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TMI Blog2020 (3) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS u/s 194H - payment of the discounts allowed to its prepaid distributors on sale of starter kits and prepaid recharge vouchers - HELD THAT:- As decided in own case [ 2016 (6) TMI 174 - ITAT MUMBAI] appellant was not required to deduct tax at source under section 194H of the IT Act in respect of the discounts allowed to prepaid distributors on sale of starter kits and prepaid recharge vouchers. Depreciation claim of the assessee u/s 32 in respect of the amount paid to the DOT for purchase of 3G spectrum and not restricting to proportionate amount as per the provisions of section 35ABB - HELD THAT:- As pointed out by the Ld. counsel, the coordinate Bench has decided the identical issue in favour of the assessee in Idea Cellular Limited [ 2017 (12) TMI 660 - ITAT MUMBAI] . Since the Ld. CIT(A) has decided this issue by following the decision of the coordinate Bench, we do not find any reason to interfere with the findings of the Ld. CIT(A). Hence, respectfully following the decision of the coordinate Bench discussed above, we uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. - ITA No. 1059/MUM/2019, 1060/MUM/2019 (Assessment Year: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recharge vouchers. 2. The Ld. CIT (A) s order is contrary in law and on facts and deserves to be set aside. 3. At the outset, the Ld. counsel for the assessee submitted that both the issues are covered by the common order dated 27.05.2016 passed by the ITAT Mumbai in assessee s own appeals for the assessment years 2009-10 to 2012-13. The Ld. counsel further submitted that since the Ld. CIT (A) has decided both the issues in favour of the assessee by following the decision of the Mumbai Bench in assessee s own case for the aforesaid assessment years, there is no infirmity in the order of the Ld. CIT(A). Hence, there is no merit in the appeal of the revenue, therefore, the same is liable to be dismissed. On the other hand, the Ld. departmental representative (DR) fairly admitted that the Tribunal has decided both the issues in favour of the assessee and the Ld. CIT(A) has decided these issues in favour of the assessee by following the decision of the Mumbai Tribunal and other cases. However, the Ld. DR supported the assessment order passed by the AO on the ground that since each assessment year is a separate unit, decision pertaining to the earlier years may not be appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72 taxmann.com 347 (Karnataka)/[2016] 241 Taxman 497 (Karnataka)/[2016] 290 CTR 436 (Karnataka/[2016] 241 Taxman 497/72 taxmann.com 347 (Karnataka). The issue is also covered in favour of the appellant by the decision of jurisdictional Tribunal, ITAT Mumbai, in the case of the appellant in ITA No. 2043 - 2045/MUM/2014 for A.Y. 2009 - 10 to A.Y. 2012 - 13. Respectfully following these decisions, it is held that the roaming /inter- connectivity charges paid by the appellant to other telecom networks are not in the nature of fees for technical services and provisions of section 194J of the IT Act are not applicable to these payments. Accordingly, disallowance of ₹ 13,04,59,145/- made by the AO under section 40(a)(ia] of the IT Act is directed to be deleted. 5. We notice that the Ld CIT(A) has decided this issue in favour of the assessee by following the decision of the coordinate Bench in assessee s own case. decisions of the other Benches of the Tribunal and the judgment of the Hon ble Karnataka High Court referred above. The findings of the coordinate Bench in assessee s own case read as under:- 12. We have considered the submissions of the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter completing this process, inter connection between the operators while roaming is done automatically and does not require any human intervention, hence, cannot be construed as technical service so as to attract provisions of section 194J. For the sake of completeness, we reproduce the observations from the order of the Tribunal hereunder in entirety: 4.10. We have heard the rival submissions and perused the materials available on record. It would be pertinent to note here that roaming services are provided by other telecom operators by using their existing telecom network/ infrastructure and no incremental investment is required to put up any additional network /infrastructure for provision of such roaming services. The aforesaid fact lends further support to the contention that roaming services are standard automated services, which are provided by other telecom operators to subscribers of VEL using the same network/infrastructure as is used by such operators for provision of telecommunication services to its own subscribers. Therefore, in essence, roaming services are similar in nature to the telecom services provided by a telecom operator to its own subscribers and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned AR has also filed prayer for receipt of additional evidence in terms of Rule 29 of ITAT Rules on 20.7. 2015 containing the statements recorded from Shri Tanay Krishna on 29.9.2010 in the case of Vodafone Essar Mobile Services Ltd cross examination by Vodafone Essar Mobile Services Ltd on 29.9. 2010. This application under Rule 29 contains a prayer with reasons that these documents could not be filed before the lower authorities and that these documents are very crucial for the disposal of the case under appeal as the examination of the technical experts had taken place post the proceedings before the Assessing Officer and as per the directions of the Hon‟ble Supreme Court, these statements were recorded in the case of the group company of the assessee. However, it is seen that the statement of Shri Tanay Krishna on 29.9. 