Term ‘Process’ defined by section 9 can’t be imported to interpret ‘secret formula or process’ used in DTAA: ITAT

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  • Last Updated on 26 February, 2022

withholding tax; section 9; income tax act; double taxation avoidance agreement; DTAA

Case Details: ACIT v. Viacom 18 Media (P.) Ltd - [2022] 135 taxmann.com 321 (Mumbai - Trib.)

Judiciary and Counsel Details

    • Prashant Maharishi, Accountant Member and Sandeep Singh Karhail, Judicial Member
    • Nimesh Vora, AR for the Appellant. 
    • Milind S. Chavan, SR DR for the Respondent.

Facts of the Case

Assessee was engaged in marketing advertisement time for different television channels and distribution of these channels. It made payment for transponder service fees to three entities. Assessee applied for an order under section 195(2) for nil withholding tax certificates for payment of transponder services fees.

The Assessing Officer (AO) rejected assessee’s application by holding that these payments were chargeable to tax as royalty.

On appeal, the CIT(A) held payment of transponder charges paid by the assessee were not taxable in India, and therefore assessee cannot be asked to withhold tax on these payments. Aggrieved revenue filed the instant appeal before the Tribunal.


The Mumbai Tribunal held that the revenue contended that the term ‘process‘ as defined in Explanation [6] to section 9 (1)(vi) of the Income-tax Act, should be read in to the Treaty as the term ‘process‘ used in the treaty Article 12(3) is not defined in Treaty.
In Article 12(3) of the India-Malaysia Treaty, the term used is ‘Secret Formula or process’ and not ‘process’. Therefore, the meaning of the term ‘process’ cannot be incorporated into the Treaty. Further, the meaning of the word ‘secret’ in Treaty would become redundant if we interpret ‘Secret Formula or process’ with the meaning of just ‘process’.
Accordingly, payment made for transponder charges didn’t constitute royalty under section 9(1)(vi) of the Act or under the relevant double taxation avoidance agreement. Thus, no tax was required to be deducted tax at the source under section 195.

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