DCIT(IT) - 4(2)(2), MUMBAI vs. STUDIO 18 MEDIA PVT. LTD., MUMBAI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the payments made by the assessee for availing standard satellite communication services from Intelsat do not constitute 'royalty' under the Income Tax Act or the India-USA DTAA. Consequently, the assessee had no obligation to deduct tax at source.
What were the facts?
The assessee, Studio 18 Media Pvt. Ltd., made payments to Intelsat Corporation, USA, for satellite transponder services. The Revenue contended these payments were 'royalty' subject to TDS. The issue had a history involving the Assessing Officer, CIT(A), Tribunal, and the Bombay High Court.
What were the issues?
Whether payments for satellite transponder services constitute royalty under domestic law or treaty, and if the assessee was liable for TDS.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘I’ BENCH
Before: SHRI AMIT SHUKLA & SHRI ARUN KHODPIA
Heard together (5 matters)
Read from the judgment's own cause title. This page is filed under one of them.
IN THE INCOME TAX APPELLATE TRIBUNAL, ‘I’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.2401/Mum/2026 (Assessment Year :2009-10) ITA No.2463/Mum/2026 (Assessment Year :2010-11) ITA No.2346/Mum/2026 & ITA No.2403/Mum/2026 (Assessment Year :2011-12) ITA No.2381/Mum/2026 & ITA No.2464/Mum/2026 (Assessment Year :2012-13) DCIT (IT)- 4(2)(2), Vs. Studio 18 Media Pvt. Ltd., Mumbai 31st Floor, Tower-4, One Unity Centre, Senapati Bapat Marg, Prabhadevi Mumbai – 400 013 PAN/GIR No.AAACM9164E (Appellant) .. (Respondent) Assessee by Shri Nimesh Vora & Ms. Moksha Mehta Revenue by Shri Sridhar G. Menon, SR DR Date of Hearing 15/07/2026 Date of Pronouncement 29/07/2026
2 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., आदेश / O R D E R PER AMIT SHUKLA (J.M):
The aforesaid six appeals have been preferred by the Revenue against the separate orders passed by the learned Commissioner of Income Tax (Appeals)-58, Mumbai, under section 250 read with section 260 of the Income-tax Act, 1961, for Assessment Years 2009-10 to 2012-13. Since all these appeals arise from an identical contractual arrangement, involve the same non-resident payee, raise a common issue regarding the character of transponder service charges and emanate from a common remand directed by the Hon’ble Bombay High Court, they were heard together and are being disposed of by this consolidated order. The facts obtaining in Assessment Year 2009-10 are being taken as the lead facts and, unless any material distinction is specifically noticed, our findings shall apply mutatis mutandis to the remaining assessment years.
The central issue arising in these appeals is whether the payments made by the assessee to Intelsat Corporation, USA, for availing satellite transponder services constitute “royalty” either under section 9(1)(vi) of the Act or under Article 12 of the Double Taxation Avoidance Agreement between India and the United States of America and, consequently, whether the assessee was under an obligation to deduct tax at source
3 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., under section 195 of the Act. The controversy has had a prolonged and chequered history. It has travelled through proceedings under section 195(2), the first appellate authority, this Tribunal and thereafter the Hon’ble Bombay High Court, which restored the matter to the learned CIT(A) for an independent factual examination of the governing agreements and for determination of the true legal character of the payments in the light of the domestic law as well as the Treaty.
The assessee, during the relevant assessment years, was engaged in the business of broadcasting television channels in India. For transmission and distribution of its television signals, it availed satellite transponder services through satellites owned and operated by Intelsat Corporation, USA. Under the arrangement, the television signals originating from the assessee were uplinked from earth stations maintained and operated by or on behalf of the assessee. These signals were received by the transponder installed on the satellite operated by Intelsat, whereupon they were amplified, converted to a different frequency and retransmitted over the designated footprint of the satellite. The retransmitted signals were thereafter received at the relevant earth stations for onward broadcasting and distribution of the television channels in India.
4 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., 4. The contractual foundation of the arrangement can be traced to a Full-Time Transponder Service Agreement dated 23.12.1993 entered into between Viacom International Inc., the holding company of the assessee, and PanAmSat L.P. for provision of twenty-four-hour fixed-term satellite signal reception and retransmission services. Under the said agreement, assignment of the contractual rights and obligations to an affiliate of Viacom International Inc. was permissible subject to the conditions stipulated therein. PanAmSat L.P. was subsequently succeeded by PanAmSat Corporation and thereafter by Intelsat Corporation. A tripartite Assignment Agreement dated 02.04.2008 was thereafter executed amongst Viacom International Inc., Intelsat Corporation and the assessee, whereby the rights, interests and obligations under the original Transponder Service Agreement were assigned to the assessee. Subsequently, a direct agreement dated 19.08.2011 was executed between the assessee and Intelsat for provision of full-time transponder services, with effect from 02.04.2008, broadly on terms akin to the earlier agreement. Intelsat had also issued a service order dated 03.04.2008 specifying the designated satellite, transponder capacity, technical parameters and service specifications. The assessee had further placed on record the tax residency certificates of Intelsat and confirmations to the effect that Intelsat did not have any permanent establishment in India.
5 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd.,
Before remitting the agreed transponder service charges, the assessee approached the Assessing Officer under section 195(2) of the Act seeking a determination that no tax was liable to be deducted from the payments proposed to be made to Intelsat. The Assessing Officer, however, by the original order dated 11.12.2008, held that the payments constituted royalty both under section 9(1)(vi) of the Act and under Article 12 of the India-USA DTAA. The Assessing Officer principally relied upon the decision of the Delhi Bench of the Tribunal in Asia Satellite Telecommunications Co. Ltd. v. DCIT, reported in 85 ITD 478, and proceeded on the premise that the transponder facilitated the use of a process involving reception, amplification and retransmission of signals and that the consideration paid for such facility was, therefore, in the nature of royalty. The Assessing Officer did not rest his conclusion upon the existence of any business connection or permanent establishment of Intelsat in India, nor did he seek to characterise the amount as fees for technical services. The entire case, in substance, was founded upon the characterisation of the payment as consideration for the use of a process. The contractual arrangement itself was not independently analysed in any considerable detail and the conclusion was substantially drawn by applying the reasoning adopted in Asia Satellite Telecommunications Co. Ltd. at the Tribunal stage.
6 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd.,
In the first round of appellate proceedings, the learned CIT(A) dismissed the appeal of the assessee by following the decision of the Special Bench of the Delhi Tribunal in New Skies Satellite BV v. ADIT, reported in 121 ITD 1, wherein it had been held that the expression “process” appearing in the domestic definition of royalty need not necessarily be a secret process. On further appeal, the Tribunal upheld the action of the lower authorities and treated the transponder charges as royalty, inter alia, by taking note of Explanation 6 inserted in section 9(1)(vi) by the Finance Act, 2012 with retrospective effect from 01.06.1976.
