THE ASST COMMISSIONER OF INCOME TAX vs. M/S SINGAPORE TELECOMMUNICATIONS LIMITED

WA/294/2024HC KarnatakaKAHC01010033202425 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 do not constitute royalty. This decision was based on a previous judgment of a Coordinate Bench of the same High Court in ITA.No.160/2015 and connected appeals, dated 14.07.2023. The Court noted that in that earlier case, the third question was whether payments made to NTOS for providing interconnect services and transfer of capacity in foreign countries were chargeable to tax as royalty. The judgment in that case stated that the Revenue had not refuted the factual aspect that for subsequent years, the ITAT had held that tax was not deductible when payment was made to a non-resident telecom operator. The Revenue had reviewed its earlier stand for subsequent assessment years, relying on ITAT decisions. Therefore, the Coordinate Bench answered that question against the Revenue. The learned Single Judge had also relied on this decision. The High Court found no infirmity in the orders under challenge and accordingly dismissed the appeal.

What were the facts?

This case involves a Writ Appeal filed by the Assistant Commissioner of Income Tax and others (the Revenue) challenging an order passed by a learned Single Judge in W.P.No.51579/2019 dated 02.11.2023. The appeal concerns whether interconnect service charges paid by M/s. Singapore Telecommunications Limited (Respondent No. 1) and Vodafone Idea Limited (Respondent No. 2) to non-resident telecom operators constitute royalty. The Revenue is appealing the Single Judge's decision, which had relied on a previous judgment of a Coordinate Bench of the same High Court.

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 Revenue's contention is that such payments are royalty. The Assessee's contention, as indicated by the reliance on a previous judgment, is that these payments do not constitute royalty. The judgment refers to a Co-ordinate Bench decision in ITA.No.160/2015 and connected appeals, which held that interconnect service charges would not constitute royalty. The Revenue had not refuted the factual aspect that for subsequent assessment years, the ITAT had held that tax was not deductible when payment was made to a non-resident telecom operator, and the Revenue had reviewed its earlier stand, placing reliance on decisions like Viacom.

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:13584-DB WA No. 294 of 2024

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH 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.294 OF 2024 (T-IT) BETWEEN:

THE ASST. COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE-2 (2), ROOM NO.440 4TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU-560095.

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

THE CENTRAL BOARD OF DIRECT TAXES DEPARTMENT OF REVENUE NORTH BLOCK, CENTRAL SECRETARIAT NEW DELHI-110001 REP. BY ITS SECRETAY. …APPELLANTS (BY SRI. Y V RAVIRAJ, ADV.)

AND:

M/S. SINGAPORE TELECOMMUNICATIONS LIMITED SINGAPORE 31 EXETER ROAD COMCENTRE SINGAPORE -239732 SINGAPORE REP. BY ITS AUTHORISED SIGNATORY MR.QUAH KUNG YANG.

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

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NC: 2024:KHC:13584-DB WA No. 294 of 2024

VODAFONE IDEA LIMITED 10TH FLOOR, BIRLA CENTURION CENTURION MILLS COMPOUND PANDURANG BUDKKAR MARG WORLI, MUMBAI-400030 REP. BY ITS DIRECTORS. …RESPONDENTS (BY SRI.HARPREET SINGH AJMANI, ADV. FOR SRI PRANAV VENKAT VISHWANATH, ADV. FOR C/R1)

THIS 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.51579/2019 (T-IT) DATED 02.11.2023.

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

JUDGMENT

Heard Sri.Y.V.Raviraj learned counsel for the appellants and learned counsel Sri.Harpreet Singh Ajmani, for Sri.Pranav Venkat Vishwanath, learned Counsel for the Caveator/respondent No.1.

Perused the appeal papers.

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

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NC: 2024:KHC:13584-DB WA No. 294 of 2024

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.”

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.

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NC: 2024:KHC:13584-DB WA No. 294 of 2024

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

NC CT:bms

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