Khushi Doshi
Published on: March 11, 2022 at 1:58 IST
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), comprised of Sandeep Sigh Karhail (Judicial Member) and Prashant Maharishi (Accountant Member), ruled that a payment made to a Foreign Company for the use of a Transponder centred on a satellite was not in the Nature of ‘Royalty’ under the Double Taxation Avoidance Agreement (DTAA).
The Assessee/Respondent in the business of marketing advertisement time for various television channels and distribution of these channels paid transponder service fees to three entities in the United States, the United Kingdom, and Malaysia.
The Assessee sought an Order under section 195 (2) of the Income Tax Act granting nil withholding tax certificates for the payment of transponder service fees owed to service providers. The application was denied by the Assessing officer because the payments were taxed as “Royalty.”
The Assessee filed an appeal with the CIT (A). The CIT(A) examined Article 12 of the India-US Double Taxation Avoidance Agreement, Article 13 of the India-UK Double Taxation Avoidance Agreement, and Article 12 of the India-Malaysia Double Taxation Avoidance Agreement in light of the payment of “royalties,” and concluded that the definition of “Royalty” in all three treaties is similar.
According to the Double Taxation Avoidance Agreements, the term “royalty” refers to any payment received in exchange for the use of, or the right to use, any copyright of a literary or scientific work, including cinematography films or works on films, tape, or other means of reproduction for use in connection with radio.
The Income Tax Appellate Tribunal cited the case of Asia Satellite Communication Co Ltd, in which the Assessee was a Non-Resident engaged in safe/We communication and had control of Satellites.
The Tribunal upheld the CIT (Afindings )’s and dismissed all 65 appeals filed by the AO.
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