ASIA SATELLITE TELECOMMUNICATIONS COMPANY LIMITED,HONGKONG vs. ACIT CIRCLE INTL. TAXATION 1(1)(1), NEW DELHI

आयकर अपीलीय अधिकरण
धिल्ली पीठ “डी”, धिल्ली
श्री धिकास अिस्थी, न्याधयक सिस्य एिं
श्री ब्रजेश कुमार स िंह, लेखाकार सिस्य के समक्ष
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “D”, DELHI
BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER&
SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER

आअसं.2353 और 2674/धिल्ली/2023(नि.व. 2020-21 और 2021-22)
ITA Nos. 2353 & 2674/DEL/2023(A.Ys. 2020-21 & 2021-22)

Asia Satellite Telecommunications Company Ltd.,
15, DAI Kawai Street, TAI PO Industrial Estate, NT,
Hong Kong, 999999
PAN: AADCA-7848-N

...... अपीलार्थी/Appellant

बिाम Vs.

Assistant Commissioner of Income-Tax,
International Taxation 1(1)(1), Civic Centre,
Minto Road, New Delhi 110002

.....प्रनिवादी/Respondent

अपीलार्थी द्वारा/ Appellant by:
S/Shri Ajay Vohra, Sr. Advocate with Aditya Vohra & Tanmay Dhakras, Advocates

प्रधििािीद्वारा/Respondent by:
Shri M.S Nethrapal, CIT-DR
सुिवाई की निथर्थ/ Date of hearing

:
10/12/2025

घोषणा की निथर्थ/ Date of pronouncement
: 19/12/2025

आदेश/ORDER

PER VIKAS AWASTHY, JM:

These two appeals by the assessee for AY 2020-21 and 2021-22 are taken up together as the issue in both appeals germinate from identical set of facts. Hence, these appeals are decided by this common order.
2. For the sake of convivence appeal for AY 2020-21 is taken up as a lead case, hence, the facts are narrated from said appeal.

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22)

ITA No.2353/Del/2023 AY (2020-21)
3. This appeal by the assessee is directed against the Assessment Order dated
29.06.2023 passed u/s. 143(3) r.w.s 144C(13) of the Income TaxAct,1961(hereinafter referred to as ‘the Act’), for Assessment Year 2020-21. 4. The assessee has filed an application dated 01.02.2024 for admission of additional ground of appeal. The ld. Counsel for the assessee made statement at Bar that he is not pressing said application. In light of the statement made by ld. Counsel for the assessee, the application filed under Rule 11 of the Income-tax (Appellate
Tribunal) Rules, 1963 for admission of additional ground of appeal is dismissed as not pressed.
5. The primary issue involved in appeal is nature of receipts by the assessee/appellant from India for providing satellite transmission services. The assessee has claimed the said receipts as not taxable in India under India-Hong Kong
Double Tax Avoidance Agreement (DTAA). Whereas, the Assessing Officer (AO) has held the said receipts as ‘process royalty’ as well as ‘equipment royalty’ u/s.9(1)(vi) of the Act and also under Article 12 of India-Hong Kong DTAA. The facts of the case in brief as emanating from records are: The assessee is a tax resident of Hong Kong.
The assessee is engaged in the business of providing satellite transponder capacity to its customers across the world including India. The assessee does not have any satellite in India or Indian orbital slots, nor does the assessee has any equipment or any office in India. All other infrastructures/equipment used for the purpose of providing such services are located outside India. These facts are not under dispute.

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22)

As part of assessee’s business activities, assessee’s customers uplinks signals through “uplink facilities” owned by said customers after encryption to the assessee’s satellites located outside India. Once the signals reach the satellite, the transponder amplifies these encrypted signals and, thereafter, downlinks the same over the area covered by satellite beam. Thereafter, the signals are decrypted and transmitted by the intend recipients as per their business requirement using their own equipment. The aforementioned services are collectively referred to as “Satellite Transmission Services” for which assessee charges fee from Indian customers. The said fee has been held to be process royalty/equipment royalty by the AO.
6. Shri Ajay Vohra, Sr. Advocate appearing on behalf of the assessee submitted that, identical issue has been considered by the Hon’ble Delhi High Court in assessee’s own case reported as 197 Taxman 263(Del.). The Hon’ble High Court held that the fee received by the assessee for providing transmission facility through satellite is not in the nature of royalty within the meaning of section 9(1)(vi) of the Act. Thereafter, the provisions of section 9(1)(vi) of the Act were amended by the Finance Act, 2012 to nullify the aforesaid judgment rendered by the Hon’ble High
Court in assessee’s case. Thereafter, the Hon’ble Delhi High Court in the case of DIT vs. New Skies Satellite BV, 382 ITR 114 considered the same issue and examined taxability of the fees under the provisions of DTAA. The Hon’ble High Court in the said case held that the amendment brought in by the Finance Act, 2012 which resulted in widening the scope of definition of royalty under the Act has no effect on the definition of ‘royalty’ as provided in DTAA. Hence, such receipt do not fall within the meaning of ‘royalty’ as defined under Article 12 of India-Thailand DTAA.
The provisions of Article 12 of India-Thailand DTAA dealing with Royalties are pari

