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of <h1>Interconnect service charges to non-resident telecom operator are not 'royalty' and not subject to tax deduction</h1> <h3>The Deputy Commissioner of Income Tax International Taxation, Circle-2 (1), Bengaluru Versus M/s. Deutsche Telekom AG Rep by its Head of Transaction Tax Sri Ulrich Hartmann</h3> HC held that interconnect service charges paid to a non-resident telecom operator do not constitute royalty and are not subject to tax deduction. The ... Interconnect service charges paid would amount to royalty or not? - HELD THAT:- The above issue was considered by a Co-ordinate Bench of this court in [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] and connected appeals held that tax is not deductable when payment is made to non-resident telecom operator. This factual aspect is not refuted. Thus the Revenue has reviewed its earlier stand for the subsequent assessment years placing reliance on Viacom etc,[2018 (1) TMI 1717 - Supreme Court] rendered by the ITAT. In that view of the matter this question also needs to be answered against the Revenue. The core issue is whether payments for interconnect service charges constitute 'royalty.' A Co-ordinate Bench held that interconnect service charges do not constitute royalty. Paragraph No. 21 states: 'The third question is, whether the payments made to NTOS for providing interconnect services and transfer of capacity in foreign countries is chargeable to tax as royalty. It was argued by [counsel], that for subsequent years in assessee's own case, the ITAT has held that tax is not deductable when payment is made to non-resident telecom operator. This factual aspect is not refuted. Thus the Revenue has reviewed its earlier stand for the subsequent assessment years placing reliance on Viacom etc35, rendered by the ITAT. In that view of the matter this question also needs to be answered against the Revenue.' The Single Judge followed that Co-ordinate Bench decision; no infirmity was found in the impugned orders. Following the 14.07.2023 Co-ordinate Bench ruling, the appeal is dismissed.
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