ORDER
Vijay Pal Rao, Judicial Member - These four appeals by the assessee are directed against the composite order of CIT(A) dated 13.01.2009 arising from the order passed u/s 195(2) of the Income Tax Act., for assessment year 2009-10 to 2011-12 respectively. The assessee raised common grounds in all the four appeals as under:—
"On the facts and in the circumstances of the case,, and in law, the learned Commissioer of income -tax (appeals) -11, Mumbai [CIT(A)] has erred in holding that the transponder fees payable by the appellant to Intelsat corporation are in the nature of 'royalty' as per provisions of the income tax Act, 1961 ('the Act') and the India-USA Tax Treaty ('the treaty') and in consequently upholding the order of the learned Asst. Director of Income Tax (Intl. Tax)-2(2) ['ADIT'] directing the Appellant to withhold tax from such payments under section 195 of the Act.
It is prayed that the Ld. ADIT be directed to consider the transponder fees as not subject to tax withholding under section 195 of the Act and that consequently, the order passed by the learned ADIT under section 195 of the Act be quashed."
2. The assessee is a company incorporated in India and is primarily engaged in broadcasting television channels from India. It is also engaged in marketing of advertising airtime on these channels, distribution of the channels, marketing and distribution of films through its film division 'Studio 18' and production of program content/television software. The assessee has been provided with a 24 hour, satellite signal reception and retransmission service ('transponder service') by Intelsat Corporation (previously known as 'PanAmsat Corporation'), a USA Corporation. In consideration for transponder service, the assessee has to pay transponder service fee to Intelsat which is a tax resident of USA under Article 4 of the India-USA Tax Treaty. The assessee approached to the AO u/s 195(2) of the I.T. Act requesting for Nil withholding tax order for payments by the assesssee to Intelsat. It was submitted beforfe AO that the payments to Intelsat are not chargeable to tax under the India-USA tax treaty as royalty or fees for included services under Article 12 and hence the payments for transponder service fee by the assessee to Intelsat are not taxable in India in the absence of Permanent Establishment (PE) of Intelsat in India. The AO did not accept the contentions of the assessee and passed its order u/s 195(2) holding that the transponder fee payable by the assessee to Intelsat is in the nature of royalty income taxable in India in terms of section 9(1)(vi) of the Act and also under Article 12 of the India-USA Tax Treaty. Consequently the AO held that the subject payments are liable to tax witholding. Aggrieved by the order of AO the assessee filed appeal before CIT(A).
3. The CIT(A) confirmed the order of the AO by following the decision of Sepecial Bench of this Tribunal in case of New Skies Satellite v. Asstt. DIT (International Taxation) [2009] 121 ITD 1 (Delhi) .
4. Before us, the Ld. Counsel for the assessee has submitted that decision of Special Bench of this Tribunal in the case of New Skies Satellite (supra), has been reversed by the Hon'ble Delhi High Court in the case of Asia Satellite Tele Communication Co. Ltd. v. DIT [2011] 332 ITR 340/197 Taxman 263/9 taxmann.com 163 . He has further contended that in the case of payee i.e. ADIT v. Intelsat Corpn. [IT Appeal No. 4662 (Delhi) of 2011, dated 9-7-2011] the Delhi Bench of this Tribunal by following the decision of Hon'ble High Court in the case of Asia Satellite Communication Co. Ltd. (supra) vide its order dated 4.03.2011 held that no liability to tax can be fastened on the assessee under the Act. The Ld. AR then referred the decision of this Tribunal in the case of Times Global dated 13.01.2012 involving the issue of payment for transponder service by the same payee as in the case of the assessee. The Tribunal in the case of Times Global Broadcasting Co. has decided the issue in favour of the assessee by following the decision of Hon'ble High Court in the case of Asia Satellite Communication Co. Ltd. (supra). The Ld. Counsel has then referred the decision of this Tribunal in the case of B4U International Holding Ltd. v. Dy. CIT [2012] 52 SOT 545/21 taxmann.com 529 (Mum.) and submitted that in the said case the payee is again same as in the case of the assessee and the Tribunal has again decided the issue in favour of the assessee by following the decision of the Hon'ble Delhi High Court in the case of Asia Satellite Communication Co. Ltd. (supra). Similarly in the case of WNS North America Inc. v. Asstt. DIT (IT) [2013] 141 ITD 117/[2012] 28 taxmann.com 173 (Mum.) , the Tribunal has again considered an identical issue and decided the same in favour of the assessee by holding that the retrospective amendment in the act will not affect the benefit available under the DTAA. The Ld. Counsel thus submitted that in all the decision of the Tribunal where the payee is same it has been held that the payment in question for providing transponder service is not royalty and, therefore, not taxable in India in the absence of PE of the payee in India. The Ld. AR then referred Article 12(3) of India-USA Double Taxation Avoidance Agreement (DTAA) and