BROADBAND TELECOM INC ,CALIFORNIA USA vs. DCIT, INTERNATIONAL TAXATION, CIRCLE-2(2), BENGALURU

PDF · subscribers
ITITA 140/BANG/2025Status: DisposedITAT Bangalore30 July 2025AY 2018-197 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal allowed the assessee's appeal on the primary issue. It noted that a coordinate bench in the assessee's own case for AY 2013-14 (ITA No. 205/Bang/2023) had already decided that long-distance calling service charges are not royalty under Section 9(1)(vi) of the Act or Article 12 of the India-USA DTAA, and the appeal was allowed. Furthermore, the Tribunal observed that the Supreme Court had dismissed the Special Leave Petition (SLP) in the case of Vodafone Idea Ltd. v. Deputy Director of Income Tax (IT) on merits, following a previous dismissal of an SLP in a related matter. Therefore, the issue of taxability of these charges in the hands of the assessee no longer survived. The grounds of appeal related to the addition of Rs. 5,80,43,570/- as royalty were allowed. However, grounds related to interest charged under sections 234A and 234B, and initiation of penalty, being consequential and premature respectively, were dismissed.

What were the facts?

The assessee, Broadband Telecom Inc., a foreign company, is in appeal against the assessment order for AY 2018-19, passed by the ACIT (International Taxation), Circle – 2(2), Bangalore, under section 147 r.w.s. 144C(13) of the Income Tax Act, 1961. The Assessing Officer (AO) reopened the case based on AIR information and Form 26AS, which indicated communication charges of Rs. 5,80,43,570/- received by the assessee. Despite notices under sections 148A(b), 148, and 142(1) not receiving a response, the AO issued a show cause notice proposing to treat these charges as royalty under section 9(1)(vi). The assessee did not reply. The draft assessment order was passed on 29.02.2024. The Dispute Resolution Panel (DRP) upheld the AO's action, and the final assessment order was passed on 30.12.2024, adding the sum as royalty.

What were the issues?

1. Whether the communication charges received by the assessee are taxable as royalty under Section 9(1)(vi) of the Income Tax Act, 1961, and Article 12 of the India-USA Double Tax Avoidance Agreement (DTAA), given that a coordinate bench had decided this issue in favor of the assessee for AY 2013-14? Assessee's Contentions: - The issue is squarely covered by the coordinate bench's decision in ITA No. 205/Bang/2023 for AY 2013-14, which held that telecommunication charges are not taxable as royalty under the Act and the DTAA. The revenue did not appeal this decision further. - The revenue's rejection of this argument by the DRP, stating the department had not accepted the order on merits and did not appeal due to monetary limits, is incorrect. - An SLP in a similar case (Vodafone Idea Ltd.) was dismissed by the Supreme Court, further supporting the assessee's position. - The addition made by the AO was merely to keep the issue alive. Revenue's Contentions: - The Ld. Departmental Representative supported the orders of the Ld. AO.

Which sections of the Income-tax Act were involved?

Section 9(1)(vi),Section 147,Section 148A(b),Section 148A(d),Section 148,Section 142(1),Section 144C(13),Section 151,Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES “C,” BANGALORE

Before: Shri Prashant Maharishi, Hon’ble & Shri Keshav Dubey, Hon’ble

For Respondent: Dr. Divya K. JCIT
Pronounced: 30.07.2025

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “C,” BANGALORE Before Shri Prashant Maharishi, Hon’ble Vice President & Shri Keshav Dubey, Hon’ble Judicial Member ITA No.140/Bang/2025 (A.Y.2018-19) Broadband Telecom Inc vs. DCIT (International Taxation) 514, South Kenneth Road Circle – 2(2) Burbank, CA, 91501 Bangalore Foreign California – 81501 PAN: AAJCB5262B (Applicant) (Respondent)

Assessee Represented by: Sri Bhaumik Goda, AR Department Represented by: Dr. Divya K. JCIT Hearing Date:17.07.2025 Date of Pronouncement 30.07.2025 O R D E R Per Prashant Maharishi, Vice President: 1. Captioned appeal is filed by M/s. Broadband Telecom Inc., California, United States (Assessee/Appellant) for the A.Y. 2018- 19 against the assessment order passed by the ACIT (International Taxation), Circle – 2(2), Bangalore (“the Ld. AO") dated 30.12.2024 under section 147 r.w.s. 144C(13) of the Income Tax Act, 1961 (“the Act”) raising the solitary issue is that the inter-

2 ITA No.140/Bang/2025 Broadband Telecom Inc communication charges received by the assessee are treated as royalty despite the issue decided in favor of the assessee by the Coordinate bench for the A.Y. 2013-14.

2.

Brief facts of the case show that assessee is Foreign Company who did not file any return of income and therefore on perusal of the AIR information and Form 26AS that assessee during the assessment year has received communication charges of Rs.5,80,43,570/-according to the Risk Management Strategy, the case of the assessee was reopened.

