OMAN TELECOMMUNICATIONS COMPANY SAOG,OMAN V. DEPUTY COMMISSIONER OF INCOME TAX/ CIRCLE INTERNATIONAL TAX 2(2)(2), DELHI, DELHI

ITA 1023/DEL/2025

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The case involves Oman Telecommunications Company SAOG, a foreign company, which did not file a return of income for the assessment year 2018-19. The Income Tax Department reopened the case under section 148 of the Income Tax Act, 1961, after noting that the assessee received payments from two Indian companies, Bharti Airtel Limited and Vodafone Mobile Services Ltd, which were not reported as income in India. The Assessing Officer treated these payments as Fees for Technical Services (FTS) under section 9(1)(vii) of the Act, leading to an addition of Rs. 11,81,52,790 to the assessee's income. The Dispute Resolution Panel (DRP) upheld this view. However, the ITAT, referencing a previous decision in a similar case involving the same assessee, ruled that the charges were not FTS as they were automated services without human intervention, and thus not taxable in India.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712013 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Assessment Year: 2018-2019
• Other Referred Cases: CIT Vs. Bhari Cellular Limited, CIT Vs. Vodafone South Limited, CIT Vs. Tata Teleservices Limited, Solvay Asia Pacific (P.) Ltd. Vs. Deputy Commissioner of Income-tax, Bangkok Glass Industry Co. Ltd. Vs. Asstt. CIT, Ford India Ltd. Vs. Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NIKHIL KUMAR GOVILA
• Assessee Lawyers: ANANYA KAPOOR
• Keywords: Business income; Double taxation relief; Permanent establishment; Application of stay
• Section: 148; 56

