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of <h1>Payments for bandwidth not taxable under section 194J. Tribunal rules in favor of assessee.</h1> <h3>Income Tax Officer Versus M/s Primenet Global Ltd. And Vice-Versa</h3> Income Tax Officer Versus M/s Primenet Global Ltd. And Vice-Versa - [2016] 48 ITR (Trib) 451 Issues Involved:1. Liability to deduct tax at source under section 194J for payments towards recurring and networking charges.2. Definition and applicability of 'fee for technical services' under section 194J.3. Human intervention requirement in providing bandwidth services.4. Previous judicial precedents on similar issues.Detailed Analysis:1. Liability to Deduct Tax at Source under Section 194J:The primary issue was whether the assessee was liable to deduct tax at source under section 194J of the Income Tax Act, 1961, for payments made towards recurring and networking charges. The Assessing Officer treated the assessee as in default for not deducting tax under section 194J, arguing that these payments were for technical services. The CIT(A) upheld this view, stating that the payments for bandwidth and interconnect facilities constituted fees for technical services.2. Definition and Applicability of 'Fee for Technical Services':The definition of 'fee for technical services' as per Explanation 2 to section 9(1)(vii) of the Act includes managerial, technical, or consultancy services. The CIT(A) concluded that the provision of bandwidth involved technical services, thus attracting section 194J. However, the assessee contended that the payments were for standard facilities without human intervention, which should not be classified as technical services.3. Human Intervention Requirement:The assessee argued that the provision of bandwidth did not involve human intervention, which is a necessary criterion for a service to be classified as technical. The Tribunal agreed with this argument, stating that the use of technical equipment or gadgets for bandwidth purposes does not constitute technical services. The Tribunal emphasized that technical services require human involvement, which was not present in this case.4. Previous Judicial Precedents:The Tribunal referred to several judicial precedents to support its decision:- CIT v. Estel Communications P. Ltd (2009) 318 ITR 185: The Delhi High Court held that payments for internet bandwidth do not constitute fees for technical services.- Skycell Communications Ltd. and Another vs DCIT and Others (2011) 251 ITR: The Madras High Court ruled that payments for the use of standard facilities do not attract section 194J.- Infosys Technologies Ltd.: The Bangalore Bench of the Tribunal held that payments for bandwidth were not for managerial, consultancy, or technical services.- Global One India P. Ltd.: The Delhi Bench of the Tribunal held that payments for standard facilities for data transmission do not require tax deduction under section 194I.Conclusion:The Tribunal concluded that the payments made by the assessee for bandwidth did not involve human intervention and were not for technical services. Therefore, the provisions of section 194J were not applicable. The Tribunal reversed the CIT(A)'s decision and allowed the assessee's appeal. Consequently, the Department's appeal was dismissed as infructuous.Order:The Tribunal pronounced the order in the open court on 5th May 2016, allowing the assessee's appeal and dismissing the Department's appeal.This comprehensive analysis preserves the legal terminology and significant phrases from the original text while providing a detailed summary of the judgment.
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