2010 have been relied upon by the Learned CIT(Appeals) vide page 29 of his order but the cross examination of Shri Tanay Krishna is not in records of the lower authorities. We find that the statement is very much relevant for the disposal of these appeal s and are hereby admitted as additional evidence (in respect of cross examination statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s technically qualified professionals and tested as per the agreed plan between services provider and vendor. Question 5 : In your expert opinion, does the system work automatically when network system o f o ne cellular opera tor gets connected with the network system of other cellular operator? Ans. 5: When a calls get connected by one operator to other, per se it is an automatic connection, but there can be instances when there is a problem in the call connect which may require resolution through human intervention. Question 6: Hence there is no 100% automatic operation of this network. Can you explain what kind of human intervention is required ? Ans. 6: Yes as I said earlier it can't be 100% fully automated. There are several circumstances under which human intervention would be required.? I would briefly tell you about each of such circumstances (a) There could be a case where there is failure in physical hardware. (b) There could be a problem due to software bug . (c) There could be snapping of fibre optic cables. In (a), (b), (c) above you are required intervention of teams of technical experts to remedy the situation. Question 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f human involvement in provision of interconnect services. i.e., carriage of calls originating on network of one operator and termination the network of the other operator? We have answered in question no 5. Q.I2. In answer to Question 21 of your Statement, you have stated that in cellular networks the level of human intervention is much higher and of sophisticated technical level. In this regard, do you agree that cellular networks are based on sophisticated technology and work on an automated mode? The human intervention as referred by you for network operations is limited to network monitoring and maintenance and fault repair, rectification, enhancement, configuration, and set-up? We agree that the telecom networks are automated networks and do not require human intervention for carriage of calls. However, as stated in Question 4 of this cross examination, human intervention is required at the inter-connect set-up stage (including configuration, installation, testing, etc) and capacity enhancement, monitoring (including network monitoring), maintenance, fault identification, repair and ensuring quality of service as per interconnect. 4.16. The next argument of Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 194-1 must be gathered from whether the wheeling and transmission charges draw its colour from the basic meaning of the expression rent . It is seen from the decision of the Supreme Court in Singapore Airlines (supra) that the meaning of rent must be understood in the context in which they are used. In the present set of facts, it is not possible to equate the wheeling and transmission charges payable MSETCL with rent. On facts it is seen that the MERC order dated June 27, 2006, deals with MSEDCL's contentions, apropos the methodology proposed by MERC. The transmission charges contemplated by MERC includes the cross subsidisation of transmission charges across licensees when found to be uneconomical and uncompetitive. It is further observed that MERC has considered pooling of transmission charges during bulk power transmission from one licensee to another licensee. It is after considering all these aspects that a composite charge method for any such transmission was adopted. Thus, it is seen that the methodology for determining of the transmission tariff could not be determined in a mechanical manner as if the charge was only for use of the State transmission utility. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electricity passing through the State transmission utility. Our views stand fortified by the very fact that the Revenue itself is confused and unsure as to the nature of the charge. The focus of the Revenue is only the requirement of deduction of tax whether under section 194- 1 or section 194J. This approach is erroneous. The Revenue contends that the wheeling and transmission charges could be rent or fees for technical services but, in our view it is neither. Wheeling charges represent the charge for permitting use of the State transmission utility by persons other than the distribution licence. The transmission charges simply constitute fees for availing of the said transmission utility to be used by open access concept for distribution of electricity to the licensees and consumers. In view of the above discussion, we are of the view that the wheeling and transmission charges are neither rent nor fees for technical services. Keeping the said interpretation into effect, we find that while interpreting the expression rent in the p resent scenario, we must bear in mind that taking into account the functioning of MSEDCL which is a public utility, it will not be appropriate to equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricity Department - Administration of Dadra and Nagar Haveli, has entered into a 'Bulk Power Transmission Agreement' with PGCIL. The preamble of this