Telecom roaming charges are not royalty where no right to use network or process is granted under the treaty.

Telecom roaming charges received for providing connectivity in the United Kingdom were held not to constitute royalty under section 9(1)(vi) of the Income-tax Act or Article 13(3) of the India-UK DTAA. The arrangement was characterised as a service arrangement, because the payer obtained no right to use the network, equipment, or process; the operator merely used its own system to render roaming services. The word "process" in the royalty definition was read in context as involving a transfer or licence of rights in an intellectual property sense. Domestic-law explanations expanding royalty could not enlarge the treaty definition absent a corresponding amendment, so the roaming receipts were not taxable as royalty.

---

---

Issues: Whether roaming charges received for providing telecom roaming services in the United Kingdom were taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 13(3) of the India-UK Double Taxation Avoidance Agreement.

Analysis: The amount was received for rendering roaming services to customers of an Indian telecom operator while they were in the United Kingdom. The payer did not obtain any access to, or right to use, the assessee's network, equipment, or process. The arrangement was found to be a service arrangement, with the assessee using its own network and process to provide connectivity, rather than transferring any right in a process to the payer. The expression "process" in section 9(1)(vi) was read in the context of the surrounding words in the royalty definition, and was held to refer to an item of intellectual property involving some transfer or licensing of rights. The domestic-law explanations expanding the definition of royalty could not be automatically read into the DTAA, and in the absence of a corresponding treaty amendment, the treaty definition continued to govern.

Conclusion: The roaming charges were not taxable as royalty under the Act or the DTAA, and the assessee succeeded on the merits of this issue.

Final Conclusion: The substantive addition on account of roaming charges was set aside, while the separately filed appeal against the later assessment order was treated as academic and dismissed.

Ratio Decidendi: A payment for telecom roaming services is not royalty unless the payer is granted a right to use the process or equipment; domestic-law expansions of the royalty definition do not enlarge an unamended treaty definition.

---