THE COMMISSIONER OF INCOME TAX vs. M/S IBASIS NETHERLANDS B.V.

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ITA/31/2024HC KarnatakaKAHC01000361202402 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court followed its previous decisions in similar cases, holding that the substantial questions of law were answered against the revenue and in favor of the assessee. Therefore, the payments were not taxable as royalty in India.

What were the facts?

The Revenue appealed against an ITAT order holding that payments to non-resident telecom operators for interconnect services and capacity transfer were not taxable as royalty. The Revenue argued that the processes were triggered from India, making the source of income arise in India.

What were the issues?

Whether payments for interconnect services and capacity transfer to non-resident telecom operators constitute royalty taxable in India, considering the source of income and presence in India.

Which sections of the Income-tax Act were involved?

Section 9(1)(vi)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

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NC: 2024:KHC:35650-DB ITA No. 31 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 INCOME TAX APPEAL NO. 31 OF 2024

BETWEEN:

1.

THE COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION 4TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU -560 095.

2.

THE DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE-2(2) 4TH FLOOR, BMTC BUILDING 80 FEET ROAD, KLORAMANGALA BENGALURU- 560 095. …APPELLANTS (BY SRI. RAVI RAJ Y.V. A/W SRI DILIP M., ADV.)

AND:

M/S. IBASIS NETHERLANDS B.V. (EARLIER KNOWN AS KPN GLOBAL CARRIER SERVICES B.V.,) KPN CORPORATE TAX DEPARTMENT, P O BOX NO.25182, 3001 HD, ROTTERDAM NETHERLANDS PAN: AACCI4050P. …RESPONDENT (BY SMT. TANMAYEE RAJKUMAR, ADV.)

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:35650-DB ITA No. 31 of 2024

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 09/10/2023 PASSED IN IT(IT)A NO.201/BANG/2023, FOR THE ASSESSMENT YEAR 2013-2014, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN IT(IT)A NO.201/BANG/2023 DATED 09/10/2023 FOR ASSESSMENT YEAR 2013-2014 ANNEXURE A AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, CIRCLE 2(2), BENGALURU AND ETC.

THIS APPEAL, COMING ON FOR HEARING, 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)

This appeal was admitted on 10.01.2024 to consider the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that payments to Non-resident telecom operators for interconnect services and capacity transfer are not taxable as royalty without considering that the processes were triggered from India, thereby making the source of such income accrue/arise out of

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NC: 2024:KHC:35650-DB ITA No. 31 of 2024

India, for the Non-resident telecom operators to earn the income and the payments were made by the deductor by collecting it from the ultimate payer i.e., the end consumer in India for services rendered?

2.

Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the non-resident telecom operators have no presence in India without considering the fact that the income accrued and arose in India at the time of the call being made and no receipt would be available for the Indian entity also in the event the call did not go through?

3.

Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the process royalty is not applicable without as much as considering the agreements between the assessee and payees, opinion of experts in the field of telecommunication and provisions governing royalty in the act & DTAA?

4.

Whether on the facts and in the circumstances of the case, the Tribunal was

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NC: 2024:KHC:35650-DB ITA No. 31 of 2024

right in holding that the income earned by the assessee from Indian entities were not in the nature of royalty as defined in explanation 2 to section 9(1)(vi) of the Act and the DTAA?

2.

We have heard learned counsel Sri.Y.V.Ravi Raj for Sri.M.Dilip, learned counsel appearing for the appellants/revenue and Smt.Tanmayee Rajkumar, learned counsel for the respondent.

3.

Learned counsel appearing for the parties would submit that the substantial questions of law raised herein are identical to the questions that were decided by a co- ordinate Bench of this Court in VODAFONE IDEA LTD., v/s DEPUTY DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) reported in (2023) 152 taxmann.com 575 (KAR) disposed of on 14.07.2023, answering the questions against the Revenue and in favour of the assessee. Similar appeals in respect of the same parties relating to other assessment years, assailing the same order of the Tribunal have been disposed of by this Court in ITA No.29/2024 disposed of on 10.06.2024.

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NC: 2024:KHC:35650-DB ITA No. 31 of 2024

4.

Following the above two decisions, the present appeal also stands disposed of, answering the substantial questions of law against the revenue and in favour of the assessee.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

MPK CT:bms List No.: 1 Sl No.: 102

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