THE DDIT (IT)-2(1), MUMBAI vs. M/S. TAJ TV LTD, MUMBAI

आदेश ORDER �ी अिमत शु�ला, �या स: PER AMIT SHUKLA, JM:

in the Department’s appeals for the AYs 2004-05 & 2005-06. Grounds of appeal as raised by the revenue read as under:

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that Taj India does not constitute an agency PE of the assessee within the meaning of Article 5(4) of the DTAA with regard to the distribution income received by it. 2.(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowances made by the Assessing Officer u/s.40(a)(i) of the I.T. Act in respect of claims of transponder charge expenses amounting to US$ 3,29,966 and up linking charges of US $ 3,05,347.

3 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 2. (ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the income received from the assessee by M/s. PanAmSat being in the nature of transponder charges and received by other non-residents being in the nature of up linking charges have arisen in India and accordingly tax should have been deducted at source on such expenses.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the distribution income earned by the assessee during the period when it was not a resident of Mauritius is not taxable in India.

4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that payment of programming fees in respect of live programmes does not constitute "royalty" as provided under Article 12 of the DTAA between India and Mauritius.

The Appellant prays that the order of CIT(A) on the above grounds he set aside and that of the A.O. restored.

5 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 TV’s primary focus is its sports channel – Ten Sports. Taj is considered as resident for tax purposes in Mauritius as it is registered in Mauritius. We enclosed a copy of 'Tax Residency Certificate'.(TR of the company, marked a s Annexure-I 2. Taj-TV has appointed Ta] Television (India) Pvt. Ltd. ('Taj-India) as the advertising sales agent vide agreement dated 8 May 2002 to sell commercial advertising time to prospective advertisers and other parties in India, in connection with the business of programming and telecasting on "Ten Sports" Channel and to collect advertisement charges from India exporters and advertisers on behalf of Tai-TV. The said agreement has been approved by the Reserve Bank of India ('RB') vide their approval letter No. EC. CO, EPD/310/210. 16.08/02- 03 dated 19 August 2002. As per the agreement, Taj India is entitled to 10% commission of the advertisement revenues secured for Taj-TV, which is considered fair and reasonable. Taj India does not have any authority to enter into any contract on behalf of Ta]- TV.

3. Taj-TV has also appointed Ta]-India as the distributor vide agreement dated 1 March 2002, to distribute an encrypted advertiser and/or subscription supported television programming service known as 'Ten Sports' to cable systems solely for exhibition to subscribers in India. The said agreement has been approved by the RBI vide their approval letter No. CO.OPD/742/21.16.06/2001-02 dated 3 October 2003. As per the agreement, the distribution revenue collected

6 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 by Ta]-India will be split in the ratio of 60:40 between Taj-TV and Taj-India. The amount payable by Taj-India to Ta]-TV shall be net of Indian Income Tax. Taj-TV is registered in Mauritius and also it does not have any branch or office in India. Further, the telecasting is being done from outside India.

4. In view of the complexity of the issues involved in determining taxability of the Foreign Telecasting Companies ('FTC.$) and the extent of income that could be said to accrue or arise to them from their operations in India, the Central Board of Direct Taxes (CBDT) has issued a Circular No. 742 dated 2nd May, 1996 read with Circular No. 6 of 2001 dated 5 March 2001 with effect from 1 April 2001. The Circular No. 742 has prescribed or presumptive taxation by treating 10% of the advertisement revenue from India meant for remittance abroad (excluding the commission of Indian agent and advertising agent) as the income of the FTCs. In view of withdrawal of Circular No. 742, the presumptive taxation system is not applicable now.

5. India and Mauritius have entered into the Double Taxation Avoidance Agreement (DTAA) on 24 August 1982 which is notified in India vide GSR 920(E) dated 26 December 1983. It is well settled that the provisions of the DTAA would override the general tax provisions (Refer Circular No.333 dated 2 April 1982 issued by the CBDT). In view of the same, the DTAA provisions would override the general tax provisions to the extent the general tax provisions are inconsistent with the DTAA provisions.

