“Section 153(9)”

Payments for transponder services do not constitute payment for the use of equipment and therefore do not qualify as royalty income under section 9(1)(vi) of the Income-tax Act for a non-resident. The use of satellite transponder services by broadcasters is not considered the use of equipment.

The case establishes that in the modern virtual world, an entity's virtual presence, rather than just physical presence, is key to determining its operational extent, especially when equipment is placed at customer premises. This principle guides the characterization of payments to non-residents, often as royalty, attracting withholding tax under Section 195, considering statutory explanations for deemed accrual of income.

The 'use or right to use' of an asset, which is a condition for royalty income, is satisfied when possession and control are given to the hirer for their beneficial use, even if the owner retains ultimate ownership.

Payments made for interconnect usage charges to foreign telecom operators are not considered 'royalty' under Section 9(1)(vi) of the Income-tax Act, 1961, nor are they subject to tax withholding under Section 195 of the Act.

For income to be characterized as 'fees for included services', the Revenue must prove that the assessee provided technical or consultancy services that involved making available technical knowledge, experience, skill, know-how, or processes. Access to a database alone does not meet this 'make available' condition.

Transponder fees are taxable in India as royalty income. The ITAT decision in Viacom 18 Media Pvt Ltd. (2015) 153 ITD 384 (Mum.) has been cited to support this conclusion.

Subscription fees paid for online access to a database, such as 'scifinder', are not considered royalty if the use does not involve the exploitation of copyright. Such payments are also not classified as fees for technical services if they do not meet the 'make available' clause requirement.

Consideration paid for the 'use' or 'right to use' equipment is taxable as royalty, even if there is no actual present use, as the right to use in the future triggers the royalty clause.