THE DEPUTY COMMISSIONER OF INCOME TAX V. VODAFONE QATAR PQSC

WA/692/2024

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax and the Commissioner of Income Tax against Vodafone Qatar PQSC and Vodafone Idea Limited, concerning the classification of interconnect service charges as royalty. The appellants sought to set aside the order dated 02.11.2023 in Writ Petition No.5112 of 2023, which had been decided in favor of the respondents. The core legal issue was whether the interconnect service charges paid by the respondents amounted to royalty, which would be subject to tax. The High Court of Karnataka, referencing a previous judgment (ITA No.160/2015), affirmed that such charges do not qualify as royalty, thus not taxable under the relevant provisions.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 745962 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 02-09-2024
• Assessment Year: misc
• Other Referred Cases: ITA.No.160/2015
• Laws Referred To: Karnataka High Court Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ANKUR
• Assessee Lawyers: SANMATHI I
• Keywords: Interconnect service charges; Non-resident telecom operator; Royalty; Tax deductibility
• Section: 4

Judgement Text

" - 1 - NC: 2024:KHC:35632-DB WA No. 692 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2ND DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA WRIT APPEAL NO. 692 OF 2024 (T-IT) BETWEEN: 1. THE DEPUTY COMMISSIONER OF INCOME TAX ASSESSMENT CIRCLE 2(1) BMTC BUILDING, 80FT ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU-560095. 2. THE COMMISSIONER OF INCOME TAX-2 BMTC BUILDING, 80FT ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU-560095. …APPELLANTS (BY SRI. SANMATHI E. I., ADV.) AND: 1. VODAFONE QATAR PQSC MASHEIREB DOWNTOWN DOHA, ZONE 3, STREET 981, BUILDING 2, 4TH FLOOR, PO BOX 27727, DOHA, QATAR, PAN-AAHCV8797K, (REP. BY AUTHORIZED SIGNATORY SHEIKH HAMAD ABDULLA J A AL THANI, AGE 43 YEARS, OCC: SERVICE, R/O MSHEIREB, Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA - 2 - NC: 2024:KHC:35632-DB WA No. 692 of 2024 DOWNTOWN DOHA, ZONE 3, STREET, 981, BUILDING 2, 4TH FLOOR, PO BOX 27727 DOHA QATAR). 2. VODAFONE IDEA LIMITED MARUTI INFOTECH CENTRE, 11/1, 12/1, KORAMANGALA, AMARJYOTHI LAYOUT, BENGALURU-560071 REPRESENTED BY ITS DIRECTOR. …RESPONDENTS (BY SRI.ANKUR P.D., ADV. FOR SRI K.R.VASUDEVAN, ADV.) THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO 1) TO SET ASIDE THE ORDER DATED 02.11.2023 IN WRIT PETITION NO.5112 OF 2023 (T-IT) PASSED BY THE LEARNED SINGLE JUDGE AND 2) GRANT SUCH OTHER ORDER AS THIS COURT DEEMS FIT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, IN THE INTEREST OF EQUITY AND JUSTICE. THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S.G.PANDIT AND HON'BLE MR JUSTICE C.M. POONACHA ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT) Heard Sri. E.I.Sanmathi, learned counsel for the appellants and learned counsel Sri.Ankur P.D. for respondents. - 3 - NC: 2024:KHC:35632-DB WA No. 692 of 2024 2. Perused the appeal papers. 3. The question involved in the appeal is as to whether interconnect service charges paid would amount to royalty. 4. The above issue was considered by a Co-ordinate Bench of this court in ITA.No.160/2015 and connected appeals. By judgment dated 14.07.2023 it is held that interconnect service charges would not constitute royalty. Paragraph No.21 of the judgment reads as follows: “The third question is, whether the payments made to NTOS for providing interconnect services and transfer of capacity in foreign countries is chargeable to tax as royalty. It was argued by Shri.Pardiwala, that for subsequent years in assessee’s own case, the ITAT has held that tax is not deductable when payment is made to non-resident telecom operator. This factual aspect is not refuted. Thus the Revenue has reviewed its earlier stand for the subsequent assessment years placing reliance on Viacom etc35, rendered by the ITAT. In that view of the matter this question also needs to be answered against the Revenue.” 5. Learned Single Judge has also placed reliance on the above decision of the Co-ordinate Bench. Therefore, we do not find any infirmity in the order under challenge. - 4 - NC: 2024:KHC:35632-DB WA No. 692 of 2024 6. Following the decision of Co-ordinate Bench dated 14.07.2023 in ITA No.160/2015 and connected appeals, the above appeal stands dismissed. SD/- (S.G.PANDIT) JUDGE SD/- (C.M. POONACHA) JUDGE MPK CT:bms List No.: 1 Sl No.: 22 "