WPI GROUP INC.,NEW JERSEY, USA V. DCIT, CIRCLE INT. TAX 3(1)(1), NEW DELHI

ITITA 1828/DEL/2025

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The case involves WPI Group INC, a foreign entity engaged in providing VoIP services, which appealed against the order of the Dispute Resolution Panel (DRP-2) and the Assessing Officer (AO) regarding the taxability of VoIP payments received from an Indian entity, M/s World Phone Internet Services Pvt. Ltd. The primary legal issues were whether the payments constituted 'Royalty' or 'Fees for Technical Services' under the Income-tax Act and the India-USA Double Taxation Avoidance Agreement (DTAA). The Tribunal examined precedents and interpretations of similar cases, ultimately deciding that the VoIP payments did not fall under the categories of Royalty or FTS, thus not taxable in India.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 778131 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 06-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2018-2019
• Appeal Filed On: 25-03-2025
• Other Referred Cases: Engineering Analysis Centre of Excellence (P) Ltd. v. Commissioner of Income Tax, Telstra Singapore Pte Ltd v. Commissioner of Income Tax, International Taxation -1, Amazon Web Services, Inc. v. Pr Commissioner of Income Tax - International Taxation 1, Bharti Airtel Ltd. v. Pr Commissioner of Income Tax - International Taxation 1, General Motors Company, USA Vs. ACIT, Novanet India Pvt. Ltd. v. ITO, Asia Satellite Telecommunications Co. Ltd. v. Director of Income-tax, Director of Income-tax v. New Skies Satellite BV & Anr., Verizon Communications Singapore Pte Ltd. Vs ITO, International Taxation
• Laws Referred To: Income-tax Act, 1961, India-USA DTAA
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIKHIL KUMAR GOVILA
• Assessee Lawyers: ASEEM CHAWLA; COUNSEL
• Keywords: Set aside; Difference of opinion; Retrospective amendment; TDS; Double taxation relief
• Section: 148; 40(a)(ia)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘D’ BENCH, NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group INC Vs. The Dy. C.I.T 476, Teal Plz, Secaucus Circle – 3(1)(1) New Jersy, 97094, USA International Taxation New Delhi PAN – AABCW 4682 L (Applicant) (Respondent) Assessee By : Shri Aseem Chawla, Sr. Counsel Ms. Pratishtha Choudhary, Adv Ms. Prerna Raman, Adv Shri Taranjit Singh Chandha, CA Department By : Shri Nikhil Kumar Govila, CIT-DR Date of Hearing : 08.07.2025 Date of Pronouncement : 06.10.2025 ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order of the DRP-2, New Delhi dated 27.12.2024 u/s 144C(5) of the Income-tax Act, 1961 [the Act, for short] pertaining to A.Y 2018-19. Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 2 of 18 2. The Grounds raised by the assessee reads as under: “1. That on the facts and circumstances of the case and in law, the learned DRP has (a) Passed a Non-Speaking Order and (b) Delegated its statutory duty to AO while simultaneously passing an adverse order making its order legally unsustainable and void ab initio and therefore liable to be quashed. 2. That on the facts and circumstances of the case and in law, the learned AO / DRP has erred in holding that VoIP payments are for the 'use of process' and 'use of equipment, and therefore constitute \"Royalty\" u/s 9(1)(vi) of the Act and Article 12(3) of the India-USA DTAA. 3. That on the facts and circumstances of the case and in law, the learned AO / DRP has erred in holding that VoIP revenue is \"Fees for Technical Services\" (FTS) u/s 9(1)(vii) of the Act and Article 12(4) of India-USA DTAA.” 4. That on the facts and circumstances of the case and in law, the learned AO/DRP has erred in holding that since the Appellant is an S-Corporation, it is not liable to tax in USA, and since it has not submitted TRC of its shareholders, it is not eligible for the benefits of India-USA DTAA. 5. That on the facts and circumstances of the case and in law, the learned AO / DRP has erred in initiating penalty proceedings (a) u/s 234F for non-filing of return of income for AY 2018-19 as per provisions of Section 139(1) and (b) u/s 270A of the Act for under reporting of income in consequence of mis-reporting despite the fact that Penalty cannot be imposed for difference of opinion on debatable interpretation of law and that there is no element of mala-fide intent and willful misreporting on the part of the Appellant. The Appellant craves leave to add, alter, amend or vary any of the above grounds either before or at the time of hearing as we may be advised. The arguments taken hereinabove are without prejudice to each other. 