ASSISTANT COMMISSIONER OF INCOME TAX vs. ORANGE Q P S C

WA/1088/2024HC KarnatakaKAHC01042703202402 September 2024Bench: S.G.PANDIT,C.M. POONACHA3 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that interconnect service charges paid by the assessee would not constitute royalty. This decision was based on a coordinate bench of the same High Court in ITA No. 160/2015 and connected appeals, decided on 14.07.2023. The court noted that the coordinate bench had answered the question against the Revenue, citing that for subsequent assessment years, the ITAT had held that tax is not deductible when payments are made to non-resident telecom operators, and this factual aspect was not refuted by the Revenue. The judgment found no infirmity in the order of the learned Single Judge, who had also relied on the coordinate bench's decision. Therefore, the appeal was dismissed.

What were the facts?

The appeal is filed by the Assistant Commissioner of Income Tax, International Taxation Ward 2(2), Bengaluru, against an order dated 23.11.2023 passed by a learned Single Judge in Writ Petition No. 17821/2022. The respondent is Orange Q P S C, formerly Ooredoo Qatar. The core issue revolves around whether interconnect service charges paid by the assessee would constitute royalty. The learned Single Judge had relied on a coordinate bench decision of the High Court. The appellant is challenging the Single Judge's order.

What were the issues?

1. Whether interconnect service charges paid by the assessee to a non-resident telecom operator are to be treated as royalty under the Income Tax Act, 1961, and consequently, chargeable to tax in India. Assessee's Contention: The assessee relies on a coordinate bench decision of the Karnataka High Court in ITA No. 160/2015 and connected appeals, dated 14.07.2023. This decision held that interconnect service charges do not constitute royalty. The assessee also points out that for subsequent assessment years, the Income Tax Appellate Tribunal (ITAT) had held that tax is not deductible when payment is made to a non-resident telecom operator, a stance the Revenue had reviewed. The assessee argues that the Revenue's earlier stand for subsequent years was based on ITAT decisions like Viacom etc.35. Revenue's Contention: The judgment does not explicitly record the revenue's specific arguments in this writ appeal. However, by filing the appeal, the revenue is implicitly challenging the finding that interconnect service charges are not royalty.

Which sections of the Income-tax Act were involved?

Section 4 of the Karnataka High Court Act

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:35637-DB WA No. 1088 of 2024

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2ND DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA WRIT APPEAL NO. 1088 OF 2024 (T-IT) BETWEEN:

ASSISTANT COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION WARD 2(2), 4TH FLOOR, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU-560095. …APPELLANT (BY SRI. SANMATHI E. I., ADV.)

AND:

ORANGE Q P S C M/S. OOREDOO QATAR, (FORMERLY KNOWN AS M/S QTEL) C/O DHRUVA TERRACES, NO.5/1, PRESTIGE TOWERS, 2ND FLOOR, UNION STREET, INFANTRY ROAD, BANGALORE-560001 REP. BY AUTHORIZED REPRESENTATIVE, MR. MUKESH SHAH, S/O ROSHANLA SHAH, AGED ABOUT 41 YEARS. …RESPONDENT (BY SRI.HARPRITH SINGH AJMANI, ADV.)

THIS APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER DATED

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:35637-DB WA No. 1088 of 2024

23.11.2023 IN WRIT PETITION NO.17821/2022 (T-IT) PASSED BY THE LEARNED SINGLE JUDGE AND ETC.

THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE S.G.PANDIT AND HON'BLE MR JUSTICE C.M. POONACHA

ORAL JUDGMENT

(PER: HON'BLE MR JUSTICE S.G.PANDIT)

Heard Sri. E.I.Sanmathi, learned counsel for the appellant and learned counsel Sri.Harprith Singh Ajmani for respondent.

Perused the appeal papers.

The question involved in the appeal is as to whether interconnect service charges paid would amount to royalty.

The above issue was considered by a Co-ordinate Bench of this court in ITA.No.160/2015 and connected appeals. By judgment dated 14.07.2023 it is held that interconnect service charges would not constitute royalty. Paragraph No.21 of the judgment reads as follows: “The third question is, whether the payments made to NTOS for providing interconnect services and transfer of capacity in foreign countries is chargeable to tax as royalty. It was argued by Shri.Pardiwala, that for subsequent years in assessee’s own case, the ITAT has

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NC: 2024:KHC:35637-DB WA No. 1088 of 2024

held that tax is not deductable when payment is made to non-resident telecom operator. This factual aspect is not refuted. Thus the Revenue has reviewed its earlier stand for the subsequent assessment years placing reliance on Viacom etc35, rendered by the ITAT. In that view of the matter this question also needs to be answered against the Revenue.”

Learned Single Judge has also placed reliance on the above decision of the Co-ordinate Bench. Therefore, we do not find any infirmity in the order under challenge.

Following the decision of Co-ordinate Bench dated 14.07.2023 in ITA No.160/2015 and connected appeals, the above appeal stands dismissed.

SD/- (S.G.PANDIT) JUDGE

SD/- (C.M. POONACHA) JUDGE

MPK CT:bms List No.: 1 Sl No.: 27

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