Payment for transponder services do not amount to royalty under the provisions of Income Tax Law and the relevant Double Taxation Avoidance Agreements, the Income Tax Appellate Tribunal, Mumbai has held, in ACIT Vs Viacom 18 Media  

Viacom 18 Media is into the business of marketing/advertising air time of different television channels, distribution of these channels etc. During the year under consideration, Viacom Media paid transponder service fees to three entities–Intelsat Corporation, USA (Intelsat) 2. Intelsat Global Sales and Marketing, UK (IGSM) 3. MEAST Satellite System, Malaysia (MEASAT).  

The Assessing Officer rejected the application of the assessee holding that payment falls under the definition of “Royalty” both under the provisions of the Act as well as under DTAA between India and relevant country and therefore, payments are liable for withholding tax. 

Viacom Media cited the decision of the Bombay High Court in the case of Neo Sports Broadcast wherein it was held that transponder charges paid to nonresidents are not taxable as “royalty”. The Income Tax Department felt otherwise.  

The Mumbai Bench of the Income Tax Appellate Tribunal, comprising Om Prakash Kant (Accountant Member) and Amarjit Singh (Judicial Member), observed that the issue in dispute was whether or not the transponder charges paid by Viacom Media to three entities was in the nature of the ‘royalty’ and liable for withholding tax.  

The Commissioner of Income Tax (Appeals) had held that it was not royalty, as had been held in other similar cases. Citing precedents, the ITAT (Mumbai) dismissed the appeals raised by the Revenue.