIGH COURT AND IN FACT RELIES ON THE ORDER OF THE SPECIAL BENCH OF THE ITAT AND THE POSITION O F LAW AS WAS THEN AVAILABLE. ACCORDINGLY IN VIEW OF THE PREPONDERANCE OF THE CONSISTENT VIEWS OF COORDINATE BENCHES THE APPEALS OF THE ASSESSEE ARE ALLOWED. 8. SINCE THE FACTS AND CIRCUMSTANCES IN THIS YEAR R EMAIN THE SAME AS IN THE PAST YEARS WHICH HAS BEEN CONSI DERED BY THE TRIBUNAL WE FIND NO REASON TO DISTRACT FROM TH E EARLIER DECISION OF THE TRIBUNAL DATED 14.07.2017 (SUPRA). PERTINENTLY IT IS ALSO NOT THE CASE OF THE REVENUE THAT THERE I S ANY CHANGE IN THE NATURE OF THE INCOME BEING EARNED BY THE ASS ESSEE FROM TCL THAN THAT CONSIDERED BY THE TRIBUNAL IN ITS ORD ER DATED 14.07.2017 (SUPRA). THEREFORE FOLLOWING THE PRECED ENT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2000-01 TO 2005- 06 THE STAND OF THE ASSESSEE HAS TO BE APPROVED. ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 34 - 9. SO HOWEVER BEFORE PARTING WE MAY MAKE A MENTI ON OF THE DISCUSSION SOUGHT TO BE MADE BY THE DRP IN THE IMPUGNED ORDER REGARDING THE INAPPLICABILITY OF THE RATIO OF THE DECISION OF THE AAR IN THE CASE OF ISRO SATELLITE CENTRE REP ORTED IN 307 ITR 59 (AAR). IN THIS CONTEXT WE FIND THAT THIS AS PECT OF THE CONTROVERSY HAS BEEN EXPRESSLY CONSIDERED BY OUR CO ORDINATE BENCH WHILE RENDERING ITS DECISION DATED 14.07.2017 (SUPRA). THEREFORE WE FIND NO REASON TO UPHOLD THE STAND OF THE REVENUE IN THIS YEAR FOLLOWING THE PRECEDENT IN THE ASSESSEES OWN CASE. THEREFORE SO FAR AS GROUND OF APPEAL NOS . 2 & 3 ARE CONCERNED THE SAME ARE ALLOWED AS ABOVE. 11. AS THE FACTS AND THE ISSUE INVOLVED IN THE CASE BEFORE US REMAINS THE SAME AS WAS THERE BEFORE THE TRIBUNAL I N THE PRECEDING YEARS THEREFORE WE RESPECTFULLY FOLLOW THE VIEW THEREIN TAKEN AND CONCLUDE THAT THE AMOUNTS RECEI VED BY THE ASSESSEE FROM TCL FOR PROVIDING SATELLITE TELECOMMU NICATION SERVICES IS NOT TO BE HELD AS ROYALTY IN ITS HANDS. THE GROUNDS OF APPEAL NOS. 2 TO 5 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 8. IN RESPECT OF GROUND OF APPEAL WHETHER THE ASSESSEE COMPANY HAD PE IN INDIA DURING THE FINANCIAL YEAR. THE HONBLE TRIBUNAL HAS OBSERVED A T PAGE 42 PARA 14 OF THE ORDER AS UNDER: 14. WE FIND THAT THE LOWER AUTHORITIES HAD CONCLUD ED THAT THE ASSESSEE HAD A PE IN INDIA ON TWO GROUNDS VIZ. (I) THAT THE LIAISON OFFICE (LO) OF THE ASSESSEE CONSTITUTED ITS PE IN INDIA; AND (II) THAT THE LAND EARTH STATIONS (LES) CONSTITUTED A PE OF THE ASSESSEE IN INDIA. WE FIND THAT THE FACTU AL POSITION PERTAINING TO THE AFORESAID TWO ASPECTS ON THE BASI S OF WHICH ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 35 - A VIEW HAD BEEN TAKEN BY THE LOWER AUTHORITIES THAT THE ASSESSEE HAD A PE IN INDIA REMAINS THE SAME AS WAS THERE IN THE PRECEDING YEARS AND HAD BEEN LOOKED INTO BY TH E TRIBUNAL AT LENGTH WHILE DISPOSING OFF THE APPEALS OF THE AS SESSEE FOR THE SAID RESPECTIVE YEARS. IN FACT A PERUSAL OF TH E ORDER OF THE DRP REVEALS THAT THE VIEW TAKEN BY THE A.O THAT THE ASSESSEE HAD A PE IN INDIA WAS ENDORSED BY THE DRP FOR THE REASON THAT ITS PREDECESSOR PANEL HAD WHILE DISPOSING OFF THE ASSESSEES OBJECTIONS