Broad telecommunication service definition supports deduction for BSNL franchise operating EPABX/PABX facilities under the tax law

An authorised BSNL franchise operating EPABX/PABX facilities was treated as providing basic telecommunication services because the statutory definition of telecommunication service is broad enough to cover transmission or reception of signals or intelligence of any nature. The activity was carried on under the BSNL arrangement, involved operation of telephone exchange facilities, and qualified as telecommunication service in association with BSNL. The view that receiving commission on behalf of BSNL destroyed the service character of the activity was rejected. On that basis, the assessee was entitled to deduction under Section 80IA(4)(ii) of the Income-tax Act, 1961.

---

---

Issues: Whether the assessee, acting under an agreement with BSNL and operating EPABX/PABX facilities, was providing basic telecommunication services so as to qualify for deduction under Section 80IA(4)(ii) of the Income-tax Act, 1961.

Analysis: The assessee was found to be an authorised BSNL franchise operating telephone exchange facilities and providing service to customers under the agreement. The statutory definition of telecommunication service under Section 2(k) of the Telecom Regulatory Authority of India Act, 1997 is of wide amplitude and covers services made available by transmission or reception of signals or intelligence of any nature. The Court also referred to the Indian Telegraph Rules, 1951 and the nature of EPABX/PABX services to hold that the activity was an authorised telecommunication service in association with BSNL. The Tribunal's view that receipt of commission on behalf of BSNL negatived the service character of the activity was held to be erroneous.

Conclusion: The assessee was held to be providing basic telecommunication services and was entitled to deduction under Section 80IA(4)(ii) of the Income-tax Act, 1961.

---