TaxTMI 
TaxTMI 
2023 (8) TMI 1375
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.... 1961 (hereinafter called 'the Act'). The relevant Assessment Years are 2013-14 and 2014-15. 2. Common issues are raised in these appeals; hence, they were heard together and are being disposed off by this consolidated order. 3. Brief facts of the case are as follows: Assessee is a telecom company incorporated and a tax resident of Spain. It is engaged in the business of providing telecommunications services, interconnection services, internet services, etc. The assessee has entered into interconnect services agreements that enables subscribers of one telecom operator to call a subscriber of another operator in any part of the world and vice-versa for receiving the calls from subscribers of other operators. Therefore, interconnection agr....
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....for provision of service (of carriage/ transmission of calls), pursuant to the interconnect agreements, by the other telecom operator. Per the interconnect agreements, invoices are issued on a monthly basis indicating the applicable rate per minute, destination country and traffic volume in minutes. 6. The assessee was of the view that the receipts towards Interconnect Usage Charges ("IUC") are not taxable in India since these do not amount to royalty/FTS but would constitute business income which is not taxable in the absence of a Permanent Establishment (PE) in India. Hence, assessee had not filed return of income in India. However, re-assessment proceedings were initiated for the impugned years under section 147 of the Act, based on the....
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.... of Vodafone South Ltd., (supra) wherein it has been clearly held that inference drawn by the Revenue authorities income is deemed to accrue or arise in India or received in India is incorrect. 10. We have heard the rival submission and perused the material on record. At the outset, we notice that Assessment Year 2010-11 has been considered by the AO as the base year and has been followed in the subsequent Assessment Years. The Tribunal in ITA Nos. 2657/Bang/2019, 180/Bang/2021 and 817/Bang/2022 for Assessment Years 2010-11 to 2012-13 has decided the issue in favour of the assessee vide order dated 10 August 2023. The Tribunal has passed a detailed order after considering several judicial precedents including the Hon'ble Karnataka High Cou....
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....f India-Spain DTAA Page 21 Para 5.2.17 We hold that payments received by assessee towards interconnectivity utility charges from Indian customers / end users cannot be considered as Royalty / FTS to be brought to tax in India under section 9(1)(vi)/(vii) of the Act and also as per DTAA Page 26 Para 5.2.20 The payment received by the non-resident assessee amounts to be the business profits of the assessee which is taxable in the resident country and is not taxable in India under Article 5 of the DTAA as there is no case of permanent establishment of the assessee that has been made out by the revenue in India. Page 26-27 Para 5.2.21 11. The learned DR's alternative argument that the payment received by the assessee is covered under sect....
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....ficient to create a charge in respect of non resident's income. However, while drawing inference that payments made by a resident would also indicate accrual or arising of the income in the hands of non resident in India. It is pertinent to mention that section 9 of the Act is a deeming section and it provides for taxation of specified income, received by foreign tax resident in India. It has different sub sections. Section 9(1)(i) of the Act provides for taxation of business income of non resident, whereas section 9(1)(vi) and 9(1)(vii) of the Act provides for taxation of income in the nature of "royalty" and FTS respectively. In order to assume accrual or arousal of business income in India, then section 9(1)(vi) along with its explan....