Satellite charges are not royalty

 The assessee claimed deduction for payment made to SSA, Thailand towards broadcasting and telecasting as well as consultancy services without deducting tax at source on the pretext that said payment constituted business income of SSA. Since SSA had no PE in India, its business income was not chargeable to tax in India in accordance with Article 7 of the DTAA between India and Thailand. AO, however, invoked section 40(a)(i) and disallowed the said payment considering it to be in the nature of fees for consultancy charges which attracted TDS provisions. CIT(A) certified order passed by AO.
On appeal, the Tribunal held in favour of assessee as under:
1) In the absence of control and possession of the user over the equipments, the amount paid to SSA could not be held to be a consideration for the use or right to use any industrial, commercial or scientific equipment as envisaged in clause (iva) of Explanation 2 to Sec. 9(1)(vi);

2) Since SSA is the licensee of certain satellite owned by Government of Thailand and for providing facility of broadcasting it recovers service charges, the amount paid by the assessee certainly constituted business income of SSA under respective Article 7;

3) Considering the legal maxim lex non cogit ad impossiblia (which means that law cannot possibly compel a person to do something which is impossible to perform), it held that provisions of Explanations 5 (dealing with 'royalty') and 6 (explaining the term 'process') to section 9(1)(vi) inserted by the Finance Act, 2012 wef 1-6-1976 cannot be made applicable.
Thus, payment to SSA could not be taxable in India in the hands of SSA either under sections 9(1)(vi) or 9(1)(vii) as per the legal position prevalent at the relevant time and consequently, assessee was not liable to deduct tax at source - CHANNEL GUIDE INDIA LTD. v. ACIT [2012] 25 TAXMANN.COM 25 (MUMBAI - TRIB.)
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