Interconnect Service Charges do not constitute Royalty to Non-resident Telecom Operators: Supreme Court [Read Order]
The Karnataka High Court had earlier decided whether interconnect service charges paid would amount to royalty.
The Supreme Court of India dismissed a SpecialLeave Petition (SLP) filed by the Income Tax Department and held, in concurrence with Karnataka High Court, that interconnect service charges do not constitute royalty to non-resident telecom operators.
The bench in the Supreme Court wished to not interfere with the decision of the Karnataka High Court at Bangalore and did not exercise their jurisdiction under Article 136 of the Constitution of India.
The question presented before the Karnataka High Court was whether interconnect service charges paid would amount to royalty. The bench there relied on a precedent which held:
“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 etc, rendered by the ITAT. In that view of the matter this question also needs to be answered against the Revenue.”
The Income Tax Department was represented by the Additional Solicitor General, Raghavendra P Shankar while M/s ORANGE and Vodafone Idea Limited were represented by Senior Advocate Sachet Jolly.
The matter was heard by Justices Pamidighantam Sri Narasimha and Alok Aradhe in the SC on 16.03.2026 and it was finally held that interconnect services charges do not constitute royalty to non-resident telecom operators.Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