3. Brief facts of the case are that the assessee is a foreign entity, incorporated in New Jersey, USA, and having its office at 476, Teal Plz, Secaucus, New Jersey, 07094, USA. The assessee is a Foreign Telecom Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 3 of 18 Operator, engaged in the supply of VoIP (Voice over Internet Protocol) services since 2001. 4. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that information flagged by the risk management strategy formulated by the Board in accordance with Explanation 1(i) to Section 148 of the Act, the assessee had entered into certain transactions during F.Y 2017-18 relevant to the Assessment Year 2018-19. It was seen that during A.Y 2018-19 assessee had received Rs. 1,48,63,238/- in foreign outward remittances on account of sale of \"VoIP Services\" from M/s World Phone Internet Services Pvt. Ltd. 5. The AO observed that tax had not been deducted at source u/s 195 of the Act even though the income was chargeable to tax as per the Income-tax Act as well as the DTAA, if applicable. The AO also found that the assessee had not filed its ITR for A.Y 2018-19 and hence he held that income from the remittances had not been offered to tax in the year under consideration. 6. The Assessing Officer further noticed that since the assessee has not filed TRC, the assessee is not eligible to avail benefits of DTAA and hence assessee’s taxability is to be decided based on income tax only. Since the assessee did not provide any argument regarding the same, the Assessing Officer came to treat the receipts of Rs. 1,48,63,238/- as Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 4 of 18 ‘Royalty/FTS” payable by resident to non-resident Indian in accordance with the provisions of section 9(1)(vi) and u/s 9(1)(vii) r.w.s 115A of the Act. 7. The assessee went in appeal before the DRP who directed the Assessing Officer to complete the assessment as per the directions of the DRP. 8. Now the aggrieved assessee is in appeal before us. 9. Ground 1 is general in nature. 10. Ground 2 is in respect of VoIP payments in nature of Royalty and Ground 3 is respect of VoIP in nature of FTS. Before us, the ld. counsel for the assessee vehemently stated that the issues involved in this appeal are covered in favour of the assessee by the decision of the co- ordinate benches. The ld AR relied on the decision of hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. v. Commissioner of Income Tax [2021] 125 Taxmann.com 42(SC); the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of Telstra Singapore Pte Ltd 467 ITR 302 as also on the decision of Delhi High Court in the case of Commissioner of Income Tax, International Taxation -1 v. Amazon Web Services, Inc. [2025] 174 taxmann.com 1188 (Delhi) and Pr Commissioner of Income Tax - International Taxation 1 v. Bharti Airtel Ltd. [2025] SCC OnLine 3298 for the Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 5 of 18 proposition that VoIP is receipts are not ‘Royalty’. The ld AR further relied on the case of General Motors Company, USA Vs. ACIT in ITA No. 2359/DEL/2022 order dated 05.09.2024 for the proposition that the assessee and its shareholders are tax residents of USA, and are therefore entitled to benefits of Indo-US Double Taxation Avoidance Agreement (\"DTAA\"). The ld AR further placed reliance on and Novanet India Pvt. Ltd. v. ITO [ITA No. 4505/MUM/2024] passed by the Hon'ble ITAT Mumbai Bench, dated February 27, 2025 for the proposition that the Foreign Receipt with respect to rendering Voice Over Internet Protocol (\"VOIP\") services, cannot be characterized as Fee for Technical Services. 11. Per contra, the ld. DR relied on the orders of the authorities below. 12. We have heard the rival submissions and have perused the relevant material on record and have carefully considered the orders of the authorities below. The facts show that the assessee has entered into an agreement with World Phone Internet Service Pvt Ltd (WPISPL) dated 05.06.2016 for sale of VoIP minutes. The agreement is valid for 10 years. WPISPL is the only customer of the assessee in India. The issue before us relates to treating the receipts of the assessee for rendering Voice Over Internet Protocol (\"VOIP\") services, as Royalty u/s 9(1)(vi) of the Act and Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 6 of 18 Article 12(3) and FTS u/s 9(1)(vii) of the Act and Article 12(4) of the India-USA DTAA. 13. In so far as the issue of Royalty is concerned, we are of the considered view that the Hon'ble Supreme Court in the case of Engineering Analysis Center of Excellence Pvt Ltd. [2021] 432 ITR 471 has settled the issue of what constitutes ‘Royalty’. The Hon'ble Supreme Court, in a bunch of appeals, conclusively held as under: “168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41f this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(l)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. 