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2024 (8) TMI 555 - HC - Income TaxTDS u/s 194J - payments to other telecom operators in the form of roaming charges without deducting Tax at Source (TDS) - HELD THAT - The provision contemplates three different services which are mutually inclusive. The use of the punctuation mark comma in the provision after the first category of managerial is to separate it from the second category of technical and the use of or after the second category of technical is to classify a separate category of consultancy . As noted that the technical service can be automated and also with human intervention at various stages which can be either managerial or consultancy or both. In the present case, the undisputed facts and the respondent's own National GSM Roaming Agreement clearly establish that human intervention and technical expertise are integral and indispensable components for the smooth, efficient, and uninterrupted operation of roaming services as a whole. Roaming Agreement explicitly acknowledges the need for human intervention in various critical aspects of roaming services, such as discussing impacts and taking necessary actions upon any change in the system or network, providing customer care support, addressing network faults through coordination between customer care and technical teams, handling issues related to lost/stolen SIM cards or mobile equipment, and resolving billing inquiries or disputes. Tribunal also accepted the presence of human intervention, however holding that for connecting a roaming call, human intervention is not required. We wish to point out few situations, which in our opinion the Tribunal has not considered. Two such situations, as it existed then and also now, is the option to manually select a network when one goes out of the home network at the subscribers end or to activate international roaming. When the subscriber selects another network when the service is either down or when the service provider does not provide any service in any particular area or country and when there are glitches or connectivity issues, it is only through human intervention, it can be resolved. Similarly, the activation of international roaming is also another situation which requires human intervention. As evident from the above that human intervention by skilled technical personnel is an integral and unavoidable part of the roaming services provided by the host telecom operators to the respondent-assessee. In our opinion, the roaming service to be provided is not mere connection but a seamless service throughout the period, when the subscriber is outside the home geographical area. These services cannot be rendered effectively or efficiently without continuous human monitoring, coordination, troubleshooting, and expertise. Therefore, this Court is of the firm view that the roaming services provided by the respondent-assessee to other telecom operators undoubtedly involve human intervention and technical expertise at various levels, thereby the charges paid would constitute fees for technical services u/s 194J as the provision lucidly spells out that the consideration can also be in one lump sum. Apex Court in Bharati Cellular Ltd case 2010 (8) TMI 332 - SUPREME COURT which in our opinion is the only case directly on the point, issued certain directions. Nothing has been placed on record to show that at what stage the expert opinion was obtained, whether the expert was subjected to cross-examination by the parties, whether the technical evidence was collected, consideration of the agreements between the parties, the extent of human intervention in the contingencies like travelling out of home network including the period when one is travelling abroad and basis of fixation of capacity and even if it is accepted that human intervention is necessary, would it not suffice if such intervention is at some stage are all the factors that ought to have been considered by the Tribunal, which in our opinion failed and misconstrued the judgment of the Hon ble Apex Court in Bharati Cellular Case. The Tribunal unfortunately restricted itself to the question of connection at the initial stage when the subscriber leaves the home territory or in other words when he is in roaming and has not postulated a situation and rendered findings on the entirety of the period of roaming. The substantial questions of law raised in these appeals are answered in favour of the appellant-Revenue and against the respondent-assessee. The impugned common order dated 20.07.2015 passed by the Income Tax Appellate Tribunal, which erroneously held that the assessee was not liable to deduct tax at source on the roaming charges paid, is set aside and the matter is remanded back to the Tribunal for fresh consideration. Tax case appeals preferred by the Revenue are allowed and the matter is remanded back to the Tribunal for fresh consideration.
Issues Involved:
1. Whether roaming charges paid by the assessee to other telecom operators constitute "fees for technical services" under Section 194J of the Income Tax Act, thereby mandating the deduction of tax at source. 2. Whether human intervention in the provision of roaming services is necessary to classify the payment as fees for technical services. 3. The impact of the Corporate Insolvency Resolution Process (CIRP) on the tax liability and the ongoing legal proceedings. Issue-wise Detailed Analysis: 1. Roaming Charges as Fees for Technical Services: The primary issue was whether the roaming charges paid by the assessee to other telecom operators should be classified as "fees for technical services" under Section 194J of the Income Tax Act, which would necessitate the deduction of tax at source. The Tribunal initially held that roaming services did not require human intervention for connecting calls and thus did not qualify as technical services. However, the High Court found that human intervention and technical expertise were integral to the operation of roaming services. The Court emphasized that the seamless operation of roaming services required continuous human monitoring, coordination, troubleshooting, and expertise, thereby classifying the roaming charges as fees for technical services under Section 194J. 2. Human Intervention in Roaming Services: The Tribunal had concluded that human intervention was not required for connecting roaming calls once the initial configurations were completed. However, the High Court disagreed, highlighting that human intervention was necessary at various stages, including initial physical connectivity, system configurations, and troubleshooting. The Court noted specific instances where human intervention was indispensable, such as manually selecting a network when the service provider does not cover a particular area and activating international roaming. Thus, the Court concluded that human intervention was an integral part of providing roaming services, making the charges paid for these services fees for technical services. 3. Impact of CIRP on Tax Liability: The respondent argued that the CIRP and the approval of the resolution plan rendered the tax case appeals infructuous. However, the High Court rejected this contention, citing the Supreme Court judgment in the Rainbow Papers Limited case, which held that statutory dues could not be ignored and must be addressed in the resolution plan. The Court emphasized that the statutory tax liability and the obligation to deduct tax at source under the Income Tax Act remained unaffected by the CIRP. The Court also noted that the resolution plan was approved after the Tribunal's order, and the substantial question of law regarding the classification of roaming charges could not be left undecided. Conclusion: The High Court concluded that the roaming charges paid by the assessee to other telecom operators constituted fees for technical services under Section 194J of the Income Tax Act, necessitating the deduction of tax at source. The Court set aside the Tribunal's order and remanded the matter back to the Tribunal for fresh consideration, directing it to consider the extent of human intervention and other relevant factors comprehensively. The appeals were allowed, and the Tribunal was instructed to re-examine the issue in light of the High Court's findings.
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