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TMI Blog2024 (11) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... on record clearly indicate that the assessee has provided the services to the Indian entity through a standard facility and system set up by it, which is fully automated. In case of CIT Vs. Bhari Cellular Limited [ 2008 (10) TMI 321 - DELHI HIGH COURT] while deciding identical nature of dispute has held that the expression technical services as used in Explanation 2 to section 9(1)(vii) takes colour from the expression managerial and consultancy services , which necessarily involve a human element or human interface. The Hon ble Court proceeded further to hold that the interconnect/port access facility is only a facility to use the gateway and the network of service provider. Hence, such service provider does not provide any assistance or aid or help to the service recipient in managing, operating and setting up their infrastructure and network. While interpreting the expression technical services it cannot be construed in the abstract and general sense but in the narrower sense as circumscribed by the expression managerial service and consultancy service as appearing in Explanation 2 to section 9(1)(vii) of the Act, which requires rendition of service through human interface. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee is a non-resident corporate entity incorporated in Oman and a tax resident of that country. As stated, the assessee is engaged in the business of fixed-line, internet and data, mobile and wholesale communication services. In course of providing such services, the assessee, in the year under consideration, had received an amount of Rs. 4,42,33,967/- from an Indian corporate entity, viz., Vodafone Essar South Limited (in short Vodafone ) for providing roaming and termination of international voice traffic services, otherwise known as interconnectivity charges. Whereas, the assessee has not offered such receipts to tax in India. The Assessing Officer further noticed that while remitting the interconnectivity charges, Vodafone had not deducted tax at source under section 195 of the Act. Being of the view that income assessable to tax has escaped assessment, the Assessing Officer reopened the assessment under section 147 of the Act by issuing a notice under section 148 of the Act. As alleged by the Assessing Officer, in response to the notice issued under section 148 of the Act, the assessee neither filed any return of income nor complied with the said notice and other st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter, referring to the definition of FTS under Article 14 of India Oman Double Taxation Avoidance Agreement (DTAA), learned DRP held that the payments made also qualify as FTS under the Treaty provisions. 5. Without prejudice, learned DRP held, in case, the receipts cannot be treated as either royalty or FTS, it cannot be treated as business income in the hands of the assessee. Therefore, such income has to be taxed under the residual clause as other income under section 56 of the Act as well as under Article 24 of India Oman DTAA. However, he directed the Assessing Officer to treat the receipts as other income on protective basis. In terms with the directions of learned DRP, the Assessing Officer passed the final assessment order treating the receipts as FTS on substantive basis and as other income on protective basis. 6. Ground nos. 1 and 5, being general grounds, do not require specific adjudication. Whereas, at the time of hearing, learned counsel for the assessee, on instructions, did not press ground no. 4. Accordingly, ground no. 4 is dismissed. Thus, the surviving issues arising for consideration in terms with ground no. 2 and 3 are, whether the receipts can be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appearing in Explanation 2 to section 9(1)(vii) would also have to be construed as involving a human element. But the facility provided by MTNL/other companies for interconnection/port access is one which is provided automatically by machines. It is independently provided by the use of technology and that too, sophisticated technology, but that does not mean that MTNL/other companies which provide such facilities are rendering any technical services as contemplated in Explanation 2 to section 9(1)(vii) of the said Act. This is so because the expression technical services takes colour from the expressions managerial services and consultancy services which necessarily involve a human element or, what is nowadays fashionably called human interface. In the facts of the present appeals, the services rendered qua interconnection/Port access do not involve any human interface and, therefore, the same cannot be regarded as technical services as contemplated under section 194J of the said Act. 20. Before concluding we would also like to point out that the interconnect/port access facility is only a facility to use the gateway and the network of MTNL/other companies MTNL or other companies d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellular Ltd. would be of any help to the appellants - 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 that any error has been committed by the Tribunal in reaching to the aforesaid conclusion. Apart from the above, the questions are already- covered by the above referred decision of the Delhi High Court, which has been considered by the Tribunal in the impugned decision . 2.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Relying on the judicial precedents, roaming charges and termination of international voice traffic charges received by Appellant does not involve any human intervention, Accordingly, the same cannot be taxable as Fees for technical Services (FTS) 2.2.7. Payment is for use of standard facility. The Appellant wish to reiterate that roaming represents a standard facility provided by a telecom operate to the subscribers of the other telecom operator and hence, roaming Charges do not fall within the purview of the definition of the term FTS as defined under section 9(1)(vii) of the Act. Provision of roaming services by the other telecom operators involves provision of standard services resulting into transmission of calls/SMS when a roaming subscriber makes/ receives calls while he is roaming in the telecom service area of the other telecom operator for which it is entitled to receive appropriate service charges from telecom operator. It is imperative to note that services provided by the other telecom operators are standard automated services, which are available for any telecom operator willing to avail those services (to enable its subscribes to make/receives calls when the subscribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer has characterized interconnectivity usage charges received by assessee as royalty income under section 9(1)(vi) of the Act. However, learned DRP has, apparently, disagreed with the Assessing Officer and recharacterized the interconnectivity usage charges as FTS both under the domestic law as well as the treaty provisions. Of course, alternatively, learned DRP has held that such receipts can also be treated as other income both under section 56 of the Act as well as under Article 24 of Indian Oman DTAA. 10. Keeping in perspective these facts, if we proceed to analyze the nature of services provided by the assessee to the Indian entity, it can be seen that such services were provided without any human intervention at any stage. The roaming services and termination of international voice traffic services were provided by the assessee using its own system located outside Indian and the entire process of providing such services is fully automated without any human element involved therein. In fact, learned DRP has acknowledged the fact that the interconnectivity usage involves high degree of machines powered by sophisticated software. Thus, the facts on record clearly indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aty provisions, rights of taxation in respect of other income has been granted to the source country. Of course, learned DRP has added the receipts as other income on protective basis. 14. Be that as it may, one needs to look into the true meaning of other income as provided under Article 24 of the Treaty. A reading of paragraph 1 of Article 24 makes it clearly that items of income not expressly dealt with in any of the other Articles of the Treaty shall be treated as other income under Article 24 of the Treaty. As rightly observed by learned DRP, it is a residual provision provided for taxability of income not specifically coming under any other Articles of the Treaty. As discussed in the earlier part of the order, the Assessing Officer had treated it as royalty income, whereas, learned DRP has treated it as FTS and suggested for addition as FTS on substantive basis. The aforesaid facts clearly indicate that the departmental authorities themselves were not sure regarding the true nature and character of the receipts. Merely, because a particular item of income cannot be treated as royalty or FTS, as such, receipts may not fit into the definition of royalty/FTS provided under the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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