169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non- resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 7 of 18 that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 of the Income-tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment.” 14. We find substantial force in the argument of the assessee that payment received from WPISPL cannot be treated as ‘Royalty” in accordance with the provisions of section 9(1)(vi) of the Act as there is no payment for the use of copyright. The assessee contention is supported by the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of Amazon Web Services [supra} where it was held that: ” 47. We find no merit in the contention that the amount received by the Assessee for providing services would be taxable as equipment royalty. As noted before, the Assessee’s customers do not acquire any right of using the infrastructure and software of the Assessee for the purposes of commercially exploitation. The charges paid by the Assessee’s customers are for availing services, which the Assessee provides by using its proprietary equipment and other assets. No part of its equipment or IPRs are alienated by the Assessee in favour of its customers for their use. Therefore, the payments received cannot be considered as royalties within the meaning of Article 12(3) of the India US DTAA. This question is also stands covered by the decisions of this Court in Commissioner Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 8 of 18 of Income-tax (International Taxation) v. Telstra Singapore Pte. Ltd.: (2024) 467 ITR 302, Asia Satellite ITA Nos.150/2025 & 154/2025 Page 36 of 36 Telecommunications Co. Ltd. v. Director of Income-tax: (2011) 332 ITR 340, and Director of Income-tax v. New Skies Satellite BV & Anr.: (2016) 382 ITR 114.” 15. Similarly, the Hon'ble Jurisdictional High Court of Delhi in the case of Bharti Airtel [supra} has held that payments made for bandwidth charges paid to overseas telecom service providers cannot of be construed as royalty in the meaning of Section 9(1)(vi) of the Act. The hon’ble Court held as under: “4. The Assessing Officer [AO] passed an order dated 28.03.2017 under Section 201(1)/201(1A)/195 of the Act holding that the respondent [Assessee] was an assessee in default as it had failed to deduct the withholding tax on the payments made to overseas entities. The AO had found that certain payments, which were made for bandwidth charges to foreign telecom service providers as well as the annual maintenance charges and other charges were either in the nature of fees for technical services [FTS] or royalty and thus were chargeable to tax under the Act. Consequently, the Assessee was obliged to deduct and deposit tax at source (TDS). 5. The Assessee had appealed the said decision before the learned CIT(A). The learned CIT(A) had partially allowed the appeals. Whilst it accepted the Assessee’s contention in regard to certain charges being remitted to entities overseas were not chargeable to tax, and therefore, it was not obliged to deduct tax at source; it rejected the assessee’s contention that bandwidth charges paid to telecom service providers overseas are not in the nature of royalty. 6. The Revenue as well as the assessee appealed the said decision before ITA 103/2025 Page 3 of 4 the learned ITAT. Whilst the Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 9 of 18 Revenue was aggrieved by the decision to the extent that the decision of the AO had been set aside, the assessee was aggrieved by the decision to reject its contention that bandwidth charges paid to overseas telecom service providers was not FTS or royalty. 7. It is material to note that the Revenue has confined its present appeal to the question whether the payment for bandwidth services is required to be construed as royalty and has projected the following questions for consideration of this court: “2.1 Whether the payment for bandwidth service do not qualify as 'royalty' under section 9 (l)(vi) of the Income Tax Act, 196 1, despite the clear definition of 'process' in Explanation to introduced by the Finance Act, 2012? 2.2 Whether the beneficial provision of the DTAA override retrospective amendments in domestic tax law, particularly when such amendments are clarificatory in nature and aim to bring clearly to the taxation of 'process' and 'equipment' under section 9 (l)(vi) of the Income Tax Act, 1961 ? 