The matter thereafter travelled to the Hon’ble Bombay High Court in a batch of appeals covering Assessment Years 2009- 10 to 2013-14. The Hon’ble High Court, by its common judgment dated 08.05.2025, noticed that neither the authorities below nor the Tribunal had independently examined the actual contractual terms between the assessee and Intelsat so as to determine whether the payments were in fact made for the use of a process or a secret process and whether the transaction fell within the ambit of royalty under the Act or the Treaty. The Hon’ble High Court, therefore, restored the matter to the file of the learned CIT(A) for fresh adjudication after examining the agreements and recording definite factual findings.
7 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd.,
While remanding the matter, the Hon’ble High Court delineated the scope of the proceedings with considerable clarity. First, it observed that if the assessee was able to demonstrate that the receipts in the hands of Intelsat had finally been determined as not taxable in India, the corresponding withholding liability of the assessee would not survive. Secondly, in respect of payments made prior to the amendment brought by the Finance Act, 2012, the liability to deduct tax at source could not be retrospectively fastened merely on the basis of an amendment enacted after the payments had already been made, having regard to the decision of the Hon’ble jurisdictional High Court in CIT v. Reliance Industries Ltd. 161 taxmann.com 423. Thirdly, for payments made after enactment of the Finance Act, 2012, the learned CIT(A) was directed to examine the nature of the agreement for each assessment year and determine whether the consideration constituted royalty under the domestic law or under the Treaty. The Hon’ble High Court also made it explicit that if the payment did not answer the description of royalty after giving effect to the more beneficial Treaty provisions under section 90(2), no withholding obligation would arise.
Pursuant to the aforesaid remand, the assessee furnished before the learned CIT(A) the complete contractual record,
8 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., including the original Transponder Service Agreement dated 23.12.1993, the tripartite Assignment Agreement dated 02.04.2008, the direct agreement dated 19.08.2011, the service order dated 03.04.2008, the technical appendices, tax residency certificates and the confirmations concerning absence of a permanent establishment of Intelsat in India. The assessee also relied upon the subsequent judicial developments rendered after the earlier orders, including the decisions in Asia Satellite Telecommunications Co. Ltd., New Skies Satellite BV, Neo Sports Broadcast Pvt. Ltd., Intelsat Corporation and other authorities dealing with satellite and transponder receipts.
The learned CIT(A), having regard to the specific mandate of the Hon’ble High Court, called for a remand report from the Assessing Officer. The Assessing Officer, in the remand report dated 29.10.2025, examined various clauses of the agreements and reiterated that the arrangement involved the use of a process embedded in the satellite transponder. An additional line of reasoning was also advanced to the effect that the payment could be regarded as consideration for the use of, or the right to use, industrial, commercial or scientific equipment. The assessee filed a detailed rejoinder and furnished a clause-wise comparison of the agreements with those considered in the decisions rendered in PanAmSat International Systems Inc. and other satellite cases. It was
9 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., also contended that the original order under section 195(2) had never proceeded on the basis of equipment royalty and that an entirely new case, beyond the original foundation of the proceedings and the scope of the remand, could not be introduced at the remand-report stage.
The learned CIT(A), after examining the agreements, the remand report, the rejoinder and the judicial authorities cited before him, held that the payments made by the assessee to Intelsat were not in the nature of royalty under Article 12 of the India-USA DTAA. The learned CIT(A) noticed that the arrangement was for provision of a standard satellite signal reception and retransmission service and did not confer upon the assessee any possession, control, operational command or proprietary right over the satellite or the transponder. The technical process involving reception, amplification, frequency conversion and retransmission of the signals was carried out by Intelsat through its own satellite infrastructure. The assessee neither operated the transponder nor had access to the technology or the mechanism embedded therein. It was further found that the process, to the extent it existed, was employed by Intelsat itself in rendering the transmission service and was never made available to the assessee for its own independent use. The consideration was thus held to be for the ultimate transmission facility and not for the use of the process through which Intelsat rendered that facility.
10 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd.,
The alternative contention of the Assessing Officer that the payment represented equipment royalty was also rejected. The learned CIT(A) observed that the satellite and the transponder remained at all times under the ownership, possession, operation and technical control of Intelsat. The assessee had no physical access to the equipment, no right to operate it, no authority to alter its technical configuration, no right to exclude Intelsat or any other customer from the satellite infrastructure and no right to deal with the transponder as an economic possessor thereof. The designation of specified transponder capacity for transmission of the assessee’s signals was held to be merely part of the service-delivery mechanism and not a transfer of any right to use the equipment itself.
The learned CIT(A) also took note of the fact that Intelsat did not have any permanent establishment in India and that the Revenue had not made out a case of taxability of the receipts as business profits under Article 7 read with Article 5 of the Treaty. Once the payment was held not to be royalty, and there being no permanent establishment of the recipient in India, the amount was not chargeable to tax in India as business income. Consequently, the very foundation for invoking section 195 ceased to exist. On the effect of the amendment brought by the Finance Act, 2012, the learned
11 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., CIT(A) held that the amendment to section 9(1)(vi) could not unilaterally expand the definition of royalty contained in the Treaty. The Treaty definition, being more beneficial to the assessee, was applicable by virtue of section 90(2). The learned CIT(A) further held that, in any event, where payments had been made prior to enactment of the Finance Act, 2012, a withholding default could not be created retrospectively on the basis of a subsequent statutory amendment, and placed reliance in this regard upon the judgment of the Hon’ble Bombay High Court in CIT v. Reliance Industries Ltd. (supra)
Another significant circumstance noticed by the learned CIT(A) was that the receipts from the same transponder services had been held not taxable as royalty in the hands of Intelsat itself for the corresponding assessment years. The learned CIT(A) regarded this as directly relevant to the first direction issued by the Hon’ble Bombay High Court. Once the income embedded in the remittance was not chargeable to tax in the hands of the recipient, the payer could not be subjected to a withholding obligation under section 195 in respect of the very same amount. The learned CIT(A), accordingly, allowed the appeals of the assessee and held that the transponder service fees paid to Intelsat were not chargeable to tax in India as royalty and that the assessee was not liable to deduct tax at source under section 195 of the Act.
12 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., 15. The Revenue is aggrieved by the aforesaid conclusion. The grounds raised in the present appeals, though differently worded, give rise to the following broad questions for our adjudication: whether the learned CIT(A) was justified in holding that the payments made to Intelsat for transponder services did not constitute royalty for the use of a process under section 9(1)(vi) of the Act; whether the retrospective Explanations inserted by the Finance Act, 2012 alter the character of the payments and render them taxable as royalty; whether the payments can be brought within the ambit of equipment royalty as consideration for the use of, or the right to use, industrial, commercial or scientific equipment under Article 12(3) of the India-USA DTAA; whether, under the contractual arrangement, the assessee can be said to have used or acquired any right to use the satellite, the transponder or any process embedded therein; whether the process contemplated in Article 12 of the Treaty must be a secret process and whether any such process was made available to the assessee; what is the effect of the more beneficial Treaty provisions in view of section 90(2) of the Act; whether a retrospective amendment in domestic law can fasten a withholding liability in respect of payments made before the amendment was enacted; what is the effect of the determination in the hands of Intelsat that the corresponding transponder receipts were not taxable in India; and whether, on cumulative consideration of the contractual terms, the
13 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., domestic provisions and the Treaty, any obligation to deduct tax at source under section 195 could at all arise.
