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2023 (9) TMI 280 - AT - Income TaxIncome taxable in India - Characterization of payments received towards interconnectivity utility charges as Royalty - satisfy 'use or right to use' - payment is made to “use the process” or “an equipment” - scope of presence in India - various service providers in India entered into agreement with assessee for international carriage and connectivity services against which an interconnectivity charges are received by the assessee - HELD THAT:- As in the present facts of the case, at no point of time, any possession or physical custody, control or management over any equipment is received by the end users / customers. It is also noted that the process involved in providing the services to the end users / customers is not “secret” but a standard commercial process followed by the industry players. Therefore the said process also cannot be classified as a “secret process”, as is required by the definition of “royalty” mentioned in clause 3 of Article 13 of India-Spain DTAA. We are therefore of the opinion that the receipt of IUC charges cannot be taxed as Royalty under Article 13 in India of India-Spain DTAA. As relying in case of Vodafone Idea Ltd. [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] and Vodafone South Ltd. [2015 (1) TMI 1018 - ITAT BANGALORE] and the discussions hereinabove, we hold that payments received by assessee towards interconnectivity utility charges from Indian customers / end users cannot be considered as Royalty / FTS to be brought to tax in India under section 9(1)(vi)/(vii) of the Act and also as per DTAA. The payment received by the non-resident assessee amounts to be the business profits of the assessee which is taxable in the resident country and is not taxable in India under Article 5 of the DTAA as there is no case of permanent establishment of the assessee that has been made out by the revenue in India. Even Hon’ble High Court has held that the non-resident service providers do not have any presence in India. Decided in favour of assessee.
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