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

WA/344/2024HC KarnatakaKAHC01012770202425 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 previous judgment of a Co-ordinate Bench of the same High Court in ITA.No.160/2015 and connected appeals, dated 14.07.2023. The Court noted that in the cited judgment, it was held that payments made to Non-resident Telecom Operators (NTOS) for providing interconnect services and transfer of capacity in foreign countries are not chargeable to tax as royalty. The Court further observed that for subsequent assessment years, the ITAT had held that tax is not deductible when payment is made to a non-resident telecom operator, a factual aspect that was not refuted by the Revenue. The learned Single Judge had also placed reliance on this earlier decision. Therefore, 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 Deputy Commissioner of Income Tax and others (Appellants/Revenue) against an order passed by a learned Single Judge in W.P.No.17266/2021. The writ petition was filed by M/s. Singapore Telecommunications Ltd. (Respondent No.1/Assessee). The core issue revolves around whether interconnect service charges paid by the Assessee to non-resident telecom operators constitute royalty. The learned Single Judge had relied on a previous decision of a Co-ordinate Bench of the same High Court in ITA.No.160/2015 and connected appeals, which held that such charges are not royalty. The Revenue is challenging the Single Judge's order upholding this view.

What were the issues?

1. Whether interconnect service charges paid by the Assessee to non-resident telecom operators are taxable as royalty under the Income Tax Act. (Question of law) Assessee's Contention: The Assessee relies on the judgment of a Co-ordinate Bench of the 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 points out that for subsequent assessment years, the Income Tax Appellate Tribunal (ITAT) had held that tax is not deductible when payments are made to non-resident telecom operators, 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 any specific arguments made by the Revenue against the Assessee's reliance on the Co-ordinate Bench's decision. However, the filing of the appeal itself indicates disagreement with the Single Judge's order.

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:13588-DB WA No. 344 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.344 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 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:13588-DB WA No. 344 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.17266/2021 (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:13588-DB WA No. 344 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:13588-DB WA No. 344 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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