submitted that the term royalty has been defined in the treaty and, therefore, the amendment in the definition of the royalty in the Act would not affect the provisions of DTAA. He has pointed out that the definition under Article 12(3) of Indo-US treaty and pre amended definition of royalty u/s 9(1)(vi) are identical and, therefore, the subsequent amendment in the Act would not take away the benefit under the treaty. In support of his contention he has relied upon the decision of Hon'ble Jurisdictional High Court in the case of CIT v. Siemens Aktiengesellschaft [2009] 310 ITR 320 (Bom.) and submitted that the Hon'ble High Court has held that an unilateral amendment is not possible for one nation which is party to an agreement to tax income which otherwise was not subject to tax, accordingly such income would not be subjected to tax. The provisions of DTAA are more beneficial to the assessee and the provisions of agreement prevail over the provisions of the Income-tax Act.
5. On the other hand, the Ld. DR has submitted that the decision of Hon'ble High Court in the case of Asia Satellite Communication Co. Ltd. (supra) was passed in the context of the Hongkong based entity and India has no tax treaty with Honkong. The payments were made by a non-resident to non-resident. Therefore, the case of the assessee is distinguishable from the case of Asia Satellite Communication Co. Ltd.(supra) as the assessee is a company incorporated in India and the payment is made by a resident to a non-resident. She has further submitted that payment made in the case of Asia Satellite Communication Co. Ltd. was (supra) by a foreign channel owner to Asia Sat Hongkong both non-residents for a feed that is meant to be viewed in India and the Hon'ble High Court of Delhi has held that Asia Sat was not taxable in India based on the territorial nexus by observing that there is no use of process. The Ld. DR has submitted that in view of the amendment in section 9(1)(vi) whereby Explanation 6 has been inserted to clarify that the expression 'Process' includes and shall be deemed to have always included transmission by satellite including up-linking, amplification, conversion or down-linking of any signal. The decision f Hon'ble of Delhi High Court is no more relevant on this point. She has also referred the various clauses of agreement between Intelsat and the assessee and submitted that the user of a particular transponder capacity is provided to the assessee and a transmission plan is drawn and agreed to by both the parties. The assessee is able to decide the content being uplinked, the number of times of such unplink or the time zone of such uplink to the transponder located in the satellite. The control of the process, by either the satellite Co. or the telecasting Co, will be through sophisticated instruments either installed at the ground stations owned by the satellite companies or through the instruments installed at the earth stations owned and operated by telecasting companies. The time of telecast and the nature of programme, all depends upon the telecasting companies, and, thus, they are using that process. Thus the Ld. DR has submitted that the terms of agreement clearly show that the use of process was provided by the satellite companies to the telecasting companies whereby the telecasting companies are enabled to telecast their programmes by uplinking and downlinking the same with the help of that process. The Ld. DR has submitted that both the Act as well as DTAA recognizes the payment for use of "Process" as royalty and taxable in the source country. What is "Process" is explained by way of Explanation 6 to section 9(1)(vi) of the Act. The Ld. DR thus submitted that when a term is not defined in the treaty then by virtue of Article 3(2) of the treaty, the meaning of the same is to be understood as given in the Act. Alternatively, the Ld. DR has submitted that use of transponder facility is also use of equipment and equipment royalty is taxable as per Act and the treaty. She has referred Explanation 5 to section 9(1)(vi) which clarifies that territorial nexus is not relevant in taxing the satellite services/utilization of segmented transponder capacity to fall in the tax jurisdiction of the soruce country as equipment royalty. The Ld. DR has placed strong reliance on the decision of Hon'ble Madras High Court in the case of Verizon Communications Singapore (P.) Ltd. v. ITO (Intl. Taxation) [2014] 361 ITR 575/39 taxmann.com 70 as well as in the case of Poompuhar Shipping Corpn. Ltd. v. ITO (IT) [2014] 360 ITR 257/220 Taxman 58/[2013] 38 taxmann.com 150 (Mad.) and submitted that the Hon'ble Madras High Court has discussed and distinguished the decision of Hon'ble Delhi High Court in the case of Asia Satellite Communication Co. Ltd (supra) by considering the amended provisions of section 9(1)(vi) of the Act. Since these decisions are later decisions and passed after considering the earlier decision, therefore, the Ld. DR has submitted that the decision of Hon'ble Madras High Court should be preferred over the earlier decisions. In support of her contention she has relied upon the decision of Jurisdictional High Court in the case of Commissioner Of Income-Tax v. Thana Electricity Supply Ltd. [1994] 206 ITR 727 (Bom.) .
