Income: Deemed to accrue or arise in India: Section 9(1)(i) and (vi) of Income-tax Act, 1961: A.Y. 1997-98: Assessee, a non-resident company leased out transponder capacity on its satellite to foreign TV channels to relay their signals for Indian viewers: Provisions of section 9(1)(i) and 9(1)(vi) not applicable: No income accrues or arises in India.

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[Asia Satellite Telecommunications Co. Ltd. v. DI, 238 CTR 233 (Del); 197 Taxman 263 (Del.)] The assessee, a non-resident company was carrying on the business of private satellite communications and broadcasting facilities. The assessee was the lessee of a satellite called AsiaSat 1 and was the owner of a satellite called AsiaSat 2. These satellites neither use Indian orbital slots, nor are they positioned over Indian airspace. The foot prints of AsiaSat 1 and AsiaSat 2 extend over four continents, viz., Asia, Australia, Eastern Europe and Northern Africa. AsiaSat 1 comprises of a South Beam and a North Beam and AsiaSat 2 comprises of the C Band and Ku Band. The territory of India falls within the footprint of the South Beam of AsiaSat 1 and the C Band of AsiaSat 2. The assessee enters into agreements with TV Channels, communication companies or other companies who desire to utilise the transponder capacity available on the assessee’s satellite to relay their signals. The customers have their own relaying facility, which are not situated in India. The assessee has no role to play either in the uplinking activity or in the receiving activity. The assessee’s role is confined in space where the transponder which it makes available to customers performs a function which it is designed to perform. The only activity that is performed by the assessee on earth is the telemetry, tracking and control of the satellite. This is carried out from a control centre at Hong Kong. In the relevant year the assessee had no customers who were residents of India. In response to a notice u/s.142(1) of the Income-tax Act, 1961 issued by the Assessing Officer, the assessee filed the return of income claiming that no part of income of the assessee is taxable in India. The Assessing Officer held that the assessee had a business connection in India and, therefore, was chargeable to tax in India. He held that the revenues would have to be apportioned on the basis of countries targeted by the TV channels who were the assessee’s customers. On this basis, he estimated that 90% of the assessee’s revenue was attributable to India. After arriving at the income of the assessee, he held that 80% thereof was apportioned to India as most of the channels were India-specific and their advertisement revenue was from India. The Tribunal held that the provisions of section 9(1)(i) are not attracted, but the provisions of section 9(1)(vi) are attracted and accordingly a portion of the income of the assessee is taxable in India.

On appeal, the Delhi High Court held that neither the provisions of section 9(1)(i), nor the provisions of section 9(1)(vi) are attracted and accordingly, no portion of the assessee’s income is taxable in India.