OPTUS NETWORKS PTY LIMITED,AUSTRALIA vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(2)(2) (INTERNATIONAL TAXATION), NEW DELHI, NEW DELHI

PER SANJAY AWASTHI, ACCOUNTANT MEMBER:

1.1 In this case, the Assessing Officer issued a notice u/s 148A(b) of the Act on 13.03.2024 to the assessee. It is seen from the records that the assessee did not respond to this notice and thereafter the AO issued a 1

IT(ITA)A No.61/Del/2026 OPTUS NETWORKS PTY LIMITED notice u/s 148 of the Act on 31.03.2024 on the allegation that Rs.667,19,787/- had escaped the assessment. The impugned receipts constituted Interconnect Usage Charges (hereafter as “IUC”) received from M/s Bharti Airtel Limited. The assessee claimed that such payments did not constitute Royalty or Fees for Technical Services (FTS) u/s 9 of the Act and even the India-Australia – DTAA (hereafter ‘DTAA’). The Ld. AO has given a finding that the income of the assessee has arisen in India from M/s Bharti Airtel Limited and thus, following the provisions of Section 5(2)(i) of the Act, the income received by the assessee would need to be considered to accrue or arise in India. It has been further held by the Ld. AO that this receipt would not be classified as business income and thus, would need to be considered as income from other sources u/s 56 of the Act. Thereafter, the Ld. AO utilized Article 22 of the DTAA to treat the impugned income as “other income” for being taxed in India u/s 56 of the Act, read with Article 22 of the DTAA.

1.2 In this case, one of the DRP members has given a dissenting order to the extent that the IUC of Rs.667,19,787/- received from M/s Bharti Airtel Limited could not be taxed in India following the Hon’ble Apex Court’s decision in the case of Vodafone Idea Limited reported in 165 taxmann.com 393 (SC). The dissenting member has also relied on the Hon’ble Karnataka High Court’s judgment in the case of Vodafone Idea Limited reported in 152 taxmann.com 575 (Kar). However, since the majority view was in favour of taxing the impugned receipts u/s 56, read 2

IT(ITA)A No.61/Del/2026 OPTUS NETWORKS PTY LIMITED with the DTAA, hence, the Ld. AO has brought the impugned receipts to tax in line with the Ld. DRP’s directions.

1.3 Aggrieved with this action, the assessee has approached the ITAT with the following grounds of appeal: -

“1. That on the facts and in the circumstances of the case and in law, the impugned order dated January 29, 2026 for assessment year 2018-19 assessing the total income of the Appellant at INR 6,67,19,787 is bad in law, void-ab-initio and therefore, liable to be quashed. 2 That on the facts and in the circumstances of the case and in law, the learned AO/Hon'ble DRP have erred in not appreciating that the time limit under section 153 of the Act is the outer time limit for passing the final assessment order and hence the impugned order is time barred and liable to be quashed. 3. That the impugned reassessment proceedings for AY 2018-19 are bad in law and liable to be set aside for following reasons: (i) Notice dated March 13, 2024 issued under section 148A(b) of the Act does not show any escapement of income;

(ii) Reassessment proceedings have been initiated without satisfying conditions prescribed under section 149(1)(b) of the Act; (iii) Order under section 148A(d) of the Act has been passed and notice under section 148 of the Act has been issued without service of notice under section 148A(b) of the Act, (iv) Draft assessment order has been passed without serving notice under section 148 of the Act. 4. That on the facts and in the circumstances of the case and in law, the learned AO/Hon'ble DRP have erred in taxing the IUC receipts of INR 6,67,19,787 from Bharti Airtel Limited during the subject year. 4.1 That on the facts and in the circumstances of the case and in law, the learned AO/Hon'ble DRP have erred in taxing that the receipts of the Appellant in relation to IUC charges are as "Other income" under the provisions of section 56 of the Act and Article 22 of the India-Australia DTAA; 4.2 That on the facts and in the circumstances of the case and in law, the learned AO/Hon'ble DRP have erred in concluding that IUC receipts are not business income;

