The Tax Publishers2020 TaxPub(DT) 4226 (Del-Trib)

INCOME TAX ACT, 1961

Section 90

Bandwidth service provided by non-resident assessee was only transaction of a service and not to 'use or right to use' an equipment, and would not attract 'Royalty' under the Act or the Tax Treaty under article 12(3) of the India-Singapore DTAA.

Double taxation relief - Agreement between India and Singapore - Royalty under Article 12(3) of India-Singapore DTAA - Consideration received from Indian Telecom Operator towards rendition of bandwidth services

Assessee-company, based at Singapore, was providing bandwidth services to various India Telecom Operators. AO taxed consideration received by assessee as equipment royalty.Held: Bandwidth services were provided as standard services wherein customer enjoyed an uninterrupted 24 x 7 service to transmit voice and data at standard rate of reliability. Delivery of Bandwidth service at a particular speed (say, 2 mbps) was nothing but a contract to delivery voice and data at a particular volume and speed. In case no service was provided or there was default of regular supply, then there was non-payment of consideration by the payee. Such rendition of service using an equipment/process and the customer being only a recipient of service would not attract equipment/process royalty, as transaction would not fall within the expression 'use or right to use'. Mere receipt of service using equipment under the control, possession and operation of service provider would only be transaction of a service and not to 'use or right to use' an equipment, and would not attract 'Royalty' under the Act or the Tax Treaty under article 12(3) of the India-Singapore DTAA.

Relied:Asia Satellite Telecommunications Co. Ltd. v. Director of IT (2011) 332 ITR 340 (Del) : 2011 TaxPub(DT) 0886 (Del-HC), which in turn has been followed in DIT v. (1) New Skies Satellite BV (2) Shin Satellite Public Co. Ltd. (2016) 382 ITR 114 (Del) : (2016) 68 taxmann.com 8 (Del.) : 2016 TaxPub(DT) 1115 (Del-HC), Thaicom Public Co. Ltd. (2018) 96 taxmann.com 577 (Del) : 2018 TaxPub(DT) 2469 (Del-Trib), John Deere India Pvt. Ltd. v. DDIT in ITA Nos. 905 to 908/Pun/2015 : (2019) 102 taxmann.com 267 (Pune) : 2019 TaxPub(DT) 1721 (Pune-Trib), Order, dated 23-1-2019.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12 to 2014-15

IN THE ITAT, DELHI BENCH

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