Interconnect service charges are not royalty for tax purposes, following binding precedent on telecom capacity transfers.

Interconnect service charges paid for telecom services were held not to constitute royalty for tax purposes. The Karnataka HC followed a co-ordinate Bench ruling that payments for providing interconnect services and transfer of capacity in foreign countries do not amount to royalty, and found no infirmity in the order under challenge. The issue was answered against the Revenue and in favour of the assessee, confirming that such interconnect service charges are outside the royalty charge.

---

---

Issues: Whether interconnect service charges paid for telecom services constitute royalty liable to tax.

Analysis: The issue had already been decided by a co-ordinate Bench, which held that payments made for providing interconnect services and transfer of capacity in foreign countries do not amount to royalty. The present appeal followed that binding view, and no infirmity was found in the order under challenge.

Conclusion: The issue is answered against the Revenue and in favour of the assessee; interconnect service charges do not constitute royalty.

Ratio Decidendi: Payments for interconnect services and transfer of capacity are not taxable as royalty where the controlling precedent has already so held on the same legal question.

---