3.

The notice under section 148A(b) of the Act was issued on 30.03.2022 asking the assessee to why the proceedings under section 147 of the Act shouldnot be initiated. Assessee did not provide any information and accordingly, order under section 148A(d) was passed on 13.04.2022 along with notice under section 148 dated 13.04.2022 after obtaining permission under section 151 of the Act. To this notice also the assessee did not respond. Further, notice under section 142(1) was issued, however no response was received.

4.

Ld. AO issued a show cause notice on 29.12.2023 that why the above income should not be considered as the Royalty under 2

3 ITA No.140/Bang/2025 Broadband Telecom Inc section 9(1)(vi) of the Act. The assessee did not furnish any reply. Accordingly, the draft assessment order was passed on 29.02.2024 proposing the above sum of Rs.5,80,43,570/- as royalty under section 9(1)(vi) of the Act.

5.

Aggrieved by the above variation in the draft assessment order dated 29.02.2024, the assessee preferred objection before the Ld. Dispute Resolution Panel – 1, Bengaluru (“Ld.DRP”) who passed a direction on 28.11.2024 upholding the action of the Ld. AO. Based on this the final assessment order was passed on 30.12.2024 adding the above sum of Rs.5,80,43,570/-.

6.

During the course of assessment proceedings, the assessee raised an objection that Coordinate bench in ITA No.205/Bang/2023 dated 05.09.2023 in assessee’s own case has held that the telecommunicationcharges received by the assessee are not taxable as royalty under the provisions of the I.T.Act r.w.s. Double Tax Avoidance Agreement between Ind-USA. It was further stated that the revenue did not prefer any further appeal before the higher forum. The Ld.DRP rejected this argument that the department has not accepted the order of the ITAT on merits

4 ITA No.140/Bang/2025 Broadband Telecom Inc of the assessee and revenue has not filed appeal because of monetary limits.

7.

The assessee is in appeal before us stating that the issue is squarely covered in favor of the assessee by the order of the Coordinate bench for the A.Y. 2013-14 in its own case and further identical issue in case of Dy. Director of Income Tax (IT) v. Vodaphone Idea Ltd. an SLP is pending. These facts were shown to the Ld.DRP and just to keep the issue alive the addition is made. Ld.AR further referred to Para No.8.4.12 where these facts are recorded. Therefore the Ld. Counsel Sri Bhaumik Goda, CA submitted that the issue is squarely covered in favor of the assessee. He further stated that now the SLP which was mentioned in the order of the Ld. AO has also been dismissed in [2024] 165 taxmann.com 392 (SC). He referred to his compilation of 209 pages wherein he has relied upon 12 judicial precedents including one of the assessee itself and stated that the addition made by the Ld.AO deserves to be deleted.

8.

Ld. Departmental Representative supported the orders of the Ld. AO.

5 ITA No.140/Bang/2025 Broadband Telecom Inc 9. We have carefully considered the rival contentions and perused the order of the Ld. LowerAuthorities. We find that the Coordinate bench in assessee’s own case for the A.Y. 2013-14 in ITA No. 205/Bang/2023 dated 05.09.2023 as decided this issue that the receipt of long distance calling service charges cannot be considered as royalty under section 9(1)(vi) of the Act as well as under Article 12 of Ind-USA DTAA and thus allowed the appeal of the assessee.

10.On identical issue in case of Vodafone Idea Ltd. v. Deputy Director of Income Tax (IT) [2024] 173 taxmann.com 695 (SC), SLPwas dismissed vide order dated 07.04.2025 following the SLP in case of Deputy Director of Income Tax (IT) v. Vodafone Idea Ltd. in 469 ITR 391 (SC). In that case, the SLP is dismissed on merits. Therefore, now the issue of taxability of long telephone call charges in the hands of the assessee does not survive. Accordingly, the grounds of appeal of the assessee at Sl.No. 1 and 2 are allowed.

11.Ground No. 3 is against the interest charged under section 234A and 234B of the Act, which is consequential in nature and Ground

6 ITA No.140/Bang/2025 Broadband Telecom Inc No. 4 against initiation of penalty is pre-mature and hence Ground Nos. 3 & 4 are dismissed.

12.In the result, appeal filed BY the assessee is partly allowed.

Order pronounced in the open court on 30th July 2025.

Sd/- Sd/- (KESHAV DUBEY) (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE PRESIDENT Bangalore; Dated: 30th July 2025 Giridhar, Sr.PS

7 ITA No.140/Bang/2025 Broadband Telecom Inc Copy to: 1. The Applicant. 2. The Respondent. 3. The CIT(A) Concerned. 4. The DCIT concerned. 5. The Sr. DR, ITAT, Bangalore. 6. Guard File.

Asst.Registrar ITAT, Bangalore

More judgments on Section 9(1)(vi)

All 1,705 judgments and leading authorities on Section 9(1)(vi) →

Recent GST High Court judgments

Search GST case law →