Case Law Details
Dialog Axiata PLC Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that the payment made towards interconnect usage charges to foreign telecom operators does not accrue or arise in India and in the absence of any permanent establishment in India could not be brought to tax in India under Article 7 of DTAA.
Facts- The assessee company is a non resident telecommunication operator rendering international carriage and connectivity services to telecom operators of other countries to facilitate seamless connectivity and carriage of telecommunication traffic in Sri Lanka.
The assessee’s case was reopened by A.O. u/s. 147 of the Act for the reason that the assessee has received payment of Rs.4,16,80,240/- during the year under consideration from M/s. Vodafone South Limited (VSL) which is an Indian entity. A.O. observed that the said income was chargeable to tax in India as ‘royalty’ and that the deductor had not deducted tax at source as per the provision of section 191 of the Act.
Accordingly, AO held that the receipts in the form of Interconnect Usage Charges are to be taxed in India as per the provisions of Income Tax Act as well as the DTAA entered into between India and Sri Lanka and held that as per the provision of section 5 of the Act, the said receipts are to be taxed as ‘royalty’.
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