Before dealing with the aforesaid issues, it would be apposite to first notice the rival submissions advanced before us, the exact contours of the contractual arrangement and the legal principles governing the distinction between availing a satellite transmission service, using a process and acquiring a right to use equipment. These aspects assume particular significance because the Hon’ble Bombay High Court has specifically required an independent factual determination based upon the agreements rather than a conclusion resting merely upon the nomenclature employed by the parties or upon a generalised description of satellite technology.
The learned Senior Departmental Representative, reiterating the grounds raised by the Revenue, submitted that the learned CIT(A) has erred both on facts and in law in holding that the payments made by the assessee to Intelsat Corporation do not partake the character of royalty. According to him, undue reliance has been placed upon the judgment of the Hon’ble Delhi High Court in Asia Satellite Telecommunications without appreciating that the said judgment has not attained finality, the Revenue having challenged the same before the Hon’ble Supreme Court. It was further submitted that after insertion of Explanations 5
14 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., and 6 to section 9(1)(vi) by the Finance Act, 2012 with retrospective effect, the legislative intent has been placed beyond doubt that consideration paid for transmission by satellite, including uplinking, amplification, conversion for down-linking and allied processes, constitutes royalty under the Act. The learned CIT(A), according to him, failed to assign due significance to these statutory amendments and erroneously proceeded upon the legal position obtaining prior thereto.
Elaborating the Revenue’s case, the learned Senior Departmental Representative contended that the satellite transponder cannot be viewed as a passive medium of communication. It performs sophisticated technological functions of receiving, amplifying, frequency conversion and retransmission of television signals and these functions constitute a highly specialised technological process. According to him, the assessee continuously utilised this process for commercial exploitation of its broadcasting business and the consideration paid cannot be divorced from such utilisation merely because the process remains embedded within the satellite infrastructure. It was further submitted that the learned CIT(A) had overlooked the independent limb contained in Article 12(3)(b) of the India- USA DTAA concerning consideration paid for the use of, or the right to use, industrial, commercial or scientific
15 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., equipment. The assessee, according to the Revenue, had secured identified and dedicated transponder capacity throughout the contractual tenure, and such earmarked capacity, coupled with its continuous commercial exploitation, effectively amounted to a right to use sophisticated scientific equipment. The agreement, it was submitted, demonstrated that the services were specifically tailored to the assessee’s broadcasting requirements and the mere fact that physical operation of the satellite continued with Intelsat could not dilute the commercial reality that the assessee was exploiting a part of the satellite infrastructure for its own business.
The learned Senior Departmental Representative also assailed the reliance placed upon the decision of the Hon’ble Bombay High Court in Reliance Industries Ltd. while considering the retrospective amendment introduced by the Finance Act, 2012. According to him, once Parliament has expressly clarified the scope of section 9(1)(vi), the amended provision necessarily governs all pending proceedings and the withholding obligation has to be determined in accordance with the law so declared. It was thus submitted that the learned CIT(A) had erred in concluding that no withholding liability could arise merely because the payments preceded enactment of the Finance Act, 2012.
16 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., 20. Per contra, the learned counsel appearing on behalf of the assessee strongly supported the order passed by the learned CIT(A). At the outset, he submitted that the controversy cannot be examined in isolation from the remand order passed by the Hon’ble Bombay High Court. The Hon’ble High Court had consciously noticed that neither the Tribunal nor the authorities below had undertaken any independent examination of the contractual agreements. It was precisely for this reason that the matter was restored to the learned CIT(A) with specific directions to examine the agreements and thereafter determine whether the payments could at all be characterised as royalty under the domestic law or under the Treaty. According to him, the learned CIT(A) has faithfully carried out the mandate of the Hon’ble High Court by analysing every material covenant governing the relationship between the assessee and Intelsat instead of merely applying earlier precedents.
The learned Senior Departmental Representative, reiterating the grounds raised by the Revenue, submitted that the learned CIT(A) has erred both on facts and in law in holding that the payments made by the assessee to Intelsat Corporation do not partake the character of royalty. According to him, the learned CIT(A) has placed undue reliance upon the judgment of the Hon’ble Delhi High Court in Asia Satellite Telecommunications Co. Ltd. v. DIT (2011) 332
17 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., ITR 340 (Delhi) without appreciating that the said judgment has not attained finality, the Revenue having challenged the same before the Hon’ble Supreme Court. It was further submitted that after insertion of Explanations 5 and 6 to section 9(1)(vi) by the Finance Act, 2012 with retrospective effect from 01.06.1976, the legislative intent has been placed beyond doubt that consideration paid for transmission by satellite, including uplinking, amplification, frequency conversion, down-linking and the processes connected therewith, constitutes royalty under the Act. According to the learned Senior Departmental Representative, the learned CIT(A) failed to assign due significance to these statutory amendments and erroneously proceeded upon the legal position obtaining prior thereto. Elaborating the Revenue’s case, the learned Senior Departmental Representative contended that the satellite transponder cannot be viewed as a passive medium of communication. It performs sophisticated technological functions of receiving, amplifying, frequency conversion and retransmission of television signals and these functions constitute a highly specialised technological process. According to him, the assessee continuously utilised this process for commercial exploitation of its broadcasting business and the consideration paid cannot be divorced from such utilisation merely because the process remained embedded within the satellite infrastructure. What is material, according to the Revenue, is
18 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., that without the employment of this process the assessee could not have transmitted its television signals over the designated footprint and, therefore, the payment was intrinsically linked to the use of the technological process employed by the transponder.
The learned Senior Departmental Representative further submitted that the learned CIT(A) committed another error in overlooking the independent limb contained in Article 12(3)(b) of the India-USA Double Taxation Avoidance Agreement concerning consideration paid for the use of, or the right to use, industrial, commercial or scientific equipment. According to him, the assessee had secured identified and dedicated transponder capacity for transmission of its television channels throughout the contractual tenure. Such earmarked capacity, coupled with its continuous commercial utilisation, effectively amounted to the grant of a right to use sophisticated scientific equipment. The fact that the physical operation of the satellite continued to remain with Intelsat, according to him, did not dilute the commercial reality that the assessee was exploiting a specified part of the satellite infrastructure for carrying on its own broadcasting activities. It was also submitted that the services were not general or indeterminate in nature but were specifically configured to the assessee’s broadcasting requirements. The Service Order identified the relevant satellite, the transponder capacity, the
19 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., technical parameters and the agreed specifications. According to the learned Senior Departmental Representative, such a dedicated and continuous allocation could not be equated with an ordinary service availed by a member of the public at large. The assessee had obtained assured access to identified capacity and was commercially dependent upon that capacity for running its television channels. The learned CIT(A), according to him, had adopted an unduly restrictive interpretation of the expression “use of equipment” by insisting upon physical possession or direct operation, whereas Article 12(3)(b) of the Treaty employed the wider expression “use of, or the right to use” industrial, commercial or scientific equipment.
