ITAT Mumbai rules Jio USA’s ₹23.2 crore voice termination receipts are business profits, not taxable in India without PE

April 17, 2026 : The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has held that payments received by Reliance Jio Infocomm USA Inc. for providing international voice termination services to its Indian affiliate cannot be classified as royalty or fees for technical services (FTS) under the Income Tax Act, 1961 or the India–US Double Taxation Avoidance Agreement (DTAA). The Tribunal ruled that such receipts constitute business profits and, in the absence of a permanent establishment (PE) in India, are not taxable.

The ruling was delivered by a Bench comprising Judicial Member Beena Pillai and Accountant Member Bijayananda Pruseth in the case of Reliance Jio Infocomm USA Inc. v. DCIT (International Tax), Mumbai (ITA No. 2991/Mum/2023) for the Assessment Year 2020–21.

The dispute arose from payments amounting to ₹23.20 crore received by the assessee from Reliance Jio Infocomm Ltd. (RJIL) for providing voice termination services. The assessee, a wholly owned subsidiary of RJIL based in the United States, had treated these receipts as business income not taxable in India due to the absence of a PE. However, the Revenue classified the receipts as “process royalty,” arguing that the services involved the use of sophisticated telecom infrastructure, including switches, routers, and transmission systems. This position was also endorsed by the Dispute Resolution Panel (DRP), which relied on the expanded domestic definition of “process” under Section 9(1)(vi) of the Act.

Before the Tribunal, the assessee explained that it operates its own telecom infrastructure outside India and provides standard connectivity services without transferring any equipment, technology, or process to the Indian entity. It was emphasised that RJIL merely received the end result in the form of successful call connectivity and had no access to or control over the underlying systems. The services were rendered under a reciprocal carrier agreement, where each party independently maintained and operated its own network infrastructure.

After examining the nature of the transaction, the Tribunal held that the services provided were standard telecom services and did not involve any grant of the right to use equipment or a process. It observed that for a payment to qualify as royalty under Article 12 of the India–US DTAA, there must be a use of or right to use a process, which must be made available to the payer. In this case, no such right was granted, and the Indian entity merely availed a service. The Tribunal further clarified that the mere use of advanced technology by the service provider does not result in the transfer of a process to the customer.

The Tribunal also rejected the Revenue’s reliance on the expanded definition of “process” under domestic law, reiterating that amendments to the Income Tax Act cannot override the provisions of a tax treaty. It held that the scope of “royalty” under the DTAA cannot be widened unilaterally by domestic legislation.

On this basis, the Tribunal concluded that the receipts could not be treated as royalty or FTS and instead fall within the category of business profits under Article 7 of the DTAA. Since the assessee did not have a permanent establishment in India, the income was held to be not taxable in India. The appeal filed by the assessee was accordingly allowed, and the addition of ₹23.20 crore was set aside.