2024 (3) TMI 1478 - HC - Income Tax

Interconnect service charges are not royalties, fees for services not payment for intellectual property use or privilege

The Deputy Commissioner of Income Tax International Taxation; The Commissioner of Income Tax International Taxation; The Central Board of Direct Taxes Department of Revenue Versus M/s. Singapore Telecommunications Limited & Vodafone Idea Limited

HC held that interconnect service charges do not constitute royalty. A Coordinate Bench considered the issue and, in connected appeals, concluded that ... Interconnect service charges paid would amount to royalty or not? - HELD THAT:- The above issue was considered by a Coordinate Bench of this court [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] and connected appeals. By judgment it is held that interconnect service charges would not constitute royalty. The sole issue is whether payments for interconnect services and transfer of capacity in foreign countries constitute 'royalty.' A Coordinate Bench previously held they do not, stating: '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 Shri. Pardiwala, that for subsequent years in assessee's own case, the ITAT has held that tax is not deductable when payment is made to nonresident 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.35, rendered by the ITAT. In that view of the matter this question also needs to be answered against the Revenue.' The Single Judge applied that precedent and found no infirmity in the impugned orders. Following the Coordinate Bench decision, the appeal was dismissed.