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TMI Blog2007 (5) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. CIT(A) and thereby asking the Assessing Officer to levy TDS u/s 194C. Apart from the above fact the instruction from the CBDT vide letter to M/s. BSNL also makes it clear that the assessee is liable to deduct TDS on such payments. We therefore set aside the order of the ld. CIT(A) holding that port charges are not subject to provision u/s 194J and are rather in the nature of work u/s 194C and therefore restore the order of the Assessing Officer. Based on the same analogy we hold that Access charges also comes under the purview of section 194J and therefore restore the order of Assessing Officer by setting aside the order of the ld. CIT(A) in this regard. Payment on account of lease rental charges , such payment is neither in the nature of work nor in the nature of agreement and therefore cannot be considered u/s 194J and therefore we uphold the order of the ld. CIT(A) and accordingly dispose of the grounds raised by the revenue in both the appeals by partly allowing the grounds raised by it and dismissing the ground No. 2 of the assessee. TDS u/s 194C on inter connect charges - HELD THAT:- We find that the provision of TDS has been made and to recover the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A). 2.The appellant prays that the order holding applicability of section 194C be held as invalid. Ground II : Applicability of section 194C on the Interconnect charges. 1.Without prejudice to Ground I above and on the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that section 194C would be applicable to the interconnect charges. 2.The appellant prays that it be held that the payments of the interconnect charges to the other telecom operators do not come within the purview of contract for "work" and therefore does not attract tax deduction at source under section 194C of the Act. The appellant therefore prays that the order treating the appellant as an assessee in default be struck down. Ground III : Taxes already paid by Telecom Operators. 1.Without prejudice to Grounds I and II above, the appellant submits that the CIT(A) erred in not considering the fact that the other telecom operators would have already disclosed their income in respect of the Interconnect charges paid by the appellant and already paid taxes due thereon and hence deduction of tax at source under section 194C of the Act by the appellant once again would am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Objector and already paid taxes due thereon and hence deduction of tax at source under section 194J of the Act (if applicable) by the Cross objector once again would amount to taxing the same amount of income twice, i.e ., once by way of regular taxes (advance tax, self-assessment tax etc.) and again by way of TDS demanded from the Cross Objector. 2.The Cross Objector therefore submits that such double taxation cannot be demanded and that it is a settled law that if the payee or income has paid the taxes due on the said income, the payer cannot be called upon to pay the TDS amount once again on the same income. 3.The Cross Objector prays that if it is held that tax was deductible under section 194J, yet the Cross objector ought not to be called upon to pay the tax and ought not to be treated as an assessees in default. Ground II : Levy of Interest under section 201(1A) . 1.In view of the Ground No. 1 above, the levy of interest under section 201(1A) of the Income-tax Act, 1961 ( the Act ) on the alleged non-deduction of tax under section 194J of the Act ought to be also disapproved. 2.Without prejudice to the above, even if interest is to be charged, it should be cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment company and hence the provision of section 194J is not applicable. The assessee has further narrated the services taken by it from other telecom companies and has contended that the services received by it did not come under the purview of section 194J and therefore the action of the Assessing Officer for levying tax and interest under section 201(1) and 201(1A) is incorrect and is liable to be deleted. 3.2 The ld. CIT(A) after considering the submissions of the assessee has observed that the payments made by the assessee-company were not in the nature of the technical services and has modified the order of the Assessing Officer to this extent. However, at the same time the ld. CIT(A) has held that payments insofar as they relate to the port charges paid to M/s. BSNL are in the nature of payments of carrying out work as understood within the meaning of section 194C of the Act and he has accordingly partly confirmed the demand raised by the Assessing Officer to this extent. 3.3 Both the assessee as well as the department are aggrieved with the order of the ld. CIT(A) in the case of both the years. The assessee is aggrieved by the order of the ld. CIT(A) in holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has been submitted by the ld. Counsel that even otherwise the word work in the context of section 194C conveys the activity that is predominantly physical and since though no physical activity at all involved in the services taken by the assessee from these telecom companies as somebody may be just plugging in one network with the other to provide inter connectivity and the transmission of voice and signals is automatic. 5. It has been contended by the ld. Counsel that the Hon ble CIT(A) considered all transmission of voice and signals as carrying on of work but the definition as laid down in Explanation III to section 194C does not include within its scope the carriage of voice or signals through an automatic medium. In support of his above contention, he has relied on the decision of the Hon ble Supreme Court in the case of Birla Cement Works v. CBDT [2001] 248 ITR 216. 5.1 It has further been submitted that transmission of voice and other signals cannot be shown in this regard in absence of specific inclusion in the definition of work in the section itself. It has been said by the ld. Counsel that never in the past the tax department has taken a view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. BSNL on which TDS was to be deducted. However, the ld. CIT(A) has considered such payments in response to port charges as payments against work and has held that such applicability of TDS can only be made as per provision laid down in section 194C in respect of port charges paid by the assessee to M/s. BSNL and has treated the other charges outside the purview of TDS. 7.1 We after hearing both the parties find that the assessee in this case is basically making three types of payments to M/s. BSNL which are as under : ( i )Lease Line rental charges ( ii )Port charges ( iii )Access charges These nature of services rendered by M/s. BSNL is explained in the following manner which has been placed on record by the assessee and is being reproduced for the facility of reference: "When a call generates from a Hutch subscriber, the signals are first encountered at the Base Transceiver Station ( BTS ) and the Base Station Controller ( BSC ) (commonly known as cell sites). Both BTS and BSC belong to Hutch. From BSC, the call travels to Mobile Switching Center where the routing and changing of the calls take place. Till this stage the signal travels on a wireless system. Fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same analogy we hold that Access charges also comes under the purview of section 194J and therefore restore the order of Assessing Officer by setting aside the order of the ld. CIT(A) in this regard. 7.3 So far as payment on account of lease rental charges, in our considered opinion, such payment is neither in the nature of work nor in the nature of agreement and therefore cannot be considered under section 194J and therefore we uphold the order of the ld. CIT(A) and accordingly dispose of the grounds raised by the revenue in both the appeals by partly allowing the grounds raised by it and dismissing the ground No. 2 of the assessee. 8. Regarding grounds of appeal No. 3, the assessee has submitted that the inter connect charges paid to M/s. BSNL cannot be subject to TDS under section 194C and TDS had been paid by M/s. BSNL and levy of TDS will mean i.e. taxing the same amount twice in the hands of M/s. BSNL and in the hands of the assessee. It has been submitted by that the various Courts and the Tribunal are consistently holding that once the payee of income has paid his due taxes the department cannot recover the same tax once again from the payer even in cases wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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