THE DEPUTY COMMISSIONER OF INCOME TAX vs. M/S. SINGAPORE TELECOMMUNICATIONS LTD

WA/334/2024HC KarnatakaKAHC01012864202425 March 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages

AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Court followed its own previous decision rendered by a Co-ordinate Bench in ITA.No.160/2015 and connected appeals, dated 14.07.2023. In that judgment, the Co-ordinate Bench had held that payments made to Non-resident Telecom Operators (NTOS) for providing interconnect services and transfer of capacity in foreign countries do not constitute royalty. The Court noted that the Revenue had not refuted the factual aspect that for subsequent assessment years, the ITAT had held that tax is not deductible when payment is made to a non-resident telecom operator, implying a review of their earlier stand. The learned Single Judge had also placed reliance on this decision. Therefore, the High Court found no infirmity in the order under challenge and dismissed the appeal.

What were the facts?

This is a Writ Appeal filed by the Deputy Commissioner of Income Tax and others (Revenue) challenging an order passed by the learned Single Judge in W.P.No.17270/2021 dated 23.11.2023. The appeal concerns the assessment of M/s. Singapore Telecommunications Ltd. and Vodafone Idea Limited. The core issue revolves around whether interconnect service charges paid by the assessee constitute royalty. The Revenue is appealing the decision of the learned Single Judge, who had relied 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 a non-resident telecom operator are exigible to tax as royalty under the Income Tax Act, 1961. Assessee's Contention: The assessee relies on a judgment of a Co-ordinate Bench of the High Court in ITA.No.160/2015 and connected appeals, dated 14.07.2023, which held that interconnect service charges do not constitute royalty. The assessee notes that for subsequent assessment years, the ITAT had also held that tax is not deductible when payments are made to a non-resident telecom operator, and the Revenue had not refuted this factual aspect, implying a review of their earlier stand. Revenue's Contention: The judgment does not explicitly record arguments made by the Revenue in this appeal. However, their filing of the appeal suggests disagreement with the Single Judge's order and the Co-ordinate Bench's decision.

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:13585-DB WA No. 334 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.334 OF 2024 (T-IT) BETWEEN:

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

THE COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION RANGE-2, 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 CHAIRMAN. …APPELLANTS (BY SRI. Y V RAVIRAJ, ADV.)

AND:

M/S. SINGAPORE TELECOMMUNICATIONS LTD., SINGAPORE 31 EXETER ROAD COMCENTRE SINGAPORE -239732 SINGAPORE

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

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NC: 2024:KHC:13585-DB WA No. 334 of 2024

REP. BY ITS AUTHORISED SIGNATORY MR.KOH BOON CHYE.

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.17270/2021 (T-IT) DATED 23.11.2023.

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:13585-DB WA No. 334 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:13585-DB WA No. 334 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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