THE DEPUTY COMMISSIONER OF INCOME TAX vs. ORANGE

PDF · subscribers
WA/1094/2024HC KarnatakaKAHC01042705202402 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that interconnect service charges paid by the Assessee do not constitute royalty. This decision was based on a Co-ordinate Bench's judgment in ITA No. 160/2015 and connected appeals, dated 14.07.2023. The Co-ordinate Bench had answered the question against the Revenue, noting that the Revenue had not refuted the factual aspect that for subsequent years, the ITAT had held that tax was not deductible when payments were made to non-resident telecom operators. The learned Single Judge had also relied on this precedent. Consequently, the High Court found no infirmity in the order under challenge and dismissed the appeal. The operative direction was to dismiss the appeal.

What were the facts?

This case involves a Writ Appeal filed by the Deputy Commissioner of Income Tax and others (the Revenue) against an order dated 23.11.2023 passed by a learned Single Judge in Writ Petition No. 6710/2023. The Writ Petition was filed by Vodafone Idea Limited and Orange (the Assessee). The core issue revolves around whether interconnect service charges paid by the Assessee constitute royalty under the Income Tax Act. The Revenue is challenging the Single Judge's decision, which was based on a previous judgment of a Co-ordinate Bench of the same High Court.

What were the issues?

1. Whether interconnect service charges paid by the Assessee to non-resident telecom operators constitute royalty, making them chargeable to tax in India? Assessee's Contention: The Assessee relied on a judgment of a Co-ordinate Bench of the Karnataka High Court in ITA No. 160/2015 and connected appeals, dated 14.07.2023. This judgment held that interconnect service charges do not constitute royalty. The Assessee also noted that for subsequent assessment years, the Revenue had reviewed its earlier stand, placing reliance on ITAT decisions like Viacom. Revenue's Contention: The judgment does not explicitly record any specific arguments made by the Revenue against the Assessee's contentions or the Co-ordinate Bench's decision. However, the appeal itself indicates a disagreement with the Single Judge's order.

Which sections of the Income-tax Act were involved?

Section 4

AI-generated summary — verify with the full judgment below

- 1 -

NC: 2024:KHC:35638-DB WA No. 1094 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. 1094 OF 2024 (T-IT) BETWEEN:

1.

THE DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION WARD 2(2), ROOM NO.430, 4TH FLOOR, BMTC BUILDING, 80 FT ROAD, 6TH BLOCK, KORMANGALA, BENGALURU-560095.

2.

THE COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION, ROOM NO.741, 7TH FLOOR, BMTC BUILDING, 80 FT ROAD, 6TH BLOCK, KORMANGALA, BENGALURU-560095.

3.

THE CENTRAL BOARD OF DIRECT TAXES DEPARTMENT OF REVENUE, NORTH BLOCK, CENTRAL SECRETARIAT, NEW DELHI-110001 REP. BY ITS CHAIRMAN. …APPELLANTS (BY SRI. SANMATHI E. I., ADV.)

AND:

1.

ORANGE 78 RULE OLIVAIER DE SERRS PARIS (FRANCE) REP. BY ITS AUTHORISED SIGNATORY,

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

- 2 -

NC: 2024:KHC:35638-DB WA No. 1094 of 2024

VODAFONE IDEA LIMITED 10TH FLOOR, BIRLA CENTURION, CENTURION MILLS COMPOUND, PANDURANG BUDKKAR MARG, WORLI, MUMBAI-400030 REP. BY ITS DIRECTOR MR. BENOIT DELAPLACE.

2.

VODAFONE IDEA LIMITED 10TH FLOOR, BIRLA CENTURION, CENTURION MILLS COMPOUND, PANDURANG BUDKKAR MARG, WORLI, MUMBAI-400030 REPRESENTED BY ITS DIRECTORS. …RESPONDENTS (BY SRI.HARIPRITH SINGH AJMANI, ADV.)

THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER DATED 23.11.2023 IN WRIT PETITION NO.6710/2023 (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 appellants and learned counsel Sri.Harprith Singh Ajmani for respondents.

2.

Perused the appeal papers.

- 3 -

NC: 2024:KHC:35638-DB WA No. 1094 of 2024

3.

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

4.

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 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.”

5.

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.

- 4 -

NC: 2024:KHC:35638-DB WA No. 1094 of 2024

6.

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.: 28

More judgments on Section 4

All 1,145 judgments and leading authorities on Section 4 →

Recent GST High Court judgments

Search GST case law →