Case Law Details
Deputy Director Of Income Tax & Anr. Vs Vodafone Idea Ltd. (Supreme Of Court India)
In a recent decision, the Supreme Court of India dismissed a petition by the Income Tax Department, affirming that Vodafone Idea Ltd. is not required to deduct TDS (Tax Deducted at Source) on payments made to non-resident telecom operators for interconnectivity and bandwidth services.
Case Background
Vodafone Idea Ltd., engaged in providing telecom services, entered into agreements with non-resident telecom operators (NTOs) and a Belgian company, Belgacom, for international connectivity and bandwidth services. The Assessing Officer (AO) claimed that Vodafone failed to deduct TDS on payments made to these entities from 2008 to 2016, which led to Vodafone being classified as a defaulter under Section 201 of the Income Tax Act, 1961.
Vodafone argued that since the services were provided outside India, TDS obligations in India did not apply. The AO ruled Vodafone as a defaulter, categorizing the payments as taxable royalty or Fee for Technical Services (FTS).
The Commissioner of Income Tax (Appeals) supported the AO’s decision, but the High Court later overturned this ruling. The High Court found that, under the Double Taxation Avoidance Agreement (DTAA), Vodafone was not required to deduct TDS on these payments.
Supreme Court Decision
The Supreme Court upheld the High Court’s decision, referencing the 2021 ruling in Engineering Analysis Centre for Excellence Private Ltd v. The Commissioner of Income Tax and Anr., which established that payments made by Indian companies to non-residents for the use of software do not constitute taxable royalty in India.
The Court also considered the April 23, 2024, ruling in The Commissioner of Income Tax v. GE India Technology Private Limited Etc., where review petitions against the Engineering Analysis judgment were dismissed on both grounds of delay and merits.
The Supreme Court found that the Special Leave Petition filed by the Income Tax Department was covered by the existing judgments and therefore dismissed the petition. The decision emphasized that there was no new ground to reconsider the established legal position.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
We have heard learned senior counsel for the petitioners and learned senior counsel for the respondent on caveat.
There is delay of 222 days in filing this Special Leave Petition.
During the course of submissions, we realised that this petition is covered by the judgment of this Court in Engineering Analysis Centre of Excellence Private Limited vs. Commissioner of Income Tax and Anr. reported in (2022) 3 SCC 321, which has been followed in other cases also. When this fact was brought to the notice of the learned senior counsel appearing for the petitioners, it was pointed out that in similar matters, this Court has issued notice.
The submission of learned senior counsel was also that there is a Review Petition pending before this Court and notice issued was in order. That is no reason for entertaining any subsequent matter having regard to the Explanation of Order XLVII Rule 1 of the Code of Civil Procedure, 1908.
At this stage, learned senior counsel for the respondent has brought to our notice order dated 23.04.2024 passed by a three-Judge Bench of this Court in Review Petition (C) Diary No(s).35475/2023 etc. titled “The Commissioner of Income Tax vs. GE India Technology Private Limited Etc.”, whereby a three-Judge Bench of this Court had dismissed the said Review Petitions both on the ground of delay as well as on merits.
In the circumstances, the Special Leave Petition is dismissed on merits following the aforesaid judgment/order.
Pending application(s), if any, shall stand disposed of.
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