Page 118 - 56-1 One Report 2022 EN

Part 1 Business Operation and Operating Performance

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Commissioner of Income Tax (Appeals or CIT (A on whether or not the revenues realized from transponder
services constituted a ‘royalty’ or business income. The ITAT Bench concluded that the use of transponder services
constituted a “process” and the revenue from the transponder service is a royalty, and as a result, withholding tax
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must be paid at the rate proscribed by law However, the ITAT Special Bench’s ruling covers only the income tax
and interest payable, and excludes the penalty with interest.
The Company’s tax agent in India received the official copy of the ITAT Special Bench ruling on 11 November 2009,
and the Company had the right to file an appeal against the ITAT Special Bench ruling with the High Court within
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120 days The Company’s tax consultant in India felt that the opinion and ruling of the ITAT Special Bench might
not be correct, and that it should be challenged, as the ruling is contrary to previous applicable judgements of the
High Court in cases related to telecommunications services. The Company is comparable in terms of its business
operations, and as such, the Company should file an appeal against the ruling with the High Court. The Company
filed an appeal against the ITAT Special Bench’s ruling with the High Court of Delhi in early December 2009.

On 31 January 2011, the High Court of Delhi passed judgement on AsiaSat’s case, ruling that the income received
by AsiaSat from non-resident customers in India are not taxable, as such income does not constitute a royalty
payment, but instead is regarded as income from transmission services provided.

On 17 February 2011, the High Court of Delhi ruled that the decision by the ITAT Special Bench, declaring that the
income from transponder service is a royalty, was not correct as it is contrary to the High Court of Delhi’s judgement
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in the AsiaSat case The High Court ordered the return of the Company’s appeal to ITAT for re-consideration and
to bring their judgment in line with the principle of law as ruled in the AsiaSat case.

On 4 March 2011, ITAT made a decision that the Company’s income from transponder services in India was not a
royalty, and as there was no permanent establishment in India, such income is free of taxes in India. ITAT also ruled
that the interest and penalty fees already assessed by the Revenue Department of India were to be nullified, and
the penalty fees assessed and requested for the years 1998-1999, 1999-2000, 2000-2001, 2001-2002 and 2002-
2003 by the Revenue Department of India against the Company to be cancelled. The Revenue Department of India
did not appeal against ITAT’s decision on the penalty issue for the said assessment years with the High Court of
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Delhi To that end, ITAT’s decision on the penalty assessment is final On 30 December 2011, the Revenue
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Department of India refunded the deposit guarantee which was placed by the Company for the payment of penalties
for the assessment years 1998-1999 to 2001–2002 in the amount of INR 162.4 million.
As per ITAT’s decision as stated in the preceding paragraphs, the Company is in the process of requesting the
refund of its guarantee money and withholding tax money already previously submitted to the Revenue Department
of India The withholding tax money which was the responsibility of the Company’s customers to collect on behalf
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of the Company, will be refunded to those customers after the final judgment of the Supreme Court of India.

On 28 September 2011, the Revenue Department of India filed an appeal with the Supreme Court of India against
the High Court of Delhi’s Judgment, which had ruled that ITAT Special Bench’s judgment on the income from
transponder service is a royalty was incorrect. The Supreme Court of India issued a letter dated 9 November 2011,
to inform the agent of the Company’s tax consultant of the appeal.

Currently, the matter is in process, awaiting the Supreme Court of India’s consideration.

2. Case in which the Court ordered the Company to be made a defendant jointly with the Ministry of Information
and Communication Technology (“MICT”) and the National Telecommunication Commission (“NTC”)

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On 19 April 2007, Mr Supong Limthanakul filed a lawsuit against MICT and NTC with the Central Administrative
Court claiming that the two government agencies were negligent in the performance of their duties by not

Part 1 Page 104