FOR A.Y. 2014-15 UPHELD THE A OS ORDER. IN THE BACKDROP OF THE AFORESAID FACTS WE ARE OF T HE CONSIDERED VIEW THAT THE BASIS AND THE FACTS THEREI N INVOLVED FOR CONCLUDING THAT THE ASSESSEE HAD A PE IN INDIA DURING THE YEAR UNDER CONSIDERATION HAD NOT WITNESSED ANY CHAN GE AS IN COMPARISON TO THE FACTS WHICH WERE THERE IN ITS CAS E FOR THE PRECEDING YEARS. ON A PERUSAL OF THE ORDER OF THE T RIBUNAL FOR A.Y. 2007-08 TO A.Y. 2012-13 WE FIND THAT AFTER E XHAUSTIVE DELIBERATIONS THE TRIBUNAL HAD CONCLUDED THAT THE A SSESSEE DID NOT HAD A PE IN INDIA OBSERVING AS UNDER: 10. SO FAR AS GROUND OF APPEAL NO. 4 IS CONCERNED THE SAME DEALS WITH THE GRIEVANCE OF THE ASSESSEE AGAINST TH E INCOME- TAX AUTHORITIES HOLDING THAT IT HAS A PE IN INDIA. IN THIS CONTEXT THE RELEVANT FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT ASSESSEE OWNED SPACE SEGMENT MONITORING SYSTEM (SSMS) WHICH WAS EQUIPMENT INSTALLED/LOCATED AT AR VI MAHARASHTRA. THE ASSESSING OFFICER FURTHER NOTES TH AT THE LAND EARTH STATION (LES) OF VSNL/TCL IS ALSO LOCATE D AT THIS PLACE AND THAT THE SSMS EQUIPMENT PLAYS A CRITICAL ROLE IN PROVIDING TELECOMMUNICATION SERVICES TO THE LAND EA RTH SERVICE OPERATOR (LESO) WHICH IS VSNL. THE ASSESSI NG OFFICER NOTED THAT THE SAID EQUIPMENT IS INSTALLED AND MAIN TAINED BY THE ASSESSEE AND THAT ASSESSEE ALSO HAS A LIAISON O FFICE IN INDIA. THE ASSESSING OFFICER NOTES THAT THE ACTIVIT IES OF THE LIAISON OFFICE CANNOT BE SAID TO BE JUST A MERE LI AISONING WORK IN INDIA. THE ASSESSING OFFICER FURTHER NOTES THAT THE EMPLOYEES/STAFF OF THE LIAISON OFFICE PROVIDE VARIO US SERVICES TO THE ASSESSEE-COMPANY IN CONNECTION WITH THE CONT RACT WITH VSNL. THEREFORE THE ASSESSING OFFICER CONCLUDED TH AT THE LOCATION OF SSMS EQUIPMENT IN INDIA AND THE PRESENC E OF THE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 36 - LIAISON OFFICE IN INDIA CONSTITUTED A PE OF THE ASS ESSEE IN INDIA AND THEREFORE THE PAYMENT RECEIVED BY THE ASSESSE E FROM VSNL WAS ATTRIBUTABLE TO THE ASSESSEES PE IN INDIA . THUS NOTWITHSTANDING HIS STAND THAT THE RECEIPTS FROM VS NL WERE IN THE NATURE OF ROYALTY THE ASSESSING OFFICER HELD T HAT EVEN GOING BY ARTICLE 7 OF THE INDIA-UK DTAA (BY WHICH S UCH RECEIPTS ARE TREATED AS BUSINESS PROFITS) BECAUSE OF THE PRESENCE OF A PE IN INDIA INCOME ARISING FROM RECE IPTS FROM VSNL WAS ATTRIBUTABLE TO A BUSINESS CONNECTION IN INDIA. THEREFORE HE APPLIED RULE 10 OF THE INCOME TAX RUL ES 1962 AND ESTIMATED THE PROFIT OF THE PE AT 30% OF THE GR OSS RECEIPTS. THE AFORESAID ADDITION PROPOSED BY THE ASSESSING OF FICER WAS OBJECTED TO BY THE ASSESSEE BEFORE THE DRP BY RAISI NG VARIOUS OBJECTIONS. THE DRP HOWEVER AFFIRMED THE ULTIMATE CONCLUSION OF THE ASSESSING OFFICER TO THE EFFECT THAT ASSESSE E HAS A PE IN INDIA. IN COMING TO SUCH A DECISION THE DRP HAS CONFINED ITS OBSERVATION TO THE PRESENCE OF THE LIA ISON OFFICE OF THE ASSESSEE IN INDIA AND NOT GIVEN ANY FINDING ON THE ASPECT OF LOCATION OF SSMS EQUIPMENT. AS PER THE DRP THE ACTIVITIES OF THE LIAISON OFFICE COULD NOT BE CONSIDERED TO B E PREPARATORY AND ANCILLARY AS THE BASIC JOB OF THE OFFICE TO ACT AS A FIXED PLACE WITH RESPECT TO THE FINAL AGREEMEN TS BEING ENTERED INTO BY THE CLIENTS LIKE ISRO VSNL WITH TH E ASSESSEE. FOR THE SAID REASON THE DRP AFFIRMED THE STAND OF THE ASSESSING OFFICER THAT THERE EXISTED A PE OF THE AS SESSEE IN INDIA. 