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2005 (12) TMI 217 - AT - Income TaxDeduction of TDS u/s 194J - Payment of port charges access charges and interconnect charges to BSNL - HELD THAT - In our considered view the situation in the case of the assessee is not different from the situation before the Hon ble Madras High Court in the case of Skycell Communications 2001 (2) TMI 57 - MADRAS HIGH COURT . In the case before Hon ble Madras High Court the question was whether firms and companies subscribing to the cellular network are required to make TDS u/s 194J or not and whether the service provided by the cellular mobile telephone companies to its subscriber was technical services or not and the Hon ble Madras High Court held that it cannot be treated as fee for technical services. In the case before us the assessee is providing service to its subscribers and certain calls are routed by making use of the network of BSNL and for that purpose the call charges received by the assessee from its subscribers are shared with BSNL. In our view the said service cannot be treated as technical service and the provisions of s. 194J are not applicable. The orders of the lower authorities are vacated. Since we have held that the provisions of s. 194J are not applicable we do not see any reason to deal with the alternative plea of the assessee. In the result both the appeals of the assessee are allowed.
Issues:
- Deduction of TDS under section 194J on payment of port charges, access charges, and interconnect charges to BSNL. Analysis: 1. The appeals were filed against the order of CIT(A) regarding the deduction of TDS under section 194J for the assessment years 2001-02 and 2002-03, initiated by the order of the Assessing Officer under section 201(1) of the IT Act, 1961. 2. The only issue involved was whether the charges paid by the assessee to BSNL for port, access, and interconnect charges should be subjected to TDS under section 194J. 3. The assessee, a telecommunication service provider, had an interconnect agreement with BSNL for routing calls through each other's networks. The AO considered the payments to BSNL as fees for technical services, requiring TDS under section 194J. 4. The CIT(A) upheld the AO's decision, stating that the payments to BSNL were for technical services, and TDS should have been deducted by the assessee. 5. The assessee appealed to the Tribunal, arguing that the charges paid to BSNL were only for using its network, not for technical services. The counsel referred to relevant case law to support their argument. 6. The Tribunal analyzed the nature of the payments and held that the interconnect charges paid by the assessee to BSNL did not qualify as technical services under section 194J. They emphasized that using technical infrastructure does not automatically imply the provision of technical services. 7. Referring to the decision of the Madras High Court, the Tribunal concluded that the situation in the present case was similar, where the service provided by BSNL was not technical in nature. Therefore, the provisions of section 194J were deemed inapplicable, and the orders of the lower authorities were overturned. 8. The Tribunal allowed both appeals of the assessee, stating that since the charges paid were not for technical services, there was no requirement to deduct TDS under section 194J. The alternative plea regarding the recipient's tax liability was not addressed due to the primary issue's resolution.
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