Telecom company: tax on royalty stayed by SC

The Supreme Court on Thursday stayed tax on royalty by Chief Commissioner Inland Revenue Islamabad from Mobilink's LinkdotNet Telecom Limited while granting leave to appeal in the matter. LinkdotNet Telecom Limited had entered into an agreement with Global Entity for Telecom Trade (GETT) Dubai, the United Arab Emirates, for providing international telecommunication services. Under the arrangement the Company was to use equipment of the GETT for transmission of the calls beyond interconnectivity point and was to make payments to it in this behalf.
Chief Commissioner Inland Revenue had taxed the payments made to the GETT under the scope and definition of royalty which the LinkdotNet Telecom Limited had challenged in the Islamabad High Court (IHC) making the Chief Commissioner and two others as respondents. LinkdotNet Telecom Limited contended before the IHC that the payments made to the GETT do not fall within the scope and definition of royalty as provided in Avoidance of Double Taxation Treaty as well as Section 2(54) of the Ordinance.
Dismissing petitions of the LinkdotNet Telecom Limited on November 26,2015, a Division bench of the IHC ruled on November 26,2015, "Respondent No 1 (Chief Commissioner Inland Revenue Islamabad) while passing impugned order has not interpreted the concept royalty in an unreasonable or irrational manner which results in any legal or jurisdictional infirmity calling for interference by this Court - Even otherwise the objections/grounds taken by the petitioner have been duly met with and there is no legal defect in the same".