ITAT Rules No TDS on Transponder Charges Paid to Intelsat UK: Revenue Appeals Dismissed

Bennett Coleman & Co. Ltd., a leading media company, entered into agreements with Intelsat Global Sales and Marketing Ltd., UK, for satellite transponder services used in uplinking and downlinking television signals in India. For AYs 2018-19 and 2019-20, the assessee withheld tax on such payments out of abundant caution and subsequently filed appeals under Section 248, contending that the payments were not taxable in India.

The Assessing Officer treated the transponder charges as “royalty” under Section 9(1)(vi), relying on Explanation 6 inserted by the Finance Act, 2012. The CIT(A) allowed the assessee’s appeals, holding that the payments were not taxable under the India-UK DTAA. Aggrieved, the Revenue filed multiple appeals before the ITAT.

Main Issue: Whether transponder service fees paid to a UK-based satellite operator constitute “royalty” under Article 13 of the India-UK DTAA, thereby attracting TDS obligations under Section 195 of the Income Tax Act.

ITAT’s Ruling: The ITAT dismissed all Revenue appeals and upheld the orders of the CIT(A). The Tribunal held that payments for satellite transponder services do not amount to “royalty” under the India-UK DTAA, as they are not for the use of any “secret process” and involve standard transmission services without transfer of control or rights in the satellite.

It further ruled that the expanded domestic definition of “process” under Explanation 6 to Section 9(1)(vi) cannot be read into the DTAA unless the treaty itself is amended. The Tribunal concluded that Bennett Coleman was not liable to deduct tax at source under Section 195 on such payments.

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