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2023 (2) TMI 161 - AT - Income TaxTDS u/s 195 - Royalty and FTS payment for non deduction of TDS - disallowance of connectivity charges paid by the assessee to TATA Communications UK Ltd. (TATA UK) and TATA US treating the same as Royalty and FTS for non deduction of TDS and disallowed by invoking section 40(a)(i) - HELD THAT:- We noted that the assessee-company is incorporated under the Companies Act and is engaged in the business of running a data and call centre for export of services and domestic BPO. A.O noted that the connectivity charges in relation to TATA Communications (UK) Ltd. and TATA Communications (USA) are in the nature of royalty in term of Explanation 2 to s. 9(1)(vii) - CIT(A) also held, after perusing the agreement between the assessee and TATA Communications, noted that it provides for specialized and customized services to be rendered by the supplier to the customers pertaining to plant maintenance on customers equipment. CIT(A) perused Services Schedule to the said agreement that, if requested by the customer, the supplier may at its option install certain customer specified communication equipment and render miscellaneous services to the customer. According to Ld. counsel, connectivity charges are in the nature of Colocation services provided by the TATA Communications, UK and TATA Communications, USA for the purpose of connecting the assessee with the various customers in UK towards making the voice and data connectivity. As in the case of Verizon Communications Singapore Pte Ltd[2013 (11) TMI 1058 - MADRAS HIGH COURT] has clearly held that the use of the process was provided by the assessee whereby through assured bandwidth the customer is guaranteed the transmission of the data and voice. In such circumstances, it is held that the bandwidth is shared with others, however, has to be seen in the light of the technology governing the operation of the process and this by itself does not take the assessee out of the scope of the royalty as per Clause (iii) of Explanation 2 to s. 9(1)(vii) of the Act. As Hon’ble Jurisdictional High Court [Supra] has clearly held on similar facts as in the present case before us i.e., Co-location services and connectivity services provided for the process of connecting by the assessee with the various customers towards making voice and data connectivity. Hence, respectfully following the decision of Verizon Communications Singapore Pte Ltd. Vs. ITO, supra, we confirm the action of the lower authorities and dismiss this issue of assessee’s appeal.
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