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TMI Blog2017 (8) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that there was no requirement to deduct TDS on bank guarantee commission of 371.25 Lacs paid by assessee to domestic bank.Also it is noted that CBDT circular do not cover payment to foreign banks and further provisions of Section 194H apply only to payments made to residents. Therefore , bank gaurantee charges are not covered u/s 194H - Revenue's appeal stands dsimissed. Assessee-in-default u/s 201(1) r.w.s. 201(1A) - Held that:-Since TDS liability dosent stand in above case relating to bank gaurantee charges then consequential interest u/s 201(1A) on the same is also been dismissed. TDS on telephone expenses / data card expenses - Held that:- Since the assessee has contended that the data card expenses is akin to telephone expenses and mere reimbursement of data card expenses to employees, we restore the matter back to the file of AO for the purpose of verification of the said contention and decide accordingly as per law. Needless to say, any reimbursement of mere data card expenses to employees, which are primarily in the nature of telephone expenses do not fall within the meaning of ‘Fees for technical services’ or ‘royalty’. TDS on internet charges - TDS u/s 194I or 194J - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ription Amount (Rs.) Rate at which TDS ought to have been deducted Amount of TDS to be deducted (Rs.) TDS Made (Rs.) Short Deduction/dem and u/s 201 (Rs.) Interest demand u/s 201(1A) (Rs.) 1. Bank Guarantee Charges 8,33,59,262/- 10% 83,35,926/- Nil 83,35,926/- 25,84,137/- 2. Internet Charges 15,96,662/- 10% 1,59,662/- Nil 1,59,662/- 49,494/- 84,95,588/- Nil 84,95,588/- 26,33,631/- 3.1 Facts qua bank guarantee charges are that during assessment proceedings, it was noted that the assessee paid bank guarantee charges to certain Indian & foreign Banks. The assessee explained that bank guarantee charges were in the nature of interest u/s 2(28A) and the payments being made to banks, no TDS was required thereupon as per Section 194A(3). Even otherwise, the said payment, being on principal to principal basis, was not covered in the ambit of 'commission / brokerage' u/s 194H as per the decision of Mumbai Tribunal rendered in Kotak Securities Limited Vs. DCIT [73 DTR 265 dated 03/02/2012]. However, not convinced, the Ld. AO opined that the same was in the nature of Commission / Brokerage as per Explanation (i) to Section 194H and therefore, TDS was required thereu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n banks and further, the provisions of Section 194H apply only to payment made to residents. The lower authorities have failed to examine the issue from correct perspective by appreciating the relevant facts, statutory provisions, Treaty provisions, relationship between parties, nature of services availed / payment made etc. Since the AY involved is 2012-13 and therefore, at this stage, we are not inclined to afford another opportunity to revenue to improve upon their case. Consequently, the impugned payments, being not covered within the ambit of Section 194H, the resultant demand raised against the same for non-deduction of TDS does not survive. 3.7 Resultantly, Ground No.1 of revenue's appeal stands dismissed, Ground No. 2 is related with consequential interest u/s 201(1A). Since, Ground No. 1 has been dismissed, consequential interest does not survive which lead to dismissal of Ground No. 2 as well. The revenue's appeal stands dismissed. 4. The issue in assessee's appeal is regarding TDS on internet charges / data card expenses. The assessee debited internet charges of ₹ 62,20,232/-, which, inter-alia, comprised of following components:- No. Particulars Amt. (Rs.) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsement of data card expenses to employees was akin to telephone expenses only and therefore, no TDS was required against the same. The Ld. CIT(A) after appreciating the provisions of Section 194J and retrospective amendment made in the definition of 'royalty' made by Finance Act, 2012 and in particular the meaning of 'process' as per Explanation 6 to 9(1)(vi) and the judgment of Hon'ble Madras High Court rendered in Verizone Communications Singapore Pvt Ltd [ITA No. 149 of 2011 and 230 of 2012 order date 19/11/2013] concluded that, 'process' included internet charges and hence royalty requiring TDS u/s 194J. Reliance placed by the assessee on the decision of this Tribunal in Channel Guide India Ltd. Vs ACIT was distinguished. The Ld. CIT(A), while observing so, further held that the said payment, being rent in nature, required deduction of TDS u/s 194I also on account of usage of equipment. 4.3 The Ld. CIT(A) further noted that since the assessee could not produce any evidence to show that reimbursement of data card expenses were mere reimbursement without their being any element of income embedded in the said payment and hence liable for TDS. Aggrieved, the assessee in appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standard internet facility obtained from the service provider whereas the Ld. AO opines that the same are in the nature of 'Fees for Technical Services' as well as 'royalty'. The Ld. CIT(A) went a step further in noting that the said expenditure was not only 'fees for technical services' but also covered u/s 194I being in the nature of rent for usage of equipment. A perusal of the sample invoice placed in the paper book, prima facie, reveals that the said expenditure is towards 'internet services' & 'internet dedicated line'. Therefore, this being the case, the nature of services being availed by the assessee requires re-appreciation by lower authorities and hence, the matter is remitted back to the file of Ld. AO to re-examine the nature of services and thereafter, determine the true character of the same i.e. whether fees for technical services / royalty / rent or payment towards usage of standard internet facility and in particular, the following observation of Apex Court regarding 'fees for technical services' made in CIT Vs. Kotak Securities Ltd. [2016 383 ITR 1]:- "6. What meaning should be ascribed to the word "technical services" appearing in Explanation 2 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re stand out in distinction to the former. The service provided by the Stock Exchange for which transaction charges are paid fails to satisfy the aforesaid test of specialized, exclusive and individual requirement of the user or consumer who may approach the service provider for such assistance/service. It is only service of the above kind that, according to us, should come within the ambit of the expression "technical services" appearing in Explanation 2 of Section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act." Resultantly, the assessee's appeal stands partly allowed for statistical purposes. 6. Now, we take up assessee's appeal ITA No. 3945/Mum/2015 for AY 2011-12 and ITA No. 3946/Mum/2015 for AY 2012-13 which assails the common order of Ld. CIT(A) order dated 13/04/2015 qua confirmation to similar TDS demand against internet / communication charges. The assessee has raised similar grounds in both the appeals and the facts are also identical with ITA No.3947/Mum/2015, which we have alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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