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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI M BALAGANESH & SHRI VIMAL KUMAR
PER VIMAL KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is against order dated 18.12.2024 of Learned Assessing Officer/ Deputy Commissioner of Income Tax, Circle- 3(1)(1), International Taxation, New Delhi (hereinafter referred to as “Ld. AO") under Section 143(3) read with section 144C of the Income Tax Act, 1961 (hereinafter referred as “the Act”) for assessment year 2022-23.
2. Brief facts of the case are that the appellant/assessee filed its return of income on 23-12-2022 declaring total income at Rs.1,95,520/-. The case was taken under complete scrutiny under CASS. Notices under Section 143(3) was served on 30.06.2023. Thereafter various notices were issued to the assessed. The appellant/assessee furnished responses. On completion of proceedings, Ld. AO passed order dated 18.12.2024 3. Being aggrieved, appellant/assessee preferred present appeal with following grounds: “
1. That the assessment order passed under section 143(3) read with section 144C of the Income Tax Act, 1961 ('the Act') by the learned Deputy Commissioner of Income Tax, Circle-3(1)(1) International Taxation, New Delhi ('the Id. AO') in pursuance of the directions of the Hon'ble Dispute Resolution Panel
2. (Hon'ble DRP) is wrong and bad in law, contrary to facts and circumstances of the case and unsustainable in law.
2. Based on the facts and circumstances of the case and in law, the Id. AO has erred in alleging that payments amounting to INR 8,90,26,680/- received by the Appellant from Indian customers (customers'/ 'service recipient'/ 'payer') for the provision of Telecommunication connectivity services (International Private Leased Circuits ('IPLC'), Multiprotocol Label Switching ('MPLS') etc., hereinafter referred to as 'bandwidth services') as consideration for the use of or the right to use of an equipment and/ or use of a process and/ or transfer of rights in a process and/or imparting of any information is taxable as a Royalty under section 9(1)(vi) of the Income Tax Act, 1961 ('the Act') and under the Article 12(3) of the India Singapore Tax Treaty ('Tax Treaty') despite the favorable precedents in the Appellant's own case by Hon'ble Delhi High Court and Hon'ble Delhi ITAT as follows:
ITA No. 785/Del/2025 S. Forum Assessment ITA number/ Date of No. year (s) Citation order 1 Delhi High 2011-12, 2012- [2024] 467 ITR Order dated Court 13, 2014-15 to 302 (Delhi) 24 July 2024 2019-20 [24.07.2024] 2 Delhi ITAT 2011-12, 2012- [2021] 186 ITD Order dated 13 and 2014-15 440 (Delhi –Trib.) 30 [30.09.2020] September 2020 3 Delhi ITAT 2015-16 and ITA Order dated 2016-17 No.5880/Del/2018 13 July 2022 and 4 Delhi ITAT 2017-18 dated 599/Del/2021 27 September 2022 5 Delhi ITAT 2018-19 and ITA No. Order dated 2019-20 1654/Del/2022 17 July 2023 and ITA No.1655/Del/2022 6 Delhi ITAT 2021-22 [2024] 207 ITD Order dated 73 (Delhi – Trib) 17May 2024 [17.05.2024
On the facts and in the circumstances of the case and in law the Id. AO has erred in initiating penalty proceedings under section 270A of the Act against the Appellant for the addition made in the assessment order The grounds above are without prejudice to each other. The Appellant craves leave to add, amend, vary, omit or substitute all or any of the aforesaid grounds of appeal at any time before or at the time of hearing of the Appeal.”