The learned Senior Departmental Representative also assailed the reliance placed upon the judgment of the Hon’ble jurisdictional High Court in CIT v. Reliance Industries Ltd. (supra) while considering the effect of the retrospective amendment introduced by the Finance Act, 2012. According to him, once Parliament has expressly clarified the scope of section 9(1)(vi), the amended provision necessarily governs all pending proceedings and the obligation to deduct tax at source has to be determined in accordance with the law so declared. It was submitted that the amendment is clarificatory in nature and, therefore, operates from the inception of the provision. Consequently, according to him,
20 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., the assessee cannot escape the obligation under section 195 merely because the remittances had been made before the Finance Act, 2012 came into force. The learned Senior Departmental Representative further contended that the learned CIT(A) had placed excessive emphasis upon the absence of physical possession or operational command over the satellite. According to him, in the context of modern technological infrastructure, “use” of equipment need not necessarily involve physical custody or manual operation. The assessee had commercially employed the transponder capacity for transmitting its own television signals, enjoyed uninterrupted access to such capacity and derived substantial commercial benefit from the satellite infrastructure. These features, according to the Revenue, were sufficient to bring the payments within the ambit of equipment royalty under the Treaty. He, therefore, submitted that the impugned orders of the learned CIT(A) deserve to be set aside and the original determinations made by the Assessing Officer under section 195(2) restored.
Per contra, the learned counsel appearing on behalf of the assessee strongly supported the orders passed by the learned CIT(A). At the very outset, he submitted that the controversy before us cannot be examined divorced from the remit of the Hon’ble Bombay High Court in the remand proceedings. It was submitted that the Hon’ble High Court had specifically
21 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., noticed that neither the Tribunal nor the authorities below had undertaken any independent examination of the contractual agreements governing the relationship between the parties. It was precisely for this reason that the matter was restored to the file of the learned CIT(A.) with a specific direction to examine the agreements in detail and thereafter determine whether the payments in question could at all be characterised as royalty either under the provisions of the Income-tax Act or under Article 12 of the India-USA DTAA. According to the learned counsel, the learned CIT(A) has faithfully carried out the mandate of the Hon’ble High Court by independently analysing each material covenant of the governing agreements instead of mechanically following the earlier decisions rendered in the first round of litigation. Inviting our attention to the Full-Time Transponder Service Agreement dated 23.12.1993, the Assignment Agreement dated 02.04.2008, the Direct Agreement dated 19.08.2011, the Service Order dated 03.04.2008 and the technical appendices forming part of the contractual documentation, the learned counsel submitted that the entire contractual framework unequivocally establishes that Intelsat alone owned, controlled, operated and managed the satellites as well as the transponders. The assessee neither acquired any proprietary interest nor any possessory rights over the satellite or the transponder. All functions relating to telemetry, tracking, station-keeping, orbital control, frequency
22 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., management, power allocation, monitoring, maintenance and overall technical operation remained exclusively with Intelsat throughout the tenure of the agreements. The assessee merely uplinked its television signals from its own earth stations and received the retransmitted signals after Intelsat had rendered the contracted transmission service.
The learned counsel further submitted that even the transmission plans prepared by the assessee could not be implemented without the prior approval and coordination of Intelsat. Any alteration in transmission schedules, bandwidth utilisation, technical parameters or operational requirements necessarily required Intelsat’s concurrence. The assessee had no authority to modify the technical configuration of the satellite, alter the transponder parameters, interfere with its functioning, determine orbital positioning or exclude Intelsat or any other customer from using the satellite infrastructure. Its contractual obligations were confined to the terrestrial facilities at its own end and to compliance with the operational protocols prescribed by Intelsat. These features, according to the learned counsel, completely negate the Revenue’s allegation that the assessee had acquired any right to use either the satellite, the transponder or the process embedded therein. The learned counsel also drew our attention to the service-level obligations contained in the agreements. It was submitted that the agreements specifically
23 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., provide for outage credits and corresponding reduction of service charges wherever the stipulated transmission specifications are not achieved. According to him, this is a significant commercial feature of a service arrangement because the performance risk attaching to the underlying satellite infrastructure continues to remain with Intelsat. If the contracted transmission service fails or falls below the agreed standards, Intelsat bears the commercial consequence by way of reduction in the agreed consideration. In a true lease or transfer of equipment, on the other hand, the economic risks associated with the asset ordinarily stand transferred to the person obtaining the right to use it. The outage-credit provisions, therefore, clearly reinforce that what was contracted for was the provision of an assured transmission service and not the transfer of any satellite equipment.
Continuing his submissions, the learned counsel contended that the agreements nowhere transfer any proprietary rights, technical know-how, confidential engineering information or secret technology to the assessee. The confidentiality clauses merely oblige the parties to preserve the confidentiality of commercial information exchanged during the performance of the agreements. They do not make available any secret process, formula or proprietary technology capable of being independently
24 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., employed by the assessee. Even assuming that the satellite employs a highly sophisticated technological process for receiving and retransmitting television signals, such process is utilised exclusively by Intelsat while rendering the contracted service. At no stage does the assessee itself use or operate that process. According to the learned counsel, the distinction between a service provider employing its own process while rendering services and a customer acquiring the right to use that process constitutes the very foundation of the present controversy.
The learned counsel thereafter submitted that the issue is no longer res integra. Inviting our attention to the decisions in DCIT v. PanAmSat International Systems Inc. (2006) 103 TTJ 861 (Delhi-Trib.), Asia Satellite Telecommunications Co. Ltd. v. DIT (2011) 332 ITR 340 (Delhi), DIT v. New Skies Satellite BV (2016) 382 ITR 114 (Delhi), PCIT v. Neo Sports Broadcast Pvt. Ltd. (2019) 107 taxmann.com 17 (Bom.), the decisions rendered in the case of Intelsat Corporation itself relating to the corresponding assessment years, and the judgment of the Hon’ble jurisdictional High Court in CIT v. Inmarsat Global Ltd. (2025) 177 taxmann.com 716 (Bom.), it was submitted that the legal position consistently emerging from this line of authorities is that consideration paid for availing standard satellite transponder services does not constitute royalty either under
25 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., the Act or under the applicable Double Taxation Avoidance Agreement. It was particularly emphasised that the decisions rendered in the case of Intelsat itself relate to the very same non-resident recipient, substantially identical agreements and the corresponding assessment years presently under consideration. According to the learned counsel, once the receipts themselves have been held to be not chargeable to tax in India in the hands of Intelsat, the inevitable consequence is that the payer cannot be fastened with an obligation to deduct tax at source under section 195 in respect of the very same payments. Particular emphasis was also placed upon the decisions rendered in the case of Intelsat Corporation itself. According to the learned counsel, these decisions directly answer the first issue formulated by the Hon’ble Bombay High Court while remanding the matter, namely, whether the receipts in question were at all taxable in the hands of the non-resident recipient. Once that question stands concluded in favour of Intelsat on substantially identical facts, it was submitted that the very substratum of the impugned orders passed under section 195(2) disappears.
