By Geeta Jani, Dhishat B. Mehta Chartered Accountants
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Article 12, India-USA DTAA; section 9(1)(vi),
the Act – transponder service will be ‘process’ under Article 12 and
hence payment therefor will be ‘royalty’ under India-USA DTAA as well as
the Act.
Facts:
The taxpayer was engaged in
broadcasting of television channels from India and marketing advertising
airtime on these channels. The taxpayer had obtained round-theclock
satellite signal reception and retransmission service (‘transponder
service’) from an American company (“USCo”). USCo was a tax resident of
USA in terms of Article 4 of India-USA DTAA . The taxpayer had paid
transponder service fee to USCo during the relevant assessment years.
The
taxpayer approached the AO u/s. 195(2) for nil withholding tax
certificate in respect of transponder service fee. The AO did not issue
the certificate since, in his view, the payment was ‘royalty’ in terms
of Article 12 of India-USA DTAA , read with amended provisions of
section 9(1)(vi)
Held:
• The definition of “royalties”
in Article 12(3)(a) includes payments for “process”. The term “process”
is not defined in India-USA DTAA. Hence, its definition in explanation 6
to section 9(1)(vi) of the Act will apply. The use of transponder by
the taxpayer for telecasting/ broadcasting the programs involves
transmission by satellite, including uplinking, amplification,
conversion by downlinking of signals and is covered within the
definition of “process”.
• Hence, payments made for use/right to use of “process” is “royalty” in terms of India-USA DTAA as well as the Act.
•
The decision of Delhi High Court in Asia Satellite Telecommunications
Co. Ltd. vs. DIT [2011] 332 ITR 340 (Delhi) is not applicable since it
was rendered prior to the insertion of the explanation 6 to section
9(1)(vi) and explanation below section 9(2).