11. AGAINST THE AFORESAID THE LEARNED REPRESENTATI VE FOR THE ASSESSEE VEHEMENTLY POINTED OUT THAT SINCE BEGINNIN G AND UPTO THE ASSESSMENT YEAR 2006-07 THERE HAS BEEN NO FINDING BY THE INCOME-TAX AUTHORITIES THAT EITHER THE LIAIS ON OFFICE OR THE SSMS EQUIPMENT CONSTITUTED A PE IN INDIA ALTHOU GH THE ARRANGEMENT WITH VSNL/TCL WAS THE SAME AS IN THE IN STANT YEARS. ON THE POINT OF LAW THE LEARNED REPRESENTAT IVE FOR THE ASSESSEE RELIED ON THE JUDGMENT OF THE HON'BLE DELH I HIGH COURT IN THE CASE OF DIT VS MITSUI & CO. LTD. [201 7] 84 TAXMANN.COM 3 (DELHI) TO POINT OUT THAT THE ONUS WA S ON THE REVENUE TO SHOW THAT ANY ACTIVITY IN THE NATURE OF BUSINESS OR ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 37 - TRADING WAS CARRIED OUT IN THE LIAISON OFFICE. IT W AS POINTED OUT THAT THE LIAISON OFFICE OF THE ASSESSEE HAS BEEN IN EXISTENCE SINCE IT WAS INITIALLY APPROVED BY THE RBI VIDE ITS PERMISSION DATED 20.10.1999 A COPY OF WHICH HAS BEEN PLACED I N THE PAPER BOOK AT PAGES 39 TO 42. IT HAS BEEN FURTHER P OINTED OUT THAT THE APPROVAL GRANTED BY THE RBI HAS BEEN RENEW ED FROM TIME TO TIME AND SO FAR AS THE CAPTIONED PERIOD IS CONCERNED THE APPROVAL OF THE RBI VIDE ORDER DATED 10.10.2008 SUBSISTS. IT IS POINTED OUT THAT THE VERY FACT THAT THE RBI C ONTINUES TO ACCORD APPROVAL FOR THE LIAISON OFFICE SHOWS THAT T HERE IS NO ACTIVITY OF TRADING COMMERCIAL OR INDUSTRIAL NATUR E WHICH IS CARRIED OUT SO AS TO TREAT SUCH LIAISON OFFICE AS A PE. 12. SO FAR AS THE REFERENCE MADE BY THE LOWER AUTHO RITIES TO SSMS EQUIPMENT IS CONCERNED THE LEARNED REPRESENTA TIVE FOR THE ASSESSEE POINTED OUT THAT IN THE PAST YEARS ALS O SUCH EQUIPMENT WAS EXISTING BUT NO ADVERSE VIEW HAS BEE N TAKEN AND IN ANY CASE SO FAR AS THE INSTANT PERIOD IS C ONCERNED THE ASSESSEE HAS FOREGONE THE USE OF SUCH EQUIPMENT FOR PROVIDING SERVICES. IN THIS CONTEXT OUR ATTENTION HAS BEEN D RAWN TO PAGE 64OF THE PAPER BOOK WHEREIN A COMMUNICATION DATED 28.04.2005 IS PLACED WHICH IS ADDRESSED TO VSNL WHE REBY IT IS INFORMED THAT THE FACILITY OF SSMS EQUIPMENT WOU LD NOT BE USED FOR PROVIDING SERVICES W.E.F. 17.06.2005. IT H AS BEEN POINTED OUT THAT SUCH CHANGE WAS ON ACCOUNT OF AN O PERATIONAL REQUIREMENT AS ASSESSEE HAS LAUNCHED ITS 4TH GENERA TION SATELLITE WHICH WAS THEREAFTER USED TO PROVIDE THE SERVICES WHICH WERE EARLIER BEING PROVIDED BY THE USE OF SSM S EQUIPMENT. 13. IT WAS THEREFORE CONTENDED THAT IT IS WHOLLY ERRONEOUS ON THE PART OF THE LOWER AUTHORITIES TO HOLD THAT THE LIAISON OFFICE AND SSMS EQUIPMENT CONSTITUTED A PE OF THE ASSESSEE IN INDIA. 