The learned counsel further submitted that the Revenue’s attempt to characterise the payments as equipment royalty is not only untenable on merits but also travels beyond the original foundation of the proceedings. From the original proceedings under section 195(2) until the first round before
26 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., the Tribunal, the Department’s case was consistently confined to the allegation that the payments constituted royalty for the use of a process. At no stage had the Assessing Officer proceeded on the footing that the payments represented consideration for the use of equipment. Even the remand directed by the Hon’ble Bombay High Court required examination of the contractual arrangements in the context of the process or secret-process limb. According to the learned counsel, the Revenue cannot now seek to substitute the original basis of its case by introducing an altogether new foundation during the remand proceedings. Without prejudice to the aforesaid objection, it was submitted that the theory of equipment royalty is wholly unsustainable even on merits. The assessee never acquired possession, dominion or operational control over the satellite or any part thereof. The transponder always remained an inseparable component of the satellite infrastructure owned and operated by Intelsat. What the assessee received was merely the benefit of the transmission service rendered through that infrastructure. Reservation of identified transponder capacity only ensured continuity and quality of the contracted service; it neither transferred the equipment itself nor conferred any legal right to operate, control or commercially exploit the satellite infrastructure. According to the learned counsel, there is a fundamental distinction between availing the benefit of an
27 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., equipment-based service and acquiring the right to use the equipment through which such service is rendered.
The learned counsel lastly submitted that Intelsat admittedly had no permanent establishment in India and that the Revenue itself has never sought to assess the receipts either as business profits under Article 7 or as fees for technical services. Once the payments do not fall within the definition of royalty under Article 12 of the Treaty, the amounts are not chargeable to tax in India in the hands of the recipient. Consequently, in view of the law laid down by the Hon’ble Supreme Court in GE India Technology Centre (P.) Ltd. v. CIT (2010) 327 ITR 456 (SC), no obligation to deduct tax under section 195 could arise. We have carefully considered the rival submissions, perused the complete contractual documentation, the remand report, the assessee’s rejoinder, the impugned orders passed by the learned CIT(A) and the judicial authorities cited before us. In our considered opinion, the controversy cannot be resolved merely by reference to the sophisticated technology employed in satellite communication or the nomenclature employed in the agreements. Its true legal character has necessarily to be ascertained from the rights and obligations actually created between the parties, the extent of ownership and control retained by Intelsat, the nature of the services actually rendered and the legal incidents flowing from the contractual
28 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., arrangement. We shall, therefore, first examine the scope of the remand directed by the Hon’ble Bombay High Court and thereafter independently analyse the contractual framework before considering the applicability of the provisions of the Act and the Treaty.
We have heard the rival submissions at considerable length and have carefully perused the entire material placed before us. We have also examined the complete set of agreements governing the transaction, including the Full- Time Transponder Service Agreement dated 23.12.1993, the Assignment Agreement dated 02.04.2008, the Direct Agreement dated 19.08.2011, the Service Orders and the technical appendices forming part thereof, besides the remand report submitted by the Assessing Officer, the assessee’s rejoinder thereto and the impugned orders passed by the learned CIT(A). Since the present appeals arise pursuant to the remand order passed by the Hon’ble Bombay High Court, it would be appropriate to first delineate the precise contours of the remand before examining the contractual arrangement independently on its own terms.
A careful reading of the judgment of the Hon’ble Bombay High Court leaves little room for ambiguity regarding the scope of the remand. The Hon’ble High Court neither affirmed nor reversed the conclusions earlier recorded by the Tribunal
29 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., on the issue of royalty. Instead, noticing that the contractual agreements governing the relationship between the assessee and Intelsat had not been independently analysed either by the Tribunal or by the authorities below, the matter was restored with a specific direction that the agreements be examined in detail and thereafter a fresh determination be made as to whether the payments constituted royalty either under the provisions of the Income-tax Act or under Article 12 of the India-USA DTAA. Thus, the remand was not intended to provide an opportunity for reiterating conclusions already recorded, but to undertake a fresh and independent examination of the contractual rights and obligations flowing from the agreements themselves. It is equally significant that while directing such reconsideration, the Hon’ble High Court specifically observed that the true nature of the transaction could not be determined merely by reference to the nomenclature adopted by the parties or by relying upon earlier precedents without first appreciating the contractual arrangement. The agreements, therefore, constitute the primary source from which the legal character of the payments has to be ascertained. Judicial precedents undoubtedly furnish the governing legal principles; however, those principles can be applied only after the factual and contractual matrix has first been independently established. We have, therefore, consciously examined each material
30 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., covenant of the governing agreements before adverting to the authorities cited at the Bar.
Before analysing the individual clauses, one fundamental aspect deserves to be noticed. The agreements do not contemplate the transfer, assignment or demise of any satellite, transponder or identifiable equipment in favour of the assessee. The relationship created under the agreements is essentially one whereby Intelsat undertakes to provide uninterrupted satellite transmission services through its own satellite infrastructure upon the terms and conditions mutually agreed between the parties. The commercial substance of the transaction, therefore, has to be gathered not from isolated expressions occurring in the agreements but from the cumulative rights and obligations assumed by each contracting party.
We find that throughout the contractual documentation, ownership of the satellite, the transponders and every constituent part of the satellite infrastructure unequivocally remains vested in Intelsat. Equally, complete operational control over the satellite continues to remain exclusively with Intelsat. The agreements confer no proprietary interest, possessory right or right of management upon the assessee. The satellite remains under the exclusive command of Intelsat, which alone is responsible for telemetry, tracking,
31 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., station-keeping, orbital positioning, frequency management, power allocation, technical monitoring, maintenance and all engineering functions necessary for keeping the satellite operational throughout the contractual tenure. The agreements further reveal that the assessee is merely entitled to uplink its television signals from its own designated earth station in accordance with the technical parameters prescribed by Intelsat. Upon receipt of such signals, it is Intelsat which, through its own satellite infrastructure, undertakes amplification, frequency conversion and retransmission of those signals over the agreed geographical footprint. The retransmitted signals are thereafter received by authorised downlink facilities situated within the designated coverage area. At no stage during this entire process does the assessee either participate in or exercise any operational control over the functioning of the satellite or the transponder itself.