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22) materia to that of India-Hong Kong DTAA Article 12. Thus, the fee charged by the assessee for providing access to satellite transmission services is not taxable as royalty in India. The ld. Counsel pointed that the Hon’ble Supreme Court of India in the case of Engineering Analysis Centre of Excellence (P) Ltd., 432 ITR 471 has affirmed the decision rendered in the case of DIT vs. New Skies Satellite BV (supra).
7. Per contra, the ld. DR vehemently supported the impugned order. The ld. DR filed his written submissions, the same are reproduced hereunder: -
“The assessee, a Hong Kong-based entity, contends that transponder fees are not taxable as "Royalty" under the India-Hong Kong DTAA, relying on the Delhi High Court's judgment in DIT v. New Skies Satellite BV. Their defense rests on the principle that the "static"
definition of Royalty in a Treaty cannot be overridden by a subsequent unilateral amendment to the domestic Income Tax Act.
The Department submits that this defense is legally untenable in the present case. Unlike the treaties in New Skies (which pre-dated the amendment), the India-Hong Kong DTAA was signed in 2018, six years after the Finance Act, 2012 expanded the definition of Royalty. Furthermore, applying the Supreme Court's ruling in Gramophone Co. of India
Ltd., the clear legislative mandate of the Indian Parliament regarding "process" must prevail, rendering the income taxable as Royalty.

DRP Order para 4.2.3 to 4.2.11 is relied upon.

Distinguishing Facts for Hong Kong:
• Date of Domestic Amendment: The Finance Act, 2012 inserted Explanation 6 to Section 9(1)(vi), explicitly defining
"process"
to include satellite transmission
(uplinking/downlinking).
• Date of Treaty: The India-Hong Kong DTAA was signed on March 19, 2018. Submission: Since the DTAA was concluded after the domestic law was amended, the Contracting States are presumed to be aware of the expanded definition of "Royalty"
(which included transponder fees) under Indian law. Therefore, the New Skies ratio—
which applies only to subsequent unilateral amendments—is factually inapplicable. The 5

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22)

Treaty definition of "process" must be read in harmony with the law existing at the time of signature (2018).
3. Argument II: Ambulatory Interpretation (Article 3(2))
Article 3(2) of the India-Hong Kong DTAA mandates an "Ambulatory" (dynamic) rather than "Static" interpretation for undefined terms.
"As regards the application of the Agreement at any time by a Contracting Party, any term not defined therein sball, unless the context otherwise requires, have the meaning that it has at that time under the law of that Party..."
• "Process" is Undefined: The DTAA defines Royalty as payment for the use of a "process" but does not define the term "process" itself.
• Domestic Meaning Applies: Under Article 3(2), the meaning of "process" must be derived from the Indian Income Tax Act "at that time" (i.e., the current assessment year).
• Current Law: Explanation 6 to Section 9(1)(vi) clearly states that "process" includes transmission by satellite.
• Result: Via Article 3(2), the domestic definition flows into the Treaty, making transponder fees taxable as Royalty.
4. Argument III: Sovereign Supremacy (The Gramophone Principle)
Even if the Assessee argues that the Treaty definition conflicts with the Domestic definition, the Supreme Court's judgment in Gramophone Company of India Ltd. v.
Birendra Bahadur Pandey [1984] provides the ultimate safeguard for the Revenue.
In Gramophone, the Supreme Court held that while courts should endeavor to harmonize municipal law with international law, the Municipal Law (Parliamentary Statute) prevails in case of a clear conflict.
Key Extracts for submissions:
• On Legislative Supremacy:
"National courts cannot say yes if Parliament has said no to a principle of international law. National Courts will endorse international law but not if it conflicts with national law."
• On Clear Statutes:
'If statutory enactments are clear in meaning, they must be construed according to their meaning even though they are contrary to the comity of nations or international law."
Application: The Parliament, via Finance Act 2012, explicitly expressed its Sovereign Will to tax satellite transmission services as "Royalty" (Explanation 6). This is a clear statutory enactment. Relying on Gramophone, the Tribunal/Court cannot bypass this clear legislative mandate by citing "International Law" or "Treaty Interpretation" theories like those in New Skies. The specific definition in the Act overrides the general interpretation of the Treaty.

