Royalty on Digital broadcasting services by foreign company & Income deemed to accrue or arise in India

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Royalty on Digital broadcasting services by foreign company & Income deemed to accrue or arise in India

 

Short Overview : Income earned by assessee, a Thailand based company, for rendering digital broadcasting services through its satellite, to both residents of India as well as non-residents, was not taxable in India as royalty under section 9(1)(vi).

Revenue challenged order of Tribunal holding that Data Transmission Services did not amount to royalty in terms of article 12 of the Indo-Thai Double Taxation Avoidance Agreement.

It is held that Following DIT v. New Skies Satellite BV’, (2016) 382 ITR 114 (Del) : 2016 Tax Pub(DT) 1115 (Del-HC), income earned by assessee, a Thailand based company, for rendering digital broadcasting services through its satellite, to both residents of India as well as non-residents, was not taxable in India as royalty under section 9(1)(vi).  Unless DTAA is amended jointly by both parties to incorporate income from data transmission services as partaking of nature of royalty, or amend definition in a manner so that such income automatically becomes royalty, Finance Act, 2012 which inserted Explanations 4, 5 and 6 to section 9(1)(vi) by itself would not affect meaning of term ‘royalties’ as mentioned in article 12 of India – Thailand DATA.

Decision: In assessee’s favor

IN THE DELHI HIGH COURT AT NEW DELHI

S. RAVINDRA BHAT & A.K. CHAWLA, JJ.

CIT (IT) v. Thaicom Public Co. Ltd.

ITA 429/2018 & CM APPL. 13887/2018

11 April, 2018

Appellant by: Ruchir Bhatia, Adv.

Respondent by:. Tarun Gulati, Adv. with Kishore Kunal & Prashant Tahiliani, Advs.

ORDER

The appellant challenges the decision of the Income Tax Appellate Tribunal (ITAT) which ruled that Data Transmission Services did not amount to royalty in terms of article 12 of the Indo-Thai Double Taxation Avoidance Agreement. This issue was covered by the decision of this Court in ‘DIT v. New Skies Satellite BV’, (2016) 382 ITR 114 (Del) : 2016 Tax Pub(DT) 1115 (Del-HC).

No question of law therefore arises. The appeal is dismissed along with the pending application.

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