agreement, inter alia, notes that the PGCIL is desirous to transmit energy from the Central Sector Power Station(s) to the Bulk Power Beneficiaries and that the said Bulk Power Beneficiaries are desirous of receiving the same through POWERGRID transmission system on mutually agreed terms and conditions . This agreement provides that POWERGRID shall operate and maintain the transmission system belonging to it in the Western Region as per agreed guidelines and the directives of the Western Regional Electricity Board and the Regional Load Dispatch Centers, and cooperate with the Bulk Power Beneficiaries of the Region, so as to maintain the system parameters within acceptable/reasonable limits except where it is necessary to take measures to prevent imminent damage to any equipment . In respect of these services, the bulk power beneficiaries are to pay to PGCIL a monthly charges computed in the manner set out in clause 9 of the said agreement. This clause, in turn, refers to formula set out in A.4 of Annexure 1 which refers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings: Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed [one hundred eighty thousand rupees] : Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section. Explanation : For the purposes of this section, [(i) rent means any payment, by whatever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any, -, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee in actual operations of the same. On these facts, in our humble understanding, the assessee has made the payments for transmission of electricity in which transmission lines have been used rather than for the use of transmission lines per se. The payments could be said to have been made for the use of transmission lines in a case in which the object of consideration for which payments are made was the use of transmission lines simplictor, and such a use by the assessee does not extend beyond the transmission of electricity through such lines in the sense that the same transmission lines continue to be in the control of PGCIL for transmission of electricity for other entities and for all practical purposes. Even as electricity purchased by the assessee is transmitted to the assessee from the NTPC busbar to its landing points, the same transmission lines continue to be engaged in similar transmission of electricity for other entities and the assessee has no say in the manner in which such transmission lines can be controlled and used by the PGCIL. Undoubtedly, for the purpose of an arrangement being termed as in the nature of rent for the purpose of Section 194-I, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment (a full lorry load) from place A to B, for an agreed consideration which is called freight charges or lorry hire. The carrier sends its lorry to the customer's depot, picks up the consignment and proceeds to the destination for delivery of the consignment. The lorry is used exclusively for the customer's consignment from the time of loading, to the time of unloading at destination. Can it be said that right to use of the lorry has been transferred by the carrier to the customer? The answer is obviously in the negative, as there is no transfer of the use of the lorry for the following reasons : (i) The lorry is never in the control, let alone effective control of the customer; (ii) the carrier decides how, when and where the lorry moves to the destination, and continues to be in effective control of the lorry; (iii) the carrier can at any point (of time or place) transfer the consignment in the lorry to another lorry; or the carrier may unload the consignment en route in any of his godowns, to be picked up later by some other lorry assigned by the carrier for further transportation and delivery at destination. (ii) On the other hand, let us consider the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 528,3629,3530 are dismissed. The various decisions cited supra have held that there will be no TDS on transmission charges and the same analogy would apply with equal force in the case of transmission charges in telecom industry. 4.17. From the aforesaid statement recorded from technical experts pursuant to the directions of the Supreme Court in CIT v s Bharti Cellular Ltd ( 330 ITR 239) which has been heavily relied upon by the Learned CITA, we find that human intervention is required only for installation / setting up / repairing / servicing / maintenance / capacity augmentation of the network. But after completing this process, mere interconnection between the operators while roaming, is done automatically and does not require any human intervention and accordingly cannot be construed as technical services. It is common knowledge that when one of the subscribers in the assessee s circle travels to the jurisdiction of another circle, the call gets connected automatically without any human intervention and it is for this, the roaming charges is paid by the assessee to the Visiting Operator for providing this service. Hence we have no hesitation to hold that the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpert to ascertain the fact whether there is any human intervention in providing cellular services. It is pertinent and obvious that the Assessing Officer has relied upon the technical report obtained in case of Vodafone Essar Mobile Services Ltd. Therefore, we are not in a position to know whether the facts relating to human intervention in assessee s case is similar to the facts in the case of Vodafone Essar Mobile Services Ltd. However, after analyzing the report submitted by the technical expert Shri Tanay