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TMI Blog2023 (9) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... in India, however, since VIL could not provide services to its customers who travelled to UK and it does not have any facility or infrastructure in UK and for this, even the arrangement with the assessee was made to provide services to its customers whenever they travel to UK. Thus, it cannot be held that the amount paid by VIL to the assessee falls within the scope and meaning of royalty u/s. 9(1)(vi). ITAT, Bangalore Bench in the case of group concern [ 2023 (9) TMI 280 - ITAT BANGALORE] had also dealt with the Explanation 5 6 to Section 9(1)(vi) and held that this definition cannot be read in to the DTAA which were in the nature and scope and held that it does not fall within the definition of Royalty as contained in Article 13(3) of India-Spain DTAA which is also applicable to India-UK DTAA. The Tribunal has also relied heavily upon the judgment of Vodafone Idea Ltd. [ 2023 (7) TMI 1164 - KARNATAKA HIGH COURT] which has reversed the judgment of Vodafone South [ 2015 (1) TMI 1018 - ITAT BANGALORE] which has been relied upon by the ld. AO. Thus, following the same reasoning, we hold that the amount received by the assessee from VIL in the form of roaming charges is not taxable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VIL with the Assessee is that the Assessee will provide telecommunication services to the customers of VIL and, for rendering the services to the customers of VIL, the Assessee would receive consideration from VIL Therefore, the agreement entered into by the Assessee with VIL is a service agreement under which the telecommunication services are provided by the Assessee to the customers of VIL The network of the Assessee and related process or equipment are used by the Assessee for providing telecommunication services and, VIL has no access to the network of the Assessee and related process or equipment which are used by the Assessee to provide the services. 6. During the previous year relevant to A.Y 2014-15, the Assessee received Rs. 7,45,72,448 for providing roaming services and discount settlement in connection therewith from VIL. The aforesaid amount received by the Assessee was not offered to tax by the Assessee, since the roaming services were rendered outside India i.e., in UK therefore, according to the Assessee, the income did not accrue or arise in India. And further, according to the Assessee, the income received by the Assessee was not chargeable to tax as Royalty or F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be considered to have been paid in respect of right to use the process or use of process. c. Without prejudice to the above, the amount received on account of Roaming services is not chargeable to tax in India by virtue of Article- 13 of India-UK DTAA which employs similar definition of royalty as found in Explanation - 2 to section 9(1)(vi) of the Act and, the Explanation 5 6 to section 9(1)(vi) which broadens the scope of royalty is not incorporated therein as there is no amendment made to the DTAA. Therefore, the provisions of Article- 13 of the DTAA are more beneficial to the Assessee and by virtue of section 90(2) of the Act, the income earned by the Assessee on account of roaming charges is not chargeable to tax in India. d. In support of the contention put before the Assessing Officer, the Assessee relied on the orders of the Tribunal in case of Bharti Airtel Ltd. vs. ITO (178 TTJ 708) (Delhi Tribunal), Interroute Communications Limited v DDIT [2016] 68 taxmann.com 160 (Mumbai - Tribunal) and M/s WNS North America Inc. (2012) (ITA No 8621/Mum/2010) (Mumbai Tribunal) wherein the Tribunal has decided similar issue and has held that IUC/leased line charges cannot be brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of royalty u/s 9(1)(vi) of the Act has not been enlarged by insertion of Explanations 5 6. f. The Hon'ble Madras High Court has dealt with a situation where payments were made toward interconnect charges/dedicated connectivity. The facts of the present case and facts before the Hon'ble Madras High Court in the case of Verizon Communication are identical. Both the issue are related to payments as a consideration for use or right to use of a process leading interconnection of voice/data. g. In view of the above discussion and the decision of the Hon'ble Bangalore ITAT in the case of Vodafone South Ltd. and Hon'ble Madras High Court in the case of Verizon Communications Singapore Pte Ltd which are directly on the point, it has been considered that consideration paid by the assessee as Communication/IUC charges for alleged inter connect service falls within the ambit of process royalty and element of income was involved. h. The Assessing Officer has also relied on the orders of the Tribunal in case of New Skies Satellite N.V. (126 TTJ 1) (Delhi Tribunal), Vodafone South Ltd. (53 taxmann.com 441) (Bangalore Tribunal) and Garcemac Corporation vs. ADIT (42 SOT 550) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecome purely academic and same is dismissed. 15. Before us, assessee has raised various grounds challenging the taxing of roaming charges as royalty u/s. 9(1)(vi) of the Income Tax Act and under Article-13 of India-UK DTAA by the Assessing Officer. Since, ld. DRP has only held that it is taxable as royalty and not as FTS, therefore, our finding will be confined whether the amount of Rs. 7,45,22,448/- received by the assessee for Indian roaming charges is taxable under the royalty or not?. As discussed above, assessee has received the amount for rendering roaming services for which no access was given to VIL. VIL network is in process of the equipment used by the assessee for providing roaming services. The arrangement of assessee in VIL was that assessee will provide telecommunication services to the customers of VIL on behalf of VIL when they travel to UK where VIL does not have any network or infrastructure to provide services to its customers. Thus, the arrangement for rendering of services and there is no right given by the Assessee to VIL or there is any right as mentioned in Explanation-2 to section 9(1)(vi) of the Act or any kind of use by VIL of any process / equipment with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. 16. The contention of the department has been that assessee has given right to use the process or has allowed the VIL to use the process in respect of connectivity services. However, nowhere it has been elaborated by the ld. AO how the right to use process has been allowed by the assessee to VIL. It is a call connectivity services which has a standard process employed by various telecom operators around the world. In fact, VIL already possessed the process used for providing roaming services and used the same to provide services to customers in India, however, since VIL could not provide services to its customers who travelled to UK and it does not have any facility or infrastructure in UK and for this, even the arrangement with the assessee was made to provide services to its customers whenever they travel to UK. Thus, it cannot be held that the amount paid by VIL to the assessee falls within the scope and meaning of royalty u/s. 9(1)(vi). 17. This view has been upheld by the Tribunal in assessee s group Telefonica Depreciation Espana SA supra in the following manner:- 5.2.9 By insertion of Explanation 5 6, meaning of word 'Process' has been widened. As per these e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase (supra) cites no reason for the extension of the amendments to the DTAA After considering the Judgment in case of Verizon (supra), Delhi High Court in case of New Skies (supra) has held that the amendments made under the provisions of the Act cannot be automatically read in to the DTAA executed by India with other countries unless the DTAA itself is amended incorporating such amendments. Therefore, in the absence of an amendment to the DTAA, the amendments made under the Act has no effect at all on the taxability of income under the DTAA. The relevant portion of Judgment is extracted as under:- 41. This Court is of the view that no amendment to the Act, whether retrospective or prospective can be read in a manner so as to extend in operation to the terms of an international treaty. In other words, a clarificatory or declaratory amendment, much less one which may seek to overcome an unwelcome judicial interpretation of law, cannot be allowed to have the same retroactive effect on an international instrument effected between two sovereign states prior to such amendment. In the context of international law, while not every attempt to subvert the obligations under the treaty is a b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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