COMMISSIONER OF INCOME TAX Vs. ISRO SATELLITE CENTRE

JUDGEMENT

(1.) As common questions are involved in all these appeals, they are taken up for consideration together and disposed off by this common order. The assessee ISRO Satellite Centre, Government of India, Department of Space is in the business of manufacture of satellites called INSAT 3A-3E. To place these satellites in Geostationary Transfer Orbit in the space, it required the services of Arianespace, a French Company. Accordingly, on 30-11-2000, an agreement was entered into between the assessee and the French Company. The service rendered by the French Company is with reference to "Launch Service Agreement for the launching into the Geostationary Transfer Orbit of the INSAT 3A-3E satellites." The remuneration payable to the French Company was with reference with the launch of INSAT 3A-3E satellites. The assessee was required to carry the satellites to the location of the launch pad/launch vehicle of the French Company. Arianespace had proposed to launch the satellite into Geostationary transfer orbit on a shared Ariane launch where the launcher's payload is made up of the assessee's Spacecraft and a spacecraft of a third party customer of Arianespace. Arianespace, on its part, was to notify the assessee customer the type of launch vehicle chosen for the launch of the two satellites. The agreement states,. "Launch Services, except for Post-launch Services, shall be deemed to be completed by Arianespace when the launch has taken place." In terms of the agreement, Arianespace rendered several services as set out in the agreement to the assessee. Arianespace also provide certain general range support like transportation, payload, preparation analysis and operations for pre-launch and various miscellaneous activities. All the activities are highly sophisticated and involve a complex nature of technologies. Therefore, the Assessing Authority held that the payments received by M/s. Arianespace from the assessee are clearly fees for technical services as per the definition in Section 9(1)(vii) of the Income-tax Act (for short hereinafter referred to as the Act). The Assessing Authority also referred to the DTAA between India and France, fees for technical services, where fees for technical services defined as under:--

(2.) In view of the aforesaid clause, the Assessing Authority was of the view that the services rendered by Arianespace clearly fall within the aforesaid definition of technical services. Accordingly, payment made by the assessee to Arianespace and M/s. Intelsat is fee for technical services/fees for ancillary services which is chargeable to Indian Income-tax as income of the recipient. Thus, the Indian Payee/the assessee should have deducted taxes at the appropriate rate in terms of the respective DTAA/Section 115A read with Section 195 of the Act, which has not been done.

(3.) Similarly, the assessee has also entered into an agreement with Intelsat, an American Company for the purpose of tracking, telemetry and command support charges for satellites launched by the assessee. It is also a highly sophisticated technical work, which is being earned out by the American Company. The technical input which is being made available by M/s. Intelsat to the assessee is used by the assessee to control the movements and other functions of the satellite. These are also the technical services and it would squarely fall within the definition given in Section 9(1)(vii) of the Act. The relevant clause in the DTAA with USA reads as under:--