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IN THE HIGH COURT OF DELHI AT NEW DELHI
Manmohan, Manmeet Pritam Singh Arora, JJ.
Commissioner Of Income Tax (international Taxation)-2 - Appellant
Versus
Intelsat Corporation - Respondent
ITA 346 of 2022 & ITA 347 of 2022
Decided On : 21-09-2022
Income Tax - Royalty - Interpretation of Section 9(1)(vi) of the Income Tax Act, 1961 and Article 12(3) of the India-USA DTAA - Satellite transponder lease not chargeable to tax as royalty
Fact of the Case:
The appeals challenged the ITAT's order holding that the amount received for lease of transponder facility by Intelsat Corporation, USA is not chargeable to tax under Section 9(1)(vi) of the Income Tax Act, 1961 read with Article 12(3) of the DTAA between India and USA as royalty.
Finding of the Court:
The court found that the issues raised in the appeals were covered by the decision of the court in the assessee's own case for the Assessment Year 2013-14, where a similar appeal of the Revenue was dismissed. The court also noted that the appeals in the aforementioned cases were pending adjudication, but there was no stay of the judgments till date. Consequently, no substantial question of law arose for consideration and the appeals were dismissed.
Issues: Interpretation of Section 9(1)(vi) of the Income Tax Act, 1961 and Article 12(3) of the India-USA DTAA regarding the taxability of amount received for lease of transponder facility as royalty.
Ratio Decidendi: The court relied on its previous decision in the assessee's own case and the absence of a stay on the judgments in the pending cases to conclude that no substantial question of law arose for consideration in the present appeals.
Final Decision: The appeals were dismissed.
JUDGMENT
Manmohan, (Oral) J. - Present income tax appeals have been filed challenging the order dated 13th December, 2021 passed by the Income Tax Appellate Tribunal ('ITAT') in ITA No. 4946/Del./2017 for the Assessment Year 2014-15 and the order dated 11th October, 2021 in ITA No. 3199/Del./2018 for the Assessment Year 2015-16.
2. Learned counsel for the Appellant states that the ITAT has erred in holding that the amount received by the Intelsat Corporation, USA for lease of transponder facility are not chargeable to tax under Section 9(1)(vi) of the Income Tax Act, 1961 ('the Act') read with Article 12(3) of the DTAA between India and USA as royalty. She states that the ITAT has erred in not appreciating that amount received by Intelsat Corporation, USA represented income by the way of royalty as defined in Explanation 2 read with Explanation 5.6 to Section 9(l)(vi) of the Act as well as Article 12(3) of the India-USA DTAA. She further states that the ITAT has erred in not appreciating that the transmission of signals/data through satellite transponder would fall within the meaning of word process, as appearing in Clauses (i), (ii) & (ii) of explanation 2 of Section 9(l)(vi) and Article 12(3) of the DTAA between India and USA.
3. Admittedly, the questions of law urged in the present appeal are covered by the decision of this Court in assessee's own case in ITA 900/2019 pertaining to the Assessment Year 2013-14, wherein this Court dismissed an appeal of the Revenue on similar grounds relying on the decisions in M/s Asia Satellite Telecommunications Co. Ltd. Vs. DIT (2011) 332 ITR 340 (Del) and Director of International Taxation Vs. New Skies Satellite BV, (2016) 382 ITR 114 Del.
4. Learned Counsel for the Appellant states that the Revenue has not accepted the aforesaid decisions and has preferred SLPs against the same.
5. Though the appeals in the aforementioned cases are pending adjudication, yet there is no stay of the said judgments till date.
6. Consequently, in view of the judgments of the Supreme Court in Kunhayammed and Others Vs. State of Kerala And Another, (2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1, the issues raised in the present appeals are covered by the judgment passed by the learned predecessor Division Bench.
7. Accordingly, no substantial question of law arises for consideration in the present appeals and the same are dismissed.
The interpretation of Section 9(1)(vi) of the Income Tax Act, 1961 and Article 12(3) of the India-USA DTAA regarding the taxability of amount received for lease of transponder facility as royalty.
Income received for leasing transponder facilities is not chargeable to tax as royalty under the Income Tax Act and applicable DTAA, based on established judicial precedent.
The classification of income as 'royalty' under the India-Netherlands DTAA remains subject to the precedent set in a related judgment, unaffected by pending appeals.
Payments for bandwidth services via international private leased circuit to non-resident not 'royalty' under pre-2012 law; Explanations 4-6 to Section 9(1)(vi) prospective, not clarificatory. No TDS ....
The main legal point established in the judgment is the application of the Supreme Court judgment in determining the classification of income under the 'royalty' definition.
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