2015 (7) TMI 778 - AT - Income Tax

Non deduction of TDS on Provision for site restoration expenses - Held that - Assessee had an obligation to incur the expenditure after termination of the lease period. The fact remains that the payment was not made to anyone and it is not credited to the account of any party or individual. The account does not disclose the person to whom the amount is to be paid. The contractor who is supposed to be engaged for dismantling the tower and restore the site in its original position is not identified. As contended by the assessee, the assessee by itself engaging its own labourers may dismantle the towers and restore the site to its original position. In such a case, the question of deducting tax at source does not arise. The assessee has to pay only the salary to the respective employees. Suppose the work is entrusted to a contractor, then definitely the assessee has to deduct tax. In this case, the contractor would be identified after the expiry of lease period. Therefore, even if the assessee deducts tax, it cannot be paid to the credit of any individual as rightly pointed out by the Ld. Sr. counsel. The assessee has to issue Form 16A prescribed under Rule 31(1)(b) of the Income-tax Rules, 1962 for the tax deducted at source. The assessee has to necessarily give the details of name and address of deductee, the PAN of deductee and amount or credited. In this case, the assessee could not identify the name and address of deductee and and his PAN. The assessee also may not be in a position to quantify the amount required for incurring the expenditure for dismantling and restoration of site to its original position. In those circumstances, this Tribunal is of the considered opinion that the provision which requires deduction of tax at source fails. Hence, the assessee cannot be faulted for non-deduction of tax at source while making a provision. - Decided in favour of assessee. Year-end provisions - Held that - As find from the order of the CIT(Appeals) it appears that apart from identification and address verification, the assessee has also made provision towards ICU charges and lease line expenses, etc. From the order of the CIT(Appeals) it appears that the assessee also has to pay the various other service providers for providing value added service to its subscribers like daily horoscopes, astrology, songs, wall paper downloads, cricket scores, etc. Admittedly, the assessee made arrangement with other service provides for providing these kind of value added services. There may be justification with regard to the expenditure for availing the services of identification and verification for the last month of financial year, since the assessee may not have the exact details on verification done by the concerned persons and the amount required to be paid. However, in respect of the downloads and value added service, etc. the entire details may be available in the system. Therefore, this Tribunal is of the considered opinion that wherever the particulars and details available and amount payable could be quantified, the assessee has to necessarily deduct tax. In respect of value added services like daily horoscopes, astrology, customer acquisition forms are all from specific service providers and these value added services are monitored by system. Therefore, even on the last day of financial year, the assessee could very well ascertain the actual quantification of the amount payable and the identity of the payee to whom the amount has to be paid. To that extent, the contention of the assessee that the payee may not be identified may not be justified. The exact facts need to be examined. However, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer - Decided in favour of assessee for statistical purposes. Roaming charges - contention of the assessee is that human intervention is not required for providing roaming facility, therefore, it cannot be considered to be a technical service - Held that - This Tribunal is of the considered opinion that human intervention is necessary for routine maintenance of the system and machinery. However, no human intervention is required for connecting the roaming calls. Therefore, as held by the Apex Court in Bharti Cellular Limited (2010 (8) TMI 332 - Supreme Court of India ), the roaming connections are provided without any human intervention and therefore, no technical service is availed by the assessee. Therefore, TDS is not required to be made in respect of roaming charges paid to the other service providers. Accordingly, the orders of the lower authorities are set aside - Decided in favour of assessee.

Issues Involved:
1. Provision for site restoration expenses
2. Year-end provisions
3. Roaming charges
4. Limitation for passing order under Sections 201(1) and 201(1A)

Detailed Analysis:

1. Provision for Site Restoration Expenses:
The assessee, engaged in telecommunication services, made provisions for site restoration expenses but did not deduct tax at source (TDS). The assessee argued that the provision was made under Accounting Standard - 29 for obligations arising from past events, and the exact contractor and amount payable were not identifiable at the time of provision. The Tribunal agreed with the assessee, noting that the contractor for site restoration would be identified only after the lease period (20 years) and thus, TDS could not be deducted as the payee and amount were unidentifiable. The Tribunal set aside the orders of the lower authorities, accepting the assessee's contention.

2. Year-End Provisions:
The assessee made year-end provisions for various services like address verification and content development, claiming that the payees and amounts were not identifiable at the time of making provisions. The Tribunal noted that while the exact amounts for customer verification might not be known, other services like value-added services (e.g., horoscopes, downloads) could be quantified and payees identified. The Tribunal remitted the issue back to the Assessing Officer (AO) to examine whether the payees and amounts payable were identifiable on the last day of the financial year. If identifiable, TDS should be deducted; if not, no TDS was required.

3. Roaming Charges:
The assessee contended that roaming charges paid to other telecom service providers did not involve human intervention and thus did not qualify as technical services requiring TDS under Section 194J. The Tribunal referred to the Supreme Court's judgment in Bharti Cellular Limited, which clarified that technical services involve human intervention. Expert opinion from BSNL confirmed that human intervention was only required for initial configuration, not for routine roaming services. The Tribunal concluded that roaming services did not involve technical services and thus, TDS was not required on roaming charges.

4. Limitation for Passing Order under Sections 201(1) and 201(1A):
The assessee argued that the orders for the first three years and three quarters of the fourth year were barred by limitation under Section 201(3)(i). The Tribunal noted that the amended provisions extending the limitation period to seven years were applicable prospectively from 1.10.2014. The issue of limitation was remitted back to the AO for re-examination in light of the applicable provisions.

Conclusion:
The Tribunal allowed the appeals of the assessee for statistical purposes, setting aside the lower authorities' orders regarding site restoration expenses and roaming charges. The issue of year-end provisions and limitation for passing orders was remitted back to the AO for fresh examination. The stay petitions were dismissed as infructuous.

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