2024 (9) TMI 1798 - HC - Income Tax

Interconnect service charges are payments for telecom interconnection, not royalties, and thus not taxable as royalty payments

The Deputy Commissioner of Income Tax International Taxation Ward 2 (2) ; The Commissioner of Income Tax International Taxation, Bengaluru & The Central Board of Direct Taxes Department of Revenue, North Block, Central Secretariat, New Delhi Versus Orange 78 Rule Olivaier De Serrs Paris (France) & Vodafone Idea Limited

HC held that interconnect service charges paid do not constitute royalty. The court, following and applying a prior coordinate-bench decision, concluded ... 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. By judgment dated it is held that interconnect service charges would not constitute royalty. Appeal concerns whether 'interconnect service charges' paid to non-resident telecom operators constitute 'royalty.' A Co-ordinate Bench in ITA No. 160/2015 & connected appeals (judgment dated 14.07.2023) held that 'interconnect service charges would not constitute royalty.' The bench noted the factual finding that the ITAT, in subsequent years of the assessee's own case, held tax was not deductible when payment was made to a non-resident telecom operator, prompting Revenue to revise its stance and rely on Viacom. The Co-ordinate Bench observed that, given those factual and precedential developments, 'In that view of the matter this question also needs to be answered against the Revenue.' The Single Judge relied on the Co-ordinate Bench decision; no infirmity was found in the impugned order, and the appeal was dismissed.