DEPUTY COMMISSIONER OF INCOME TAX vs. M/S. BELGACOM INTERNATIONAL CARRIER SERVICES SA BELGIUM

PDF · subscribers
WA/650/2024HC KarnatakaKAHC01024987202402 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 paid by the assessee do not constitute royalty. This decision was based on a coordinate bench's judgment in ITA No. 160/2015 and connected appeals, dated 14.07.2023. The court noted that the factual aspect, that for subsequent assessment years the ITAT had held tax is not deductible on such payments to non-resident telecom operators (relying on the Viacom case), was not refuted by the Revenue. Consequently, the High Court found no infirmity in the order under challenge, which had also relied on the coordinate bench's decision. The appeal filed by the Revenue was dismissed.

What were the facts?

The appellants, the Deputy Commissioner of Income Tax (International Taxation) and others, have filed a writ appeal challenging an order dated 27/10/2023 passed by the learned Single Judge in WP No. 6002/2018. The respondent is M/s. Belagacom International Carrier Services SA Belgium. The core issue revolves around whether interconnect service charges paid by the respondent constitute royalty under the Income Tax Act. The learned Single Judge had relied on a coordinate bench decision of the High Court in ITA No. 160/2015 and connected appeals, which held that such payments are not royalty. The Revenue has not refuted the factual aspect that for subsequent assessment years, the ITAT had also held that tax is not deductible on such payments to non-resident telecom operators, placing reliance on the Viacom case.

What were the issues?

1. Whether interconnect service charges paid by the assessee to non-resident telecom operators constitute royalty under the Income Tax Act, 1961, specifically in light of the definition of royalty and the application of Double Taxation Avoidance Agreements (DTAAs)? Assessee's Contentions: The assessee relies on a coordinate bench decision of the High Court in ITA No. 160/2015 and connected appeals, which held that interconnect service charges do not constitute royalty. The assessee also points to ITAT decisions for subsequent assessment years in its own case, which held that tax is not deductible on such payments to non-resident telecom operators, referencing the Viacom case. The revenue has not refuted this factual aspect. Revenue's Contentions: The judgment does not explicitly record the revenue's contentions in this specific appeal. However, the appeal itself suggests the revenue disputes the finding that interconnect service charges are not royalty.

Which sections of the Income-tax Act were involved?

Section 4

AI-generated summary — verify with the full judgment below

- 1 -

NC: 2024:KHC:35627-DB WA No. 650 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. 650 OF 2024 (T-IT) BETWEEN:

1.

DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) CIRCLE-2(1), ROOM NO.441, 4TH FLOOR, BMTC BUILDING KORAMANGALA BENGALURU- 560 095.

2.

PRINCIPLE CHIEF COMMISSIONER OF INCOME TAX C-3, DONA CYNTHIA, PRIMROSE ROAD BENGALURU-560025.

3.

THE UNION OF INDIA THROUGH ITS SECRETARY DEPARTMENT OF REVENUE MINISTRY OF FINANCE 128/A, NORTH BLOCK NEW DELHI- 110 001. …APPELLANTS (BY SRI. SANMATHI E. I., ADV.)

AND:

M/S. BELGACOM INTERNATIONAL CARRIER SERVICES SA BELGIUM REP. BY AUTHORIZED SIGNATORY. …RESPONDENT

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

- 2 -

NC: 2024:KHC:35627-DB WA No. 650 of 2024

THIS APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO I) SET ASIDE THE ORDER DATED 27/10/2023 IN WP NO.6002/2018 PASSED BY THE LEARNED SINGLE JUDGE AND ETC.

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 appellants.

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

- 3 -

NC: 2024:KHC:35627-DB WA No. 650 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.: 17

More judgments on Section 4

All 1,145 judgments and leading authorities on Section 4 →

Recent GST High Court judgments

Search GST case law →