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TMI Blog2015 (1) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... ere made available vide DATA link satellite link line established from one service provider to be carried over to the other service provider, does not involve technical services as there was only interconnection of the networks to the equipments of other service providers In the absence of any human intervention for transmitting the DATA through such DATA link satellite link line, the payments made for utilizing such services was not in the nature of technical services governed by section 194J of the Act – the order of the CIT(A) is reversed and DATA link charges is held to be not liable for tax deduction at source under the provisions of section 194J - since there was no requirement to deduct tax at source u/s 194J, there was no liability upon the assessee and there was no failure on part of assessee for non-deduction of tax at source and the assessee was not liable to pay interest u/s 201(1A) – Decided in favour of assessee. - ITA Nos.1301 to 1303 & 1616/PN/2013 - - - Dated:- 30-12-2014 - Shri G. S. Pannu And Ms. Sushma Chowla,JJ. For the Appellant : Shri C. H. Naniwadekar For the Respondent : Shri Rajesh Damor ORDER Per Sushma Chowla, J.M: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. In view thereof, show cause notice was issued to the assessee under section 201(1) of the Act and 201(1A) of the Act. The plea of the assessee before the ACIT-TDS was that the DATA link charges were not in the nature of fee for technical services but for allowing the satellite link line from one service provider to be carried over to the other service provider. As such, the existing service provider had to provide inter connection of their net works from equipment of net works to equipment of other service providers to provide subscribers efficient and flawless services. The DATA link usage was only for transmission of data from the server of assessee to the designated client server. The assessee further explained that it was obvious that through the process of interconnection, one service provider establishes a link between it s own network, services and equipment with the network, services and equipment of other service provider. For facilitating these arrangements, service provider only uses the network element (for carrying the lines to their destination) of other service provider. By providing the interconnection, the interconnection provider does not render any tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectification / directions of the appellate authorities. 6. The CIT(A) after considering the submissions of the assessee called for the Remand Report and observed that the reply of the ACIT(TDS) was cryptic and even the assessee had not been able to procure necessary certificates from the service providers regarding the nature of human element involved in entire exercise of DATA link services. 7. The CIT(A) vide para 17 observed as under:- 17. From the copy of bills submitted during the course of appellate proceedings, it is seen that service tax has been levied by the service providers. It is claimed by the appellant that data link facility is provided by service providers with the use of technical gadgets without any human intervention. This submission may be true as long as the leased lines are functioning properly, as due to increased automation human intervention has been greatly reduced. However, whenever network is jammed or data link is slow or bad, human intervention is required as machines cannot be expected to correct itself automatically. To take care of such exigencies, service providers have to maintain 24/7 customer support with toll free numbers. For exampl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest under section 201(1A) of the Act. The learned Authorized Representative for the assessee pointed out that in the said data link charges paid by the assessee, the human involvement was only for limited purpose of maintenance of equipment. The learned Authorized Representative for the assessee placed reliance on the ratios laid down in the following decisions:- 1. Infosys Technologies Ltd. Vs. DCIT in ITA No.1140/Bang/2009 2. Wipro Ltd. Vs. ITO in ITA Nos.991 to 996/Bang/2002 3. Global One India P. Ltd. Vs. ACIT (2014) 31 ITR (Trib) 722 (Delhi) 4. CIT Vs. Estel Communications P. Ltd. (2009) 318 ITR 185 (Delhi) 13. It was further pointed out by the learned Authorized Representative for the assessee that the decision of Kolkata Bench of the Tribunal in Hutchison Telecom East Ltd. Vs. ACIT (supra) was later on over ruled by the Hon ble Delhi High Court in CIT Vs. Bharti Cellular Ltd. reported in (2009) 319 ITR 139 (Del) and the Hon ble Apex Court has set aside the issue in CIT Vs. Bharti Cellular Ltd. (2011) 330 ITR 239 (SC). 14. The learned Departmental Representative for the Revenue has placed reliance on the ratio laid down in CIT Vs. Bharati Cellular Ltd. (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, which reads as under:- Fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries . 18. Under the provisions of section 194J of the Act, where the assessee makes any payment against fees for technical services, then, is liable to deduct tax at source at the specified rates at the time of credit of the payment or at the time of actual payment, whichever is earlier. Fee for technical services is defined under the Act as consideration paid for rendering any managerial, technical or consultancy services but does not include consideration paid for any construction, assembly, mining or like project undertaken by the recipient. Further, the consideration which in turn, would become the income of the recipient chargeable under the head Salaries , is also not to be included as fees for technical servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal were as under:- The CIT(A)'s reasoning that the only way out is to get a nodeduction certificate from the AO (TDS), is lacked merit in substance and this reasoning of the CIT(A) is to be out rightly rejected. Software developed by companies in India is exported either in physical mode (i.e. through floppy disks) or through wireless communication using satellite links. When an Indian company exports software to companies outside India using satellite communication facilities, the digital signals are converted into analog signals through earth stations and are transmitted to one of the geo-stationery satellites using the required bandwidth provided by Videsh Sanchar Nigam Ltd. or Software Technology Parks of India. The signals that have been beamed to the satellite will be downlinked to the earth station in the US and sent to the client locations using the bandwidth and downlinking facility provided by international service providers such as AT T, MCI Telecommunications etc. The assessee shares the bandwidth provided by the international service providers. Bandwidth in normal parlance refers to the amount of traffic that could be carried on the internet. Greater t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to provisions of section 194J of the Act. However, the Hon ble Delhi High Court in CIT Vs. Bharti Cellular Ltd. (supra) has overruled the ratio laid down by the Calcutta Bench of the Tribunal in Hutchison Telecom East Ltd. Vs. ACIT (supra) by holding that the word technical had to take colour from the words managerial and consultancy. It was further held by the Hon ble High Court that managerial services had definite human element attached to and similar services of consultancy also necessary entailed human intervention and consequently, the word technical as appearing in Explanation (2) under section 9(1)(vii) of the Act has to be construed involving human element. The facilities which were provided by MTNL and other companies for inter-connection / port access which was provided automatically by the machines and hence the MTNL and other companies which provides said facilities were not rendering any technical services and the payments made to such service providers were not liable for tax deduction at source under section 194J of the Act. 24. The Hon ble Supreme Court in CIT Vs. Bharti Cellular Ltd. (supra) observed that question of human intervention was never raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... human intervention for transmitting the DATA through such DATA link satellite link line, the payments made for utilizing such services was not in the nature of technical services governed by section 194J of the Act. Accordingly, we reverse the finding of CIT(A) in this regard and hold that DATA link charges of ₹ 8,32,46,468/- were not liable for tax deduction at source under the provisions of section 194J of the Act. In view thereof, the grounds of appeal No.1 (a) and (b) are allowed. Since there was no requirement to deduct tax at source under section 194J of the Act, there was no liability upon the assessee and there was no failure on part of assessee for non-deduction of tax at source and consequently, the assessee was not liable to pay interest under section 201(1A) of the Act. The ground of appeal No.1(c) raised by the assessee is allowed. 26. The facts and issue in ITA Nos.1302, 1303 and 1616/PN/2013 are identical to the facts and issue in ITA No.1301/PN/2013 and our decision in ITA No.1301/PN/2013 shall apply mutatis mutandis to ITA Nos.1302, 1303 and 1616/PN/2013. 27. In the result, all the appeals of the assessee are allowed. Order pronounced in the open Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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