2025 (7) TMI 1586

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.... Assessment Year 2018-19. 2. Brief facts of the case as coming out from the orders of the authorities below are that the assessee is foreign company and had not filed return of income for the impugned year. Thereafter, the case of the assessee was reopened u/s 148 of the Income Tax Act, 1961 on the ground that assessee has received certain payments from two Indian entities namely M/s Bharti Airtel Limited and M/s Vodafone Mobile Services Ltd and has not shown any income in India. The Assessing Officer was of the view that the service provided by the assessee to the Indian entities were in the nature of the FTS and, hence, taxable in India. The Assessing Officer relied upon the provisions of section 9(1)(vii) of the Act held that the serv....

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....e assessee has provided to Vodafone. At the cost of repetition, we must observe, while framing draft assessment order, the Assessing Officer has characterized interconnectivity usage charges received by assessee as royalty income under section 9(1)(vi) of the Act. However, learned DRP has, apparently, disagreed with the Assessing Officer and recharacterized the interconnectivity usage charges as FTS both under the domestic law as well as the treaty provisions. Of course, alternatively, learned DRP has held that such receipts can also be treated as other income both under section 56 of the Act as well as under Article 24 of Indian Oman DTAA. 10. Keeping in perspective these facts, if we proceed to analyze the nature of services prov....

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....he facility of interconnection and port access provided by a service provider is technical in sense that it involves sophisticated technology and the facility may even be construed as service in the broader sense, however, while interpreting the expression 'technical services' it cannot be construed in the abstract and general sense but in the narrower sense as circumscribed by the expression 'managerial service and consultancy service' as appearing in Explanation 2 to section 9(1)(vii) of the Act, which requires rendition of service through human interface. Identical view has been expressed by Hon'ble Karnataka High Court in case of CIT Vs. Vodafone South Limited (supra) and Hon'ble Delhi High Court in case of CIT V....

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....of the Treaty. As discussed in the earlier part of the order, the Assessing Officer had treated it as royalty income, whereas, learned DRP has treated it as FTS and suggested for addition as FTS on substantive basis. The aforesaid facts clearly indicate that the departmental authorities themselves were not sure regarding the true nature and character of the receipts. Merely, because a particular item of income cannot be treated as royalty or FTS, as such, receipts may not fit into the definition of royalty/FTS provided under the Treaty, that by itself would not make it taxable under the residual clause of the treaty. It needs to be seen, whether such income can come within the ambit of any other Article preceding Article 24 of the Treaty. U....