6. In rebuttal, the Ld. Counsel for the assessee has submitted that the royalty is defined in the treaty which is identical to the definition of the Act prior to the amendment, therefore, the decision in the case of Asia Satellite Communication Co. Ltd. (supra) is applicable on this issue. He has emphasized the provisions of Article 3(2) of the Indo-US DTAA and submitted that it is provided that any term not defined in the treaty the meaning is given in the Act will be applied. Since the term "Royalty" has been defined under Article 12(3) of the treaty, therefore, the definition under the Act is not relevant. The Ld. AR has then submitted that the decision of Hon'ble Madras High Court in the case of Verizon Communications Singapore Pte. Ltd. (supra) as well as in the case of Poompuhar Shipping Corpn. Ltd. (supra) are not applicable as the decision of Hon'ble Jurisdictional High Court in the case of Siemens Aktiengesellschaft (supra) has not been considered. He has thus submitted that the decision of Hon'ble Jurisdictional High Court is binding on the Tribunal. The Ld. Counsel further submitted that the decision in the case of Poompuhar Shipping Corpn. Ltd. (supra) is not on the point of transponder service but it is on the point of use of equipment/plant. Further in the case of Verizon Communications Singapore (P.) Ltd. (supra), the Hon'ble High Court has not gone into the applicability of extended definition of the Act which is contrary to the definition of royalty under the DTAA. The Ld. Counsel has relied upon the decision of Hon'ble Delhi High Court in the case of Nokia Networks OY, wherein the High Court has considered the issue of royalty as per the amended definition of the Act and decided that when a particular payment does not fall within the purview of royalty as per treaty the same cannot be taxed as per the definition given in the Act. The Ld. AR has also relied upon the decision of Hon'ble Andhra Pradesh High Court in the case of Sanofi Pasteur Holding SA v. Department of Revenue, Ministry of Finance [2013] 354 ITR 316/213 Taxman 504/30 taxmann.com 222 . To counter the arguments of Ld. DR, the Ld. AR has submitted that the AO and CIT(A) treated the assessee's case as identical to Asia Satellite Communication Co. Ltd (supra) and the CIT(A) has followed the decision of Special Bench in the case of New Skies Satellite (supra) which has been reversed by the Hon'ble High Court, therefore, the deparment cannot change its stand by saying that the decision in the case of Asia Satellite Communication Co. Ltd. (supra) is different from the assessee's case. Even in the case where two views on a point exist, the view which is in favour of the assessee should be preferred. In support of his contention he has relied upon the following decisions:—
(i)
Dy. DIT v.
Solid Work Corpn. [2012] 51 SOT 34/18 taxmann.com 189 (Mum.)
(ii)
Allianz SE v.
Asstt. DIT (International Taxation)[2012] 51 SOT 399/21 taxmann.com 62 (Pune)
(iii)
Asstt. DIT (International Taxation) v.
Siemens Aktiengesellschaft [2013] 33 taxmann.com 480 (Mum. - Trib.).
(iv)
Convergys Customer Management Group Inc. v.
Asstt. DIT (International Taxation) [2013] 34 taxmann.com 24/58 SOT 69 (Delhi - Trib.)