14. ON THE OTHER HAND THE LD. DR APPEARING FOR THE REVENUE DEFENDED THE STAND OF THE LOWER AUTHORITIES BY PLAC ING RELIANCE ON THE RESPECTIVE ORDERS. FURTHER INSOFAR AS THE A SSESSMENT ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 38 - YEARS 2010-11 TO 2012-13 IS CONCERNED THE LD. DR R AISED A FURTHER POINT BASED ON THE OBSERVATION OF THE DRP. IN THE AFORESAID THREE YEARS THE ASSESSING OFFICER HELD T HE EXISTENCE OF A PE IN INDIA ON THE BASIS OF THE EXISTENCE OF T HE LIAISON OFFICE AND LOCATION OF SSMS EQUIPMENT. ON THE OTHER HAND THE DRP IN ASSESSMENT YEARS 2007-08 TO 2009-10 CONCLUDE D THE EXISTENCE OF A PE ON THE BASIS OF EXISTENCE OF LIAI SON OFFICE WHEREAS FOR ASSESSMENT YEARS 2010-11 TO 2012-13 TH E DRP HAS BASED ITS DECISION ON THE EXISTENCE OF LIAISON OFFICE AS WELL AS THE USE OF LES BY THE ASSESSEE FOR PROVIDING SER VICES. IN THIS MANNER THE LD. DR HAS DEFENDED THE STAND OF T HE LOWER AUTHORITIES. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. FACTUALLY SPEAKING IT IS SEEN THAT THE ASSESSEE HA S A LIAISON OFFICE IN INDIA WHICH HAS BEEN INITIALLY PERMITTED BY THE RBI UNDER THE RELEVANT PROVISIONS OF FOREIGN EXCHANGE R EGULATION ACT 1973. IN FACT INITIALLY THE PERMISSION TO SET -UP A LIAISON OFFICE WAS GRANTED ON 20.10.1999 FOR A PERIOD OF TH REE YEARS SUBJECT TO CERTAIN TERMS AND CONDITIONS. ONE OF THE SPECIFIC CONDITION WAS THAT THE LIAISON OFFICE SHALL ONLY UN DERTAKE LIAISON ACTIVITIES I.E. TO ACT AS A COMMUNICATION CHANNEL BETWEEN THE HEAD OFFICE AND THE PARTIES IN INDIA. T HE CONDITION IMPOSED BY THE RBI SPECIFICALLY PROHIBITE D THE LIAISON OFFICE FROM UNDERTAKING ANY OTHER ACTIVITY OF TRADING COMMERCIAL OR INDUSTRIAL NATURE. THE LIAISON OFFICE WAS ALSO INTER-ALIA PROHIBITED FROM ENTERING INTO ANY BUSIN ESS CONTRACT IN ITS OWN NAME. IT FURTHER PRESCRIBED THAT THE LIA ISON OFFICE WILL NOT CHARGE ANY COMMISSION OR FEE FOR ITS LIASI ONING ACTIVITY/SERVICES RENDERED BY IT. THE STANDARD TERM S AND CONDITIONS ALSO STATED THAT THE ENTIRE EXPENSE OF T HE LIAISON OFFICE WERE TO BE MET EXCLUSIVELY OUT OF THE FUNDS RECEIVED FROM ABROAD AND THAT THE LIAISON OFFICE COULD NOT B ORROW OR LEND ANY MONEY FROM OR TO ANY PERSON IN INDIA WITHO UT PRIOR APPROVAL ETC. THE AFORESAID PERMISSION HAS BEEN FU RTHER RENEWED AND THERE IS NO DISPUTE THAT FOR THE PERIOD UNDER CONSIDERATION ALSO THE REQUISITE APPROVAL OF THE RB I EXISTS FOR THE LIAISON OFFICE OF THE ASSESSEE. WE ARE ONLY HIG HLIGHTING THE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 39 - AFORESAID FEATURES OF THE PERMISSION GRANTED BY THE RBI TO POINT OUT THAT THE LIAISON OFFICE IS PROHIBITED FRO M CARRYING OUT ANY BUSINESS OR TRADING ACTIVITY. AT THE TIME OF HE ARING IT WAS ALSO STATED BY THE LEARNED REPRESENTATIVE FOR THE A SSESSEE AT BAR THAT TILL NOW THERE IS NO INFRINGEMENT OR ANY O THER ADVERSE VIEW TAKEN BY THE RBI QUA THE ACTIVITIES WHICH ARE BEING CARRIED OUT BY THE LIAISON OFFICE IN INDIA. THIS SI NGULAR ASPECT IS QUITE PERTINENT TO ESTABLISH THAT IF THE ASSESSI NG OFFICER IS TO HOLD TO THE CONTRARY I.E. TO SAY THAT THE LIAISON OFFICE WAS UNDERTAKING ACTIVITIES IN THE NATURE OF BUSINESS OR COMMERCE THEN THE ONUS WAS ON HIM TO ESTABLISH SO. ANOTHER NOTABLE FEATURE IS THAT THE LIAISON OFFICE OF THE ASSESSEE HAS BEEN IN EXISTENCE SINCE 1999 AND EVEN IN THE PAST ASSESSME NT YEARS WHEN THE ASSESSING OFFICER DISAGREED WITH THE ASSES SEE ON THE NATURE OF THE RECEIPTS FROM VSNL/TCL THERE WAS NO ADVERSE CONCLUSION