Payment for Transponder Services does not amount to ‘Royalty’: ITAT [Read Order]

The Income Tax Appellate Tribunal, Mumbai has held that the payment for transponder services would not amount to royalty under the provisions of Income Tax Law and the relevant Double Taxation Avoidance Agreements.

The assessee is engaged in the business of marketing/advertising air time of different television channels, distribution of these channels etc. During the year under consideration, the assessee made payment of transponder service fees to three entities. The Assessing Officer withheld the tax on transponder service fees paid by the assessee and held that the payment is in the nature of royalty both under the provisions of the Act as well as under DTAA between India and relevant country and therefore, payments are liable for withholding tax.

The assessee relied on the decision of the Bombay High Court in the case of Neo Sports Broadcast Pvt. Ltd. wherein it is held that transponder charges paid to nonresident is not taxable as “royalty”.

The department contended that in view of Explanation to section 9(1)(vi), the term “process” referred in definition of Royalty includes transmission by satellite. Therefore, as per Act, the payment for transponder service is Royalty. The definition of Royalty according to DTAA also includes payment made for any “Process”. The term “Process” has not defined in DTAA and therefore the definition has to imposed from the Act. In such circumstances, the providing transponder service is Royalty as per DTAA also.

The Tribunal bench comprising Shri Om Prakash Kant (Accountant Member) and Shri Amarjit Singh (Judicial Member) has observed that the issue in dispute in these both appeal is whether the transponder charges paid by the assessee to three entities listed above is in the nature of the ‘royalty’ and liable for withholding tax.

Relying on the decision in ITA No. 523/M/2021, 1068/M/2021, 1072/M/2021, 1063/M/2021 and 1064/M/2021 wherein it was held that the payments made for transponder services as not liable for withholding tax.

“The issue being identical, respectfully following the finding of the Tribunal, the grounds raised by the Revenue are dismissed,” the Tribunal concluded.

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.