7. We have considered the rival submissions as well as relevant material on record. The question before us is whether the fee payable by the assessee to Intelsat Corporation, a tax resident of USA is in the nature of "Royalty" in the light of amended provisions of section 9(1)(vi) as well as under Article 12 of Indo-US DTAA. The Ld. Counsel for the assessee has given much emphasis on the submission that any amendment in the Act would not affect the beneficial provisions of DTAA and consequently the payment by the assessee cannot be treated as royalty by unilateral act of amendment in Act. There is no quarrel on this point that as per section 90(2) in relation to the assessee to whom DTAA applies, the provisions of Act shall apply to the extent they are more beneficial to that assessee. In other words if the assessee is covered by DTAA and the provisions of DTAA are nore beneficial then there is no need to go into the provisions of the Act. The decision of Hon'ble Jurisdictional High Court in the case of Siemens Aktiengesellschaft (supra) as well as in the case of DIT v. Infrasoft Ltd. [2013] 39 taxmann.com 88/[2014] 220 Taxman 273 (Delhi) are relevant on this point.
8. The term "Royalty" has been defined in DTAA as well as in the Act. As per Article 12(3) of the Indo-US DTAA, the term "Royalty" is defined as under:—
'ARTICLE 12- Royalties and Fees for included Services.
The Term "Royalties" as used in this article means:
(a)
Payments made of any kind received as 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 contingent on the productivity, use of 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.'
9. The definition of royalty under the Act is given in Explanation 2 of section 9(1)(vi) as under:—
Income by way of royalty payable by-
'Explanation 2.—For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for-
(i)
the transfer of all or any rights (including the granting of a (licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property;
(ii)
the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property;
(iii)
the use of any patent, invention, model, design, secret formula or process or trade mark or similar property;
(iv)
the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ;
(iva)
the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB; (v) the transfer of all or any rights (including the granting of a (licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films; or
(v)
the rendering of any services in connection with the activities referred to in sub-clauses (1) to 93[(iV), (iva) and (v).'
10. So far as the term "Royalty" defined in the Explanation 2 of section 9(1)(vi), there is no change or amendment in the term royalty as such. Therefore, the definition of term royalty remained unchanged despite insertion of Explanation 6 by Finance Act 2012. Even otherwise the term "Royalty" is defined in the DTAA, therefore, any amendment in the definition of "Royalty" affecting adversely to an assessee covered by the DTAA would be inconsequential due to the protection of DTAA. The clause (b) of Article 12(3) of DTAA and clause (iva) of Explanation 2 of section 9(1)(vi) are pari materia of DTAA and clause (i) to (v) except clause (iva) are also pari material. It is pertinent to note that there is no change in the definition of term "Royalty" as provided in Explanation 2 of section 9(1)(vi) of the Act, by virtue of the retrospective amendment inserting of Explanation 6 to this clause of section 9(1)(vi). We are concerned with the definition of royalty which is common under the DTAA as well as under the Act to the extent - " payment of any kind received as consideration for the use of, or the right to use ---------- any process, industrial, commercial or scientific equipment". The term process, industrial, commercial or scientific equipment are not defined in DTAA. Therefore, the meaning of such term under the Act shall apply by virtue of Article 3(2) of Indo-US DTAA which reads as under:—
ARTICLE 3 - General Definitions
"As regards the application of the Convention by a Contracting State any term not defined therein shall, unless the context otherwise requires or the competent authorities agree to a common meaning pursuant to the provision of article 27 (Mutual Agreement procedure), have the meaning which it has under the laws of that State Concerning the taxes to which the Convention applies"
11. Apart from the ordinary contextual meaning, the term process has been defined in Explanation 6 of section 9(1)(vi) of the Act as under:—
"Explanation 6.—For the removal of doubts, it is hereby clarified that the expression "process" includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret;"
12. The introduction of Explanation 6 with retrospective effect w.e.f 1.6.1976 is an expression as intended by the legislature of the meaning of term process in the context of transmission by satellite is clarificatory in nature and, therefore, it does not amend the definition of royalty per se .There is no quarrel on the point that any payment for use or right to use of process is in the nature of royalty as per the provisions of Article 12(3) of DTAA as well as the Explanation 2 of section 9(1)(vi) of the Act. Since the term process is not defined under the DTAA, therefore, by virtue of Article 3(2) of the Indo-US DTAA, the meaning of term process as defined in the Act would apply for this purpose. We say so as a word 'process' is a term of wide import and, accordingly, has to be construed in a generic sense. The same has in fact been the subject matter of elucidation by the Hon'ble apex court in a number of cases, viz. Chillies Exports House Ltd. v. Commissioner Of Income Tax [1997] 225 ITR 814/92 Taxman 68 (SC) ; Ujagar Prints v. Union of India [1989] 