IT(ITA)A No.61/Del/2026 OPTUS NETWORKS PTY LIMITED 4.3 That on the facts and in the circumstances of the case and in law, the learned AO/Hon'ble Panel have erred in not following the settled position in law as laid down by the Hon'ble Supreme Court in the case of Vodafone Idea Limited (165 taxmann.com 392) wherein it was held that the Indian Income Tax Authorities do not have jurisdiction to bring to tax income in relation to IUC receipts arising from extra territorial source. 5. That the learned AO has erred in initiating penalty proceedings under section 270A of the Act.” 2. Before us, the Ld. AR made a statement at the Bar that the assessee was not interested in pursuing grounds 2 & 3 challenging the assumption of jurisdiction by the Ld. AO. It was also pointed out by the Ld. AR that ground 1 was general and was not required to be specifically adjudicated. The Ld. AR confined his arguments with respect to ground no.4 and its sub parts. The Ld. AR drew our attention to the basic premise of the Ld. AO as laid down in paras 8 & 9 at pages 3 & 4 of the impugned order. The Ld. AR also read extensively from para 11 at page 13 of the DRP’s order where the dissenting view of CIT (DRP-2), Delhi has been mentioned. The Ld. AR argued that the said dissenting Member has rightly followed the decision rendered by the Hon’ble Karnataka High Court in the Vodafone Idea case (supra) and also the clear-cut finding given by the Hon’ble Supreme Court in the case of Vodafone Idea Limited (supra). The position of law was briefly summarized by the Ld. AR by mentioning that the Hon’ble Supreme Court while dismissing the SLP had held that payments made to non- resident Telecom Operators for IUC was not chargeable to tax as royalty. The Ld. AR concluded his arguments by stating that the law was settled on the point that IUC paid by Telecom Operator to non-resident entities for availing services outside India could not be treated as accruing or arising

IT(ITA)A No.61/Del/2026 OPTUS NETWORKS PTY LIMITED in India. It was also pointed out that the treatment of impugned receipts as income from other sources also could not be valid since the assessee is a Telecom Service Provider and the provision of roaming and international call termination facilities is part of its business, which could not be assessed as such in the absence of a PE in India. Thereafter, the Ld. AR relied on the order in the case of Oman Telecommunications Company SAOG vs. DCIT in ITA No.2080/Del/2024, order dated 24.10.2024. The Ld. AR pointed out paragraphs 13 to 16 from this order. The Ld. AR also relied on the case of Andaman Sea Food (P) Ltd. reported in 22 taxmann.com 400 (Kol). The Ld. AR pointed out para 9 of this order in support of his claim that the impugned receipts could not be taxed in India at all. The Ld. AR also thereafter drew our attention to para 8.1 of the coordinate bench decision in the case of DCIT vs. Campus Eai India Pvt. Ltd. in ITA No.355/Del/2021, order dated 20.10.2023.

2.1 The Ld. DR relied on the findings given by the Ld. DRP, especially in paras 7.3, 7.4 and 7.5 of the order dated 30.12.2025. It was argued by the Ld. DR that section 5(2) of the Act would permit taxing the impugned receipts in India. The Ld. DR also invoked the source rule following the GVK Industries case reported in 332 ITR 130 (SC). Through this case law it was argued that a receipt would need to be taxed in a country where it’s source of the receipt is located, and since the source was located in India, hence, the taxability was also thereunder.

IT(ITA)A No.61/Del/2026 OPTUS NETWORKS PTY LIMITED 3. We have carefully considered the rival submissions and have gone through the documents before us, including the case laws relied on by either of the sides. We find that the taxability issue of IUC is more or less settled in favour of the assessee through a series of judgments, most notably the Vodafone orders by the Hon’ble Karnataka High Court and the Hon’ble Apex Court discussed supra. A further review of the judicial literature on the subject reveals that coordinate benches of ITAT have been consistently holding that the impugned services could not be taxed as Royalty/FTS in India. The following cases deserve to be mentioned:

i. Reliance Jio Infocomm USA Inc. reported in 185 taxmann.com 604 (Mum. – Trib.); ii. Telecom Italia Sparkle Singapore Pte. Ltd. reported in 155 taxmann.com 404 (Bang. – Trib.); iii. Orange (Formerly known as France Telecom) reported in 158 taxmann.com 186 (Bang. – Trib.); iv. Globe Tele Services Ltd. reported in 163 taxmann.com 73 (Bang. – Trib.).

