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(v).

26. The said amendment relating to "royalty", particularly with reference to use or right to use any industrial, commercial or scientific equipment, etc., was inserted with effect from April 1, 2002, under the Finance Act, 2001. The said expression came up for consideration before the Authority for Advance Rulings in the 2013 SCC OnLine Mad 3316 decision reported in Dell International Services India (P.) Ltd., In re (2008) 305 ITR 37 (AAR), a decision strongly relied on by the appellant in support of its contention that the payment to the assessee herein is not "royalty". The applicant-company before the Authority for Advance Rulings was Dell International Services (India) P. Ltd. engaged in the business of providing call centre, data processing and information technology support services to its group companies. It entered into an agreement with BT America - a non- resident company formed and registered in the USA under which BTA provides the applicant with two-way transmission of voice and data through telecom bandwidth. While BTA would provide the international half-circuit from the US/Ireland, the Indian half circuit is provided by Indian telecom company, namely, VSNL with whom BTA has a tie-up. The bandwidth so provided by BTA would give full country coverage in both the countries of delivery, i.e., USA and India. The fixed monthly recurring charge for the circuit between America and Ireland and for the circuit between Ireland and India is payable to BTA.

29. Appearing for the respondents, Mr. Sabharwal submitted that undisputedly, the assessee is a foreign telecom operator engaged in the business of providing data transmission/ bandwidth services from outside India facilitating high speed data connectivity. It was submitted that in pursuance of the above, it enters into contracts for transmission of voice and data to customers. Mr. Sabharwal pointed out that for rendering telecom services in India, it is incumbent upon an operator to obtain a telecom license and which the assessee, admittedly, does not hold since it does not render any service in India. It was asserted that the entire infrastructure and equipment with the aid of which the assessee provides transmission/bandwidth services is situate outside India and that at no point of time does it rent out that equipment.

36. This position, according to Mr. Sabharwal, is also evident from a reading of the directions of the DRP dated 16 October 2015 and where the business of the respondent assessee was examined and understood as having the following characteristics: -

―1.0 The assessee, M/s. Telstra Singapore Pvt. Ltd., is a non-resident company incorporated in Singapore. It is engaged in the business of providing connectivity solutions (International Private Leased Circuits, Multi-Protocol Label Switching ('MPLS'), IP/VPN etc.) to facilitate high speed data connectivity (hereinafter referred to as 'bandwidth services'). Telstra Singapore holds the infrastructure and equipment, either owned or leased, outside India required to provide bandwidth services to customers. Under the Indian telecom regulations, only a licensed service provider can provide Bandwidth Services in India. To facilitate provision of bandwidth services in India, it entered into an agreement with Bharti Airtel Limited ('Bharti'), an unrelated telecom company (referred as One Stop Shop ('OSS') Agreement).

―5. Briefly in the facts of the case, the assessee company is incorporated in Singapore. It is engaged in the business of providing digital transmission of data through international private line or multi-protocol label switching, etc. to facilitate high speed data connectivity (hereinafter referred to as 'bandwidth services') The assessee provides, bandwidth services outside India to its customers. It has entered into Global Business Service Agreement ('GBSA') with various customers. 1n case where services are provided by Indian telecom operator like Bharti Airtel in India and the services outside India are provided by the assessee, it enters into One Stop Shopping Services Agreement('OSS') with Bharti Airtel or any other Indian telecom operator, to facilitate single billing facility to the customer. Under the agreement with the customer, uninterrupted 24X7 services are available to it. In case, the services are unavailable or not available at the requisite speed the customer shall be entitled to rebate as per the rates agreed upon. The assessee for the year under consideration, had filed the return of income at Nil. The Assessing Officer was of the view that the amount received from Indian customers for the provisions of bandwidth services outside India was equipment/process royalty under section 9( 1 )(vi) of the Act read with Article 12(3) of the India Singapore Tax Treaty. The Assessing Officer in this regard, has placed reliance on Hon'ble Madras High Court in the case of Verizon Singapore Pte Ltd. vs ITO [2013] 39 taxmann.com 70 (Madras) and in Special Bench of Delhi ITAT in the case of New Skies Satellite NV vs ADIT (2009) (126 TTJ 1), The DRP upheld the findings of the Assessing Officer in view of the ratio laid down by the Hon'ble Madras High Court in the case of Verizon Singapore Pte Ltd. vs ITO (supra). The Assessing Officer passed the final assessment order against which the assessee is in appeal before us.