2.3 Whether the decision of Ld. ITAT disregarded the principles set out by the Hon'ble Madras High Court in Verzon Communication Singapore Pte Ltd. Vs ITO, which held that payment for bandwidth service are taxable as royalty under Indian tax law? 2.4 Whether the Ld. ITAT ruling undermines the substance over from principle by ignoring the actual use of processes and infrastructure that enable the provisions of service to Indian customers, even though such equipment is located outside India?” 8. Undisputedly, the questions raised are covered by the earlier decisions of this court in New Skies Satellite BV [68 taxmann.com8] [2016] and CIT v. Telstra Singapore Pte. Ltd. : [2024] 165 taxmann.com 85 (Delhi). Thus, the charges paid for bandwidth to Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 10 of 18 overseas telecom service providers cannot of be construed as royalty in the meaning of Section 9(1)(vi) of the Act.” 16. The Hon'ble Delhi High Court in the case of Telstra Singapore [supra}, differing with the hon’ble Karnataka High Court in the case of Verizon Communications Singapore Lte Ltd. vs. Income Tax officer, International Taxation, has held that mobile communication services or access to the internet does not stand vested with a right over a patent, invention or process and hence cannot be considered as Royalty u/s 9(1)(vi) of the Act. The hon’ble Court held as under: “104. On an overall conspectus of the above, we have no hesitation in holding that the issues which were sought to be canvassed on these set of appeals stand conclusively answered and settled by this court in Asia Satellite Telecommunications Co. Ltd. v. DIT and DIT v. New Skies Satellite BV. Any doubt that could have been possibly harboured with respect to the amendments introduced in section 9 stand laid to rest by virtue of the binding declaration of the law by the Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT. We also find ourselves unable to either discern a distinction that could be legitimately acknowledged to exist or draw a wedge between \"satellite\" and \"telecom\" cases as was suggested at the behest of the appellants. We note that the assessments in these cases was based on the decision of the Madras High Court in Verizon Communications Singapore Pte Ltd. v. ITO (International Taxation) and the Special Bench of the Tribunal in New Skies Satellite N.V. v. Asst. DIT. The latter decision no longer holds the field having been set aside by our court in appeal. In so far as Verizon as an individual assessee is concerned, the issue came to be answered in its favour at least by this court in Pr. CIT v. Verizon Communications India Pvt. Ltd. Although the appellants would contend that the said decision came to be rendered on the basis of a concession Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 11 of 18 made by the appellant there, as we read that order, we find that the court appeared to be convinced that the issue in any case stood settled in the light of the judgment of the court in DIT v. New Skies Satellite BV and which had by then been affirmed by the Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT. 105. That only leaves us to deal with the decision of the Madras High Court in Verizon Communications Singapore Pte Ltd. v. ITO (International Taxation) and which constituted the sheet anchor for the appellants. The said decision firstly proceeds on the premise that the definition of royalty under the Double Taxation Avoidance Agreement as well as the Act are pari materia. However, this premise clearly appears to be incorrect as is borne out from the preceding discussion. The Madras High Court then proceeded to rest its judgment principally on section 9 and the Explanations forming part of that statutory provision. The issue of the extent to which that provision would be applicable as well as the degree to which it could influence article 12 of the Double Taxation Avoidance Agreement, however, does not appear to have been critically evaluated. The tenor of that decision appears to suggest that it proceeded on the basis that section 9 undoubtedly applied. With due respect, and for reasons aforenoted, we find ourselves unable to agree with or affirm the position as struck in Verizon Communications Singapore Pte Ltd. v. ITO (International Taxation). 