9911796707
TMI Blog2016 (11) TMI 1723X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of section 201 of the Act and consequential interest u/s 201(1A) of the Act in respect of non-deduction of tax at source for payments made towards interconnect charges (including port charges, access charges, roaming charges and pass through charges) in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee is engaged in providing Cellular Mobile Telephony Services (CMTS) in Kolkata Telecom Circle after receipt of approval from the Department of Telecommunications (DOT). The ld AO while analyzing the profit and loss account of the assessee for the financial year 2001-02 relevant to Asst Year 2002-03, observed that the deductor has made payment to different telecom companies in the form of Roaming Charges, Pass Through Charges, PSTN Interconnect Fees and Inter Operator Charges. All these charges, in telecom parlance, are known as Access Charges. The assessee has entered into roaming arrangements with other telecom operators which have been given licence to operate as telecom service providers in other territories. The ld AO found that the assessee was making payment to various telecom operators such as BSNL, Sterling Cellular Ltd, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of section 194J of the Act. These arguments did not find favour with the ld AO and accordingly he charged tax u/s 201(1) of the Act amounting to Rs. 1,57,07,700/- and interest u/s 201(1A) of the Act amounting to Rs. 57,33,311/- in relation to FY 2001-02. Similarly he charged tax u/s 201(1) of the Act amounting to Rs. 2,71,45,200/- and interest u/s 201(1A) of the Act amounting to Rs. 58,36,218/- in relation to FY 2002-03. 4. Before the ld CITA, the assessee apart from reiterating the aforesaid submissions made specific submissions as to how the subject mentioned payments would not fall under the ambit of section 194I and section 194C of the Act based on specific query raised by the ld CITA in that regard. It was submitted that the provisions of section 194I of the Act cannot be made applicable to the assessee's case as there was no use of any land or building of the telecom operators by the assessee. It was also submitted that section 194C of the Act applied to work in relation to labour work and as the assessee's case has nothing to do with advertising, broadcasting and telecasting, carriage of goods and passengers and catering and hence section 194C of the Act cannot be made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re be said without any controversy that the telecom operators had worked for the assessee's business providing accessibility to its system, had worked to provide space in its system and had transmitted its goods / calls / voice signals to its destination and this work is substantially achieved through automation and technology. He further observed that it is common knowledge that work or any work is accomplished through the application of manual, mental and mechanical / technological power. In the modern age, computer technology has performed work that could not be performed or achieved through manual or mechanical applications. The term 'any work' in section 194C of the Act is not limited to the end result arising out of manual work above, but is an all inclusive definition covering all sorts of energy relatable to any work. The TX system and the Exchange System of the telecom operators are all performing work and the telecom operator's action of receiving, sorting and releasing the call / voice signals are performance of work for the assessee through the application of sophisticated technology as a tool. Accordingly, when the telecom operators allow access, regulate space for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. He stated that the Hon'ble Supreme Court in the case of CIT vs Bharti Cellular Ltd reported in 330 TIR 239 (SC) had held that whether human intervention is required or not for rendering the services for which subject mentioned payments were made is to be examined from technical expert. Accordingly the statements were recorded by ACIT, Circle 51(1), New Delhi from Shri Tanay Krishna, technical expert , Group Leader (Project Planning) at C-DOT, Delhi in connection with the assessment proceedings of M/s Vodafone Essar Mobile Services ltd (formerly known as Hutchison Essar Telecom Ltd) for the Asst Year 2003-04 on 29.9.2010. He also argued that Shri Tanay Krishna was also cross examined by the assessee's representative in the presence of the ld AO on the same day i.e 29.9.2010. The relevant extracts of the examination and cross examination of Shri Tanay Krishna have been duly considered by this tribunal while rendering the decision in assessee's own case for the Asst Years 2009-10 and 2010-11 supra vide order dated 15.9.2015 and held that the assessee payer is not obligated to deduct tax at source either in terms of section 194C, 194I and 194J of the Act and held that no human in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for technical services requiring TDS under section 194J - It was noted that issue as to whether roaming charges paid by assessee to other telecom operator was in nature of 'fees for technical services' did not reach final conclusion, in view of fact that case of Vodafone Essar Mobile Services Ltd., dated 31-12-2010 had not been concluded by any appellate authority or any court - Whether, therefore, Tribunal should be refrained from deciding issue whether roaming charges paid were in nature of 'fees for technical services' and assessee was liable for deduction of tax at source under section 194J - Held, yes - Whether, however, since assessee had furnished declaration from various payees and had also furnished PAN details and jurisdiction in which payees were assessed for tax, assessee could not be treated as 'assessee-in-default' - Held, yes - Whether since deductees had themselves incurred huge losses and thus, no income-tax was payable, assessee could not be held to be assessee-in-default nor non-deduction of tax would entail levy of interest under section 201(1A) - Held, yes [Paras 13, 14 and 15] [Partly in favour of assessee/Matter remanded]" 7.1. The Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices provided by mobile service provider to its subscriber or customer, but the subject matter is utilization of the roaming facility by payment of roaming charges by one mobile service provider Company to another mobile service provider Company. Hence, we do not find that the observations made are of any help to the Revenue. 