{"id":1056,"date":"2009-10-20T12:44:39","date_gmt":"2009-10-20T12:44:39","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=1056"},"modified":"2009-10-20T12:44:39","modified_gmt":"2009-10-20T12:44:39","slug":"new-skies-satellites-vs-adit-itat-delhi-special-bench","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/new-skies-satellites-vs-adit-itat-delhi-special-bench\/","title":{"rendered":"New Skies Satellites vs. ADIT (ITAT Delhi Special Bench)"},"content":{"rendered":"\n\n
Click here to download the judgement (new_skies_satellites_royalty.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nFee for use of satellite is \u201croyalty\u201d under Act & DTAA
\n<\/strong><\/p>\n

The assessee, a foreign company, was engaged in operating geostationary telecommunication satellites with transponder capacity which were provided to telecasting companies in India for a fee. The question arose whether the said fee was \u201cconsideration for \u2026 the use of any \u2026 secret formula or process<\/strong> \u2026\u201d so as to constitute \u201croyalty\u201d under Expl. 2 to s. 9 (1)(vi) and corresponding definition under the DTAA. <\/p>\n

In Asia Satellite<\/a><\/strong> 85 ITD 478 the Tribunal held that the said receipts were taxable as \u2018royalty\u2019 having been paid in respect of a \u201cprocess\u201d. However, in PanAmSat<\/a><\/strong> 9 SOT 100 it was held that as in the term \u201croyalty\u201d in Art. 12 of the India-USA DTAA there was a \u2018comma\u2019 after the words \u201csecret formula or process\u201d, it was only a \u2018secret process\u2019 which would qualify as royalty and not what was provided by the assessee. To resolve the conflict, the issue was referred to the Special Bench. HELD, reversing PanAmSat<\/a><\/strong>:<\/p>\n

(i) The provision of the transponder through which the telecasting companies are able to uplink the desired images\/data and downlink the same in the desired area is a \u201cprocess<\/strong>\u201d. To constitute \u201croyalty\u201d, it is not necessary that the process should be a \u201csecret process\u201d<\/strong>. The fact there is a \u2018comma\u2019 after the words \u201csecret formula or process\u201d in the DTAA does not mean that a different interpretation has to be given to the DTAA as compared to the Act;<\/p>\n

(ii) The argument that there is no \u201cuse\u201d of the satellite by the payer as it has no control or possession of the satellite is not acceptable. To constitute \u201croyalty\u201d, it is not necessary that the instruments through which the \u201cprocess\u201d is carried on should be in the control or possession of the payer<\/strong>. The context and factual situation has to be kept in mind to determine that whether the process was \u201cused\u201d by the payer. In the case of satellites physical control and possession of the process can neither be with the satellite companies nor with the telecasting companies. The fact that the telecasting companies are enabled to telecast their programmes by uplinking and downlinking the same with the help of that process shows that they have \u201cuse\u201d of the same<\/strong>. Time of telecast and the nature of programme, all depends upon the telecasting companies and, thus, they are using that process;<\/p>\n

(iii) The consideration paid by telecasting companies to satellite companies is for the purpose of providing \u201cuse of the process\u201d and consequently assessable as \u201croyalty\u201d under the Act and the DTAA. <\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

The provision of the transponder through which the telecasting companies are able to uplink the desired images\/data and downlink the same in the desired area is a \u201cprocess\u201d. To constitute \u201croyalty\u201d, it is not necessary that the process should be a \u201csecret process\u201d<\/strong>. The fact there is a \u2018comma\u2019 after the words \u201csecret formula or process\u201d in the DTAA does not mean that a different interpretation has to be given to the DTAA as compared to the Act. The consideration paid by telecasting companies to satellite companies is for the purpose of providing \u201cuse of the process\u201d and consequently assessable as \u201croyalty\u201d under the Act and the DTAA. <\/p>\n

Read more ›<\/a><\/div>\n

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