2018 (12) TMI 644 - HC - Income Tax

Entitled for deduction u/s 80IA - assessee is not a basic telecommunication service provider as per Section 80IA(4)(ii) or not - Held that - We find that the definition of telecommunication service , as defined under Section 2(k) of the TRAI Act, is a very wide and comprehensive definition, which includes services of any description, which is made available to users by means of any transmission or reception of signs, signals etc. Thus, the definition being very wide and inclusive definition, it would encompass all types of services regardless of the description and definitely it would encompass the type of service rendered by the assessee and therefore, we have no hesitation to hold that the type of service rendered by the assessee is a basic telecommunication service . Furthermore, the official website of the BSNL also shows EPABX as one of the enterprises services provided by BSNL. The official website of BSNL also states that it permits telephone subscribers to use their own PABX/EPABX connected to the BSNL network under certain commercial/technical conditions. Thus, this type of service done by the assessee is an authorised telecommunication service in association with BSNL. Income Tax Officer v. Quick Telecom, Mumbai 2011 (1) TMI 1537 - ITAT MUMBAI also examined an identical agreement as that of the agreement entered into by the assessee with BSNL and held that merely because the services are provided in association with MTNL (in that case), it does not mean that the assessee is not providing the basic telecommunication services . - decided in favour of assessee.

Summary

Issues:
Interpretation of Section 80IA(4)(ii) of the Income Tax Act, 1961 regarding deduction eligibility for telecommunication services.

Detailed Analysis:

1. Background and Assessment: The appellant filed returns for assessment years 2003-04 and 2004-05, claiming deduction under Section 80IA(4)(ii) of the Income Tax Act. The Assessing Officer rejected the deduction, deeming the appellant as a commission agent of BSNL, not providing telecommunication services. The Commissioner of Income Tax (Appeals) allowed the appeals, but the Tribunal overturned this decision.

2. Arguments Before the High Court: The appellant contended that they were providing basic telecommunication services as per the agreement with BSNL and the Certificate issued by BSNL. The CITA supported this claim, emphasizing the terms of the agreement and the definition of telecommunication service under Section 80IA(4)(ii) of the Act.

3. High Court's Analysis: The High Court examined the definitions of telecommunication services under the Indian Telegraph Rules 1951 and the Telecom Regulatory Authority of India Act, 1997. It noted that the definition of telecommunication service under the TRAI Act is broad, encompassing various services transmitted by different means. The Court found that the appellant's services fell within this definition.

4. Precedents and Legal Interpretation: The High Court referenced a similar case in the Gujarat High Court and an ITAT decision in Mumbai, both supporting the view that franchisees providing telecommunication services in association with BSNL are entitled to deductions under Section 80IA of the Act.

5. Conclusion: The High Court upheld the CITA's decision, ruling in favor of the appellant. It found that the appellant was indeed providing basic telecommunication services in collaboration with BSNL, as per the terms of their agreement. The Tribunal's interference was deemed unwarranted, and the High Court set aside the Tribunal's order, restoring the CITA's decision in favor of the appellant.