4. Learned Authorized Representative for the appellant/assessee submitted that Ld. AO failed to appreciate that the case of assessee was covered by the decision of ITAT in its own case for earlier assessment year from 2011-12 to onwards and the Departmental Appeals were dismissed by Hon'ble High Court. He submitted the details as under:
5. Learned Authorized Representative for the Department of Revenue submitted that Hon'ble Supreme Court in State of Kerala v. Asianet Satellite Communications Ltd. & Ors. (2025 INSC 757) extensively analyzed the scope of "entertainment" under Entry 62, List II, and held that:
Entertainment is not limited to theaters but includes television, cable, and DTH. Entertainment may be provided privately through signals received via set-top boxes and satellite transponders. Cable/DTH operators are the "source of entertainment," as they deliver films, programs, and shows via signals to end-consumers. Thus, satellite services are not mere technical carriage of signals; they are intrinsically linked to providing amusement, enjoyment, and diversion to viewers. This nexus between signal transmission and entertainment provides the foundation to characterize transponder services as royalty, since the payer is accessing satellite equipment and processes to commercially deliver entertainment content.
From examination of record in light of aforesaid rival contentions, it is crystal clear that assessee company is incorporated in Singapore. The appellant as a tax resident of Singapore. It is engaged in the business of providing digital transmission of data through international private line (IPL) or multi-protocol label switching ('MPLS'), etc. to facilitate high-speed data connectivity (hereinafter referred to as 'bandwidth services'). Ld. AO passed assessment order dated 18.12.2024 under section 143(3) r.w.s. 144C(1) by following the earlier assessment orders from Assessment year 2011-12 onwards treated the amount of Rs. 8,90,26,680 being the amount received from Indian customers for the provision of bandwidth services outside India, as equipment/ process royalty under section 9(1)(vi) of the Act and also under Article 12(3) of the India Singapore Tax Treaty ('Tax Treaty').
ITA No. 785/Del/2025 7. Ld. AO failed to appreciate that the case of assessee was covered by the decision of Tribunal in its own case for earlier years from assessment years 2011-12 onwards and the departmental appeal had been dismissed by the Hon'ble High Court. Hon'ble Delhi ITAT in Appellant's own case for AY 2021- 22 in vide para nos. 7 and 8 has followed the decision of Hon'ble Delhi ITAT in Appellant's own case for the earlier years and held that: "7. We find, this is a recurring issue between the assessee and the Revenue from past assessment years. While deciding the issue for the first time in assessee's case in assessment years 2011-12, 2012-13 and 2014- 15, the Tribunal in and Ors., dated 30.09.2020, held that Bandwidth charges are not taxable as royalty income. Identical view was taken by the Tribunal in subsequent assessment years, till assessment year 2019-20 through orders passed in ITA No.5880/Del/2018 &5479/Del/2019, dated 13th July, 2022 in assessment years 2015-16 and 2016-17; ITA No.599/Del/2021, dated 27th September, 2022 in assessment year 2017-18 and the latest order passed in ITA No. 1654/Del/2022 & 1655/Del/2022, dated 17th July, 2023 in assessment years 2018-19 and 2019-20; 2.11 The Hon'ble Delhi High Court in their order dated 24 July 2024 has dismissed the department's appeal and upheld the Hon'ble ITAT decision for AY 2011-12, 2012-13, 2014-15, 2015-16, 2016-17, 2017-18, 2018-19, 2019-20 and 2021-22- ITA Nos. 334/2022, 335/2022, 206/2023, 55/2023, 597/2023, 61/2023, 171/2024 & CM APPL 15018/2024, 174/2024 & CM APPL 15029/2024 (enclosed from Page no. 179-327 of Paper Book).”
In view of above material facts and judicial precedents, it is held that the appeal of assessee is fully covered in assessee’s own case for earlier years. Therefore, respectfully following the consistent view of the Tribunal on the issue, as discussed above, we hold that the receipts from Bandwidth charges are not taxable as royalty income either under section 9(1)(vi) of the Act or under Article 12(3) of India Singapore DTAA. Accordingly, we direct the Assessing Officer to delete the addition. Ground of appeal
nos. 1 and 2 are allowed. Ground of appeal no.3 being consequential does not require adjudication.