2024 (9) TMI 1678 - HC - Income Tax

Accrual of income in India or not? - royalty income - interconnect service charges - HELD THAT - As decided in M/S. VODAFONE IDEA LIMITED 2023 ( 7) TMI 1164 - KARNATAKA HIGH COURT held that tax is not deductable when payment is made to non-resident telecom operator. This factual aspect is not refuted. No infirmity in the orders under challenge.

Summary

In the case before the Karnataka High Court, presided over by Hon'ble Mr. Justice S.G. Pandit and Hon'ble Mr. Justice C.M. Poonacha, the primary legal issue was whether interconnect service charges paid constitute "royalty." The appellants were represented by Sri. Sanmathi E. I., while the respondent was represented by Mr. Mohamed Karim Bennis.

The court referenced a prior judgment by a Co-ordinate Bench in ITA No. 160/2015, dated 14.07.2023, which held that interconnect service charges do not constitute royalty. Specifically, paragraph 21 of that judgment noted that payments made to NTOS for interconnect services and capacity transfer in foreign countries are not taxable as royalty. The Income Tax Appellate Tribunal (ITAT) had similarly ruled in the assessee's favor for subsequent years, indicating that tax is not deductible for payments to non-resident telecom operators. This position was not contested by the Revenue, which had revised its stance based on the ITAT's decision in cases like Viacom.

The High Court found no fault in the order under challenge, as it relied on the Co-ordinate Bench's decision. Consequently, the appeal was dismissed, upholding the earlier judgment that interconnect service charges are not considered royalty.