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Fees to Foreign Satellite Companies are Non-taxable
The Delhi High Court has issued an important ruling in the case of Asia Satellite Telecommunications Limited on the issue of taxability of lease of transponders. The Delhi High Court has ruled that lease rentals paid to foreign satellite service providers does not constitute 'royalty' under the provisions of the Income-tax Act, 1961 and is accordingly, not taxable under the Act. Taxand India provides a synopsis of the key issues on which the Delhi High Court issued its ruling.
The High Court held that no such purported use (i.e. use of a process) has taken place in India given that the customers/companies are situated outside India, agreements are executed outside India and satellites were not located in the orbital slots allotted to India. Merely because the transponder had footprints on various continents would not mean that the process has taken place in India.
The characterisation of the payment for lease of transponder space has been a subject matter of extensive debate owing to conflicting judicial decisions at the appellate level. This landmark decision has come as a relief to global satellite companies as it has resolved taxability of provision of bandwidth.
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