2020 (3) TMI 1187 - AT - Income Tax

TDS u/s 194J - disallowance u/s 40(a)(ia) - non-deduction of tax at source on payment of roaming/interconnectivity charges - Whether not in nature of fee for technical services ? - HELD THAT - Since this issue is covered in favour of the assessee by the decision of the coordinate Bench of the Tribunal in assessee s own case for the assessment year 2009-10 to assessment year 2012-13 and 2016 (6) TMI 174 - ITAT MUMBAI as held roaming /inter- connectivity charges paid by the appellant to other telecom networks are not in the nature of fees for technical services and provisions of section 194J of the IT Act are not applicable to these payments. Since there is no change of material facts in the present case, the Ld. CIT(A) has rightly followed the decision of the coordinate Bench and decided this issue in favour of the assessee. Hence, respectfully following the decision of the coordinate Bench aforesaid, we dismiss this ground of appeal of the revenue and direct the AO to delete the addition made on account of disallowance u/s 40(a)(ia) TDS u/s 194H - payment of the discounts allowed to its prepaid distributors on sale of starter kits and prepaid recharge vouchers - HELD THAT - As decided in own case 2016 (6) TMI 174 - ITAT MUMBAI appellant was not required to deduct tax at source under section 194H of the IT Act in respect of the discounts allowed to prepaid distributors on sale of starter kits and prepaid recharge vouchers. Depreciation claim of the assessee u/s 32 in respect of the amount paid to the DOT for purchase of 3G spectrum and not restricting to proportionate amount as per the provisions of section 35ABB - HELD THAT - As pointed out by the Ld. counsel, the coordinate Bench has decided the identical issue in favour of the assessee in Idea Cellular Limited 2017 (12) TMI 660 - ITAT MUMBAI . Since the Ld. CIT(A) has decided this issue by following the decision of the coordinate Bench, we do not find any reason to interfere with the findings of the Ld. CIT(A). Hence, respectfully following the decision of the coordinate Bench discussed above, we uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the revenue.

Summary

Issues Involved:
1. Disallowance of roaming/interconnectivity charges under section 40(a)(ia) for non-deduction of tax at source.
2. Disallowance of discounts extended to prepaid distributors under section 40(a)(ia) for non-deduction of tax at source.
3. Allowance of depreciation claim on the amount paid for the purchase of 3G spectrum.

Issue-wise Detailed Analysis:

1. Disallowance of Roaming/Interconnectivity Charges:
The revenue challenged the CIT(A)’s decision to delete the disallowance of ?13,04,59,145/- under section 40(a)(ia) for non-deduction of tax at source on roaming/interconnectivity charges. The CIT(A) held that these charges do not qualify as "fees for technical services" and thus, section 194J does not apply. The Tribunal upheld this view, referencing the decision in the assessee's own case for earlier years and other cases, including the Hon’ble Karnataka High Court in CIT(TDS) vs. Vodafone South Ltd. The Tribunal emphasized that roaming services are automated and do not involve human intervention, thus not falling under "technical services."

2. Disallowance of Discounts to Prepaid Distributors:
The revenue also contested the deletion of ?57,24,22,930/- disallowed under section 40(a)(ia) for non-deduction of tax on discounts allowed to prepaid distributors. The CIT(A) ruled in favor of the assessee, stating that the relationship between the assessee and distributors was on a principal-to-principal basis, not an agency relationship, thus section 194H was not applicable. The Tribunal supported this conclusion, citing the decision of the Karnataka High Court in Bharti Airtel Ltd. and the assessee's own case for earlier years, which established that discounts on sales do not constitute commission.

3. Depreciation Claim on 3G Spectrum Purchase:
For the assessment year 2013-14, the revenue challenged the CIT(A)’s decision allowing the assessee’s depreciation claim of ?176.88 crores on the amount paid for the purchase of 3G spectrum. The CIT(A) followed the decision of the Mumbai Tribunal in Idea Cellular Limited, which held that the payment for 3G spectrum is not for acquiring any right to operate telecommunication services but for the right to use a particular frequency, thus qualifying for depreciation under section 32. The Tribunal upheld this view, dismissing the revenue's appeal and confirming that section 35ABB does not apply to such payments.

Conclusion:
The Tribunal dismissed the appeals filed by the revenue for both assessment years 2012-13 and 2013-14, upholding the CIT(A)’s decisions on all issues. The Tribunal confirmed that the roaming/interconnectivity charges and discounts to prepaid distributors do not attract TDS under sections 194J and 194H, respectively, and the depreciation claim on the 3G spectrum purchase is allowable under section 32. The judgments were consistent with prior decisions in the assessee's own cases and relevant high court rulings.