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Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI
Before: Sh. K. N. CharyDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order dated 27.10.2020 passed by the AO u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961.
Following grounds have been raised by the assessee: “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
ITA No. 56/Del/2021 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.
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.
ITA No. 56/Del/2021 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.
That the Ld. AO erred in initiating penalty proceedings under section 270A of the Act.”
At the outset, the ld. Counsel for the assessee has brought to our notice that the appeal involves, a. Determination of taxability of the payment received as a consideration for data transmission services are in the nature of “Royalty” as defined u/s 9(1)(vi) of the Income Tax Act and Article 12(4) of the DTAA. b. The AO wrongly treated the payment received as a consideration for data transmission services are in the nature of “Fee for Technical Services” as defined u/s 9(1)(vii) of the Income Tax Act and Article 12(5) of the DTAA. c. That the issue before us has been settled in favour of the assessee by the orders of the Hon’ble Jurisdictional High Court for the assessment years 2000-01 to 2014-15 (382 ITR 114) (Del.).
We have gone through the record before us. The para 3.2 of the DRP order reads as under: “3.2 The matter is in litigation since last many years starting AY 2006-07 and upto AY 2014-15. The AO in his draft order, in para 9.7 brought out that the department is in appeal before Hon'ble Supreme Court against the judgment of Hon'ble Delhi High Court in case of the assessee which has been admitted. It has to be borne in mind that the panel is an extension of the assessment process and the AO
ITA No. 56/Del/2021 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.”
Before us, the ld. CIT DR fairly submitted that the additions have been made as the revenue is filed appeal against the order of the Hon’ble Jurisdictional High Court and the matter is being agitated before the Hon’ble Apex Court.
From the above, it is clear that the addition made by the AO is due to the fact that the revenue is agitating the issue before the Hon’ble Apex Court. Since, the matter stands adjudicated in favour of the assessee as on today, we hold that the decision of the Hon’ble Jurisdictional High Court is applicable to the appeal before us.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 25/02/2021.
Sd/- Sd/- (K. N. Chary) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 25/02/2021 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR