Interconnect service charges are not royalty, as the Karnataka High Court followed its earlier co-ordinate Bench ruling.

Interconnect service charges paid to a non-resident telecom operator were treated as not constituting royalty for tax purposes. The Karnataka HC followed its earlier co-ordinate Bench ruling that such charges do not fall within the royalty characterisation, and it found no infirmity in the order under challenge. The issue was therefore answered against the Revenue and in favour of the assessee.

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

Analysis: The appeal was tested against an earlier co-ordinate Bench decision of the same Court, which had held that interconnect service charges do not amount to royalty. The Court followed that decision and found no infirmity in the order under challenge.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

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