179 ITR 317 (SC); Dy. CST, Board of Revenue (Taxes) v. Pio Food Packers [1980] 46 STC 63 (SC), explaining the same in the context of processing of goods, which though would apply and hold. There is nothing in the language of the relevant provision/s of either the Act or of the DTAA constricting or restricting the scope of the term, which has thus to be examined and considered contextually. As such, even de hors Explanation 6 to section 9(1)(vi), which only abundantly clarifies matters, a process could only reasonably be regarded as including a process/es as specified in Explanation 6 (supra). The same must, therefore, be regarded as within the contemplation of the said term and, thus, the term 'royalty' as defined by Explanation 2 to section 9(1)(vi) and Article 12(3) of the Indo-US DTAA. The foregoing, however, does not detract from the fact that the term 'process' being not defined, the extant definition of the same, i.e. as per the domestic law, shall apply in terms of Article 3(2) of the said treaty. The Hon'ble Madras High Court in the case of Verizon Communications Singapore (P.) Ltd (supra) while considering an identical issue has observed in para 33 as under:—
"33. Faced with the decisions of the Authority for Advance Ruling, Explanations 4 and 5 were inserted under Finance Act, 2012, with effect from 01.06.1976. Under Explanation 5, the Legislature sought to clarify the definition of 'royalty' to include the consideration in respect of any right, property or information whether or not possession or control of such right, property or information is with the payer; such right, property or information is used directly by the payer; the location of such right, property or information is in India. Explanation 6 further clarifies that the expression 'process' included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret. Thus, after the amendment introduced in the year 2012, with effect from 01.06.1976, irrespective of possession, control with the payer or use by the payer or the location in India, the consideration would nevertheless be treated as 'royalty'. The decisions cited, hence, cannot be pressed into service to understand the scope of the expression 'royalty'."
13. The expression process has been understood by the Hon'ble High Court in the light of Explanation 6 inserted by the Finance Act 2012 w.e.f 1.6.1976 and it was observed that the decision relied upon by the assessee cannot be pressed into service to understand the scope of expression royalty while distinguishing the decision of Hon'ble Delhi High Court in the case of Asia Satellite Communication Co. Ltd (supra), the Hon'ble Madras High Court in para 42 and 43 has held as under:—
"42. The decision relied on by the assessee, particularly with reference to the Delhi High Court reported in 332 ITR 340 (Asia Satellite v. DIT) is also distinguishable. This relates to a case of an assessee/lessee of a satellite called AsiaSat 1 which was launched in April 1990 and was the owner of a satellite called AsiaSat 2 which was launched in November 1995. These satellites were launched by the appellant and were placed in a geostationary orbit in orbital slots, which initially were allotted by the International Telecommunication Union to UK, and subsequently handed over to China. These satellites neither use Indian orbital slots nor are they positioned over Indian airspace. The footprints of AsiaSat 1 and AsiaSat 2 extend over four continents, viz., Asia, Australia, Eastern Europe and Northern Africa. It enters into an agreement with TV channels, communication companies or other companies who desire to utilize the transponder capacity available on the appellant's satellite to relay their signals. The customers have their own relaying facilities, which are not situated in India. From these facilities, the signals are beamed in space where they are received by a transponder located in the appellant's satellite. The transponder receives the signals and on account of the distance the signals have travelled, they are required to be amplified. The amplification is a simple electrical operation. Thereafter, the frequency on which the signals are to be downlinked is changed only in order to facilitate the transmission of signals so that, there is no distortion between the signals that are being received and the signals that are being relayed from the transponder. The transponder operations are commonly known, which are carried out not only in satellite transmission but also in the case of terrestrial transmission. There is no change in the content of the signals whatsoever that is carried out by the appellant in the transponder. Thereafter, the signals leave the transponder and are relayed over the entire footprint area where they can be received by the facilities of the appellant's customers or their customers. Its role is confined in space where the transponder which it makes available to its customers performs a function which it is designed to perform. It is claimed by the appellant that no part of the income generated by it from the customers to whom the aforesaid services are provided was chargeable to tax in India and for this reason no return income was filed in India. The Tribunal found that the transponder was not equipment and hence the payment made by the TV channels to the appellant could not be regarded as one for use of equipment. The Tribunal held that the appellant had not leased out any equipment but had only made available the process that was carried out in the transponder to its customers. Insofar as income earned by the appellant from its customers in India is concerned, the Tribunal held that this would qualify as 'royalty' as defined in Explanation 2 to Section 9(1)(vi) of the Act.
