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TMI Blog2016 (5) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices as there was only interconnection of the networks to the equipments of other service providers. Hence in the absence of any human intervention for providing bandwidth, 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 bandwidth charges were not liable for tax deduction at source under the provisions of section 194J of the Act. - Decided in favour of assessee. - ITA No. 4061/Del/2011, C.O. No. 331/Del/2012 - - - Dated:- 5-5-2016 - Shri N. K. Saini, Accountant Member And Shri Sudhanshu Srivastava, Judicial Member For the Appellant : Shri N.J. Singh, Sr. DR For the Respondent : Shri Ajay Wadhwa, Adv Ms Aruna Mittal CA ORDER Per Sudhanshu Srivastava, Judicial Member I.T.A. No. 4061/Del/2011 has been preferred by the Department against the order dated 22.06.2011 passed by the Ld. CIT(A)-XXX, New Delhi wherein through the impugned order for Assessment Year 2009-10 (Financial Year 2008-09) the Ld. CIT (A) has held that although the assessee was liable to deduct tax at source u/s 194J of the Income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2 to section 9(1)(vii) of the Act and opined that the term technical service included managerial and consultancy services which ordinarily were not technical services and their inclusion only enlarged the meaning of the term but did not divest the normal meaning of the expression technical service . The Assessing Officer was of the opinion that since interconnect/access/port service was a service of technical nature, normal meaning of technical services was applicable on the facts and the assessee was liable to deduct tax u/s 194J of the Act. 3. Before the Ld. First Appellate Authority, it was the assessee s contention that bandwidth was provided with the state-of-art mechanism without human intervention inasmuch as a static optical fibre was used to provide bandwidth through a pair of two wires and the bandwidth followed the path just as an electric circuit. However, the Ld. CIT(A) was of the opinion that in view of the present day technological world, the role of human intervention in the process of provision of bandwidth could not be negated and wherever sophisticated technology was being used, human intervention became imperative. The ground of appeal of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... needs to be noted. AIGP s lay down optical fibre / copper wires to provide the bandwidth to the customers. A customer receives bandwidth through these lines optical fibre / copper wires. Modem or converters pairs / optimux are installed to convert the transmission signals into Data / Voice. There are two connections to a modem, one from computer to its modem, and one from the computers modem to the ISP s modem. The Ld. AR further submitted that an Authorised service provider (AIGP) as a part and parcel of its business provides bandwidth to its customers. Bandwidth provided by AIGP s conforms to the requirement and specifications of the person taking the bandwidth. The Ld. AR further submitted that internet leased line service is statutorily regulated and can be used only for permissible purposes. It is this service i.e. provision of bandwidth that the assessee has availed from AIGP to provide connectivity to its customers and the assessee is not permitted to resell the service. 4.4 The Ld. AR also submitted that for the purposes of sections 194J, meaning of the term fee for technical services needs to be seen. Clause (b) of the Explanation to section 194J of the Act inter-alia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bai in Pacific Internet (India) P. Ltd. vs. ITO (2009) 318 ITR 179 (AT) has relied upon the observations rendered in Estel Communications P. Ltd (supra), Skycell Communications Ltd. 4.7 It was submitted by the Ld. AR that there has to be a service through human intervention. In the absence of such service, mere use of standard facility cannot be said to have resulted in rendering of technical services. This proposition of law that there should be service either that of managerial, technical or consultancy through the medium of human intervention has not been doubted by any Court of law. Even the Hon ble Supreme Court in CIT v. Bharti Cellular Ltd 193 Taxman 97, has not held so. All that was observed was that there was no expert evidence show that human intervention was there or not. Therefore, all that is required to be examined is whether in providing access to bandwidth any service through human intervention was provided. It is submitted that no such service was provided and hence payments made to BSNL, MTNL TATA Communication Ltd were for the receipt of bandwidth and in providing the bandwidth no services were rendered, therefore, section 194J was not attracted. The que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue that such services are technical services provided by the service provider to the assessee so as to be covered under the provisions of section 194J of the Act. Moreover, where such technical equipments/gadgets require maintenance, then technical support staff is used for maintaining the system but that itself does not establish that the services provided by the maintenance crew are in the nature of technical services. The Hon'ble Madras High Court in Skycell Communications Ltd. (supra) had held that for the purpose of section 194J to become applicable, it is necessary that the payee receives 'services'. If the payee uses only technical gadgets, which are made available to others also for fees, the same does not make the payment subject to tax deduction at source under section 194J of the Act. The Bangalore Bench of the Tribunal in Infosys Technologies Ltd. {supra) on consideration of the payment made towards bandwidth charges to the service providers had held that such payments were not in the nature of managerial, consultancy or technical services nor was it for the use of or right to use industrial, commercial or scientific equipments. It was further he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate tax issues which is ground No. 5 for the assessment year 2007-08. The assessee is a licensed internet provider. During the year it procured, domestic half circuit facility to its customers from telecom service providers like BSNL, MTNL, and international half circuit facility from Rag, Atlantic at France. These are standard facilities provided for transmission of data by those organizations. The issue is whether tax should be deducted at source under section 194-I from payments made for use of such standard facilities. The Hon'ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd. v. DIT P20111 332 ITR 340 (Delhi) and the Hon'ble Madras High Court in the case of Sky cell Communications Ltd. v. Deputy CIT [2001] 251 ITR 53 (Mad.) have adjudicated the issue in favour of the assessee. Respectfully following the same, we hold that payments made towards use of standard facility, when the lessee is not having any domain or control or possessory rights over such facility, cannot be categorised as use of assets for the purpose of the Act. 6.2 The Hon'ble Supreme Court in Bharti Cellular Ltd. (supra) observed that question of human intervention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion. The payments made to service providers were for the use of bandwidth and the payments cannot be considered to be in the nature of managerial, consultancy or technical services so as to attract the provisions of section 194J of the Act. In view thereof, in the absence of any human intervention between the assessee and the services provided by the AIGP, it cannot be said that the payment made by the assessee was for technical services. Merely because for maintenance purpose certain human intervention might be required, it cannot lead to the surmise that the bandwidth charges paid to various AIGP were in the nature of technical services governed by the provisions of section 194J of the Act. The bandwidth charges were paid for utilizing the standard facilities which were provided by way of use of technical gadgets and the same does not involve technical services as there was only interconnection of the networks to the equipments of other service providers. Hence in the absence of any human intervention for providing bandwidth, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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