DCIT (International Taxation) Vs Belgacom International Carrier Services Sa Belgium (Karnataka High Court)
The Karnataka High Court considered whether interconnect service charges paid to foreign telecom operators constitute royalty and are thus taxable. The issue had already been addressed by a Co-ordinate Bench in an earlier judgment dated 14.07.2023, which held that such payments for interconnect services and transfer of capacity in foreign countries do not amount to royalty. The earlier ruling also noted that, in subsequent assessment years, the Income Tax Appellate Tribunal had held that tax was not deductible on payments made to non-resident telecom operators, and this position was not disputed by the Revenue. The Revenue had also revised its earlier stance in light of tribunal decisions.
Read SC Judgment in this case: SC dismissed SLP for Delay & Lack of Merit on Interconnect Charges Taxability
In the present case, the Learned Single Judge relied on the Co-ordinate Bench’s decision. The Division Bench found no infirmity in that order. Accordingly, following the binding precedent, the appeal filed by the Revenue was dismissed, reaffirming that interconnect service charges are not taxable as royalty.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Heard Sri. E.I.Sanmathi, learned counsel for the appellants and Sri. Sagar Agarwal, learned counsel for the respondent.
