The Authority for Advance Rulings (AAR) was faced with questions of characterizing and taxing the income of a non-resident company which leased its navigation transponder capacity to the Indian Space Research Organization (ISRO).
ISRO Satellite Centre had entered into a contract with M/s Inmarsat Global, UK, to lease the navigation transponder capacity of a satellite owned by Inmarsat. The navigation transponder capacity of the satellite consists of certain transponders aboard the satellite, which orbit the earth at an altitude of 36,000 kilometres.
The crux of the controversy before the AAR related to the characterization of the income of Inmarsat. The question was whether the contractual arrangement resulted in ISRO’s “use of” or “right to use” any industrial, commercial or scientific equipment belonging to Inmarsat, so as to determine whether it was a royalty consideration, and thus, income taxable in India.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm that provides legal and tax counselling. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