7 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 6. Article 7 of the India/Mauritius DTAA provides that a resident of Mauritius shall be liable to tax in India on profits of an enterprise only if it carries business in India through a Permanent Establishment (PE) situated in India. If an enterprise carries on business in the other contracting state through a PE, the profit of the enterprise may be taxed in the other state but only so much of them as is directly attributable to the PE. Article 5 of the DTAA defines PE.

8 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 9. Section 139 of the Act requires every company including a foreign company to file return of income in India. In view of the same, without prejudice to the above, Taj-TV has prepared its financial statements for the year ended 31 March 2003 as applicable in the case of its Indian operations. The financial statements pertain to revenue derived from the Indian operations and costs attributable to the same (including apportionment of common costs).

9 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 5. However, the AO after detailed discussion in his assessment order rejected the assessee’s claim. In sum and substance he held that:- Firstly, in relation to the advertising income, Taj India is a ‘dependent agent’ of the assessee and, therefore, assessee has PE in India in the form of Taj India within the scope and meaning of Article 5(4) of India-Mauritius DTAA; Secondly, in relation to distribution income, he held that distribution agreement involves full/partial transfer of distribution rights and granting of license in respect of trademark, copyright, secret formula, or process etc., including films and video tapes. The said agreement involves the ‘use of’ or ‘right to use’ the copyright, trademark, etc. owned by the company. The assessee company is providing service through Taj India and Taj India could not have rendered any service to the subscribers and cable operators without the trademark, copyright, etc. transferred to it by the assessee Company; Thirdly, the assessee company allows the cable operators to use or access the encrypted signal for commercial exploitation by allowing them to distribute it to the viewers. The encrypted signal is the property of the assessee company and by allowing it to be commercially exploited, it is partially transferring the rights to the cable operators. Therefore, distribution income is taxable as ‘Royalty’ under section 9(1)(vi) of the Act. Since the assessee company was incorporated in British Virgin Islands and was re-registered 10 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 as a company in Mauritius w.e.f. 12th July, 2002, therefore it is not entitled to treaty benefits of India-Mauritius DTAA in respect of distribution income earned up to 12 July 2002 (i.e. from 1.04.2002 to 12.07.2002) and such distribution income shall be taxable as 'Royalty'. However, he held that distribution income earned after 13th July, 2002 is connected with the PE in India and hence, it is taxable under Article- 7 of India-Mauritius-DTAA; Fourthly, he disallowed the Programming cost paid to various cricket boards and other sports association for acquiring live telecast rights in respect of events taking place outside India under section 40(a)(i) of the Act as no tax was deducted at source. According to him, such payment are in the nature of 'Royalty' under section 9(l)(vi) of the Act as the assessee company has acquired the 'copyright' in respect of such events; Fifthly, he also disallowed the Transponder fees of US $ 3,29,966 paid to PanAmSat International Systems Inc. USA (hereinafter referred to as the "PanAmSat") for rendering services through satellite, located outside India, in telecasting the sports channel 'Ten Sports' to various countries under section 40(a)(i) of the Act as no tax was deducted at source from such payment. According to him, it is in the nature of 'Royalty' and falls under clause (iv a) of Explanation 2 to Section 9(1)(vi) of the Act; and Lastly, he also disallowed the up-linking charges of US $ 3,05,347 paid to PanAmSat and various other non- residents for rendering services in the form of up linking the 11 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 signal in respect of live events, taking place outside India, from the venue of the event to the satellite under section 40(a)(i) of the Act as no tax was deducted at source from such payment as according to him, it is in the nature of 'Royalty' and falls under clause (iva) of Explanation 2 to Section 9(1)(vi) of the Act.

6. First of all it is noted that the AO has accepted the business loss computed by the assessee as per its Profit & Loss Account computed for the income from Indian operation. Thereafter he has proceeded to disallow various payments after invoking the provisions of section 40(a)(i) on the ground that same would be allowable in the year of payment of tax at source and lastly, the distribution revenue has been taxed as ‘royalty income’.