Equally significant is the fact that even the assessee’s transmission plans are not capable of unilateral implementation. The agreements expressly require prior coordination and approval from Intelsat regarding transmission schedules, bandwidth allocation, technical specifications and operational parameters. Any modification in transmission requirements necessarily requires Intelsat’s concurrence. The assessee is not authorised to alter the
32 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., technical configuration of the satellite, change the transponder settings, interfere with orbital operations or determine the engineering parameters governing the functioning of the satellite. These contractual restrictions are wholly inconsistent with the existence of any independent right to use the satellite or the transponder. The contractual framework also demonstrates that Intelsat retains complete responsibility for the availability, performance and uninterrupted functioning of the satellite infrastructure. It alone bears the obligation of maintaining the satellite in operational condition, rectifying technical defects, ensuring continuity of transmission services and complying with the stipulated performance standards. Significantly, where the agreed transmission parameters are not achieved, the agreements provide for outage credits and corresponding reduction in service charges. Such provisions clearly indicate that the commercial risk associated with the functioning of the satellite continues to remain with Intelsat itself and is never transferred to the assessee.
In our considered view, these outage-credit provisions assume considerable significance while determining the true legal character of the transaction. Where equipment itself is leased or the right to use equipment is transferred, the commercial risks associated with its utilisation ordinarily stand shifted, wholly or substantially, to the person obtaining
33 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., such right. The present agreements proceed on an entirely different commercial premise. The assessee pays only for the availability of uninterrupted transmission services. If those services are not rendered in accordance with the stipulated standards, Intelsat itself bears the financial consequences by way of proportionate reduction of the agreed consideration. This allocation of commercial risk is wholly consistent with a service arrangement and not with a transfer of any right to use equipment. We also find that none of the agreements transfers to the assessee any proprietary technology, confidential engineering information, software, technical know-how or secret process capable of independent commercial exploitation. The confidentiality clauses merely regulate the manner in which commercial information exchanged between the parties is to be protected during the subsistence of the agreements. They neither disclose nor make available any secret process or proprietary technology enabling the assessee to independently perform the transmission functions undertaken by Intelsat.
It is no doubt true that the satellite employs highly sophisticated scientific processes while receiving, amplifying, converting and retransmitting television signals. However, the crucial distinction lies in identifying the person who actually employs those processes. The agreements unequivocally establish that such technological processes are utilised
34 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., exclusively by Intelsat while rendering the contracted transmission services. The assessee merely supplies its television signals for transmission and thereafter receives the retransmitted output. It neither operates those processes nor acquires any independent right to employ them. The mere fact that a service provider necessarily utilises sophisticated technology while rendering services cannot, by itself, lead to the conclusion that the customer has acquired the right to use that technology or the process embedded therein. Thus, when the agreements are read as an integrated commercial arrangement and not by isolating individual clauses, one consistent picture unmistakably emerges. Ownership, possession, management, operation, technical control and commercial risk relating to the satellite infrastructure remain throughout with Intelsat. The assessee neither acquires any proprietary interest nor any possessory or operational control over the satellite, the transponder or the technological processes employed therein. What is made available to the assessee is the benefit of an uninterrupted satellite transmission service rendered through infrastructure exclusively owned, controlled and operated by Intelsat. It is this cumulative contractual arrangement, and not any isolated covenant viewed in abstraction, that must constitute the foundation for determining the true legal character of the payments in question.
35 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., 37. Having independently analysed the contractual framework in the manner directed by the Hon’ble Bombay High Court, we shall now examine whether the legal consequences flowing from these contractual rights and obligations support the Revenue’s contention that the payments constitute royalty either for the use of a process or for the use of industrial, commercial or scientific equipment under the provisions of the Act and the applicable Treaty. It is in this context that the judicial authorities relied upon by both sides assume relevance, for they serve to test the legal conclusions emerging from the contractual analysis already undertaken, rather than substitute such analysis itself.
The conclusions emerging from the contractual analysis undertaken hereinabove also stand consistently reinforced by the judicial authorities which have examined substantially similar satellite transponder arrangements. We hasten to clarify that our conclusions are not founded merely because judicial precedents exist on the subject. Rather, having independently examined the agreements in the manner directed by the Hon’ble Bombay High Court and having arrived at the conclusion that no proprietary interest, possessory right, operational control or right to employ the technological process ever stood transferred to the assessee, we find that the principles laid down in the decided cases lend
36 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., complete support to the legal consequences flowing from the contractual arrangement before us.
The earliest authoritative pronouncement dealing with the true nature of satellite transponder arrangements is the decision of the Delhi Bench of the Tribunal in DCIT v. PanAmSat International Systems Inc. (2006) 103 TTJ 861 (Delhi-Trib.). The Tribunal, after an elaborate examination of the functioning of satellite communication systems and the contractual relationship between the parties, held that the customer merely avails communication services rendered through sophisticated satellite infrastructure and does not acquire possession, control or any independent right to use either the satellite or the transponder. The Tribunal accordingly held that the receipts could not be characterised as royalty merely because the service provider necessarily employed advanced technological processes while rendering the communication services. The distinction drawn between the utilisation of technology by the service provider and acquisition of the right to use such technology by the customer has considerable relevance while appreciating the agreements before us. The aforesaid distinction thereafter received authoritative approval from the Hon’ble Delhi High Court in Asia Satellite Telecommunications Co. Ltd. v. DIT (2011) 332 ITR 340 (Delhi). After analysing the manner in which satellite communication actually functions, the
37 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., Hon’ble High Court held that although sophisticated technological processes undoubtedly operate within the satellite system, those processes continue to remain under the exclusive control of the satellite operator. The customer merely transmits signals which are processed by the operator’s own equipment and does not itself employ, operate or control the process. Consequently, the consideration paid for standard transponder services was held not to constitute royalty either for the use of equipment or for the use of any process. We find that the factual matrix examined by the Hon’ble Delhi High Court substantially corresponds with the contractual arrangement before us.
Much emphasis was laid by the learned Senior Departmental Representative on the ground that the judgment in Asia Satellite has been challenged before the Hon’ble Supreme Court. In our considered opinion, the mere pendency of an appeal neither dilutes nor eclipses the binding precedential value of a judgment so long as it continues to hold the field and has neither been stayed nor reversed. More importantly, the principles enunciated therein have subsequently been reaffirmed and elaborated in later decisions, including those rendered after considering the retrospective amendments introduced by the Finance Act, 2012. The pendency of further proceedings, therefore, does not persuade us to depart from the settled judicial position.
38 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., The effect of the retrospective amendments introduced by the Finance Act, 2012 came to be exhaustively considered by the Hon’ble Delhi High Court in DIT v. New Skies Satellite BV (2016) 382 ITR 114 (Delhi). The Hon’ble High Court held that while Parliament may amend the provisions of the domestic law retrospectively, such amendments cannot ipso facto alter the meaning of expressions employed in an international treaty. The provisions of the DTAA continue to be governed by internationally accepted principles of treaty interpretation and cannot be unilaterally expanded by subsequent amendments to domestic legislation. The Court further observed that the expression “process” occurring in the Treaty must receive its ordinary and contextual meaning and that merely because the service provider utilises sophisticated technology while rendering services does not mean that the customer has acquired the right to use a “process” within the meaning of the Treaty. These observations, in our opinion, directly answer the principal submission advanced by the Revenue before us.
