Bandwidth charges not treated as royalty, while TDS credit claim was sent for verification and eligible allowance.

Bandwidth charges for data transmission services were held not to constitute royalty under section 9(1)(vi) of the Income-tax Act or Article 12(3) of the India-Singapore DTAA, because the facts were materially identical to earlier years and the Tribunal followed its consistent view in the assessee's favour. The assessee's claim for TDS credit on tax deducted from interest on income-tax refund was directed to be verified by the assessing authority, with credit to be granted if the deduction was reflected and relatable to the taxed income. The bandwidth addition therefore did not survive, and the TDS credit claim was allowed subject to verification.

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Issues: (i) Whether receipts from bandwidth charges were taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-Singapore Double Taxation Avoidance Agreement. (ii) Whether the assessee was entitled to grant of TDS credit in respect of tax deducted on interest income from income-tax refund.

Issue (i): Whether receipts from bandwidth charges were taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-Singapore Double Taxation Avoidance Agreement.

Analysis: The issue was treated as a recurring one already decided in the assessee's favour for earlier assessment years. The facts for the year under consideration were found to be materially identical to those in the prior years. The Tribunal followed its consistent earlier view that bandwidth services do not amount to royalty, and therefore the receipts could not be brought to tax on that basis.

Conclusion: The issue was decided in favour of the assessee. Bandwidth charges were held not taxable as royalty either under section 9(1)(vi) of the Income-tax Act, 1961 or under Article 12(3) of the India-Singapore Double Taxation Avoidance Agreement.

Issue (ii): Whether the assessee was entitled to grant of TDS credit in respect of tax deducted on interest income from income-tax refund.

Analysis: The assessee's claim was directed to be factually verified. The assessing authority was required to examine the claim and grant credit in accordance with law if the deduction was found to be reflected and relatable to the taxed income.

Conclusion: The issue was decided in favour of the assessee by way of a verification direction for grant of eligible TDS credit.

Final Conclusion: The assessment addition on bandwidth charges did not survive, and the assessee also obtained a direction for verification and allowance of the claimed TDS credit, resulting in a partial success in appeal.

Ratio Decidendi: Bandwidth charges for data transmission services, on identical facts and in line with the Tribunal's earlier consistent view, do not constitute royalty within the meaning of the domestic tax provision or the applicable treaty article.

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