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22)

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22)

“2. The substantial question framed by this Court is two-fold;
(1) whether the receipts of the assessees earned from providing data transmission services, fall within the term royalty under the Income Tax Act, 1961, and (2) if the answer to the first is in the affirmative, whether the assessees would be eligible for the benefit under the relevant Double Tax Avoidance Agreements.”
11. The Hon’ble High Court answered the aforesaid questions as under:-

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22) clarificatory as the Revenue suggests it is, or prospective, given what its nature may truly be. The issue of taxability of the income of the assessees in this case may be resolved without redressal of the above question purely because the assessee has not pressed this line of arguments before the court and has instead stated that even if it were to be assumed that the contention of the Revenue is correct, the ultimate taxability of this income shall rest on the interpretation of the terms of the DTAAs. Learned Counsel for the assessee has therefore contended that even if the first question is answered in favour of the Revenue, the income shall nevertheless escape the Act by reason of the DTAA. The court therefore proceeds with the assumption that the amendment is retrospective and the income is taxable under the Act.

Article 12(3), Indo Thai Double Tax Avoidance Agreement:

'3. The term "royalties" as used in this article means payments of any kind received as a consideration for the alienation or the use of, or the right to use, any copyright of literary, artistic or scientific work (including cinematograph films, phonographic records and films or tapes for radio or television broadcasting), any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.'

Article 12(4), Indo Netherlands Double Tax Avoidance Agreement :

'4. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.'

Section 9(1)(vi), Explanation 2, Income Tax Act, 1961

"(iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property"

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22) transmission services, systematically and without exception, have treated the two definitions as pari materia. This Court cannot take a different view, nor is inclined to disagree with this approach for it is imperative that definitions that are similarly worded be interpreted similarly in order to avoid incongruity between the two. This is, of course, unless law mandates that they be treated differently. The Finance Act of 2012 has now, as observed earlier, introduced Explanations 4, 5, and 6 to the Section 9(1)(vi). The question is therefore, whether in an attempt to interpret the two definitions uniformly, i.e. the domestic definition and the treaty definition, the amendments will have to be read into the treaty as well. In essence, will the interpretation given to the DTAAs fluctuate with successive
Finance Act amendments, whether retrospective or prospective? The Revenue argues that it must, while the Assessees argue to the contrary. This Court is inclined to uphold the contention of the latter.

"132. An important principle which needs to be kept in mind in the interpretation of the provisions of an international treaty, including one for double taxation relief is that treaties are negotiated and entered into at a political level go ahead and have several considerations as their bases. Commenting on this aspect of the matter, David R. Davis in Principles of International Double Taxation Relief , David R. Davis, Principles of International Double Taxation Relief , Pg.4 (London Sweet & Maxwell, 1985)points out that the main function of a Double Taxation Avoidance Treaty should be seen in the context of aiding commercial relations between treaty partners and as being essentially a bargain between two treaty countries as to the division of tax revenues between them in respect of income falling to be taxed in both juri ictions. It is observed (vide para 1.06):

The benefits and detriments of a double tax treaty will probably only be truly reciprocal where the flow of trade and investment between treaty partners is generally in balance.
Where this is not the case, the benefits of the treaty may be weighted more in favour of 10

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22) one treaty partner than the other, even though the provisions of the treaty are expressed in reciprocal terms. This has been identified as occurring in relation to tax treaties between developed and developing countries, where the flow of trade and investment is largely one way.

Because treaty negotiations are largely a bargaining process with each side seeking concessions from the other, the final agreement will often represent a number of compromises, and it may be uncertain as to whether a full and sufficient quid pro quo is obtained by both sides."

"Indo Thailand DTAA:

ARTICLE 3: GENERAL DEFINITIONS

Indo Netherlands DTAA:

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22)

ARTICLE 3: GENERAL DEFINITIONS

The treaties therefore, create a bifurcation between those terms, which have been defined by them (i.e the concerned treaty), and those, which remain undefined. It is in the latter instance that domestic law shall mandatorily supply the import to be given to the word in question. In the former case however, the words in the treaty will be controlled by the definitions of those words in the treaty if they are so provided.

