THE JOINT COMMISSIONER OF INCOME TAX vs. M/S DEUTSCHE TELEKOM AG,

WA/1566/2023HC KarnatakaKAHC01066928202318 March 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 to non-resident telecom operators do not constitute royalty. This decision was based on a Co-ordinate Bench's judgment in ITA No. 160/2015 and connected appeals, dated July 14, 2023. The Court noted that the ITAT had previously held that tax is not deductible when payments are made to non-resident telecom operators for interconnect services and transfer of capacity in foreign countries. The Revenue had not refuted this factual aspect for subsequent assessment years. The learned Single Judge had also relied on this Co-ordinate Bench decision. Consequently, the High Court found no infirmity in the orders under challenge and dismissed the appeal.

What were the facts?

This case involves a Writ Appeal filed by the Joint Commissioner of Income Tax and others (the Revenue) challenging an order passed by the learned Single Judge in W.P. No. 51999/2019. The respondent is M/s Deutsche Telekom AG. The core issue revolves around whether interconnect service charges paid by the respondent to non-resident telecom operators constitute royalty. The Revenue's appeal is against the Single Judge's order which relied on a previous decision of a Co-ordinate Bench of the same High Court in ITA No. 160/2015 and connected appeals.

What were the issues?

1. Whether interconnect service charges paid by the assessee to non-resident telecom operators are chargeable to tax as royalty under the Income Tax Act. This is a question of law. The assessee contends that for subsequent assessment years, the Income Tax Appellate Tribunal (ITAT) has held that such payments do not constitute royalty, and the Revenue has not refuted this factual aspect, implying a review of their earlier stand. The assessee relies on the ITAT's decision in their own case for subsequent years and the decision in Viacom. The Revenue's arguments are not explicitly recorded in the provided text, other than their appeal against the Single Judge's order.

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:10968-DB WA No. 1566 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18TH DAY OF MARCH, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA WRIT APPEAL NO. 1566 OF 2023 (T-IT)

BETWEEN:

THE JOINT COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION, CIRCLE-2(1), BMTC BUILDING, 80 FEET ROAD, KORAMANGALA , BENGALURU - 560 095

THE DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION, CIRCLE-2(1), ROOM NO.440, 4TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU - 560 095

THE ASST., COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION, CIRCLE-2(1), ROOM NO.440, 4TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA,

Digitally signed by A K CHANDRIKA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:10968-DB WA No. 1566 of 2023

BENGALURU - 560 095. …APPELLANTS

(BY SRI. Y.V.RAVIRAJ ADVOCATE A/W SRI.DILIP.M., ADVOCATES)

AND:

M/S DEUTSCHE TELEKOM A G FRIEDRICH-EBERT-ALLE 140, 53113 BONN, GERMANY, (REP BY ITS HEAD OF TRANSACTION TAX SRI ULRICH HARTMANN S/O SRI WERNER HARTMANN AGED ABOUT 62 YEARS …RESPONDENT

(BY SRI.CHYTHANYA.K.K, SR. COUNSEL FOR SRI.S.SHARATH., ADVOCATE)

THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED BY THE LEARNED SINGLE JUDGE IN W.P NO. 51999/2019 (T-IT) DATED 23.08.2023 & ETC.

THIS APPEAL, COMING ON FOR PERLIMINAY HEARING, THIS DAY, S.G.PANDIT J., DELIVERED THE FOLLOWING:

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NC: 2024:KHC:10968-DB WA No. 1566 of 2023

JUDGMENT

Heard Sri. Y.V.Raviraj along with Sri. Dilip.M., learned counsel for the appellants and Sri. Chythanya.K.K., learned Senior Counsel for Sri. S.Sharath, learned counsel for the 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 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

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NC: 2024:KHC:10968-DB WA No. 1566 of 2023

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 orders 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/- JUDGE

SMJ/MPK

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