Tribunal: Roaming charges not subject to TDS

The Tribunal ruled that roaming charges paid by the CDMA service provider do not constitute fees for technical services requiring TDS under Section 194J. The assessee was not considered an 'assessee in default' under Section 201(1) due to declarations provided by payees. The interest under Section 201(1A) was to be reconsidered upon verification of deductees' tax liabilities, providing partial relief to the assessee. The appeals were partly allowed for statistical purposes, with directions for verification by the AO regarding deductees' tax liabilities.

---

---

Issues Involved:
1. Treatment of Roaming Charges as Fees for Technical Services and TDS applicability under Section 194J.
2. Treating the Appellant as 'assessee in default' under Section 201(1).
3. Levy of Interest under Section 201(1A).

Detailed Analysis:

1. Treatment of Roaming Charges as Fees for Technical Services and TDS applicability under Section 194J
The assessee, a CDMA service provider, entered into a "Roaming Agreement" with another telecom operator to provide GSM services in areas where it lacked a GSM license. The primary contention was that roaming charges paid to other operators should not be treated as fees for technical services (FTS) under Section 194J because the process is automated and does not involve human intervention. The assessee argued that the roaming facility is a standard telecom infrastructure facility provided by the visiting network and does not involve rendering technical services requiring TDS under Section 194J.

The AO, however, referred to the Supreme Court's decision in the case of Bharati Cellular Ltd., which required examining whether human intervention is involved in the process. The AO concluded that human intervention is required in maintaining and rectifying technical snags, thus classifying the payments as FTS under Section 194J.

2. Treating the Appellant as 'assessee in default' under Section 201(1)
The AO accepted the assessee's alternative argument that it should not be treated as 'assessee in default' under Section 201(1) because the payee companies were assessed to tax and had provided declarations and PAN details. This was in line with the Supreme Court's decision in Hindustan Coca Cola Beverage Pvt Ltd. vs CIT, which held that if the recipient has paid the taxes, the payer cannot be treated as an assessee in default.

The CIT(A) erroneously observed that the assessee had not furnished declarations from the deductees, contradicting the AO's findings. The Tribunal found this observation incorrect, noting the AO had acknowledged the declarations and PAN details provided by the assessee, thus reversing the CIT(A)'s finding and ruling in favor of the assessee on this issue.

3. Levy of Interest under Section 201(1A)
The AO imposed interest under Section 201(1A) for non-deduction of TDS, despite not treating the assessee as in default under Section 201(1). The CIT(A) dismissed the assessee's plea that no interest should be levied because the deductees had incurred losses and were not liable to pay tax, due to lack of documentary evidence.

The Tribunal directed the AO to verify the assessee's claim that the deductees had incurred losses and were not required to pay any taxes. If verified, no interest under Section 201(1A) should be charged, thereby providing partial relief to the assessee.

Conclusion
The Tribunal ruled that:
- Roaming charges paid by the assessee do not constitute fees for technical services requiring TDS under Section 194J.
- The assessee is not an 'assessee in default' under Section 201(1) due to the declarations provided by the payees.
- The interest under Section 201(1A) should be reconsidered upon verification of the deductees' tax liabilities.

The appeals were partly allowed for statistical purposes, with directions for verification by the AO regarding the deductees' tax liabilities.

---