Payment towards interconnectivity utility charges from Indian customers not taxable as Royalty

Al Telekom Austria Vs DCIT (ITAT Bangalore)

ITAT Bangalore held that payments received towards interconnectivity utility charges from Indian customers / end users cannot be considered as Royalty to be brought to tax in India under section 9(1)(vi) of the Income Tax Act and also as per DTAA.

Facts- The assessee company M/s. A1 Telekom Austria TA AG is a non-resident telecommunications operator engaged in the business of telecommunication services, interconnect services, internet services, etc. and a tax resident of Austria. Proceedings u/s 201 were initiated in respect of non-deduction of tax at source on payments made to Non-resident Telecom Operators (NTOs) for the provision of bandwidth capacity and for the provision of interconnect services. The said charges were considered royalties or FTS both as per the Act and the respective DTAAs.

CIT(A) thus held that the payment received by the assessee for interconnect charges for the years under consideration would amount to royalty under the provisions of the act as well as DTAA. Being aggrieved, the present appeal is filed.

Conclusion- Held that payments received by assessee towards interconnectivity utility charges from Indian customers / end users cannot be considered as Royalty to be brought to tax in India under section 9(1)(vi) of the Act and also as per DTAA.

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