We find that the dissenting view expressed by CIT-DRP(2), Delhi follows the correct position of law and we also find considerable persuasive value in the case of Oman Telecommunications Company SAOG (supra), where paras 13 to 16 are relevant for deciding the issue at hand. The relevant portion may be extracted as under: -

“13. Having held so, now it is necessary for us to decide whether the receipts can be treated as other income under section 56 of the Act and under Article 24 of India - Oman DTAA. The line of thinking

IT(ITA)A No.61/Del/2026 OPTUS NETWORKS PTY LIMITED of learned DRP is, if a particular income cannot be characterized under any other heads of income provided under the Act, it has to be treated as other income under the residual provision of section 56 of the Act and similar provision under Article 24 of the Treaty. Learned DRP has further observed that as per the Treaty provisions, rights of taxation in respect of other income has been granted to the source country. Of course, learned DRP has added the receipts as other income on protective basis. 14. Be that as it may, one needs to look into the true meaning of 'other income' as provided under Article 24 of the Treaty. A reading of paragraph 1 of Article 24 makes it clearly that items of income not expressly dealt with in any of the other Articles of the Treaty shall be treated as other income under Article 24 of the Treaty. As rightly observed by learned DRP, it is a residual provision provided for taxability of income not specifically coming under any other Articles 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. Undisputedly, the roaming and termination of international voice traffic services were provided by the assessee in course of its regular business activities. Hence, it cannot be said that provision of such facility is not connected to assessee's business activity. 15. That being the factual position record, the interconnectivity usage charges have to be treated as business income, hence covered under Article 7 of India Oman DTAA. However, since, the assessee did not have any Permanent Establishment (PE) in India, the business profit has to be taxed in the country of residence in Oman. Merely, because the income is not taxable in India under a particular head due to beneficial provisions under the Treaty, it cannot automatically lose its character, as in the present case, and made taxable as other income. The following decisions support the view: 1. Solvay Asia Pacific (P.) Ltd. Vs. Deputy Commissioner of Income-tax [2024] 159 taxamnn.com 90 (Delhi - Trib.) 2. Bangkok Glass Industry Co. Ltd. Vs. Asstt. CIT (2013) 34 taxmann.com 77 (Madras)

IT(ITA)A No.61/Del/2026 OPTUS NETWORKS PTY LIMITED 3. Ford India Ltd. Vs. Deputy Commissioner of Income Tax, [2017) 78 taxmann.com 5 (Chennai - Trib.) 16. Thus, taking an overall view in the context of facts and materials on record and the ratio laid down in the judicial precedents cited before us, we hold that interconnectivity usage charges received by the assessee are not taxable in India, either as FTS or as other income. Ground nos. 2 and 3 are allowed.” In this extracted portion the position regarding IUC and its non-taxability either as FTS or Royalty and even its taxability as “other income” has been explicitly discussed. Furthermore, we also draw strength from the judgments of Karnataka High Court and the Hon’ble Apex Court discussed (supra) to hold that the impugned receipts cannot be taxed as FTS/Royalty or even “other income” in India. Accordingly, the assessee succeeds with respect to ground no.4.

Order pronounced in the open court on 17.06.2026

Sd/- Sd/- (VIKAS AWASTHY) (SANJAY AWASTHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 17.06.2026 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals)

IT(ITA)A No.61/Del/2026 OPTUS NETWORKS PTY LIMITED 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Sr. No. Particulars Date 1 Date of dictation of Tribunal Order 12.06.2026 2 Date on which typed draft Tribunal Order is placed before the 15.06.2026 Dictation Member 3 Date on which typed draft Tribunal Order is placed before the 17.06.2026 other Member (in the case of DB) 4 Date on which the approved draft Tribunal Order comes to the 17.06.2026 Sr. P.S. /P.S. 5 Date on which the fair Tribunal Order is placed before the 17.06.2026 Dictating Member for sign 6 Date on which the fair Order is placed before the other Member 17.06.2026 for sign (in the case of DB) 7 Date on which the signed order comes back to the Sr. P.S. /P.S 17.06.2026 for uploading on ITAT website 8 Date of uploading, if not, reason for not uploading 17.06.2026 9 Date on which the file goes to the Bench Clerk 17.06.2026 10 Date on which order goes for xerox 11 Date on which the file goes for endorsement 12 Date on which the file goes to the Superintendent/O.S. for checking 13 Date on which the file goes to the Assistant Registrar for signature on the order 14 Date on which the file goes to dispatch section for dispatch the Tribunal Order 15 Date of dispatch of order 16 Date on which file goes to Record Room after dispatch the order