2020 (10) TMI 418 - AT - Income Tax

Tribunal Upholds Non-Classification of Roaming Charges as 'Fee for Technical Services,' No TDS Required, Interest Deleted.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision that the roaming charges paid by the assessee are not classified as 'Fee for ... TDS u/s 194J - roaming charges paid by the assessee to the other telecom service provider (Reliance Telecom Ltd.) are in the nature of ‘Fee for technical Services’ - Default u/s 201(1)/201(1A) - AO had invoked the provisions of section 201(1)/201(1A) for non-deduction of tax at source on payment of roaming charges terming it as ‘fee for technical services’ - CIT(A) reversed the findings of AO and held that the payment for roaming charges are not akin to ‘fee for technical services’ and hence, the provisions of section 194J are not attracted - Department assailed the findings of CIT(A) before the Tribunal in aforementioned appeals and the same were dismissed - HELD THAT:- Identical reasons the provisions of section 201(1)/201(1A) of the Act were invoked in assessee’s own case in AY 2010-11 and 2011-12 [2016 (4) TMI 811 - ITAT MUMBAI]. We observe that in above said appeals, grounds raised by the Department assailing the finding of CIT(A) are identical to grounds raised in the present appeal. Tribunal did not have the benefit of decision rendered in the case of CIT vs. Vodafone South Ltd. [2016 (8) TMI 422 - KARNATAKA HIGH COURT] as the said judgement is later in time. Post Vodafone South Ltd. (supra) various benches of the Tribunal have been consistently following the law laid down by Hon’ble Karnataka High Court. We hold that the roaming charges paid by the assessee are not in the nature of ‘fee for technical services’. DR has not brought before us any contrary decision. We find no infirmity in the impugned order. Accordingly, the same is upheld and ground No.1 (a) of the appeal is dismissed sans-merit. Interest levied under section 201(1A) - Since we have held that the roaming charges paid by the assessee to the other telecom service provider are not in the nature of ‘fee for technical services’ no TDS under section 194J is liable to be deducted. Once there is no liability for deducting tax at source, question of charging interest under section 201(1A) of the Act does not arise. Issues Involved1. Whether the roaming charges paid by the assessee to Reliance Telecom Ltd. are in the nature of 'Fee for Technical Services' and hence, liable for deduction of tax at source under section 194J of the Income Tax Act, 1961.2. Whether the CIT(A) erred in not sustaining the 201(1) order regarding non-deduction of TDS under section 194J and consequently deleting the levy of interest under section 201(1A) of the Income Tax Act, 1961.Issue-Wise Analysis1. Roaming Charges as 'Fee for Technical Services'The primary issue is whether the roaming charges paid by the assessee to Reliance Telecom Ltd. qualify as 'Fee for Technical Services' under section 194J of the Income Tax Act, 1961, thus requiring tax deduction at source (TDS).The Assistant Commissioner of Income Tax (TDS) held that these charges are indeed 'Fee for Technical Services', invoking sections 201(1) and 201(1A) due to non-deduction of TDS, resulting in a tax liability of Rs. 4,24,07,479 and interest of Rs. 57,05,216.The CIT(A) overturned this decision, relying on the Supreme Court's ruling in CIT vs. Bharti Cellular Ltd., 330 ITR 239 (SC), and various other judgments. The CIT(A) concluded that the payments made for utilizing the network do not constitute 'Technical Services' as they are fully automatic and do not require human intervention. Consequently, no TDS was deductible on such payments.The Tribunal reviewed the CIT(A)'s decision and the relevant case laws, including the Karnataka High Court's decision in CIT vs. Vodafone South Ltd., which upheld that payments for roaming connectivity are not 'technical services' and thus not subject to TDS under section 194J. The Tribunal found no error in the CIT(A)'s decision, agreeing that the roaming process is fully automatic and does not involve human intervention.2. Non-Sustaining of 201(1) Order and Deletion of Interest under Section 201(1A)The second issue is whether the CIT(A) erred in not sustaining the 201(1) order regarding non-deduction of TDS and consequently deleting the levy of interest under section 201(1A).The Tribunal noted that since the roaming charges are not 'Fee for Technical Services', there was no obligation to deduct TDS under section 194J. Therefore, the question of charging interest under section 201(1A) does not arise. The Tribunal upheld the CIT(A)'s decision to delete the interest levied under section 201(1A).ConclusionThe Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order that the roaming charges paid by the assessee are not 'Fee for Technical Services' and thus not liable for TDS under section 194J. Consequently, the deletion of interest under section 201(1A) was also upheld. The grounds of appeal were found to be without merit, and the order was pronounced in open court on October 8, 2020.