2010 (12) TMI 667 - AT - Income Tax

ITAT rules internet access payments not subject to IT Act sections 194J & 194C

The Appellate Tribunal ITAT, Hyderabad, dismissed the Revenue's appeal, ruling that payments for internet access services did not fall under sections 194J ... Internet access services - Expln.2 S. 9(1) (vii) of the IT Act read with read with 194J of the IT Act - Technical services or not - held that:- interconnect charges paid by assessee, a telecommunication service provider, to BSNL in respect of calls which are routed through the latter's network cannot be treated as payment for technical services and, therefore, provisions of S.194J are not applicable - Held that: the payment made by the assessee for getting the services of internet access is not technical services, within the meaning of - Accordingly the grounds raised by the Revenue are dismissed.TDS Under section 194C - There was no contract between the assessee and VSNL/Airtel to carry our any work as envisaged in section 194C - There was only a commercial/technical arrangement under which the assessee connected its equipments/network with that of VSNL/Airtel to enable their customers to have the access to the data or information over the internet - Hence, the case of the assessee is also not covered by the provisions of section 194C of the Act. Issues:1. Applicability of sections 194J and 40(a)(i) to amount paid for Bandwidth services.2. Alternative applicability of section 194C in absence of section 194J.Analysis:Issue 1: Applicability of sections 194J and 40(a)(i)The Revenue contended that the amount paid for Bandwidth services falls under section 194J, thus invoking section 40(a)(i) of the Act. However, the Tribunal referred to a previous order in a similar case where it was held that payments for bandwidth services do not qualify as technical services under section 194J. The Tribunal cited precedents and judgments to support this view, emphasizing that the services availed were standard and did not fall under the purview of section 194J. The Tribunal also highlighted the distinction made by the departmental representative as devoid of merit, as per the judgments cited. The Tribunal concluded that the payment made for internet access services did not constitute technical services under the relevant sections of the IT Act, hence dismissing the Revenue's grounds.Issue 2: Alternative applicability of section 194CRegarding the alternative argument of invoking section 194C in the absence of section 194J applicability, the Tribunal analyzed the term 'any work' under section 194C. Citing various judicial decisions, the Tribunal explained that 'any work' under section 194C refers to tangible material results or supply of labor for specific activities. In the case at hand, the Tribunal noted that there was no contract for carrying out work between the assessee and the service providers, but rather a commercial/technical arrangement for providing internet access. Therefore, the Tribunal held that the case did not fall within the scope of section 194C. Consequently, the Tribunal dismissed this ground raised by the Revenue.In conclusion, the Tribunal dismissed the Revenue's appeal based on the above analysis, emphasizing the inapplicability of sections 194J and 194C to the payments made for internet access services. The judgment was pronounced on 3.12.2010 by the Appellate Tribunal ITAT, Hyderabad.