INCOME TAX ACT, 1961

Section 90

Double taxation relief - Agreement between India and UK - Royalty - Consideration received for relecommunication services

Assessee based at UK engaged in providing telecommunication services and leasing of space segment capacity of navigational transponder entered into agreement with Tata Communications Ltd. AO taxed consideration received by assessee from TCL as royalty. Held: Assessee was engaged in providing telecommunication services from outside India. The services essentially involved making available a channel (frequency) in air through which communication signals were transmitted. This frequency is made available by a network which included resources such as Satellite, Network Co-ordinating Station ('NCS'), Network Operation Centre ('NOC'), Satellite Control Centre and Other infrastructure. Assessee provided a telecommunication link between user of mobile telephone system known as Mobile Earth Station ('MES') and Land Earth Station ('LES'). MES was an equipment located on a ship, aircraft or vehicle or carried in hand held case. The users of equipment were third parties who were not connected with assessee. The LES was a fixed site (with large satellite dishes and related equipment), which was operated by a third party, i.e., a Land Earth Service Operator ('LESO'). Accordingly, from the nature of services it was clear that amount received by assessee was not in the nature of Royalty rather it fell under the expression 'commercial or industrial profits' and, therefore, could not be taxed in India in absence of PE.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

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