7. In the first appeal, so far as the issue of advertising revenue or income is concerned, the Ld. CIT(A) held that, the assessee did had an agency PE in the form of Taj India within the meaning of Article 5(4) of the India-Mauritius-DTAA. Assessee’s case before the CIT(A) was that, Taj India is not a wholly owned subsidiary of Taj TV and in any case merely being a wholly owned subsidiary, it does not follow that the subsidiary is the agent of parent company and in support, reference was made to para (6) of Article 5. It was further submitted that, under the meaning of Article 5(4) also, there cannot be an agency PE, because, the assessee has paid the commission of 10% which is at arm’s length price to Taj India for the services rendered by it and the said payment of 12 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 commission has been examined by the TPO both in the hands of the assessee as well as in the hands of the Taj India and no adjustment has been suggested. Thus, it was submitted that, once payment has been accepted to be at arm’s length price then liability of the principal non-resident is extinguished in India. It was further submitted that, agent should have authority and also should have habitually exercised that authority to conclude contract in the name of non-resident principal, before any agent could be said to have constitute a PE under Article 5(4). Here Taj India does not have any authority to conclude contract in the name of Taj and, therefore, it cannot be said there existed an agency PE between assessee and Taj India under Article 5(4). The Ld. CIT(A), after considering the various clauses of the advertising sales agency agreement dated 08.05.2002, specifically with regard to clauses 1, 3, 5 and 6, came to the conclusion that Taj India was in fact, dependent agent of assessee in all respect and its income was from advertisement and distribution and the entire source of revenue of Taj India is from Ten Sports Channel. It did not have any income from any other source and, therefore, it was wholly dependent on assessee for its business. Thus, he concluded for all practical purpose, Taj India was exercising authority to conclude contract on behalf of the assessee in India and, therefore, there was an agency PE within the meaning and scope of Article 5(4). It is on this finding assessee had filed its appeal which is belated.

13 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 8. In respect of the “Distribution Income”, Ld. CIT(A) noted that, the agreement between the assessee and Taj TV is an agreement on principal to principal basis and it is not acting as an agent of the assessee company albeit it has obtained the right of distribution of TV channel for itself and subsequently it enters into “sub-distribution agreement” with other parties in its own name to which the assessee company is not a party at all. The assessee had given exclusive right to Taj India for distribution of TV Channel and for such right it had agreed to pay 40% of the total subscription income earned as a consideration. Further, the agreement clearly stipulates that, Taj India shall be solely responsible for the marketing and promotion of the services to help drive cable operator sales and marketing support shall be at the discretion of Taj India. From the perusal of entire terms and conditions, he held that it is apparent that Taj India is an independent contractor. During the course of the Appellate proceedings, he also required the assessee to furnish copy of agreements entered into by the distributors with the cable operators. As a sample copy of sub-distribution agreement was filed which was entered between Taj India and HMA Udyog Ltd on 11.03.2002. On the perusal of the entire gamut of the materials and the submission of the assessee, Ld. CIT(A) observed that, the assessee has appointed Taj India exclusively for distribution in India and prohibits assessee from a distribution agreement to anybody else. He further observed that Taj India is not acting as an agent of the assessee to obtain TV Channel itself and secondly, it has 14 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 entered into contract with other parties and that too in his own name. From the perusal of the sub-distribution agreement, he noticed that, 75% of the revenue belongs to Taj India and balance 25% belongs to sub-distributors. In any sub-distributors agreement, assessee does not figure anywhere. Thus, he concluded that, assessee has given distribution right to Taj India for permitting and distributing TV Channel in India on principal to principal basis and there is no evidence to show or hold that, Taj India is acting as an agent of the assessee qua the distribution business. Accordingly he concluded that, there is no agency PE for distribution income in terms of Article 5(4).

