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2023 (2) TMI 1111 - AT - Income TaxTDS u/s 194J - Disallowance u/s 40(a)(i) - non-deduction of TDS - payment of interconnect user charges as it could not be categorized as fee for technical services - HELD THAT - Hon ble High Court has noted in the case of Vodafone South Ltd. 2016 (8) TMI 422 - KARNATAKA HIGH COURT which hold that no TDS is required to be deducted by the assessee on payment of interconnect user charges as it cannot be categorized as fee for technical services, thus decided the aforesaid issue in favour of the respondent-assessee. Addition on account of excess depreciation claimed - assessee has taken license which allows the assessee to use that particular right on payment of certain amount and that being an intangible asset on which depreciation is allowable @ 25% only - HELD THAT - As in assessee s own in AY 2013-14 case granted the relief to the assessee holding that depreciation on a limited user license is eligible @ 60%. Disallowance as excessive depreciation claimed, is directed to be deleted. Appeal of the Revenue stands dismissed.
Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) on account of disallowance under Section 40(a)(i) of the Income Tax Act, 1961 for non-deduction of TDS on 'communication charges'. 2. Taxability of 'communication charges' under Indo-US DTAA. 3. Legality of telecom services provided by TATA INC without a unified license. 4. Reliance on previous judicial decisions regarding technical services and human intervention. 5. Disallowance of excess depreciation claimed on Aspect license-SW kit phone. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 40(a)(i): The AO added Rs. 2,50,67,848/- under Section 40(a)(i) due to non-deduction of TDS on 'communication charges' paid to TATA INC. The CIT(A) deleted this addition, noting that similar facts were considered in the assessee's appeal for AY 2013-14, where it was held that the payment did not involve any income component arising to the non-resident company. The CIT(A) cited the Supreme Court judgment in GE Technologies India vs. CIT, emphasizing that TDS obligation arises only when the payment is chargeable to tax in India. The CIT(A) concluded that since the payment did not involve human intervention and was for interconnection charges, it did not constitute 'Fees for Technical Services' (FTS) under Section 9(1)(vii) of the Act. 2. Taxability under Indo-US DTAA: The CIT(A) examined the taxability under Article 12 of the Indo-US DTAA, which defines 'fees for included services'. It was concluded that the 'communication charges' did not make available any technical knowledge to the recipient, thus not falling under the definition of 'fees for included services'. Consequently, the payment was not taxable under the DTAA, and no TDS was required under Section 195. 3. Legality of Telecom Services by TATA INC: The AO argued that TATA INC did not possess the necessary license to provide telecom services in India. The CIT(A) noted that the services were rendered by the non-resident company at the foreign end and not in India. The requirement of a license was deemed irrelevant to the taxability of the payment. The CIT(A) emphasized that the payment to the US entity was not taxable in India, thus insulating the assessee from the provisions of Section 40(a)(i). 4. Reliance on Judicial Decisions: The CIT(A) and the Tribunal relied on various judicial precedents, including the Delhi High Court and Supreme Court decisions, which held that payments for interconnection charges without human intervention do not qualify as FTS. The Tribunal upheld the CIT(A)'s order, noting that similar issues had been decided in favor of the assessee in previous cases, including CIT vs. Bharti Airtel and Vodafone South Ltd. 5. Disallowance of Excess Depreciation: The AO disallowed Rs. 40,452/- claimed as excess depreciation on Aspect license-SW kit phone, treating it as an intangible asset eligible for 25% depreciation. The CIT(A) granted relief, following the decision in the assessee's case for AY 2013-14, where it was held that limited user licenses are integral to the computer system and eligible for 60% depreciation. The Tribunal upheld this decision, noting no distinguishing facts were presented by the Revenue. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order on both the deletion of addition under Section 40(a)(i) and the allowance of excess depreciation claimed. The judgment emphasized adherence to judicial precedents and the specific provisions of the Income Tax Act and DTAA.
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