Deputy CIT v. Panamsat International Systems Inc.

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers2006 TaxPub(DT) 1795 (Del-Trib) : (2006) 103 TTJ 0861 : (2006) 009 SOT 0100 Deputy CIT v. Panamsat International Systems Inc. INCOME TAX ACT, 1961 Income deemed to accrue or arise in India - Taxability in India -Non-resident assessee company contracted with non-resident television channels for using satellite in India Assessee-company was non-resident, owned and operated a global network of telecommunication satellite. Assessee entered into contract with non-resident television channels for using satellite (actually transponder capacity) in India through various cable operators. AO brought into tax, payments received by assessee from non-resident television channels under article 12(3) keeping in view that services of assessee were utilized by television channels for viewers in India and that payments received by assessee were liable to be assessed as royalty. *Held:* AO had not provided or collected any evidence to show that assessee had any patent to satellite or transponder which it allowed broadcasters to use for a consideration and as per agreement entered into between assessee and non-resident television channel showed that assessee was intended to provide and customer should utilise a services of transponder and, thus, payment represented consideration for use of service and not of any process. Since, there was neither any secret process involved in operation of transponder nor any transfer of technical knowledge to broadcaster and payments made to assessee were neither royalties as per article 12(3)(a) nor fee for included services as per article 12(4)(b). Hence, payments received by assessee were not liable to tax in India. Income-tax Act, 1961, Section 9, read with article 12 of DTAA between India and USA A.Y. : 1997-98 Decision: In favour of assessee Case Law Analysis:Asia Satellite Telecommunication Co. Ltd. v. Dy. CIT [2003] 85 ITD 478 (Delhi) (para 4), DUN & Broadstreet Espana S.A., In re [2005] 272 ITR 99 (AAR) (para 13), P.No. 30 of 1999, In re [1999] 238 ITR 296 (AAR) (para 13), P.No. 22 of 1996, In re [1999] 238 ITR 99 (AAR) (para 13), State of U.P. v. UOI [2004] 190 CTR (SC) 569 (para 13), Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791 (Mum.) (para 13), Skycell Communications Ltd. v. Dy. CIT [2001] 251 ITR 53/ 119 Taxman 496 (Mad.) (para 13), Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706/ 132 Taxman 373 (SC) (para 17), CIT v. P.V.A.L. Kulandagan Chettiar [2004] 267 ITR 654/ 137 Taxman 460 (SC) (para 17), Steffen, Robertson & Kirsten Consulting Engineers & Scientists v. CIT [1998] 230 ITR 206/[1997] 95 Taxman 598 (AAR) (para 35), Sedco Forex International Drilling Inc. v. Dy. CIT [2000] 72 ITD 415 (Delhi) (para 39) and Motorola Inc. v. Dy. CIT [2005] 95 ITD 269 / 147 Taxman 39 (Delhi) (SB) (Mag.) (para 39). SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2006 TaxPub(DT) 1795 (Del-Trib) : (2006) 103 TTJ 0861 : (2006) 009 SOT 0100

Deputy CIT v. Panamsat International Systems Inc.

INCOME TAX ACT, 1961

Income deemed to accrue or arise in India - Taxability in India -Non-resident assessee company contracted with non-resident television channels for using satellite in India

Assessee-company was non-resident, owned and operated a global network of telecommunication satellite. Assessee entered into contract with non-resident television channels for using satellite (actually transponder capacity) in India through various cable operators. AO brought into tax, payments received by assessee from non-resident television channels under article 12(3) keeping in view that services of assessee were utilized by television channels for viewers in India and that payments received by assessee were liable to be assessed as royalty. Held: AO had not provided or collected any evidence to show that assessee had any patent to satellite or transponder which it allowed broadcasters to use for a consideration and as per agreement entered into between assessee and non-resident television channel showed that assessee was intended to provide and customer should utilise a services of transponder and, thus, payment represented consideration for use of service and not of any process. Since, there was neither any secret process involved in operation of transponder nor any transfer of technical knowledge to broadcaster and payments made to assessee were neither royalties as per article 12(3)(a) nor fee for included services as per article 12(4)(b). Hence, payments received by assessee were not liable to tax in India.

Income-tax Act, 1961, Section 9, read with article 12 of DTAA between India and USA

A.Y. : 1997-98
Decision: In favour of assessee

Case Law Analysis:Asia Satellite Telecommunication Co. Ltd. v. Dy. CIT [2003] 85 ITD 478 (Delhi) (para 4), DUN & Broadstreet Espana S.A., In re [2005] 272 ITR 99 (AAR) (para 13), P.No. 30 of 1999, In re [1999] 238 ITR 296 (AAR) (para 13), P.No. 22 of 1996, In re [1999] 238 ITR 99 (AAR) (para 13), State of U.P. v. UOI [2004] 190 CTR (SC) 569 (para 13), Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791 (Mum.) (para 13), Skycell Communications Ltd. v. Dy. CIT [2001] 251 ITR 53/ 119 Taxman 496 (Mad.) (para 13), Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706/ 132 Taxman 373 (SC) (para 17), CIT v. P.V.A.L. Kulandagan Chettiar [2004] 267 ITR 654/ 137 Taxman 460 (SC) (para 17), Steffen, Robertson & Kirsten Consulting Engineers & Scientists v. CIT [1998] 230 ITR 206/[1997] 95 Taxman 598 (AAR) (para 35), Sedco Forex International Drilling Inc. v. Dy. CIT [2000] 72 ITD 415 (Delhi) (para 39) and Motorola Inc. v. Dy. CIT [2005] 95 ITD 269 / 147 Taxman 39 (Delhi) (SB) (Mag.) (para 39).