106. We are also of the firm opinion that even if one were to assume that Explanations 2 and 6 to section 9 of the Act applied, the position would remain unaltered. This since there was no transfer or conferment of a right in respect of a patent, invention or process. Customers and those availing of the services provided by Telstra were not accorded a right over the technology possessed or infrastructure by it. The underlying technology and infrastructure remained under the direct and exclusive control of Telstra. Parties availing of Telstra's services were not provided a corresponding general or effective control over any intellectual property or equipment. The agreements merely enabled them to avail of the services offered by it. Similarly, the expressions \"use\" or \"right to use\" as they appear in clauses (iii) and (iva) of Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 12 of 18 Explanation 2 would have to be understood in the light of the principles that we have enunciated hereinabove. A person who is provided mobile communication services or access to the internet does not stand vested with a right over a patent, invention or process. The consideration that the service recipient pays also cannot possibly be recognised as being intended to acquire a right in respect of a patent, invention, process or equipment. The word \"process\" being liable to be construed ejusdem generis is lent added credence by clause (iii) employing the expression \"or similar property\" which follows. It thus clearly appears to be intended to extend to a host of intellectual properties. This we observe only as an aside since the question raised in these appeals stands conclusively answered in any case in the light of our conclusions rendered in the context of the extent of the applicability of section 9 of the Act and the scope of article 12 of the Double Taxation Avoidance Agreement as explained in the preceding parts of this judgment. L. Operative directions 107. Accordingly and for all the aforesaid reasons, we would answer the question posited in the negative and against the appellants. We hold that neither the concept of process nor equipment royalty stand attracted and the consideration is thus not taxable as per article 12 of the Double Taxation Avoidance Agreement. 108. The appeals consequently fail and shall stand dismissed. 17. In view of the judicial precedence discussed above, we are of the view that the receipts from the WPISPL on account of sale of VoIP cannot be considered as ‘Royalty’ u/s 9(1)(vi) of the Act. Ground 2 is allowed. 18. With respect to the issue whether the payment received for VoIP minutes is FTS, the same was decided by the ITAT Mumbai Bench in the case of Novanet India Pvt Ltd [supra} wherein it was held that the Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 13 of 18 amount paid by foreign company to the assessee towards VoIP minutes cannot be treated as FTS as the foreign company is not providing any technical service to the assessee. The ITAT held as under: “7. We heard the parties and perused the material on record. The issue arising in this appeal for our consideration is whether the amount paid by the assessee to NSPL toward purchase of VoIP minutes is to be treated as FTS and accordingly tax deductible under the Act. Before we proceed to adjudicate the impugned issue, we will understand the VoIP technology and the nature of billing done for usage of VoIP i.e. based on VoIP minutes. VoIP is a technology in which calls are made using the internet connection instead of traditional telephone lines. VoIP converts the voice into a digital signal which is sent in digital packets through internet and these packets gets arranged to be reconverted at the receiving end. A typical example of VoIP is the calls using WhatsApp. VoIP communication can be done using a public internet services such as Airtel, Jio etc. where the issues may arise due to poor connectivity and also there is a risk of data protection. Therefore the big companies, who have huge requirement for uninterrupted and secured communication link, enter into agreement with internet service providers for a dedicated VoIP services i.e. where the network is dedicatedly made available to the customer. If the companies have international operation then the service provider procures the VoIP network from various suppliers across the globe and sells the same to the customer. The assessee is one such service provider who procures the VoIP network from various carriers across the globe and sells the same to the customers in India. As Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 14 of 18 per the submissions of the assessee, instead of the assessee obtaining the VoIP from various international carriers across the globe, NSPL was formed to consolidate the procurement and to manage the various suppliers. In other words, NSPL buys and sells the VoIP network among various international customers including the assessee. The billing for using VoIP network is done for the bandwidth and the usage i.e. VoIP minutes. This is similar to the billing of traditional phone lines where the customer is billed for the minutes spoken during a particular call. The fact