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

WA/679/2024HC KarnatakaKAHC01024985202427 September 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 co-ordinate bench's judgment in ITA No. 160/2015 and connected appeals, dated 14.07.2023. The co-ordinate bench had answered the question against the Revenue, noting that the Revenue itself had reviewed its earlier stand for subsequent assessment years and accepted that tax was not deductible in such cases, relying on ITAT decisions. The learned Single Judge had also placed reliance on this co-ordinate bench decision. Therefore, the High Court found no infirmity in the order under challenge and dismissed the appeal.

What were the facts?

The appellants, the Deputy Commissioner of Income Tax (International Taxation) and others, filed a writ appeal challenging an order dated 27.10.2023 passed by a learned Single Judge in WP No. 48207/2018. The respondent is M/s. Belagacom International Carrier Services SA Belgium. The core of the dispute revolves around whether interconnect service charges paid by the respondent would constitute royalty under the Income Tax Act. The learned Single Judge had relied on a previous decision of a co-ordinate bench of the High Court.

What were the issues?

1. Whether interconnect service charges paid by the respondent to a non-resident telecom operator would amount to royalty under the Income Tax Act. Assessee's Contention: The judgment does not explicitly record the assessee's (Revenue's) arguments. However, it notes that for subsequent assessment years, the Revenue had reviewed its earlier stand and accepted that tax was not deductible when payment was made to a non-resident telecom operator for interconnect services, placing reliance on Viacom etc. (rendered by the ITAT). Revenue's Contention: The judgment does not explicitly record the Revenue's arguments. However, the context implies the Revenue contended that the interconnect service charges should be treated as royalty.

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:40391-DB WA No. 679 of 2024

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH 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.679 OF 2024 (T-IT)

BETWEEN:

DEPUTY COMMISSIONER OF INCOME TAX, (INTERNATIONAL TAXATION), CIRCLE-2(1) ROOM NO.441, 4TH FLOOR, BMTC BUILDING, KORAMANGALA, BENGALURU - 95.

PRINCIPLE CHIEF COMMISSIONER OF INCOME TAX, C-3, DONA CYNTHIA, PRIMSORE ROAD, BENGALURU - 560 025.

THE UNION OF INDIA THROUGH ITS REVENUE SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, 128/A, NORTH BLOCK, NEW DELHI - 110 001. …APPELLANTS

(BY SRI. SANMATHI E.I, ADVOCATE)

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:40391-DB WA No. 679 of 2024

AND:

M/S. BELGACOM INTERNATIONAL CARRIER SERVICES SA BELGIUM, REPRESENTED BY AUTHORIZED SIGNATORY, RUE LEBARY, B-1000 BRUSSELS, BELGIUM. …RESPONDENT

(BY SRI. SAGAR AGARWAL, ADVOCATE)

THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER DATED 27.10.2023 IN WP No-48207/2018(T-IT) PASSED BY THE HONBLE LEARNED SINGLE JUDGE AND ETC.

THIS APPEAL IS 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

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NC: 2024:KHC:40391-DB WA No. 679 of 2024

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)

Heard Sri. E.I.Sanmathi, learned counsel for the appellants and Sri. Sagar Agarwal, learned counsel for the respondent.

Perused the appeal papers.

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

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

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NC: 2024:KHC:40391-DB WA No. 679 of 2024

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 order under challenge.

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

SMJ List No.: 4 Sl No.: 2

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