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2023 (12) TMI 1122 - ITAT BANGALOREIncome taxable in India - interconnectivity utility charges (IUC) received by the assessee as Royalty / FTS in India - HELD THAT:- On perusal of the agreement between the assessee and the end users, it is noted that the installation and operation of sophisticated equipments are with the view to earn income by allowing the users to avail the benefits of such equipments or facility and does not tantamount to granting the use or the right to use the equipment or process so as to be considered as royalty within the definition of "royalty" as contained in clause 3 of Article 13 of India-France DTAA. We note that the issue has now been settled pursuant to the decision of in a group of cases between M/s. Vodafone Idea Ltd. (Formerly known as M/s. Vodafone Mobile Services Ltd. vs. DDIT(IT) & Ors. [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] In case of Vodafone Idea Ltd [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] also observed that the equipments and submarine cables are situated overseas and that Vodafone Idea Ltd. had availed certain services from the non-resident telecom operators and that such agreements would not create a permanent establishment of such non-resident telecom operators in India. Thereafter Hon'ble High Court after verifying the facts of the case having regards to the decision of Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd [2021 (3) TMI 138 - SUPREME COURT]. 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. We also note that 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-France DTAA. The receipt of IUC charges cannot be taxed as Royalty under Article 13 in India of India-France 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 in para 25, held that the non-resident service providers do not have any presence in India. Appeal filed by the revenue stands dismissed.
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