Tribunal: Roaming charges not "fees for technical services"

The Tribunal held that roaming charges paid by the assessee to other telecom companies do not fall under "fees for technical services" under Section 194J of the Income Tax Act, as the process is automatic without human intervention. Therefore, the assessee was not liable to deduct tax at source on these payments. The Revenue's appeals were dismissed, affirming the CIT(A)'s decision.

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Issues Involved:
1. Applicability of TDS provisions under Section 194J of the Income Tax Act, 1961 on roaming charges paid to other telecom companies.
2. Determination of whether roaming charges constitute "fees for technical services" requiring tax deduction at source.

Detailed Analysis:

Issue 1: Applicability of TDS Provisions under Section 194J on Roaming Charges

The appeals filed by the Revenue challenge the order dated 10.06.2016 by the Commissioner of Income Tax (Appeals)-8, Ahmedabad, which deleted the demand raised under Sections 201(1) and 201(1A) of the Income Tax Act, 1961. The demand pertained to non-deduction of TDS on roaming charges paid by the assessee company to other telecom companies for the Assessment Years 2008-09 and 2009-10.

The Assessing Officer initially passed an order on 02.01.2009 holding that the payment for roaming charges should be subjected to deduction under Sections 194J and 194C, thereby treating the assessee as "assessee in default." This order was upheld by the CIT(A), who also considered an alternate plea that roaming charges are akin to rent for the use of machinery, requiring TDS under Section 194I.

Upon appeal, the Tribunal, relying on the judgment in CIT vs. Bharti Cellular Ltd. (330 ITR 239), remanded the matter to the Assessing Officer to determine the necessity of manual intervention in the process of call traffic. Following this, the Assessing Officer reaffirmed the non-deduction of TDS in a fresh order dated 26.03.2014, raising demands for the respective assessment years.

Issue 2: Determination of Roaming Charges as "Fees for Technical Services"

The CIT(A) deleted the demand based on multiple Tribunal judgments, including Vodafone East Ltd., Dishnet Wireless Ltd., and the assessee's own case, which consistently held that no manual intervention is involved in roaming services. These judgments concluded that interconnection charges are not "fees for technical services" and thus do not attract TDS under Section 194J.

During the hearing, the assessee's counsel cited various judgments supporting the view that roaming services operate automatically without human intervention, thus falling outside the ambit of Section 194J. The Revenue's representative failed to counter these arguments effectively.

The Tribunal reviewed the materials and judgments, confirming that roaming services do not require human intervention. It referenced the Karnataka High Court's decision in CIT vs. Vodafone South Ltd. (290 CTR 436), which held that roaming connectivity does not involve human intervention and thus does not constitute "technical services."

The Tribunal also considered the Jaipur Bench's decision in Bharti Hexacom Ltd., which supported the non-requirement of TDS on roaming charges, emphasizing the automatic nature of interconnection services.

The Tribunal upheld the CIT(A)'s order, finding no error in the conclusion that roaming charges are not "fees for technical services" and are outside the purview of Section 194J. Consequently, the Revenue's appeals were dismissed.

Conclusion:

The Tribunal concluded that the roaming charges paid by the assessee to other telecom companies do not qualify as "fees for technical services" under Section 194J, as the process is automatic and does not involve human intervention. Thus, there was no liability for the assessee to deduct tax at source on such payments. The appeals by the Revenue were dismissed, affirming the CIT(A)'s order.

Order Pronounced:
The order was pronounced in open court on 28/02/2019, dismissing both appeals by the Revenue.

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