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22) broadcast revenues slip by, will be insufficient to persuade this Court to hold that such amendments are applicable to the DTAAs.
60. Consequently, since we have held that the Finance Act, 2012 will not affect Article 12
of the DTAAs, it would follow that the first determinative interpretation given to the word
"royalty" in Asia Satellite, when the definitions were in fact pari materia (in the absence of any contouring explanations), will continue to hold the field for the purpose of assessment years preceding the Finance Act, 2012 and in all cases which involve a Double Tax Avoidance
Agreement, unless the said DTAAs are amended jointly by both parties to incorporate income from data transmission services as partaking of the nature of royalty, or amend the definition in a manner so that such income automatically becomes royalty. It is reiterated that the Court has not returned a finding on whether the amendment is in fact retrospective and applicable to cases preceding the Finance Act of 2012 where there exists no Double Tax
Avoidance Agreement.
61. For the above reasons, it is held that the interpretation advanced by the Revenue cannot be accepted. The question of law framed is accordingly answered against the Revenue. The appeals fail and are dismissed, without any order as to costs.”
[Emphasised by us]
13. Thereafter, in the case of Engineering Analyses Centre of Excellence P. Ltd.
vs. CIT (supra), the Hon’ble Supreme Court of India affirmed the decision of Hon’ble
Delhi High Court in the case of DIT vs. New Skies Satellite BV (supra) holding as under:-
“155. In DIT v. New Skies Satellite BV [2016] 68 taxmann.com 8/28 Taxman
577/382 ITR 114 (Delhi) ["New Skies Satellite"], a Division Bench of the High Court of Delhi correctly observed that mere positions taken with respect to the OECD Commentary do not alter the DTAA's provisions, unless it is actually amended by way of bilateral re- negotiation. This was put thus:
"68. On a final note, India's change in position to the OECD Commentary cannot be a fact that influences the interpretation of the words defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into a treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well. Any attempt short of this, even if it 13

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22) is evidence of the State's discomfort at letting data broadcast revenues slip by, will be insufficient to persuade this Court to hold that such amendments are applicable to the DTAAs."

(emphasis in original)”
14. One of the argument put forth by ld. DR is that that judgement rendered in the case of New Skies Satellite BV (supra) protects the assessee from ‘Treaty
Override’ only where treaty was already in existence at the time of amendment to domestic law. Where the treaty comes into existence at later point of time as is the case here, where India-Hong Kong DTAA was signed in the year 2018, the provisions of Act would apply.

We do not find favour with the said submission of the ld. DR. The DTAA between two sovereign nations is also akin to Legislation. Any amendment in the domestic law does not impact the provisions of the DTAA unless two sovereigns mutually decide to amend the terms of DTAA. When DTAA is signed between two nations defining ‘royalty’ in narrower sense, knowingly too well that existing provisions of domestic Act provide for much wider definition of royalty, it was the conscious call taken by the sovereigns. Now, at a later point of time provisions of domestic law cannot be superimposed over DTAA provisions by the Revenue to disregard DTAA provisions.
15. Thus, in light of facts of the case and decisions referred above, we hold that the fee received by the assessee for providing satellite transmission services does not fall within the definition of royalty under Article 12 of India-Hong Kong DTAA.
Section 90 sub section (2) of the Act provides that where the provisions of DTAA are more beneficial to the assessee, the same shall override the provisions of the Act.
Thus, the assessee succeeds on ground of appeal no. 3 & 4. 14

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22)

ITA Nos. 2674 & 2353/DEL/2023(A.Ys. 2020-21 & 2021-22) ground of limitation. In light of the statement made by ld. Counsel for the assessee, ground of appeal no. 5 & 6 are dismissed as not pressed.
23. In ground no. 7 of appeal, the assessee has assailed initiation of penalty proceedings u/s.270A of the Act. Challenge to penalty proceeding at this stage is premature, hence, ground no. 7 of appeal is dismissed.
24. In the result, appeal of the assessee for AY 2021-22 is partly allowed.
25. To sum up, both appeals of the assessee are partly allowed.
Order pronounced in the open court on Friday the 19th day of December,
2025. (BRAJESH KUMAR SINGH)
(VIKAS AWASTHY)
लेखाकार सदस्य/ACCOUNTANT MEMBER
न्यानयक सदस्य/JUDICIAL MEMBER
धिल्ली / Delhi, ददिांक/Dated 19/12/2025

NV/-
प्रतिलिपि अग्रेपििCopy of the Order forwarded to :
1. अपीलार्थी/The Appellant ,
2. प्रनिवादी/ The Respondent.
3. The PCIT
4. ववभागीय प्रनिनिथि, आय.अपी.अथि., सिल्ली /DR, ITAT, धिल्ली
5. गार्ड फाइल/Guard file.

BY ORDER,

////

(Asstt.