Interconnect service charges treated as non-royalty, with the tax issue decided against the Revenue.

Payments for interconnect service charges were held not to constitute royalty for tax purposes. The Karnataka HC followed its earlier decision in connected appeals, where payments for interconnect services and transfer of capacity in foreign countries had already been held outside the scope of royalty. Applying that precedent, the substantial question of law was answered against the Revenue, and the appeal was dismissed, leaving the assessee successful on the sole issue decided.

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Issues: Whether payments towards interconnect service charges were chargeable to tax as royalty.

Analysis: The issue was covered by an earlier decision of the same Court in connected appeals, where it was held that payments made for interconnect services and transfer of capacity in foreign countries were not chargeable to tax as royalty and the corresponding question was answered against the Revenue.

Conclusion: The substantial question of law was answered against the Revenue.

Final Conclusion: The appeal was dismissed, and the assessee succeeded on the sole question decided.

Ratio Decidendi: Payments for interconnect services, on the facts considered, do not constitute royalty for tax purposes.

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