Krishna, in case of Vodafone Essar Mobile Services Ltd.,who incidentally also submitted the report in case of Bharti Cellular Ltd.,and the cross examination of Shri Tanay Krishna, the ITAT, Kolkata Bench, has found that the roaming /inter connectivity services are rendered automatically without any human intervention. It is evident from the order passed under sections 201(1) and 201(1A), that the Assessing Officer relying upon the technical report obtained in case of Vodafone Essar (supra), has raised the demand against the assessee inferring that roaming charges were in the nature of fees for technical services, hence , coming within the preview of section 194J. However, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 194H were applicable to this discount. Since the appellant had not deducted any tax at source, the AO disallowed the amount of ₹ 57, 24,22, 93Q/- relying on following decisions: - 1 The judgment of Honourable Delhi High Court in the case of CIT XVII Vs Idea Cellular Ltd [2010] 189 Taxman 118 (Dclhi)/[2010] 325 ITR 148 (Delhi/[2010] 230 CTR 43 (Delhi) 2 The judgment of Honourable Kerala. High Court in the case of Vodafonc Essar Cellular Ltd. Vs ACIT [2010] 194 Taxman 518 (Kerala)/ {2011] 332 JTR 255{Kerala)/(2QlQl 235 CTR 393 3 The decision of Honurable ITAT Chennai in the case of 1TO, TDS Vs Vodafone Essar Cellular Ltd [2011] 12 taxmann.com 45 (Chennai)/[2011] 46 SOT 211 (Chennai) (URO)/[2011] 141 TTJ 461 (Chennai) 4 The decision of Honourable ITAT Chennai in the case of Vodafonc Essar Cellular Ltd Vs ACIT, TDS Kochi (2009) 32 SOT 280 and 5 The decision of Honourable ITAT Cochin in the case of Vodafone Essar Cellular Ltd Vs ACIT, TDS Kochi [2011)43 SOT 257 Thus, three high courts and many tribunals are against the appellant on this issue. However, it is seen that the judgment of the Hon'ble Karnataka High Court in Bharti A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd under no circumstances, they can he returned back to the asscssee. From the aforesaid facts, it is clearly evident that as far as sale of starter kit / sim card is concerned, it is purely a purchase / sale transaction on principal-to-principal basis and there is no relationship of agency. That being the case, the provisions of section 194H are not applicable. The Hon'ble Karnataka High Court after examining in detail the aforesaid factors have decided the issue in favour of the assessee by reversing the order of the Tribunal. In view of the changed scenario, after the order of the Hon'ble Karnataka High Court as referred to above, the decision of the learned Commissioner (Appeals) cannot be sustained. In fact, ITAT, Jaipur Bench, in case of M/s. Tata Teleservices Ltd. v/s 1TO, ITA no-309/JP./2O12 and others, dated 13th. March 3015, following the decision of Hon'ble Karnataka High Court (supra), held that provisions of section 194H is not attracted on the discount given on sale of pre-paid starter kit and accordingly, following the decisions referred in above, we set aside the impugned Order of the learned Commissioner [Appeals) and quash the demand raised by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid. Since we have dismissed this ground of appeal of the revenue in its appeal for the assessment year 2012-13, by following the decision of the coordinate Bench rendered in assessee s appeal, consistent with our findings in the aforesaid case, we dismiss this ground of appeal of the revenue in this appeal for the same reasons. Vide ground No 2 the assessee has challenged the action of the Ld. CIT(A) in allowing depreciation claim of the assessee amounting to ₹ 176.88crores u/s 32 of the Act in respect of the amount paid to the DOT for purchase of 3G spectrum and not restricting to proportionate amount as per the provisions of section 35BB of the Act. 3. The Ld. counsel for the assessee submitted before us that this issue is covered by the decision of the Mumbai Bench of the Tribunal in the case of Idea Cellular Limited., in which the Tribunal has held that the assessee is entitled for depreciation on the payment of fees for acquiring 3G spectrum. The Ld. counsel further pointed out that since the Ld. CIT(A) has decided this issue by following the decision of the jurisdictional Tribunal, there is no merit in the appeal of the revenue. 4. On the other hand, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requency/spectrum while providing telecommunication service. In view of the above, even the provisions of section 35ABB of the act are not applicable to Such payment. In view of these facts, we ore of the view that the assesses is entitled for claim depreciation on merits also and AO has rightly allowed the claim while framing assessment under section 143 (3) of the Act and the reunion order of CIT Under section 263 of the Act is bad in law Accordingly, we quash the revision order. Respectfully following the same, the AO is directed to allow the depreciation claim of the appellant amounting to ₹ 176.88 Cr in respect of amount paid to DoT for purchase of 3G spectrum. Accordingly, this ground of appeal is allowed. 6. As pointed out by the Ld. counsel, the coordinate Bench has decided the identical issue in favour of the assessee in Idea Cellular Limited ITA No.360/ Mum/2016. Since the Ld. CIT(A) has decided this issue by following the decision of the coordinate Bench, we do not find any reason to interfere with the findings of the Ld. CIT(A). Hence, respectfully following the decision of the coordinate Bench discussed above, we uphold the findings of the Ld. CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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