NEW SKIES SATELLITES BV,GURGAON vs. DCIT CIRCLE-2(2)(2), INTERNATIONAL TAXATION, NEW DELHI

Per Dr. B. R. R. Kumar, Accountant Member:

1. That on the facts and in the circumstances of the case and in law, the Ld. Dispute Resolution Panel (‘the Panel’) erred in not directing the Learned Assessing Officer (‘Ld. AO’) to pass appropriate orders holding that the Appellant is not liable to be assessed to tax in India.

1.1. That on the facts and circumstances of the case and in law, the Panel and the Ld. AO erred in not following the orders passed by the Hon’ble High Court of Delhi for the Assessment years 2000-01 to 2 New Skies Satellites BV 2014-15 and the Hon’ble Income Tax Appellate Tribunal for AY 2016-17 in the Appellant’s own case since there was no change in facts recorded for the present year.

1.2. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in not holding that the payments received by the Appellant from providing data transmission services via Space Segment Capacity are assessable as business profits in India and in the absence of a Permanent Establishment under Article 5 of the India- Netherlands Double Taxation Avoidance Agreement between India and Netherlands (‘the DTAA’), the receipts earned by the Appellant are not taxable in India.

2. That on the facts and circumstances of the case and in law, the Ld. AO erred in holding that the payments received by the Appellant as consideration for data transmission services are in the nature of ‘Royalty’ as defined under section 9(1)(vi) of the Income Tax Act, 1961 (‘the Act’) and Article 12(4) of the DTAA.

2.1. That without prejudice to the above, on facts and circumstances of the case and in law, the Panel and the Ld. AO erred in reading into the expanded meaning of ‘Royalty’ contained in section 9(1)(vi) of the Act as retrospectively amended by Finance Act, 2012, for the purpose of interpreting the definition of ‘Royalty’ as provided under Article 12(4) of the India-Netherlands DTAA, when it is a settled position in law that amendment in the Act cannot have any effect in interpretation of DTAA as also held by the Hon’ble High Court of Delhi in the Appellant’s own case in [2016] 382 ITR 114 (Delhi) for AY 2006-07 and AY 2008-09.

2.2. Without prejudice to ground 2 above, the Ld. AO and the Panel erred in not taking cognizance of the fact that ‘use of a secret process’ is a sine qua non for the payments to qualify as ‘Royalty’ under the India-Netherlands DTAA.

3 New Skies Satellites BV 3. That the Ld. AO erred in holding that the payments received by the Appellant as consideration for data transmission services would also qualify as “fee for technical services” as defined under section 9(1)(vii) of the Act as well as within the meaning of Article 12(5) of the India-Netherlands DTAA.

4. That the Ld. AO erred in initiating penalty proceedings under section 270A of the Act.”

4 New Skies Satellites BV is now bound by the directions of DRP. Accordingly, the matter needs to be kept alive in view of its pendency before the Apex Court. The panel accordingly upholds the adjustment made by the AO in this matter. The objections are rejected.”