WITH REGARD TO THE NATURE OF ACT IVITIES BEING CARRIED OUT BY THE LIAISON OFFICE. THE HON'BL E DELHI HIGH COURT IN THE CASE OF MITSUI & CO. LTD. (SUPRA) NOTE D THAT IN A CASE WHERE ASSESSEE WAS FOUND ADHERING TO THE CONDI TIONS IMPOSED BY THE RBI FOR RUNNING OF A LIAISON OFFICE IT INCREASES THE BURDEN OF THE REVENUE TO SHOW THAT NOTWITHSTAND ING THE SUBSISTING RBI PERMISSION THE LIAISON OFFICE CAN B E CONSTRUED AS A PE IN INDIA. IN OUR VIEW THE FACTUAL MATRIX I N THE INSTANT CASE CLEARLY ATTRACTS THE LEGAL POSITION ENUNCIATED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF MITSUI & CO . LTD. (SUPRA) AND THEREFORE WE PROCEED FURTHER TO EXAMI NE AS TO WHETHER THE REVENUE HAS DISCHARGED ITS BURDEN ON TH IS ASPECT IN THE PRESENT CASE. IN THIS CONTEXT WE HAVE PERUS ED THE DISCUSSION MADE BY THE ASSESSING OFFICER WHEREIN H E HAS CONCLUDED THE EXISTENCE OF A PE IN PARA 11.1 OF HIS ORDER BASED ON THE EXISTENCE OF LIAISON OFFICE AND THE LO CATION OF SSMS EQUIPMENT OWNED BY THE ASSESSEE. WE FIND THAT APART FROM MAKING BALD ASSERTIONS THAT THE ACTIVITY OF TH E LIAISON OFFICE CANNOT BE MERE LIASIONING NO OTHER SPECIF IC POINT HAS BEEN MADE OUT BY THE ASSESSING OFFICER. THE ASSESSI NG OFFICER ALSO NOTES THAT THE LIAISON OFFICE IS PERFORMING F UNCTIONS WHICH ARE MUCH MORE THAN LIASIONING NATURE SO HOW EVER WE DO NOT FIND EVEN AN IOTA OF EVIDENCE REFERRED TO BY THE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 40 - ASSESSING OFFICER IN THIS REGARD. IN FACT IN THE C OURSE OF HEARING A QUESTION WAS PUT ACROSS TO THE PARTIES A S TO WHETHER DURING THE ASSESSMENT PROCEEDINGS THIS ASPE CT WAS SPECIFICALLY SHOW CAUSED TO THE ASSESSEE OR NOT? TH E LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT AFTE R RECEIPT OF THE DRAFT ASSESSMENT ORDER ASSESSEE HAD RAISED OBJ ECTIONS BEFORE THE DRP IN THE FOLLOWING MANNER :- 4.1 THE ASSESSEE HAS A SSMS LOCATED IN INDIA AT VSNLS LAND EARTH STATION (LES) AT ARVI. THE PURP OSE OF THE SSMS IS TO PROVIDE A DEGREE OF SURVEILLANCE CAPABILITY TO THE INMARSAT NETWORK OPERATIONS CENTR E IN THE UK WHEREBY THE ASSESSEE CAN MONITOR THE TRANSMITTED POWER LEVELS OF INDIVIDUAL CHANNELS (BO TH SIGNALLING AND VOICE CARRIERS) TO AND FROM SATELLIT ES IN THE INDIAN OCEAN REGION AND THE FREQUENCY DEVIATION S. SSMS IS NOT A CRITICAL COMPONENT TO THE SERVICES RENDERED BY THE ASSESSEE AND EVEN WITHOUT SSMS THE SE SERVICES CAN BE CONTINUED TO BE RENDERED. THE COST OF THIS EQUIPMENT IS APPROXIMATELY USD 150 000. THIS INVESTMENT IS INSIGNIFICANT WHEN COMPARED WITH THE TOTAL COST OF THE ASSESSEES ASSE TS WORLDWIDE (INCLUDING SATELLITES) WHICH IS USD 2 230 839 000 AS PER THE AUDITED ACCOUNTS FOR THE Y EAR 1998. THUS SSMS IS NOT CONTRIBUTING TO THE REVENUE S AND HENCE NO PART OF THE AMOUNTS RECEIVABLE IS ATTRIBUTABLE TO SSMS. 4.2 THE ASSESSEE HAS A LO IN INDIA WHICH HAS BEEN SET- UP WITH THE APPROVAL OF THE RESERVE BANK OF INDIA (RBI). ALL THE ACTIVITIES OF THE LO ARE IN ACCORD ANCE WITH THE RBIS APPROVAL. THE LO UNDERTAKES LIAISON AND COORDINATION ACTIVITIES ON BEHALF OF THE ASSESSEE. THERE ARE NO INCOME GENERATING ACTIVITIES CARRIED OUT BY THE LO IN