16 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 10. In respect of disallowance of US $ 3,29,966, paid to PanAmSat as Transponder fees, under section 40(a)(i) of the Act, Ld. CIT(A) observed that the Delhi Tribunal in the case of DCIT vs. PanAmSat International System (9 SOT 100) itself has held that payment made for transponder facility is considered to be paid for the use of service and not for use of any equipment, therefore, it did not amount to ‘Royalty’. The Hon’ble Tribunal also held that fees paid for Transponder facility does not amount to ‘Royalty’ as it is not for a secret process; or ‘Fees for Included Services’ as it does not make available technical knowledge as per Article -12 of India-US DTAA. The ld. CIT(A) also held that the payment of ‘transponder fees’ was not borne by the PE in India, hence, even if payment is held to be ‘Royalty’, it is still not taxable as it is not borne by PE of US company in India therefore, there was no obligation to deduct tax at source in view of Article 12(7). In respect of allowance of payment of US $ 305,347, paid to PanAmSat and various other non-residents as Up linking charges which has been disallowed under section 40(a)(i) by the AO, the ld. CIT(A) held that Up linking charges paid by the assessee company are in connection with the events taking place outside India for sending the signal from the venue of the event to the Satellite. The payment is made for rendering services by PanAmSat to uplink the signal from the venue of the event to the Satellite therefore, it is not in the nature of ‘Royalty’ or ‘Fees for included services’. Ld. CIT(A) further held that the payment of Up linking charges is neither incurred in connection with the PE in India nor borne 17 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 by the PE in India, therefore, there was no obligation to deduct tax at source. In respect of Programming cost paid to various cricket board and sport associations, which has been disallowed under section 40(a)(i) of the Act, the ld. CIT(A) held that Programming cost paid to acquire live telecast rights of events was not in the nature of 'Royalty' as there is no copyright involved in live telecast of events. He further held that in any case, programming cost are neither in connection with the PE nor is it borne by the PE in India, therefore, even if the payments are characterized as 'Royalty' it will not be taxable as per Article 12(7) of DTAA. Hence, there was no obligation to deduct tax at source on programming cost paid to acquire live telecast rights. Thus, after detailed discussion, ld. CIT(A) held that none of the payments would be taxable in India even if it is deemed to be ‘royalty’, because the payment made to the parties do not have their PE in India, therefore, by virtue of article 12(7) the same cannot be taxed in India. Regarding programming fee also, he has relied upon the decision of CIT(A) in the order passed under section 201/(201A) dated 17.03.2004.

14 As regards the argument of Ld. DR that, now in wake of newly inserted Explanation (v) and (vi) to section 9(1)(vi) by the Finance Act, 2012 w.r.e.f. 1st April, 1976, he submitted 22 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 that, first of all the said definition under the Act cannot be read into the Treaty because the definition of ‘royalty’ in the India-US DTAA has been clearly defined. The enlargement of definition of “Royalty” under the amended provision of domestic law cannot be imported in Treaty and this view now founds support by a latest decision of Hon’ble Delhi High Court in the case of DIT vs. New Skies Satellite BV and others, reported in [2016] 95 CCH 0032 wherein the Hon’ble High Court after taking note of various provisions of the Act, decisions of various High Court and relevant provision of the DTAA held that the amendment brought by the Finance Act, 2012 would apply to the payments chargeable to tax under the Act, and such an amendment does not alter the definition under the DTAA, therefore, the benefits under the Treaty are available even after the retrospective amendment w.r.e.f. 1.04.1976. He pointed out that, similar view was upheld by the Tribunal in the case of Dy. Director Income-tax vs B4U International Holdings Ltd., 137 ITD 346. As regards the reliance placed by Madras High Court decision in the case of Verizon Communications Singapore Pte Ltd. (supra) and the ITAT decision in the case of Viacom 18 Media Pvt. Ltd, he submitted that the Hon’ble Delhi High Court has taken note of the decision of Hon’ble Madras High Court and have discussed the same in detail and did not follow the proposition laid down by the High Court on the ground that, no reasons were cited by the Hon’ble High Court for extending the amendment to DTAA. By this reasoning also the decision of ITAT Mumbai Bench in the case of Viacom 18 Media Pvt.

23 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 Ltd will not be applicable. As regards the decision of Hon’ble Bombay High Court in the case of CIT vs. Siemens Aktiongesellschaft (supra), the Hon’ble Delhi High Court has also dealt with this point that the issue and situation before the Hon’ble High Court was materially different and also the term ‘royalty’ was not defined in the German DTAA. Regarding the decision of ITAT in the case of Atos Information Technology HK Ltd (supra), he submitted that, first of all, this case pertains to HongKong based company wherein there is no DTAA and secondly, the issue involved therein was different. On the decision of ITAT Mumbai in the case of NGC Network (supra), he submitted that in that case matter was set-aside to AO and no final decision was taken by Tribunal qua the distribution income. In any case, here in this case AO for the period of 9 months and in subsequent years has himself held that the income from distribution is business income; therefore, this decision will not apply at all.