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’: NEW DELHI BEFORE SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No.1023/Del/2025 (ASSESSMENT YEAR 2018-19) Oman Telecommunications Company SAOG VP Finance Office, PO box 789, Postal Code 11, Ruwi Muscat, Sultanate of Oman Outside India PAN-AABCO4203F Vs. Deputy Commissioner of Income Tax/Circle International Tax 2(2)(2), Delhi. (Appellant) (Respondent) Assessee by Ms. Ananya Kapoor, Adv. Department by Shri Nikhil Kumar Govila, CIT-DR Date of Hearing 16/07/2025 Date of Pronouncement 23/07/2025 O R D E R PER PRAKASH CHAND YADAV, JM: The present appeal of the assessee is arising out from the order of Ld. Assessing Officer dated 25th December, 2024 having DIN & Order No. ITBA/AST/S/147/2024-25/1071556765(1) dated 25/12/2024 and relates to Assessment Year 2018-19. 2. Brief facts of the case as coming out from the orders of the authorities below are that the assesse is foreign company and had not filed return of income for the impugned year. Thereafter, the case of the assessee was reopened u/s 148 of the Income Tax Act, 1961 on the ground that assessee has received certain payments from two Indian entities namely M/s Bharti Airtel Limited and M/s Vodafone Mobile Services Ltd and has not shown any income in India. The Assessing Officer was of the view that the service provided by the assessee to the Indian entities were in the nature of the FTS and, hence, taxable in India. The Printed from counselvise.com 2 ITA No.1023 /Del/2025 Oman Telecommunications Company SAOG vs. DCIT Assessing Officer relied upon the provisions of section 9(I)(vii) of the Act held that the service rendered by the assessee are in the nature of technical services and, hence, the same are taxable in India. Accordingly, the Assessing Officer made addition of Rs. 11,81,52,790/. DRP also affirmed the view of the AO vide order dated 4th November, 2024. Thereafter, Ld. AO framed the final assessment order. 3. Aggrieved with the order of the AO, the assessee has come up in appeal. 4. At the outset, the Ld. Counsel for the assessee pointed that the similar issue has already been decided by the Co-ordinate Bench of ITAT, Delhi in assessee’s own case in ITA No.2080/Del/2024 vide order dated 24th October, 2024. 5. On the other hand, the Ld. DRP relied upon the orders of authorities below. 6. After considering the rival submissions, we observed that Co-ordinate Bench of the ITAT has thread barely examined the issue involved this appeal. The relevant findings of the Co-ordinate Bench of ITAT are reproduced as under: “9. We have considered rival submissions in the light of judicial precedents relied upon and perused the materials on record. The dispute in the present appeal revolves around the issue of taxability of interconnectivity usage charges received by the assessee from Vodafone, an Indian entity. Learned DRP has explained the interconnectivity usage charges as the cost that a mobile operator receives for carrying through/terminating a call. In simple terms, it means provision of roaming and termination of international voice traffic services, which the assessee has provided to Vodafone. At the cost of repetition, we must observe, while framing draft assessment order, the Assessing Officer has characterized interconnectivity usage charges received by assessee as royalty income under section 9(1)(vi) of the Act. However, learned DRP has, apparently, disagreed with the Assessing Officer and recharacterized the interconnectivity usage charges as FTS both under the domestic law as well as the treaty provisions. Of course, alternatively, learned DRP has held that such receipts can also be treated as other income both under section 56 of the Act as well as under Article 24 of Indian Oman DTAA. 10. Keeping in perspective these facts, if we proceed to analyze the nature of services provided by the assessee to the Indian entity, it can be seen that such services were provided without any human intervention at any stage. The roaming services and termination of international voice traffic services were provided by the assessee using its own system located outside Indian and the entire process of providing such services is fully automated without any human element involved therein. In fact, learned DRP has acknowledged the fact that the interconnectivity usage involves high degree of machines powered by sophisticated software. Thus, the facts on record clearly indicate that the assessee has provided the services to the Indian entity through a standard facility and system set up by it, which is fully automated. Printed from counselvise.com 3 ITA No.1023 /Del/2025 Oman Telecommunications Company SAOG vs. DCIT 11. In case of CIT Vs. Bhari Cellular Limited (supra), the Hon'ble Delhi High Court while deciding identical nature of dispute has held that the expression technical services' as used in Explanation 2 to section 9(1)(vii) takes colour from the expression 'managerial and consultancy services', which necessarily involve a human element or human interface. The Hon'ble Court proceeded further to hold that the interconnect/port access facility is only a facility to use the gateway and the network of service provider. Hence, such service provider does not provide any assistance or aid or help to the service recipient in managing, operating and setting up their infrastructure and network. Though, the Hon'ble Court observed that the facility of interconnection and port access provided by a service provider is technical in sense that it involves sophisticated technology and the facility may even be construed as service in the broader sense, however, while interpreting the expression 'technical services' it cannot be construed in the abstract and general sense but in the narrower sense as circumscribed by the expression 'managerial service and consultancy service' as appearing in Explanation 2 to section 9(1)(vii) of the Act, which requires rendition of service through human interface. Identical view has been expressed by Hon'ble Karnataka High Court in case of CIT Vs. Vodafone South Limited (supra) and Hon'ble Delhi High Court in case of CIT Vs. Tata Teleservices Limited (supra). 12. Revenue was unable to bring any contrary decision to our notice. Thus, keeping in view the ratio laid down in the judicial precedents cited before us, we hold that the receipts towards interconnectivity usage charges cannot be treated as FTS. 13. Having held so, now it is necessary for us to decide whether the receipts can be treated as other income under section 56 of the Act and under Article 24 of India - Oman DTAA. The line of thinking of learned DRP is, if a particular income cannot be characterized under any other heads of income provided under the Act, it has to be treated as other income under the residual provision of section 56 of the Act and similar provision under Article 24 of the Treaty. Learned DRP has further observed that as per the Treaty provisions, rights of taxation in respect of other income has been granted to the source country. Of course, learned DRP has added the receipts as other income on protective basis. 14. Be that as it may, one needs to look into the true meaning of 'other income' as provided under Article 24 of the Treaty. A reading of paragraph 1 of Article 24 makes it clearly that items of income not expressly dealt with in any of the other Articles of the Treaty shall be treated as other income under Article 24 of the Treaty. As rightly observed by learned DRP, it is a residual provision provided for taxability of income not specifically coming under any Articles of the Treaty. As discussed in the earlier part of the order, the Assessing Officer had treated it as royalty income, whereas, learned DRP has treated it as FTS and suggested for addition as FTS on substantive basis. The aforesaid facts clearly indicate that the departmental authorities themselves were not sure regarding the true nature and character of the receipts. Merely, because a particular item of income cannot be treated as royalty or FTS, as such, receipts may not fit into the definition of royalty/FTS provided under the Treaty, that by itself would not make it taxable under the residual clause of the treaty. It needs to be seen, whether such income can come within the ambit of any other Article preceding Article 24 of the Treaty. Undisputedly, the roaming and termination of international voice traffic services were provided by the assessee in course of its regular business activities. Hence, it cannot be said that provision of such facility is not connected to assessee's business activity. 15. That being the factual position on record, the interconnectivity usage charges have to be treated as business income, hence covered under Article 7 of India Oman DTAA. However, since, the assessee did not have any Permanent Establishment (PE) in India, the business profit has to be taxed in the country of residence in Oman. Merely, because the Printed from counselvise.com 4 ITA No.1023 /Del/2025 Oman Telecommunications Company SAOG vs. DCIT income is not taxable in India under a particular head due to beneficial provisions under the Treaty, it cannot automatically lose its character, as in the present case, and made taxable as other income. The following decisions support the view: 1. Solvay Asia Pacific (P.) Ltd. Vs. Deputy Commissioner of Income-tax (2024) 159 taxamnn.com 90 (Delhi-Trib.) 2. Bangkok Glass Industry Co. Ltd. Vs. Asstt. CIT [2013] 34 taxmann.com 77 (Madras) 3. Ford India Ltd. Vs. Deputy Commissioner of Income Tax, (2017) 78 taxmann.com 5 (Chennai - Trib.) 16. Thus, taking an overall view in the context of facts and materials on record and the ratio laid down in the judicial precedents cited before us, we hold that interconnectivity usage charges received by the assessee are not taxable in India, either as FTS or as other income. Ground nos. 2 and 3 are allowed. 17. In the result, appeal is partly allowed. 18. Since, the appeal itself has been disposed of, the stay application having become infructuous is dismissed.” 7. Perusal of the above order of the Coordinate Bench would show that coordinate bench has held that interconnectivity services provided by the assessee to Indian companies does not involve any human intervention and hence out of the purview of section 9(1)(vii). The Coordinate Bench has also dealt with the issue of chargeability of the amounts received by the assessee under the head “Income from other Sources”. No contrary decision has been brought to our notice. Therefore, following the verdict of Coordinate Bench we allow this appeal of the assessee. 8. In the result, the appeal of the assessee stands allowed. Order pronounced in the open court on 23/07/2025. Sd/- Sd/- (NAVEEN CHANDRA) (PRAKASH CHAND YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23/07/2025 PK/Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) Printed from counselvise.com 5 ITA No.1023 /Del/2025 Oman Telecommunications Company SAOG vs. DCIT 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "