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2024 (3) TMI 1062 - AT - Income TaxIncome deemed to accrue or arise in India - payment made for providing interconnect services - consideration paid towards IUC charges treated under the ambit of “royalty” - benefit under DTAA - requirement of direct control or physical possession over a right or property or information - whether the IUC charges received by the assessee is in the nature of royalty under the Act and India-Sri Lanka DTAA? - assessee’s contention that the interconnect service does not permit the use of or transfer of right to use any of assessee’s patent, model, design, secret formula or process or trade mark, etc. which are exclusively in possession or control of the assessee, also there is also no use of equipment of the assessee by VSL and does not involve any ancillary services pertaining to the use or transfer of right to use of a process/equipment HELD THAT:- It is pertinent to note that the Hon’ble Karantaka High Court in the case of Vodafone South Ltd. [2016 (8) TMI 422 - KARNATAKA HIGH COURT] to whom the assessee has received the IUC charges has held that the assessee is entitled to take benefit under DTAA and that the amendment to provision of section 9(1)(vi) inserting the Explanation cannot be read into the provisions of DTAA by relying on the decision of the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. [2021 (3) TMI 138 - SUPREME COURT]. It is also pertinent to point out that the lower authorities have relied on the decision of the Tribunal in the case of Vodafone South Ltd [2015 (1) TMI 1018 - ITAT BANGALORE] which has now been reversed by the Hon'ble High Court [2016 (8) TMI 422 - KARNATAKA HIGH COURT] thereby holding that the order of the lower authorities to be perversed. We would also place reliance on the decision relied upon by the assessee in the case of New Skies Satellite BV [2016 (2) TMI 415 - DELHI HIGH COURT] whereas held that the provision of the DTAA cannot be altered unless by way of amendment through bilateral renegotiation after duly considering the decision of Hon’ble Madras High Court in the case of Verizon Communications Singapore Pte. Ltd. [2013 (11) TMI 1058 - MADRAS HIGH COURT] relied upon by the Revenue. It has also held that the amendment or change in a domestic law cannot result in change in the provision of DTAA unless specific amendment is brought about in DTAA. Apart from the grounds of applicability of amendment to section 9(1)(via) and the DTAA between India-Sri Lanka It is observed that the Delhi Tribunal in the case of Bharti Airtel Ltd [2016 (3) TMI 680 - ITAT DELHI] and Bharat Sanchar Nigam Ltd [2017 (10) TMI 1093 - ITAT DELHI] has held that the payment made towards interconnect usage charges to foreign telecom operators does not accrue or arise in India and in the absence of any permanent establishment in India could not be brought to tax in India under Article 7 of DTAA. - Decided in favour of assessee.
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