Thus, an agent is deemed to be a PE of a foreign enterprise, if he is not independent and has habitually exercises an authority to conclude contracts in the name of the enterprise unless the activities of such person are limited to those mentioned in paragraph 4 that is, to the purchase of goods or merchandise for the enterprise; or if he has no such 28 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 authority, but habitually maintains a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise. Thus, the character of an agent, who can be said to be a dependent only if, firstly, the commercial activity for the enterprise is subject to instructions or comprehensive control and secondly, he does not bear the entrepreneur risk. It is sufficient for the establishment of an agency PE that the agent has sufficient authority to bind the enterprise’s participation in the business activity. Here in this case, none of the conditions as stipulated in Article 5(4) is applicable because Taj India is acting independently qua its distribution rights and the entire agreement ostensibly is on principal to principal basis as analyzed and found by ld. CIT (A). When the entire relationship qua the distribution revenue is that of principal to principal basis and the Taj India is acting independently, then it moves out from the conditions laid down in Article 5(4). Thus the distribution income by the assessee cannot be taxed in India, because Taj India does not constitute an agency PE under the terms of Article 5(4). Thus, the order of the CIT (A) is upheld and ground No.1 as raised by the revenue is dismissed.

“3. The term "royalties as used in this Article means: a) payments of any kind received as a consideration for the use of or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are 31 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 contingent on the productivity, use, or disposition thereof; and b) payments of any kind received as consideration for the use of or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8 The article gives exhaustive definition of the term ‘royalty’ and therefore, the definition and scope of ‘royalty’ is to be seen from the Article alone and no definition under the domestic Act or law is required to be considered or seen or any amendment made in such definition whether retrospective or prospective which can be read in a manner so as to extend any operation to the terms as defined or understood in the Treaty. The Legislature or Parliament while carrying out amendment to interpret or define a given provision under the Domestic Law of the country cannot supersede or control the meaning of the word which has been expressly defined in a Treaty negotiated between executives of two sovereign nations. The payment of transponder charges to PanAmSat and up linking charges cannot be treated as a consideration for ‘use’ or ‘right to use’ any copyright of various terms used in para 3(a) like copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting or in any manner relates to any patent or trademark, design, secret formula or process. It is 32 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 also not use or right to use any industrial, commercial, or scientific equipment. There is no such kind of right to use which is given by Pan Am Sat to asessee. Thus, the said payment does not fall within the ambit of the terms used in para 3 of Article 12. So far as the reading of amended definition of ‘royalty’ as given in section 9(1)(vi) into treaty, Hon’ble Delhi High Court in its latest judgment in the case of DIT vs. New Skies Satellite(supra), wherein it has considered Hon’ble Madras High Court decision in the case of Verizon Communications Singapore Pte Ltd. (supra) also, have discussed the issue threadbare and came to the conclusion in the following manner:- “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, supra note 1, when the definitions were in fact pari material (in the absence of any contouring explanations), will continue to hold the filed 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 partners 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 33 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 applicable to cases preceding the Finance Act of 2012 where there exists no Double Tax Avoidance Agreement”.

The aforesaid decision takes care of all the arguments relied upon by the ld. DR including that of the Verizon Communications Singapore Pte Ltd’s. The Hon’ble High Court has specifically clarified as to why the said decieion of Madras High Court cannot be applied in such cases after observing as under:- “31. In a judgment by the Madras High Court in Verizon Communications Singapore Pte Ltd. V. The Income Tax Officer, International Taxation I, [2014] 361 ITR 575 (Mad), the Court held the Explanations to be applicable to not only the domestic definition but also carried them to influence the meaning of royalty under Article 12. Notably, in both cases, the clarificatory nature of the amendment was not questioned, but was instead applied squarely to assessment years predating the amendment. The crucial difference between the judgments however lies in the application of the amendments to the DTAA. While TV Today, supra note 22 recognizes that the question will have to be decided and the submission argued, Verizon, supra note 23 cites no reason for the extension of the amendments to the DTAA.

