M/s. Bharti Airtel Limited Vs. Assistant Commissioner of Income-tax, Circle 4(2), New Delhi

Parties Involved

Facts Summary

The assessee, M/s. Bharti Airtel Limited, is a resident corporate entity providing mobile telecom services in India. The Assessing Officer noticed that the assessee had remitted substantial amounts towards various charges, including bandwidth charges, without deducting tax at source or at a lesser rate. The assessee argued that the bandwidth charges were for standard services and not for technical services, and thus, not taxable as royalty. The Assessing Officer disagreed and held that the payments were in the nature of royalty under section 9(1)(vi) of the Income-tax Act, 1961. The assessee appealed to the first appellate authority, which partially agreed with the assessee, holding that the payments were not royalty if made to entities in treaty countries. The assessee further appealed to the Income Tax Appellate Tribunal. The Tribunal held that the bandwidth charges were not royalty, even for non-treaty countries, based on a decision of the Hon’ble Delhi High Court.…

Legal Issues

• 1. Taxability of bandwidth charges remitted by the assessee to foreign telecom service providers as royalty income.
• 2. Taxability of annual maintenance charges (AMC) paid to certain foreign companies as FTS.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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