Equally instructive is the judgment of the Hon’ble jurisdictional Bombay High Court in PCIT v. Neo Sports Broadcast Pvt. Ltd. (2019) 107 taxmann.com 17 (Bom.). While affirming the view taken by the Tribunal, the Hon’ble High Court accepted that payments made for satellite transponder services do not constitute royalty where the
39 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., payer merely avails communication services rendered through infrastructure owned, controlled and operated by the satellite operator. The decision assumes particular significance as it has been rendered by the jurisdictional High Court while dealing with substantially similar contractual arrangements concerning television broadcasting services. We also find considerable substance in the submission of the learned counsel that the decisions rendered in the case of Intelsat Corporation itself possess direct relevance in the present appeals. Those decisions concern the very same non-resident recipient, substantially identical transponder arrangements and the corresponding assessment years. The receipts arising from such transponder services have already been held to be not chargeable to tax in India in the hands of Intelsat. This aspect assumes importance not merely because of factual similarity but because one of the issues specifically noticed by the Hon’ble Bombay High Court while remanding the present matter was whether the receipts themselves were liable to tax in the hands of the recipient. Once that issue stands concluded in favour of the non-resident recipient on substantially identical facts, it constitutes an important circumstance while examining the consequential obligation under section 195. The legal position has thereafter received further reinforcement from the judgment of the Hon’ble jurisdictional Bombay High Court in CIT v. Inmarsat Global Ltd. (2025) 177 taxmann.com 716 (Bom.). The
40 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., Hon’ble High Court reiterated that where the non-resident retains complete ownership, possession, operational control and management of the satellite infrastructure, the customer merely receives communication services and does not acquire either the use of equipment or the right to employ any technological process embedded therein. The Court reaffirmed that the essence of the transaction lies in the rendition of services through sophisticated equipment and not in the transfer of any rights in such equipment itself. The ratio laid down therein, in our considered opinion, fortifies the conclusion emerging from our own independent examination of the agreements.
We are, therefore, unable to accept the Revenue’s submission that the mere reservation of dedicated transponder capacity or continuous utilisation of such capacity necessarily results in the transfer of the right to use industrial, commercial or scientific equipment. The agreements unmistakably demonstrate that the identified capacity merely defines the quality, continuity and availability of the communication service contracted between the parties. It does not confer upon the assessee any dominion over the satellite, any authority to operate or manage the transponder, any right to exclude others from the satellite infrastructure except to the limited extent necessary for ensuring contracted service levels, or any ability to commercially exploit the
41 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., equipment independently of Intelsat. Reservation of capacity is, therefore, only an incident of the service arrangement and cannot, by itself, be elevated to the status of a transfer of equipment or of any proprietary rights therein. Viewed thus, the judicial authorities referred to hereinabove do not merely furnish precedential support for the conclusion reached by us. They also demonstrate a consistent and coherent judicial understanding of satellite communication arrangements over the last two decades. The common thread running through all these decisions is that sophisticated technology employed by the service provider cannot be conflated with the customer’s acquisition of the right to use either the technology, the process or the equipment. Since the contractual arrangement before us exhibits the very same essential characteristics, we find no reason to depart from the settled judicial position. Having thus concluded that neither the process limb nor the equipment limb of Article 12 is attracted on the contractual facts before us, we shall now examine the impact of the retrospective amendments to section 9(1)(vi), the provisions of the India–USA DTAA and the obligation to deduct tax under section 195 in the light of the principles governing treaty interpretation.
The principal plank of the Revenue’s challenge nevertheless rests upon the retrospective amendments introduced by the Finance Act, 2012 whereby Explanations 5
42 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., and 6 were inserted below section 9(1)(vi) with retrospective effect from 01.06.1976. According to the Revenue, these amendments have put the controversy beyond debate by clarifying that consideration for transmission by satellite, including uplinking, amplification, frequency conversion and down-linking of signals, constitutes royalty notwithstanding the absence of possession or control over the equipment. The submission, though attractive at first blush, cannot be accepted in the broad manner canvassed before us. At the outset, it requires to be borne in mind that the controversy before us does not arise merely under the provisions of the domestic law. The payments in question have been made to a tax resident of the United States of America and are, therefore, governed simultaneously by the provisions of the Income-tax Act as well as the India-USA Double Taxation Avoidance Agreement. By virtue of section 90(2) of the Act, where the provisions of the Treaty are more beneficial to the assessee, they prevail over the corresponding provisions of the domestic statute. Consequently, even assuming that the domestic definition of royalty has undergone expansion by virtue of the retrospective amendments, it still becomes necessary to examine whether such unilateral amendment can correspondingly enlarge the scope of Article 12 of the Treaty.
43 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., 44. In our considered opinion, this question is no longer open to debate. The Hon’ble Delhi High Court in New Skies has authoritatively held that while Parliament undoubtedly possesses legislative competence to amend the provisions of the domestic statute, such amendment cannot, by unilateral legislative action, alter the scope, meaning or content of an international treaty. A Double Taxation Avoidance Agreement represents reciprocal obligations voluntarily assumed by two sovereign States and continues to operate according to internationally accepted principles governing treaty interpretation. Unless the Treaty itself is correspondingly amended by mutual agreement between the Contracting States, the expressions employed therein continue to retain the meaning which they ordinarily bear in international fiscal jurisprudence. This principle has acquired even greater significance after the judgment of the Hon’ble Supreme Court in Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT (2021) 432 ITR 471 (SC). While examining the concept of royalty under various Double Taxation Avoidance Agreements, the Hon’ble Supreme Court emphatically reaffirmed that domestic amendments cannot automatically rewrite or expand the provisions of a tax treaty. The Court reiterated that treaty provisions must receive an autonomous interpretation consistent with international principles and cannot be controlled by subsequent unilateral amendments to municipal legislation. Although Engineering Analysis arose in
44 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., the context of software payments, the underlying principle governing treaty interpretation applies with equal force to the controversy before us.
Applying the aforesaid principles to the facts of the present case, we find that even after the retrospective amendments introduced by the Finance Act, 2012, the essential character of the contractual arrangement remains wholly unchanged. As already discussed while examining the agreements, the assessee neither acquires possession nor operational control over the satellite infrastructure. No proprietary interest in the satellite or the transponder is transferred. No technological process is made available for independent use. Intelsat alone continues to own, manage, control and operate the entire satellite system while rendering communication services to the assessee. The amendments introduced in the domestic law do not alter these foundational contractual facts. We are equally unable to accept the Revenue’s submission that the reservation of dedicated transponder capacity by itself constitutes the grant of a right to use industrial, commercial or scientific equipment within the meaning of Article 12(3)(b) of the Treaty. Reservation of capacity merely assures the customer of uninterrupted availability of transmission services conforming to the agreed technical standards. Such reservation neither confers dominion over the equipment nor enables the
45 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., customer to operate, manage, control or commercially exploit the satellite independently of its owner. Every significant incident of ownership, possession, management and operational control continues throughout to remain vested exclusively in Intelsat. In commercial substance, therefore, the assessee contracts for assured communication services and not for the transfer of any equipment or any right therein.