INDIA. THE LO WAS ENGAGED IN COORDINATING A PILO T PROJECT TO ASSIST VSNL AND DEPARTMENT OF TELECOMMUNICATIONS TO PROVIDE SATELLITE BASED VILLA GE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 41 - PUBLIC TELEPHONE IN RURAL AREAS. PRESENTLY THE LO INTERACTS WITH THE INDIAN GOVERNMENT TO GET INFORMA TION AND COORDINATES WITH THE REGULATORY AUTHORITIES IN CONNECTION WITH THE USE OF INMARSATS SERVICES IN I NDIA. THE LOS ACTIVITIES DO NOT PLAY ANY ROLE IN THE REN DERING OF TELECOMMUNICATION SERVICES TO VSNL. 4.3 BASED ON THE ABOVE INMARSAT SUBMITS THAT THE PRESENCE OF THE SSMS AND THE LO IN INDIA DOES NOT CONSTITUTE A PE OF INMARSAT IN INDIA. 16. THE AFORESAID FACT-SITUATION ASSERTED BY THE AS SESSEE HAS NOT BEEN COUNTERED BY THE DRP IN ANY MANNER. IN FACT THE LEARNED REPRESENTATIVE FOR THE ASSESSEE HAS POINTED OUT THAT WITH REGARD TO THE DISCONTINUATION OF THE USE OF SS MS EQUIPMENT COMMUNICATION TO VSNL DATED 28.04.2005 ( COPY PLACED AT PAGE 64 OF THE PAPER BOOK) WAS ALSO FURNI SHED WHICH CLEARLY ESTABLISHES THAT THE SAME WAS NOT USE D IN RENDERING SERVICES DURING THE PERIOD UNDER CONSIDER ATION. 17. THUS WE FIND THAT THE ASSERTIONS OF THE ASSESS EE QUA THE ACTIVITY OF THE ASSESSEE AND LIAISON OFFICE AS WELL AS THE SIGNIFICANCE OF THE USE OF SSMS EQUIPMENT LOCATED I N INDIA QUA THE SERVICES PROVIDED TO VSNL CLEARLY ESTABLISHES T HAT THE SAME COULD NOT BE CONSTRUED TO CONSTITUTE A PE IN I NDIA. THE DRP IN OUR VIEW HAS ALSO NOT REFERRED TO ANY SPEC IFIC INSTANCES IN THE FUNCTIONING OF THE LIAISON OFFICE TO POINT OUT THAT IT WAS RENDERING SERVICES WHICH COULD BE CONST RUED AS BEING A PE IN INDIA. CONSIDERING THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL LED BY THE ASSESSEE B EFORE THE LOWER AUTHORITIES IN THE PRESENT CASE IT IS SAFE TO DEDUCE THAT THE REVENUE HAS FAILED TO DISCHARGE ITS BURDEN OF P ROVING THAT THE ACTIVITIES OF THE LIAISON OFFICE WERE SUCH AS T O CONSTRUE IT TO BE A PE IN INDIA. 18. ON THE ASPECT OF USE OF SSMS EQUIPMENT ALSO WE FIND THAT THERE IS NO REASON TO HOLD THAT IT COULD BE CO NSTRUED AS A PE IN INDIA. SO FAR AS THE REFERENCE TO THE LES MAD E BY THE ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 42 - DRP IN ASSESSMENT YEARS 2010-11 TO 2012- 13 IS CONC ERNED THE SAME IN OUR VIEW IS QUITE MISPLACED. THE DRP ITSELF NOTES THAT THE LES IS OWNED BY THE LESO I.E. VSNL. IT IS ALSO A FEATURE OF ASSESSEES AGREEMENT FOR PROVIDING SERVI CES THAT IT IS THE LESO I.E. VSNL WHO HAS THE FULL RIGHT AND RESPONSIBILITY WITH REGARD TO THE LES. IN ANY CASE IT IS UNDENIABLE THAT THE LES IS NOT OWNED BY THE ASSESSE E AN ASPECT WHICH THE DRP ITSELF HAS NOTED IN ITS ORDER. THEREFORE CONSIDERING THE MATTER IN ITS ENTIRETY WE FIND IT ERRONEOUS ON THE PART OF THE ASSESSING OFFICER TO HOLD THAT THER E EXISTS A PE OF THE ASSESSEE IN INDIA. THUS ASSESSEE SUCCEEDS O N THIS ASPECT ALSO. 19. INSOFAR AS GROUND OF APPEAL NO. 5 IS CONCERNED THE SAME RELATES TO INCOME COMPUTED BY THE ASSESSING OFFICER WHICH CAN BE ATTRIBUTABLE TO THE PE OF THE ASSESSEE IN IN DIA. SINCE WE HAVE UPHELD THE PRIMARY STAND OF THE ASSESSEE TH AT THERE DOES NOT EXIT ANY PE OF THE ASSESSEE IN INDIA THE DISPUTE IN GROUND OF APPEAL NO. 5 IS RENDERED ACADEMIC AND IS DISMISSED AS INFRUCTUOUS. 