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2024 (5) TMI 909 - ITAT BANGALOREIncome deemed to accrue or arise in India - revenue characterization - Taxability of IUC [Interconnect utility charges] as Royalty u/s 9(1)(vi) - DTAA between India and Hongkong was come into effect later - whether payment is made to “use the process” or “an equipment”? - HELD THAT:- Admittedly there is no treaty between India and Hong Kong, the country of which the assessee is a tax resident. Therefore the payment received by assessee has to be analysed under the Income Tax Act alone. We note that the decision relied by the Ld.AR has analysed the taxability of the identical payment received by the assessee therein for similar services, under the provisions of Income Tax Act, having regards to section 9(1)(vi); Explanation 2, 5 and 6 also. And this Tribunal has held that payments made by an Indian telecom company for identical services, as rendered by the present assessee will not fall within the ambit of Royalty under section 9(1)(vi), Explanation 2,5 and 6. Thus as following the decision of Vodafone Idea Ltd. [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] we hold that the payments received by the assessee cannot be held to be royalty under section 9(1)(vi) of the Act. Further the revenue has not made out a case that there is a permanent establishment of assessee in India in order to tax the receipt by assessee in India as it is arising from extra territorial sources. Accordingly, in our opinion, the payments received by assessee amounts to be business profits of the assessee which is taxable in the recipient country. Decided in favour of assessee.
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