2016 (5) TMI 905 - AT - Income Tax

Non-deduction of tax u/s 194H - discount allowed to the prepaid distributors - demand u/s 201(1)/201(1A) - Held that - The impugned demand was raised against the assessee by holding it to be assessee in default for non-deduction of TDS by considering the payments made in respect of roaming charges to other Telecom Operators as liable for TDS either u/s 194J or 194C of the I.T. Act. The ITAT Kolkata Bench in the case of Vodafone East Ltd. vs. Addl. CIT, Range-7, Kolkata 2015 (9) TMI 1358 - ITAT KOLKATA and plethora of other judgments have settled that the payments in question made by the assessee to various Telecom Operators are not liable for TDS in any of the sections i.e. 194C and 194J or 194I. In view thereof, the issue stands decided on merit in favour of the assessee

Summary

Issues:
1. Non-deduction of tax u/s 194H on discount allowed to prepaid distributors.
2. Taxability of payment for the use of standard facility as 'fees for technical services' u/s 194J.
3. Treatment of appellant as 'assessee in default' u/s 201(1) r.w.s. 194H.
4. Applicability of Section 194C to payments made for roaming charges to Other Telecom Operators (OTOs).

Analysis:
1. The appellant contested the non-deduction of tax u/s 194H on discounts to distributors. The CIT(A) treated the discount as commission, leading to the appellant being considered an 'assessee in default.' The appellant argued that the distributor relationship is on a Principal to Principal basis, hence no TDS was required. The AR mentioned the issue became infructuous due to a subsequent order u/s 154.

2. Regarding the payment for standard facility use as 'fees for technical services' u/s 194J, the appellant challenged the CIT(A)'s decision. The ITAT Kolkata Bench precedent established that roaming charges did not fall under TDS provisions of sections 194C, 194J, or 194I. Consequently, the demand against the appellant was deemed unsustainable, and the entire demand and interest were to be deleted.

3. The issue of treating the appellant as an 'assessee in default' u/s 201(1) r.w.s. 194H was addressed. The ITAT found in favor of the appellant, ruling that the payments to Telecom Operators were not subject to TDS under sections 194C, 194J, or 194I. The demand raised against the appellant was deemed unsustainable and liable to be deleted.

4. The appellant raised an additional ground on the applicability of Section 194C to payments for roaming charges to OTOs. The ITAT admitted the ground as purely legal. The appellant argued that the roaming charges did not require human intervention, thus not falling under the definition of 'work' in Section 194C. The ITAT concurred, allowing the appeal of the assessee on merits and rendering the appeal related to Section 154 infructuous.

In conclusion, the ITAT allowed the appeal of the assessee in ITA No. 678/JP/2013 and dismissed the appeal in ITA No. 293/JP/2014 as infructuous, as the necessary relief had already been granted.