15. AS THE FACTS IN THE BACKDROP OF WHICH THE AO/DR P HAD IN THE AFORESAID PRECEDING YEARS CONCLUDED THAT THE LO AND LES WERE TO BE TREATED AS THE PE ON THE ASSESSEE IN INDIA REMAINS THE SAME AS ARE INVOLVED IN THE APPEAL OF T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WE THERE FORE RESPECTFULLY FOLLOW THE AFORESAID ORDER OF THE TRIB UNAL. ACCORDINGLY IN THE BACKDROP OF OUR AFORESAID OBSER VATIONS WE HEREIN CONCLUDE THAT THE ASSESSEE DID NOT HAVE ANY PE IN INDIA DURING THE YEAR UNDER CONSIDERATION. THE GRO UNDS OF APPEAL NOS. 6 & 7 ARE ALLOWED IN TERMS OF OUR AFORE SAID OBSERVATIONS. 9. WE FOUND THAT THE GROUNDS OF APPEAL NO 2 TO 5 IN THE ASSESSEE APPEAL ARE IN RESPECTIVE OF TAXABILITY OF RECEIPTS FROM TCL AS BUSINESS INCOME AND NOT ROYALT Y ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 43 - INCOME. AND THE GROUND OF APPEAL NOS. 6 AND 7 ARE I N RESPECT OF PRESENCE OF ASSESSEE S PERMANENT ESTABLISHMENT (PE) IN INDIA. WE FIND THE OBSERVATIO NS OF THE HONBLE TRIBUNAL IN THE ABOVE PARAGRAPHS SQUARELY COVER THE GROUNDS OF APPEAL NO 2 TO 7 RAIS ED BY THE ASSESSEE IN THE PRESENT ASSESSMENT YEAR. WE RESPECTFULLY FOLLOW JUDICIAL DECISION OF THE HONBL E TRIBUNAL AND ALLOW THE GROUNDS OF APPEAL NOS. 2 TO 7 OF THE ASSESSEE. 10. THE ASSESSEE HAS RAISED THE GROUND OF APPEAL NO.8 THAT THE LD. AO ERRED IN CONSIDERING THE PROFITABILITY ON ADHOC BASIS OF 30% ON GROSS RECEIP TS FROM TCL BY APPLYING THE RULE 10 OF INCOME TAX RULES 1962. WE FIND THAT THE HONBLE TRIBUNAL HAS DEALT ON THIS ISSUE AT PAGE 47 PARA 16 OF THE ORDER AND DISMISSED AS INFRUCTUOUS: 16. WE SHALL NOW DEAL WITH THE CONTENTION OF THE ASSESSEE THAT THE AO HAD ERRED IN CONSIDERING ITS PROFITABILITY ON AN ADHOC BASIS AT 30% OF ITS GROSS RECEIPTS FROM TCL BY APPLYING RULE 10 OF THE INCOME TAX RULES 1962. WE FIND THAT THE AFORESAID ISSUE PERT AINS TO THE COMPUTING THE INCOME OF THE ASSESSEE ATTRIBUTAB LE TO ITS PE IN INDIA. SINCE WE HAVE UPHELD THE PRIMARY STAND OF THE ASSESSEE THAT THERE DOES NOT EXIST ANY PE OF THE ASSESSEE IN INDIA THUS THE DISPUTE IN GROUND OF A PPEAL ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 44 - NO. 8 HAVING BEEN RENDERED AS MERELY ACADEMIC AS DISMISSED AS INFRUCTUOS. 11. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR AS OBSERVED IN THE HONBLE TRIBUNAL DECISIO N THAT THE ASSESSEE DOES NOT HAVE ANY PE IN INDIA THEREFORE THE GROUND OF APPEAL BECOME INFRUCTUOUS AND IS DISMISSED. 12.WITH RESPECT TO THE GROUNDS OF APPEAL NOS. 9 TO 10 WHERE THE A.O HAS ERRED IN LEVYING SURCHARGE SECONDARY EDUCATION CESS AND HIGHER SECONDARY EDUCATION CESS OVER AND ABOVE THE TAX COMPUTED. WE FIND THAT THE SAID ISSUE WAS CONSIDERED BY THE HON BLE TRIBUNAL AT PAGE 47 PARA 17 OF THE ORDER AS UNDER: 17. THE ASSESSEE HAS ASSAILED THE ASSESSMENT ORDER ON THE GROUND THAT THE A.O HAD ERRED IN LEVYING SURCHARGE SECONDARY EDUCATION CESS AND HIGHER SECONDARY EDUCATION CESS OVER AND ABOVE THE TAX COMPUTED AT THE RATE PRESCRIBED UNDER THE INDIA- U.K. TAX TREATY ON THE RECEIPTS OF THE ASSESSEE