Interconnect service charges are not royalty, as the Karnataka HC followed earlier precedent and upheld relief to the assessee.

Interconnect service charges paid to a non-resident telecom operator were held not to constitute royalty, so they were not chargeable to tax as royalty. The Karnataka HC followed an earlier co-ordinate Bench ruling that interconnect service charges and transfer of capacity in foreign countries do not amount to royalty, and found no infirmity in the orders under challenge. The issue was decided in favour of the assessee and against the Revenue.

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Issues: Whether interconnect service charges paid to a non-resident telecom operator constitute royalty and are chargeable to tax as such.

Analysis: A co-ordinate Bench had already held that interconnect service charges and transfer of capacity in foreign countries do not amount to royalty. The present Bench followed that decision and found no infirmity in the orders under challenge.

Conclusion: Interconnect service charges do not constitute royalty. The issue was decided against the Revenue and in favour of the assessee.

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