2024 (3) TMI 1453 - HC - Income Tax

Telecom Interconnect Charges: Non-Resident Service Payments Denied as Deductible Tax Expense Under Existing Precedent

THE COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, THE DEPUTY COMMISSIONER OF INCOME-TAX, INTERNATIONAL TAXATION CIRCLE-2 (2), BENGALURU Versus M/s. COMMUNICATIONS GLOBAL NETWORK SERVICES LTD

HC dismissed Revenue's appeal challenging ITAT's order, ruling that interconnect service charges paid to non-resident telecom operators are not deductible ... Payment towards interconnect service charges chargeable to tax as royalty - HELD THAT:- This Court by Judgment [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] Revenue has reviewed its earlier stand for the subsequent assessment years placing reliance on Viacom etc. [2023 (2) TMI 1165 - ITAT DELH] rendered by the ITAT. In that view of the matter this question also needs to be answered against the Revenue.. The observation made by this Court [supra] and connected matters would squarely apply to the question raised in the present appeal also. Substantial question of law is answered against the Revenue. The Karnataka High Court, in an appeal by the Revenue challenging the Income Tax Appellate Tribunal's order partly allowing the assessee's appeal for AY 2012-13, addressed the substantial question of law whether 'payment towards interconnect service charges could be chargeable to tax as royalty.' Relying on its prior judgment dated 14.07.2023 in ITA No.160/2015 and connected appeals, the Court held at paragraph 21 that such payments 'are not deductible as tax when made to non-resident telecom operators,' referencing the ITAT's reliance on Viacom and related precedents. The Court concluded that this reasoning 'needs to be answered against the Revenue,' thereby dismissing the present appeal.