In a landmark ruling, the special bench of the Income Tax Appellate Tribunal in New Delhi has held that payments made to satellite companies for the use of satellite transponders will be characterized as royalty income (because the transaction relates to the use of a “process”), and are therefore liable to taxation under the Income Tax Act, 1961, and the relevant double taxation avoidance agreements (DTAAs). This decision reverses the one delivered in the PanAmSat International Systems case, and reinstates the 2002 decision in the Asia Satellite Telecommunications case.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
