2016 (8) TMI 422 - HC - Income Tax

Non-deduction of tax at source on roaming charges paid to other service providers - whether the Tribunal is right in law in holding that the assessee could not have been deemed as one in default for non-deduction of tax at source on roaming charges paid by it to other service providers? - Held that - Revenue contention is not only misconceived, but is on non existent premise, because the subject matter of the present appeals is not roaming services provided by mobile service provider to its subscriber or customer, but the subject matter is utilization of the roaming facility by payment of roaming charges by one mobile service provider Company to another mobile service provider Company. Hence, we do not find that the observations made are of any help to the Revenue. As such, even if we consider the observations made by the Apex Court in the case of Bharti Cellular Limited 2010 (8) TMI 332 - Supreme Court of India whether use of roaming service by one mobile service provider Company from another mobile service provider Company, can be termed as technical services or not, is essentially a question of fact. The Tribunal, after considering all the material produced before it, has found that roaming process between participating entities is fully automatic and does not require any human intervention. Coupled with the aspect that the Tribunal has relied upon the decision of the Delhi High Court for taking support of its view. In our view, the Tribunal is ultimately fact finding authority and has held that the roaming process between participating company cannot be termed as technical services and, therefore, no TDS was deductible. We do not find that any error has been committed by the Tribunal in reaching to the aforesaid conclusion. Apart from the above, the questions are already covered by the above referred decision of the Delhi High Court, which has been considered by the Tribunal in the impugned decision. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the assessee is in default for non-deduction of TDS on roaming charges under Sections 194H and 194J of the Income Tax Act, 1961.
2. Whether data link charges paid by the assessee qualify as technical fees requiring TDS deduction under Section 194J of the Act.

Detailed Analysis:

Issue 1: Non-Deduction of TDS on Roaming Charges

Facts and Arguments:
- The assessee, a mobile service provider, paid roaming charges to other service providers. The Revenue argued that these payments constituted "technical services," necessitating TDS under Sections 194H and 194J of the Income Tax Act, 1961.
- The Assessing Officer held the assessee in default for not deducting TDS, resulting in recovery orders under Sections 201 and 201(1A) of the Act.
- The CIT (Appeals) upheld the Assessing Officer's decision, but the Tribunal reversed this, relying on the Delhi High Court's decision in Bharti Cellular Ltd., which stated that roaming services do not involve human intervention and thus do not qualify as technical services under Section 194J.

Tribunal's Findings:
- The Tribunal referenced the Jaipur bench's decision in Bharti Hexacom Ltd., which outlined that roaming services are automated and do not involve human intervention.
- The Tribunal noted that the entire roaming process, including the identification and authentication of the subscriber, is automatic and does not require manual intervention.
- The Tribunal concluded that payments for roaming charges do not constitute fees for technical services and thus are not subject to TDS under Section 194J.

High Court's Decision:
- The High Court upheld the Tribunal's decision, stating that the Tribunal is the fact-finding authority and had correctly determined that the roaming process is fully automatic and does not require human intervention.
- The Court dismissed the Revenue's reliance on the Supreme Court's decision in Bharti Cellular Ltd., noting that the Tribunal had already considered this and found no human intervention in the roaming process.
- The Court also rejected the Revenue's argument based on the Kotak Securities Ltd. case, clarifying that the issue was not about services provided to subscribers but about inter-operator payments for roaming facilities.

Conclusion:
- The High Court found no substantial question of law arising from the Tribunal's decision and dismissed the appeals, confirming that the assessee was not in default for non-deduction of TDS on roaming charges.

Issue 2: Data Link Charges as Technical Fees

Facts and Arguments:
- The Revenue contended that data link charges paid by the assessee to other operators qualify as technical fees under Section 194J, requiring TDS deduction.
- The Tribunal, however, found that data link services do not involve human intervention and thus do not fall under the purview of Section 194J.

Tribunal's Findings:
- The Tribunal referenced various judicial precedents, including the Pune Bench's decision in iGATE Computer Systems Ltd., which held that data link services are automated and do not constitute technical services.
- The Tribunal concluded that payments for data link charges are not fees for technical services and thus are not subject to TDS under Section 194J.

High Court's Decision:
- The High Court did not explicitly address this issue in detail, as the primary focus was on the non-deduction of TDS on roaming charges. However, by upholding the Tribunal's decision, the Court implicitly agreed with the Tribunal's findings on data link charges.

Conclusion:
- The Tribunal's decision that data link charges do not qualify as technical fees under Section 194J was upheld, indicating that the assessee was not required to deduct TDS on these payments.

Summary:
The High Court dismissed the Revenue's appeals, confirming that the assessee was not in default for non-deduction of TDS on roaming charges and data link charges. The Tribunal's findings that these payments do not constitute fees for technical services under Section 194J were upheld, as the processes involved are automated and do not require human intervention.