2020 (7) TMI 463 - AT - Income Tax

Tribunal rules interconnection usage charges not subject to tax deduction; COVID-19 lockdown justifies delayed order

Deputy Commissioner of Income Tax (TDS) 2 (3) Mumbai Versus M/s. Vodafone India Ltd

The appeal filed by the Revenue was dismissed by the Tribunal. It was held that interconnection usage charges (IUC) do not qualify as Fees for Technical ... TDS u/s 194J - interconnection usages charges (IUC) - HELD THAT:- CIT(A) while allowing the claim of the applicant in deleting the demand raised u/s 194J for A.Y. 2008-09 & 2009-10 respectively with the conclusion that the roaming charges paid by the appellant to other telecom companies are not covered under “fee for technical service” and such payments are out of the purview of TDS provision of 194J. We find no infirmity in the order passed by the Learned CIT(A). We, therefore, do not hesitate to confirm the same. Therefore, revenue's appeal is devoid of any merit and hence dismissed. Issues Involved:1. Whether interconnection usage charges (IUC) are in the nature of Fees for Technical Services and hence liable for TDS under section 194J of the I.T. Act 1961.2. Procedural issue regarding the pronouncement of the order beyond the 90-day period due to COVID-19 lockdown.Issue-Wise Detailed Analysis:1. Nature of Interconnection Usage Charges (IUC) and TDS Liability:The primary issue is whether IUC, paid by the appellant to other telecom operators, qualifies as Fees for Technical Services (FTS) under section 194J of the Income Tax Act, 1961, thus necessitating the deduction of tax at source (TDS). The Assessing Officer (AO) argued that IUC involves technical services due to human intervention, relying on the examination of technical experts.However, the Tribunal referenced previous decisions, including the coordinate bench's decision dated 28th February 2019, which held that roaming services do not require human intervention and operate automatically. The Tribunal cited the Karnataka High Court's decision in CIT vs. Vodafone South Ltd., which concluded that roaming connectivity does not involve human intervention and thus does not fall under 'technical services.' Consequently, the assessee was not required to deduct tax at source on such payments.The Tribunal also reviewed various judgments, including those from the Jaipur Bench and the Ahmedabad Bench, which consistently held that the interconnection charges paid by telecom operators are not fees for technical services and thus not liable for TDS under section 194J.The Tribunal concluded that the CIT(A) correctly held that the roaming charges paid by the appellant to other telecom companies are not covered under 'fee for technical service' and are outside the purview of TDS provisions of section 194J. Therefore, the appeal by the Revenue was dismissed on this ground.2. Procedural Issue Regarding Pronouncement of Order Beyond 90 Days:The Tribunal addressed the procedural issue of the delayed pronouncement of the order beyond the 90-day period, as stipulated by rule 34(5) of the Income Tax Appellate Tribunal Rules, 1963. The hearing was concluded on 4th February 2020, but the order was pronounced on 13th July 2020, due to the COVID-19 pandemic and subsequent nationwide lockdown.The Tribunal noted that the term 'ordinarily' in rule 34(5) allows for flexibility in extraordinary circumstances. The nationwide lockdown, declared by the Prime Minister on 24th March 2020, and extended multiple times, caused unprecedented disruption in judicial work. The Tribunal referenced the Supreme Court's order extending limitation periods due to the lockdown and the Bombay High Court's order extending the validity of interim orders.Given these extraordinary circumstances, the Tribunal concluded that the lockdown period should be excluded from the 90-day limit for pronouncement of orders. The Tribunal emphasized a pragmatic approach, considering the disruption caused by the pandemic, and held that the time limit for pronouncement should be computed by excluding the lockdown period.Conclusion:The appeal filed by the Revenue was dismissed on both grounds. The Tribunal upheld the CIT(A)'s decision that IUC does not constitute fees for technical services and is not liable for TDS under section 194J. Additionally, the Tribunal justified the delayed pronouncement of the order due to the extraordinary circumstances of the COVID-19 lockdown. The order was pronounced under rule 34(4) by placing the details on the notice board.