WHI LE CALCULATING ITS INCOME TAX LIABILITY FOR THE YEAR U NDER CONSIDERATION. WE FIND THAT THE AFORESAID ISSUE IS SQUARELY COVERED BY THE ORDER OF THE ITAT KOLKATA IN THE CA SE OF DDIT VS. THE BOC GROUP LTD. [ITA NO. 571/KOL/2013 DATED 30.11.2015]. IN ITS AFORESAID ORDER IT WAS OBSERVE D BY THE TRIBUNAL THAT ARTICLE 2 OF THE INDIA-U.K. TAX TREAT Y PROVIDES THAT INCOME TAX INCLUDES ANY SURCHARGE THEREON AND THAT THE CONVENTION SHALL ALSO APPLY TO ANY IDENTICAL OR SUB STANTIALLY SIMILAR TAXES WHICH ARE IMPOSED BY EITHER CONTRACTI NG STATE AFTER THE DATE OF SIGNING OF THE CONVENTION IN ADDI TION TO OR IN PLACE OF THE TAXES OF THE CONTRACTING STATE REFERRE D TO IN ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 45 - PARAGRAPH 1 OF THE ARTICLE. THE TRIBUNAL HAD CONCLU DED THAT WHEN THE TAX RATE IS DETERMINED UNDER THE TAX TREAT Y THEN THE TAX RATE PRESCRIBED THEREON SHALL HAVE TO BE FOLLOW ED STRICTLY WITHOUT ANY ADDITIONAL TAXES THEREON IN THE FORM OF SURCHARGE OR EDUCATION CESS. THE TRIBUNAL WHILE CONCLUDING AS HEREINABOVE HAD RELIED ON A SIMILAR VIEW TAKEN BY T HE COORDINATE BENCHES VIZ. (I) DIC ASIA PACIFIC PTE. L TD. VS. ADIT (INTL. TAXATION) (2012) 52 SOT 447 (KOL); (II) SUNI L V. MOTIANI VS. ITO (INTL. TAXATION) (2013) 33 TAXMAN.COM 252; (III) PARKE DAVIS & CO. LLC VS. ACIT (2014) 41 TAXMAN.COM 193 ( MUM); AND (IV) ITO (INTL. TAXATION) VS. M/S M. FAR HOTELS LTD. [ITA NOS. 430-435/COCH/2011 DATED 05.04.2013] (COCHIN). ACCORDINGLY FOLLOWING THE VIEW TAKEN BY THE COORDI NATE BENCHES OF THE TRIBUNAL IN THE AFORESAID CASES WE HEREIN CONCLUDE THAT THE TAX COMPUTED AT THE RATE PRESCRIB ED UNDER THE INDIA-U.K. TAX TREATY IS NOT BE SUBJECTED TO AN Y ADDITIONAL TAXES IN THE FORM OF SURCHARGE OR EDUCATION CESS. W E THUS SET ASIDE THE VIEW TAKEN BY THE LOWER AUTHORITIES AND D IRECT THE A.O TO RECOMPUTE THE TAX LIABILITY OF THE ASSESSEE IN TERMS OF OUR AFORESAID OBSERVATIONS. THE GROUND OF APPEAL NO . 9 IS ALLOWED. 13. IN THE PRESENT APPEAL THE ISSUES ARE SIMILAR A ND IDENTICAL. ACCORDINGLY WE REMIT THE DISPUTED ISSUE TO THE FILE OF THE A.O FOR LIMITED PURPOSES TO COMPUTE THE TAXABILITY AS PER THE OBSERVATIONS AND ALLOW THE GROUND OF APPEAL 14. THE ASSESSEE RAISED THE GROUND OF APPEAL THA T IT WAS NOT GRANTED TDS CREDIT TO THE EXTENT OF RS.61 89 852/-.SINCE THE MATTER REQUIRES EXAMINATIO N AND VERIFICATION OF THE FACTS IN RESPECT OF TAX C REDITS. WE RESTORE THIS DISPUTED ISSUE TO THE FILE OF A.O T O ITA NO . 7485/MUM/2019 INMARSAT GLOBAL LTD. MUMBAI - 46 - GRANT CREDIT AFTER VERIFICATION AND ALLOW THE GROUN D OF APPEAL FOR THE STATISTICAL PURPOSES. 15. IN RESPECT OF OTHER GROUNDS OF APPEAL THE LD.AR OF THE ASSESSEE HAS NOT MADE ANY SUBMISSIONS THEREFORE THE SAME ARE TREATED AS NOT PRESSED AND DISMISSED. 16. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24.03.2021 SD/- SD/- (MANOJ KUMAR AGGARWAL) (PAVAN KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 24.03.2021 KRK PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 4. ( ) / CONCERNED CIT 5. '#$%&&' )* / DR ITAT MUMBAI 6. %-./0 / GUARD FILE. / BY ORDER '& //TRUE COPY// 1. ( ASST. REGISTRAR) ITAT MUMBA I