43.Therefore, issues which arose for consideration in the appeal before the Delhi High Court related to Clauses (i), (vi) and (vii) of sub-Section (1) of the Section 9 of the Act. The High Court held that even when the appellant had business connection in India, no part of the appellant's income was chargeable to tax in India in terms of Section 9 (1)(i), as no operations to earn the income were carried on in India. The Delhi High Court held that carrying out the operations in India, wholly or at least partly, is sine qua non for the application of Clause (i) of sub-section (1) of Section 9 of the Act. Merely because the footprint area included India and ultimate consumers/viewers are watching the programmes in India, even when they are uplinked and relayed outside India, would not mean that the appellant is carrying out its business operations in India. No machinery or computer, etc. is installed by the appellant in India through which the programmes are reaching India. The process of amplifying and relaying the programmes is performed in the satellite which is not situated in the Indian airspace. The transponder functioned on its own. The High Court held that the terms 'lease of transponder capacity', 'lessor', 'lessee' and 'rental' used in the agreement would not be the determinative factors. It is the substance of the agreement which is to be seen. The High Court went through the various clauses of the said agreement and held that the control always remained with the appellant and the appellant had merely given access to a broadband available with the transponder, to particular customers. Merely because the transponder has its footprint on various continents, it would not mean that the process has taken place in India. Thus the Delhi High Court followed the decision of the Apex Court reported in [2007] 288 ITR 408 (Ishikawajma-Harima Heavy Industries Ltd. v. Director Of Income Tax, Mumbai.) and held that services rendered outside India would have nothing to do with the permanent establishment in India and hence there was no process carried out in India or was there any business in India which could be attributed to the Indian territory. Thus the High Court held that the income earned by the assesee would not qualify as 'royalty', as defined in Explanation 2 to Section 9(1)(vi) of the Income Tax Act. As seen from the facts, the said judgment was rendered in the year 2011, much before the amendment under Finance Act, 2012. Further after the decision reported in [ [2007] 288 ITR 408 (Ishikawajma-Harima Heavy Industries Ltd. v. Director Of Income Tax, Mumbai.) an explanation was inserted below subsection 2 of Section 9, with effect from 01.06.1976 under Finance Act, 2007 to get over the decision of the Supreme Court. Hence this decision of the Delhi High Court is distinguishable and has no relevance to the case on hand which has to be considered on the strength of the law prevailing now."
14. After considering the definition of royalty under Article 12 of the DTAA as well as u/s 9(1)(vi), The Hon'ble High Court had held that the definition of royalty under DTAA and Indian Income Tax Act are pari materia in para 100 as under:—
"100. The definition of 'royalty' under DTAA and the Indian Income Tax Act are in parimateria. As rightly pointed out by the Revenue, Explanation 6 defines 'process' to mean and include transmission by satellite (including uplinking, amplification, conversion for downlinking of any signal) cable, optic fibre, or by any other similar technology, whether or not such process is secret. Thus, apart from the relevance and applicability of Clause (iva) that the payment is for the use or right to use of the equipment, the Tribunal held that payment for the bandwidth amounts to royalty for the use of the process. The Tribunal also pointed out that out by reason of the long distance, to maintain the required speed, boosters are kept at periodical intervals. Going by this too, in any event, the payment received by the assessee was rightly assessed as 'royalty' and would constitute so for the purposes of DTAA."