12. As such, even if we consider the observations made by the Apex Court in the case of Bharti Cellular Ltd., supra, whether use of roaming service by one mobile service provider Company from another mobile service provider Company, can be termed as "technical services" or not, is essentially a question of fact. The Tribunal, after considering all the material produced before it, has found that roaming process between participating entities is fully automatic and does not require any human intervention. Coupled with the aspect that the Tribunal has relied upon the decision of the Delhi High Court for taking support of its view. 13. In our view, the Tribunal is ultimately fact finding authority and has held that the roaming process between participating company cannot be termed as technical services and, therefore, no TDS was deductible. We do not find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Delhi High Court in the case of Bharti Cellular Ltd (supra) had held that since the entire process of making a call and switching the call from one network to the other is done automatically on the basis of machines and does not involve any human interface, the interconnect charges cannot be regarded as Fee for Technical Services (FTS) and hence would not fall in the ambit of section 194J of the Act. We find that on further appeal by the revenue to the Honble Supreme Court in Bharti Cellular Ltd (supra), the Honble Apex Court had stated that "right from 1979 various judgements of the High Courts and Tribunal have taken the view that the words "technical services" have got to be read in the narrower sense by applying the rule of noscitur a sociis, particularly, because the words "technical services" in section 9(1)(vii) r.w. Explanation 2 comes in between the words "managerial and consultancy services". We find that the principles laid down by the Delhi High Court have been accepted by the Apex Court as such and the Apex Court has merely directed the TDS officer to carry out factual verification to determine the extent of human involvement. Based on this direction, the CBDT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td are identical with the facts of the assessee herein and also it happens to be the group company of the assessee. 4.14 Shri Tanay Krishna's statement-questions and answers - 4, 5, 6 & 16 are reproduced below :- Question 4: Can you enlighten us about the functioning of the network system of the cellular operators at the time of receiving or providing inter-connect services to each other including installation, interconnectivity etc from the very beginning? Ans. 4: As regards to interconnect to Gateway switches/MSC of two different operators are interconnected using any transport technology which involves wires as well as human interface for setting up. It involves different phases - (i) Planning phase- where how much capacity required and how much traffic handling capacity is required on these basis hardware and software is determined. (ii) Selection of vendor - is done to determine who will provide these services along with his consultancy. (iii) Hardware and software is supplied by the vendor and it is customized to the need of the network as per the TEC specifications. (iv) Installation as per vendor guidelines - it involves installation of both hard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other network flows automatically, i.e. without any human intervention. Once a call originates, the call travels automatically. In establishment of a call, therein no human intervention i.e., once a subscriber dials and the call gets connected without any fault, then there is no human intervention. Intervention is required only when the call is not successful, i.e., the call fails due to any reason. Q. 4. Is any human intervention involved in the entire process of carriage of call from one operator to another? No, as stated above, no human intervention is required in the process of carriage of calls. However, 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. Q.5. From the perusal of your answer to Question 4 of your Statement, it appears that the phases described thereon are restricted to merely setting-up of the interconnect between the networks of the two operators and not during actual carriage of the call by one operator for the other. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Electricity Distribution Co. Ltd [2015] 375 ITR 23/232 Taxman 373/58 taxmann.com 339 (Bom) Auro Mira Biopower India (P.) Ltd. v. ITO TDS [2015] 55 taxmann.com 452/68 SOT 188 (Chennai-Tribunal) Dy. CIT v. Delhi Transco Ltd. [2014] 52 taxmann.com 261 (Delhi - Trib.) 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 Bharti Cellular Ltd . case (supra) 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the definition of 'work' as defined in section 194C and hence the provisions of section 194C are not applicable to the impugned issue. 9.1. We find that there is no dispute on the non-applicability of provisions of section 194I of the Act in the instant case. We also draw support of our finding from the decision of Delhi Tribunal in the case of Bharti Airtel Limited & Anr vs ITO & Anr in ITA Nos. 3593 to 3596/Del/2012 and ITA Nos. 4076 to 4079/Del/2012 dated 17.3.2016 reported in (2016) 46 CCH 0304 Del Trib , wherein they have held that the subject mentioned payments do not fall under the ambit of 'fee for technical services' or under 'royalty' u/s 194J of the Act. 9.2. We also draw support from the recent decision of the Hon'ble Karnataka High Court in the case of CIT, TDS Bangalore vs Vodafone South Ltd reported in (2016) 72 taxmann.com 347 (Karnataka) vide order dated 28.7.2016 , wherein the head notes read as under:- Section 194J , read with section 201 of the Income Tax Act, 1961 - Deduction of tax at source - Fees for professional or technical services (Roaming charges) - Asessment Years 2005-06 to 2012-13 - Assessee was a mobile service provider company - ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