Thus, respectfully following the ratio laid down by the Hon’ble Delhi High Court, we hold that, the definition of royalty as 34 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 enlarged by Finance Act, 2012 with retrospective effect will not have any affect in Article 12 of DTAA.

36 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 22. So far as the reliance placed by the Ld. DR on the decision of ITAT Mumbai Bench in the case of NGC Network (supra), we find that in that case the issue of distribution income was set aside to the file of the AO to examine whether it falls within the ambit of ‘royalty’ as defined under the Income-tax Act or not. Here in this case, as pointed out by the Ld. Sr. Counsel, the AO himself has treated the income from distribution activity as business income for the period of 9 months and in the subsequent years. The same income cannot have two treatments, one as royalty and other as business income. Thus, the said decision will not apply on facts of the present case.

raised in these appeals are:- (Assessment year: 2004-05):

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that Taj India does not constitute an agency PE of the assessee within the meaning of Article 5(4) of the DTAA with regard to the distribution income received by it.

2.(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowances made by the Assessing Officer u/s.40(a)(i) of the I.T. Act in respect of claims of transponder charges expenses amounting to US$ 1,87,328 and uplinking charges of US $ 50,254.

2.(ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the income received from the assessee by M/s. PanAmSat being in the nature of transponder charges and received by other non-residents being in the nature of uplinking charges have arisen in India and accordingly tax should have been deducted at source on such expenses.

3. The Appellant prays that the order of CIT(A) on the above grounds he set aside and that of the A.O. restored.

4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary”.

38 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 (Assessment year: 2005-06): “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that Taj India does not constitute an agency PE of the assessee within the meaning of Article 5(4) of the DTAA with regard to the distribution income received by it.

2.(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowances made by the Assessing Officer u/s.40(a)(i) of the I.T. Act in respect of claims of transponder charge expenses amounting to US$ 2,63,149 and uplinking charges of US $ 4,57,939.

2.(ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the income received from the assessee by M/s. PanAmSat being in the nature of transponder charges and received by other non-residents being in the nature of uplinking charges have arisen in India and accordingly tax should have been deducted at source on such expenses.

3(i). On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in holding that payment of programming fees in respect of live progammes does not constitute Royalty as provided under Article 12 of the DTAA between India and Mauritious.

3(ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that programming fee in respect of live programming even if taken as royalty would not be deemed to accrue or arise in India as per Article 12(7) of the relevant treaty and accoridnlgy would not be taxable in India.

4. The Appellant prays that the order of CIT(A) on the above grounds he set aside and that of the A.O. restored.

From the perusal of the grounds it can be seen that they 26. are same and facts raised in the aforesaid appeals of the revenue are similar to the facts and issues involved in 39 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 revenue’s appeal which we have dealt and deliberated in detail and decided by us herein above for the AY 2003-04, which will apply mutatis mutandis to impugned appeals of the revenue also as the same facts are permeating in these years also. Accordingly, both the appeals of the revenue stands dismissed.

On the facts and in the circumstances of the case, the Commissioner of Income Tax Appeals XXX [hereinafter referred to as learned CIT(A) has erred in law and in facts in concluding that Taj TV Ltd (Taj) has the income chargeable to tax in India on the grounds that it has Permanent Establishment In India 28. At the outset, it is noticed that, appeal of the assessee are barred by limitation by several days. In support of its condonation of delay, the assessee contended and stated as under:-

With reference to the captioned subject, Taj submits as under:- Taj has received an order passed by Honorable Commissioner of Income Tax (Appeals)-)XXXI [(A)'], pertaining to AY 2003-04 on 26.02.2007 In this regard, we state that the Deputy Director of Income Tax (International Taxation) -2(1) Mumbai, 40 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 (DDIT) has preferred an appeal against the said CIT (A) order. The copy of Form 36 filed by the income-tax Department is attached herewith for your ready reference. Further, no hearing for the appeal filed by the tax department has been taken place till date.

