THE DEPUTY COMMISSIONER OF INCOME TAX vs. M/S M.I. LIMITED

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WA/598/2024HC KarnatakaKAHC01022346202402 September 2024Bench: S.G.PANDIT,C.M. POONACHA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that interconnect service charges would 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 court noted that in the cited case, it was argued that for subsequent years, the ITAT had held that tax was not deductible when payments were made to non-resident telecom operators for interconnect services and transfer of capacity in foreign countries. The revenue had not refuted this factual aspect and had reviewed its earlier stand. Therefore, the question regarding royalty was answered against the revenue. The learned Single Judge had also relied on this co-ordinate bench decision. Consequently, the High Court found no infirmity in the order under challenge and dismissed the appeal.

What were the facts?

The appeal was filed by the Deputy Commissioner of Income Tax (International Taxation) against an order dated 02/11/2023 in WP No. 5452/2022, passed by a learned Single Judge of the Karnataka High Court. The respondent is M/s M.I. Limited, a Singapore-based company. The core issue revolves around whether interconnect service charges paid by the assessee would constitute royalty. The learned Single Judge had relied on a previous decision of a Co-ordinate Bench of the High Court in ITA No. 160/2015 and connected appeals.

What were the issues?

1. Whether interconnect service charges paid by the assessee constitute royalty under the Income Tax Act, 1961 and the relevant Double Taxation Avoidance Agreement (DTAA). Assessee's Contention: The judgment does not record any specific contentions made by the assessee in this appeal. However, it refers to the assessee's position in a previous case (ITA No. 160/2015) where it was argued that tax is not deductible when payment is made to a non-resident telecom operator for interconnect services and transfer of capacity in foreign countries. Revenue's Contention: The judgment does not explicitly record the revenue's contentions in this specific appeal. However, it notes that the revenue had reviewed its earlier stand for subsequent assessment years, placing reliance on decisions like Viacom, which was rendered by the ITAT.

Which sections of the Income-tax Act were involved?

Section 4

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:35625-DB WA No. 598 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. 598 OF 2024 (T-IT) BETWEEN:

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

…APPELLANT (BY SRI. SANMATHI E I.,ADVOCATE) AND:

1.

M/S M.I. LIMITED 10, INTERNATIONAL BUSINESS PARK, SINGAPORE - 609928 REPRESENTED BY ITS AUTHORIZED SIGNATORY LEE KOK CHEW SON OF LEE CHIN LAM, AGED ABOUT 54 YEARS 10 INTERNATIONAL BUSINESS PARK SINGAPORE - 609 928

RESPONDENT

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:35625-DB WA No. 598 of 2024

WRIT APPEAL FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO i)SET ASIDE THE ORDER DATED 02/11/2023 IN WP NO.5452/2022 PASSED BY THE HONBLE LEARNED SINGLE JUDGE.

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 appellant.

2.

Perused the appeal papers.

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

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NC: 2024:KHC:35625-DB WA No. 598 of 2024

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.

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.: 15

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