2023 (3) TMI 1452 - HC - Income Tax

Interconnection usage charges paid by assessee to Foreign Telecom Operators (FTOs) - Whether neither royalty nor Fees for Technical Services (FTS)? - As decided by ITAT 2016 (3) TMI 680 - ITAT DELHI assessee was not liable to deduct tax at source - HELD THAT - A perusal of the condonation of delay applications shows that the appellant/revenue has preferred the instant appeals, for the reason that the Bangalore Bench of the Tribunal had decided this very issue in its favour. We are told that the aforementioned bench has held that the aforementioned payment would constitute royalty. It is not in dispute that the Bangalore Bench rendered its decision on 30.12.2014 2015 (1) TMI 1018 - ITAT BANGALORE which is, as is obvious, prior to the date when the impugned order was passed by the Delhi Bench of the Tribunal. Furthermore, in any case, in the impugned order, there is a reference to the decision of the Bangalore Bench, which the Delhi Bench has chosen not to follow because of the decision of the jurisdictional High Court i.e., this court. According to us, the appellant/revenue would have to cross the hurdle of the delay, which is in excess of four (4) years.

Summary

Issues involved:
The issues involved in this case are the classification of interconnection usage charges paid to Foreign Telecom Operators (FTOs) as royalty or Fees for Technical Services (FTS), liability of the respondent/assessee to deduct tax at source, and the delay in filing the appeal by the appellant/revenue.

Classification of interconnection usage charges:
The Tribunal held that the charges paid by the respondent/assessee to FTOs are neither royalty nor FTS. However, the Bangalore Bench had previously decided in favor of classifying the payment as royalty. The Delhi Bench chose not to follow the Bangalore Bench's decision due to the jurisdictional High Court's ruling.

Liability to deduct tax at source:
The Tribunal also ruled that the respondent/assessee was not liable to deduct tax at source. The appellant/revenue challenged this decision based on the Bangalore Bench's ruling, which considered the payment as constituting royalty.

Delay in filing the appeal:
The appellant/revenue filed the appeal after a delay of over four years, citing the Bangalore Bench's decision as the reason for the appeal. The delay was acknowledged, and the appellant/revenue was required to address this hurdle.

Separate Judgment:
The judges ordered a physical or hybrid hearing as per the request made during the proceedings. Mr. Sunil Agarwal, Senior Standing Counsel, represented the appellant, while Mr. Arvind P. Datar, Senior Advocate, represented the respondent. The matters were listed for further hearing on a specified date at the request of Mr. Agarwal.