In view of the appeal preferred by the Income-tax Department and in view of certain recent judicial pronouncements, which is applicable in the present case of Taj, Taj would like to prefer an appeal against the order of CIT (A) for A Y 2003-04.

Certain relevant judicial pronouncements on arms length principle as similar to the facts of case of Taj, are as under:-

• DIT V Morgan Stanley & Co Inc (2007) 79 lTD 417 (Supreme Court) • Galileo International Inc. V DCIT (2008) 19 SOT 257 (Delhi Tribunal) • Amadeus Global Travel Distribution S A Vs DCIT, Delhi (2008) TA Nos. 2143, 2144 & 2145 IDeII2000 (Unreported) In the aforesaid judicial pronouncements, the Honorable Apex Court / Honorable Tribunal had observed as under:

… the said ruling equates an arm's length analysis (ALA) with attribution of profits. It holds that once a transfer pricing analysis is undertaken: there is no further need to attribute profits to a PE. The impugned ruling is correct in principle insofar as an associated enterprise, that also constitutes a PE, has been remunerated on an arm's length basis taking into account all the risk-taking functions of the enterprise. In 41 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 such cases nothing further would be left to be attributed to the PE, In this regard, Taj prays to your Honor for condoning the delay in filing an appeal on account of following ground:-

The DDIT had held that Taj is having PE in India and without considering the Circular No. 23 based on Arm's length principle, it has held that Taj's income is liable to tax in India.

Now, in view of the aforesaid judicial pronouncements on the subject matter relevant to the facts of the Taj, Taj humbly prays to your Honor to admit an appeal to consider the submission while dealing with the appeal filed by the income-tax department for the same assessment year.

Taj further submits that it has also recently obtained a opinion from the Indian legal consultant opining that the ratio laid down in the aforesaid judicial pronouncements would be similar to the case of Taj and appeal may be filed before the appellate authorities in this context.

Taj humbly prays to your Honor to condone the delay which is at the discretion of the Honorable Court and provide an opportunity of being heard. In view of above, Taj humbly requests your Honor to admit the appeal and further request your Honor to combine the said appeal with the appeal filed by the income-tax department for the same assessment year”.

42 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 This reason is common in all the three appeals of the assessee. The aforesaid reason for condoning the delay does not fall within the realm of “reasonable cause”, because assessee was not aggrieved initially by the order of the CIT(A) and took a conscious decision that no appeal is to be filed. Later on, when certain decisions have come-up, it decided to file the appeal. This shows that, assessee was not interested in prosecuting the appeal after receiving the CIT(A)’s order. Thus, it was a conscious and deliberate decision not to file the appeal; therefore, we do not find any reason to condone the delay on the reasons as stated by the assessee before us. However, we are making it clear that, qua the advertisement revenue whether the assessee has PE in India or not as raised in grounds of appeal before us is left open and assessee would be free to take-up this issue in subsequent years, if at all the dispute arises. Thus, the dismissal of appeal on the ground of limitation will not affect the merits of ground raised before us. With this direction, all the three appeals raised by the assessee are treated as dismissed. To sum-up: All the appeals filed by the revenue as well by the assessee stands dismissed. Order pronounced in the open court on 5th July, 2016 Sd/- Sd/- (जी.एस. प�ू) (अिमत शु�ला) लेखा सद�य �याईक सद�य (G S PANNU) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 5th July, 2016 43 ताज ट� वी �ल�मटेड M/s Taj TV Ltd ITA No. : 4678/Mum/2007 ITA No.: 412/Mum/2008 ITA No.: 4176/Mum/2009 ITA No.: 5537/Mum/2008 ITA No.: 5536/Mum/2008 ITA No.: 4706/Mum/2009 ��त/Copy to:- 1) अपीलाथ� /The Appellant. 2) ��यथ� /The Respondent. 3) The CIT(A) –XXXI, Mumbai. 4) The DIT(International Taxation)/CIT- Concerned, Mumbai. 5) िवभागीय �ितिनिध “एल“, आयकर अपीलीय अिधकरण, मुंबई/ The D.R. “L” Bench, Mumbai. 6) गाड� फाईल \ Copy to Guard File. आदेशानुसार/By Order / / True Copy / /