15. Turning to the facts of the assessee's case the undisputed facts are that the payments in question was payable to the Intelsat is for user of transponder capacity by the assessee for telecasting/broadcasting of its various programmes on television channels including marketing and advertising airtime etc. The Hon'ble Delhi High Court in the case of Asia Satellite Communication Co. Ltd (supra) ousted the application of the term 'royalty' to the said transaction on the premise of territorial jurisdiction in-as-much as the said 'process' was not being used in India. However, the said decision endorses the conceptual understanding of term 'process', i.e., as explained by us at para 12 of this order. Even, the same, if at all, impinges on Explanation 5 to section 9(1)(vi), has nothing to do with Explanation 6 thereto. In fact, to our mind, it is not the situs of the property or the process, but of the rights therein, that is relevant. Without doubt, the rights in or for the use of the process vesting in the assessee are, thus, located in India, whereat the signals are downlinked as also uplinked from. Again, the same has to be read in conjunction with Explanation below section 9(2), inserted on the statute by Finance Act, 2007 w.r.e.f 01.06.1976.The decision in the case of Asia Satellite Communication Co. Ltd (supra) is thus completely inapplicable in the given facts and circumstances of the case, even as clarified by the Hon'ble Madras High Court in the case of Verizon Communications Singapore (P.) Ltd. (supra). The use of transponder by the assessee for telecasting/broadcasting the programme involves the transmission by the satellite including uplinking, amplification, conversion for downlinking of signals which falls in the expression "Process" as per Explanation 6 of section 9(1)(vi). Hence the payments made for use/ right to use of process falls in the ambit of expression "royalty" as per DTAA as well as provisions of Income Tax Act.
16. In the case of Siemens Aktiengesellschaft (supra) the question before the Hon'ble High Court was that when the payment does not fall under the term of royalty as per the provisions of DTAA, the same can be taxed as royalty in terms of the definition in the Act. Thus it is clear that the payment in the said case was not found as royalty in terms of DTAA between India and Germany. However it was taxed by the revenue authorities on the basis of the definition of royalty as per the Income Tax Act. The Hon'ble High Court has held in para 40 and 41 as under:—
'40 In our opinion, even in the absence of royalty being defined under the clauses of the agreement, if it amounts to any industrial or commercial profit it would be taxable under clause III provided there is a PE in India unless we hold that considering the Explanation to section 9 brought by the Finance Act, 2007 the requirement of PE is now of no consequence."
"41 While considering the DTAA the expression "law in force" would not only include a tax already covered by the treaty but would also include any other tax as taxes of a substantially similar character subsequent to the date of the agreement as set out in article I(2). Considering the express language of article I(2) it is not possible to accept the broad proposition urged on behalf of the assessee that the law would be the law as was applicable or as defined when the DTAA was entered into. The question however, would still remain, whether the income by way of royalties other than those included in article III(3) are subject to tax in India considering the DTAA when there is no PE".'
17. Thus it is clear that in the case of Siemens Aktiengesellschaft (supra) it was found that the payment was not royalty as defined in the clauses of agreement and, therefore, it could not be taxed as royalty as per the provisions of the Act. The Hon'ble High Court though was of the view that if any term is not at all defined in the treaty then considering the express language of Article 1(2) of the Indo-German DTAA, the term defined in the act even by subsequent to the date of agreement would be applicable as set out in the Article 1(2) of the treaty. Therefore, the said decision will not help the case of the assessee before us because the Explanation 6 defines the term process and not royalty and further there is no change in the definition of royalty by virtue of Explanation 6. The other decisions relied upon by the assessee are based on the decision of Hon'ble Delhi High Court in the case of Asia Satellite Communication Co. Ltd (supra) which was prior to the amendment and without considering the Explanation 6 as well as Explanation below sub-section (2) of section 9. Further the benefit of the decision of Hon'ble Madras High Court in the case of Verizon Communications Singapore Pte. Ltd (supra) was not available at the time of those decisions, therefore, the same are not applicable in the facts of the assessee's case. In fact, the said decision, based on the situs of the process itself supports the Revenue's case of the same being a process as contemplated under Explanation 2 to s. 9(1))(vi).
18. In view of the above discussion we do not find any reason to interfere with the orders of authorities below.
19. In the result appeal of the assessee is dimissed.
JYOTI