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TMI Blog2018 (5) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... evant amended provision in Section 9(1)(vi) of the Act inserted by the Finance Act, 2012 with retrospective effect in impugned assessment year 2010-11 - Held that:- We find this issue to be no more res integra since hon’ble Bombay high in CIT vs. NGC Networks India Pvt. Ltd. [ 2018 (5) TMI 1148 - BOMBAY HIGH COURT] has already concluded the above amendment is not applicable with retrospective effect as per “rule of impossible compliance” since the liability to deduct TDS cannot be fastened on a deductor assessee after the end of relevant previous year. As asked the Revenue to specifically indicate any material suggesting the assessee to have any control over these three equipments of optical dark fibre, bandwidth for production and interconnective uses charges so as to involve royalty component in the impugned payments. There is no such materials. The CIT(A)’s has rightly concluded the assessee’s three payments to be in lieu of standard facilities only not to be taken as royalty - Decided against revenue - ITA No.700-701/Kol/2016, ITA No.734-735/Kol/2016 - - - Dated:- 17-5-2018 - Shri S. S. Godara, Judicial Member And Dr. A. L. Saini, Accountant Member By Assessee : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the charges paid to other service providers as Interconnectivity Usage Charges (IUC) does not require any facility involving no human intervention. The interpretation of the CIT(A) is erroneous as the payment comes directly as defined as Royalty as clarified through Explanation (6) below Section 9(1)(vi). Moreover, he has not considered the clarifiatory letter issued by CBDT to M/s BSNL wherein it was clarified that port charges / interconnectivity charge comes under provision of TDS u/s 194J. 4. Both learned representatives take to CIT(A) detailed discussion qua the three issues of last mile charges, bandwidth for protection payment and interconnectivity usage charges paid; respectively, reading as under:- 4. Last Mile Charges - Bandwidth-End connectivity through optical fibre from Railtel's POP to Customers Premises: In the submission dated 05.011.2016 there is not much details about what exactly is the service or use for which last mile charges have been paid. Even the AO's order is not very clear on the exact nature of the facility for which the said last mile charge was paid. From the details appearing in the AO's order and the submission i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of hiring the dark fiber(within optic fiber) cable is to end use carrying traffic from point(A) to point(b). Point A - Railtel POP Point B - Customer POP vi) The reason for hiring of the dark fiber (within optic fiber cable) is that the customers POP are very scattered, the quantum is variable and laying exclusive OFC is commercially NOT Viable. Timeline and delivery is also a constraint. In my view the optical fibre, if in the possession of the appellant during hire, can be said to be hit only by section 194I, which prescribes rate of 2% in cases of plant and machineries. The appellant is noted to have applied 2% though u/s.194C. Thus the tax amount seems to have been collected in correct amount though the correct section may be section 1941. No loss to revenue seems to have been caused. As the facility or the service involved in last mile connectivity is of standard nature section 194J cannot be said to be applicable as per law prevailing prior to Finance Act, 2012. As to the question whether the Finance Act 2012 changes the definition of the 'process' for the purpose of section 9(1)(vi) explanation-2 the appellant has relied on the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: i) Bandwidth for protection refers to hiring of Bandwidth capacity from a third party ii) The reason for hiring bandwidth capacity is because the agreement with the customers stipulates a very high level of SLA requirements. It is near impossible to provide such high level of SLA in case of Linear Traffic. Therefore, railtel ha hired bandwidth capacity only in places where Railtel s network is not protected. Protection means there is no media diversity available between point A to point B. Point A- Railtel POP (Originating) Point B Railtel POP (Terminating) iii) Protection Bandwidth is on absolute hiring basis. Ownership belongs to the 3rd party. iv) Protection Bandwidth is necessary because creating alternate path is not commercially viable. As the facts are now clear I am able to appreciate the point raised by the ape. Only Bandwidth capacity has been hired. Following the cases of i) Asia Satellite telecommunications Co. Ltd. v. DIT (2011) 323 ITR 340 (Delhi HC) ii) Vodafone Eat Limtied vs. ACIT (in ITA No.1864/Kol/2012 dated 15.9.2015) iii) Shin Satellite Public Co. Ltd v DIT, 12 Taxmann.Com 6 ITAT Delhi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue fails to indicate that the said hiring creates any kind of right being vested in assessee s favour regarding control of the equipment hardware. A coordinate bench in M/s Standard Chartered Bank vs. CIT ITA 3824/Mum/2006 holds in similar circumstances that a payment made for availing equipment facilities of standard nature without any control on the corresponding hardware does not amount to royalty u/s 9(1)(vi) Explanation-2 clause (iva) of the Act. The CIT(A) has already concluded that the assessee had deducted its TDS at equivalent rate (supra). We further make it clear that the CIT(A) s above extracted findings also take into consideration various other case law (supra) to conclude that the impugned payments are not in the nature of royalty as insisted by the Assessing Officer. All these findings on facts have gone unrebutted from the Revenue s side. 6. Similar appears to the outcome of Revenue s latter two substantive grounds seeking to apply the relevant amended provision in Section 9(1)(vi) of the Act inserted by the Finance Act, 2012 with retrospective effect in impugned assessment year 2010-11. We find this issue to be no more res integra since hon ble Bombay high cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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