Once the contractual arrangement is viewed in its entirety, it becomes abundantly clear that the Revenue’s attempt to characterise the payments simultaneously as royalty for the use of a process and as royalty for the use of equipment proceeds on a misconception of the true nature of the transaction. The sophisticated technological processes embedded within the satellite are undoubtedly employed, but they are employed exclusively by Intelsat while rendering its communication services. Likewise, the satellite and the transponder undoubtedly constitute highly sophisticated scientific equipment, but such equipment at all material times remains under the ownership, possession, management and operational control of Intelsat. The assessee merely receives the benefit of the services rendered through such equipment and technology. The distinction between the provider’s use of technology for rendering services and the customer’s acquisition of the right to use such technology is fundamental and cannot be obliterated by adopting an
46 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., unduly expansive interpretation of the expression “royalty.” Once this distinction is kept in view, the consequence under section 195 follows almost inevitably. The obligation to deduct tax at source under section 195 arises only where the payment is chargeable to tax in India in the hands of the recipient. This principle stands authoritatively settled by the Hon’ble Supreme Court in GE India Technology Centre (P.) Ltd. v. CIT (2010) 327 ITR 456 (SC), wherein it has been held that the withholding obligation is inextricably linked with the chargeability of the sum under the Act. Since we have already held, on an independent examination of the contractual arrangement reinforced by the applicable judicial precedents, that the payments in question do not constitute royalty under Article 12 of the India-USA DTAA, the necessary corollary is that the amounts were not chargeable to tax in India in the hands of Intelsat. Consequently, no obligation to deduct tax at source under section 195 could have arisen in respect of the remittances made by the assessee.
We may also observe that this conclusion does not rest upon any single circumstance viewed in isolation. It is the cumulative effect of the contractual covenants, the continued ownership and exclusive operational control retained by Intelsat, the allocation of commercial risks under the agreements, the absence of any transfer of proprietary rights or technological processes, the settled principles governing
47 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., interpretation of Article 12 of the Treaty and the consistent line of judicial authorities commencing from PanAmSat and culminating in Inmarsat that collectively lead us to the inescapable conclusion that the payments made by the assessee represent consideration for availing standard satellite communication services and not royalty either under the provisions of the Act or under the India-USA Double Taxation Avoidance Agreement. In view of the foregoing discussion, we find ourselves in complete agreement with the elaborate findings recorded by the learned CIT(A) after remand. The learned CIT(A) has undertaken the very exercise directed by the Hon’ble Bombay High Court, namely, an independent examination of the governing agreements before applying the relevant legal principles. We find no infirmity, either factual or legal, in the conclusions ultimately reached by the learned CIT(A). The grounds raised by the Revenue, therefore, fail.
Before parting, we may deal with one ancillary aspect which was faintly urged on behalf of the Revenue, namely, that the sophisticated nature of the satellite technology itself is sufficient to characterise the payments as royalty. In our considered opinion, the submission overlooks the essential distinction between the technology employed by a service provider for rendering services and the legal rights acquired by the customer under the governing contract. The complexity
48 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., or sophistication of the technology has never been the determinative test for deciding whether a payment constitutes royalty. The decisive test has always been whether the payer has acquired any proprietary interest, possessory right or legally enforceable entitlement to use the equipment or the process itself. As discussed in the preceding paragraphs, no such right can be culled out from any of the agreements executed between the parties. Equally, we are unable to accept the proposition that because identified transponder capacity stood reserved in favour of the assessee, the transaction necessarily assumes the character of equipment royalty. Reservation of capacity merely ensures that the service provider remains contractually obliged to make available the agreed bandwidth and transmission capability during the contractual tenure. Such reservation neither divests Intelsat of its ownership nor confers upon the assessee any right to manage, operate, alter or commercially exploit the satellite infrastructure. Every incident of ownership and operational control continued to vest exclusively with Intelsat and the assessee remained only the recipient of the communication services rendered through that infrastructure.
We also find that the contractual obligations undertaken by Intelsat are wholly inconsistent with the Revenue’s theory of transfer of equipment or transfer of any right to use
49 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., equipment. The continuing responsibility for maintaining the satellite, monitoring its performance, ensuring uninterrupted transmission, rectifying technical failures, allocating frequencies, managing orbital positioning and bearing the financial consequences of service deficiencies unmistakably demonstrate that Intelsat retained complete dominion over the entire satellite system throughout the subsistence of the agreements. Had the transaction truly involved transfer of any right to use equipment, the allocation of contractual rights and commercial risks would have been fundamentally different. Having regard to the contractual framework, the governing provisions of the Act, the India–USA DTAA and the judicial authorities discussed hereinabove, we are of the considered opinion that the payments made by the assessee to Intelsat Corporation were in the nature of consideration for availing standard satellite communication services. They cannot be characterised either as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment or as consideration for the use of any process within the meaning of section 9(1)(vi) read with Article 12 of the India–USA DTAA. The retrospective amendments introduced by the Finance Act, 2012 do not alter this conclusion in view of the settled principles governing treaty interpretation.
50 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd., 50. Once the payments are held not to be chargeable to tax in India in the hands of the non-resident recipient, the consequence under section 195 follows as a matter of law. In the light of the ratio laid down by the Hon’ble Supreme Court in GE India Technology Centre (P.) Ltd. v. CIT (2010) 327 ITR 456 (SC), no obligation to deduct tax at source could have arisen in respect of the remittances made by the assessee. The orders passed by the Assessing Officer under section 195(2), therefore, cannot be sustained. We accordingly uphold the well-reasoned orders passed by the learned CIT(A). In our considered view, the learned CIT(A) has faithfully complied with the remit of the Hon’ble Bombay High Court by undertaking an independent examination of the governing agreements, appreciating the contractual rights and obligations of the parties and thereafter applying the correct legal principles emerging from the Act, the Treaty and the binding judicial precedents. We find no factual or legal infirmity in the conclusions so arrived at warranting our interference.
Consequently, all the grounds raised by the Revenue fail and are dismissed.
51 ITA No. 2346/Mum/2026 and others Studio 18 Media Pvt. Ltd.,
In the result, all the appeals filed by the Revenue stand dismissed.
Order pronounced on 29th July, 2026.
Sd/- Sd/- (ARUN KHODPIA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 29/07/2026 KARUNA, sr.ps Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy//
(Asstt. Registrar) ITAT, Mumbai
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