that the assessee is using the similar method for purchasing the VoIP network from NSPL and that the assessee is charging the customers also in the similar manner is evidenced from the below extracts from the UCSA with NSPL and the contract entered into by the assessee with Bajaj Alianze General Insurance Company Ltd. ********** 8. Now coming to the issue of whether NSPL is providing any technical service to the assessee by procuring and selling the dedicated VoIP network. It is relevant to note here that the VoIP is a fully automatic process with no human intervention i.e. the conversion of voice in to digital data, transmitting data packets through optimum routing, and reconverting into voice at the receiving end etc. The role of NSPL and for that matter even that of the assessee is to ensure that the customer who has bought the dedicated VoIP network is provided with the same. NSPL is not involved in the technology of VoIP but acts as an intermediary to obtain the network services and sell the same to the customers. Therefore it cannot be said that NSPL is providing any technical Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 15 of 18 services to the assessee by procuring and selling the VoIP network. There are judicial precedence as relied on by the assessee where it has been held that when there is no human intervention and process is carried out through a fully automated software, then there is no FTS. Considering unique nature of business of providing VoIP network to the customers, we are of the view that NSPL cannot be said to be providing any technical service to the assessee and therefore the payment made by the assessee cannot be treated as FTS. Further NSPL does not have a PE in India and that no technical services are made available to the assessee. Accordingly we hold that the payments made by the assessee to NSPL towards VoIP are not taxable in the hands of NSPL in India and therefore the assessee is not liable to deduct any tax on such payments. We direct the AO to delete the disallowance made under section 40(a)(ia) of the Act.” Respectfully following the ITAT decision, we hold that the receipts of the assessee for rendering Voice Over Internet Protocol (\"VOIP\") services cannot be treated as FTS u/s 9(1)(vii) of the Act and Article 12(4) of the India-USA DTAA. Ground 3 is allowed. 19. Another issue contested by the assessee vide ground no 4 is the view of the AO that the India-USA Treaty is not applicable to the Assessee because the TRC issued by the Assessee pertains to the Assessee Company but not the shareholders and that being an S Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 16 of 18 Corporation, the TRC of the shareholders has not been provided by the assessee. 20. We find that the assessee has filed its Tax Residency Certificate (TRC) dated 23.11.2022 duly issued by the Department of Treasury, Internal Revenue Service (IRS), United States, which states that the assessee is an \"S\" Corporation each of its shareholders are tax residents of the United States of America. We also find that the ITAT in the case of General Motors (supra) supports the contention of the assessee that the TRC establish the residency status of the shareholders and that the phrase \"to the best of our knowledge\" constitutes standard terminology employed by the IRS in official communications. We also find that the Instructions for the Form 8802 require that an S-Corporation cannot have non-U.S. resident shareholders which would go to show that the TRC could not have been issued to a S-Corporation not owned by U.S. tax resident shareholders. We therefore are of the considered view that the assessee Company is a tax resident of the USA. Ground 4 is allowed. 21. In view of the discussion as above, we are of the considered view that the amount paid by customers in India to the assessee towards VoIP minutes cannot be treated either as Royalty or FTS in the hands of the assessee u/s 9(1)(vi) or 9(!)(vii) of the Act. Accordingly, we direct the Assessing Officer to delete the impugned addition. Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 17 of 18 22. Ground no 5 is premature. 23. In the result, the appeal of the assessee in ITA No. 1828/DEL/2025 is allowed. The order is pronounced in the open court on 06.10.2025. Sd/- Sd/- [VIKAS AWASTHY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 06th October, 2025. VL/ Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Printed from counselvise.com ITA No. 1828/DEL/2025 [A.Y 2018-19] WPI Group Vs.The Dy. C.I.T Page 18 of 18 Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order . 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order Printed from counselvise.com "