2024 (9) TMI 1833 - HC - Income Tax

Interconnect service charges paid to non-resident telecom operator are not royalty and not taxable as withholding

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 in M/S. VODAFONE IDEA LIMITED [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] as held that tax is not deductable when payment is made to non-resident telecom operator. This factual aspect is not refuted. 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 appeal concerns whether 'interconnect service charges' (including payments for providing interconnect services and 'transfer of capacity in foreign countries') constitute 'royalty.' A Co-ordinate Bench held that interconnect service charges 'would not constitute royalty,' noting factual findings that the ITAT had held tax was not deductible where payment was made to a non-resident telecom operator and that the Revenue had altered its stance relying on ITAT decisions (e.g., Viacom). The Co-ordinate Bench concluded, as stated, 'this question also needs to be answered against the Revenue.' The Single Judge relied on that decision; no infirmity was found in the impugned order, and the appeal was dismissed.