DCIT Vs Belgacom International (Karnataka High Court)
Karnataka High Court, in the case of DCIT Vs Belgacom International, addressed the specific legal question of whether interconnect service charges paid by a company to non-resident telecom operators (NTOs) are classifiable as “Royalty” and thus subject to tax deduction at source under the Income Tax Act, 1961.
The Court relied entirely on the binding precedent set by its own Co-ordinate Bench in the judgment dated July 14, 2023, delivered in ITA.No.160/2015 and connected appeals (referred to as Viacom by the ITAT in subsequent years). That earlier decision concluded that payments made to NTOs for providing interconnect services and capacity transfer in foreign countries do not constitute royalty payments. The court noted that in the assessee’s own case for subsequent assessment years, the Income Tax Appellate Tribunal (ITAT) had already adopted this position, a fact not refuted by the Revenue.
Following the established precedent, the Karnataka High Court found no infirmity in the orders under challenge and dismissed the appeal filed by the Deputy Commissioner of Income Tax (DCIT). The final order affirmed that the interconnect service charges paid are not chargeable to tax as royalty in the hands of the non-resident recipients.
