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of <h1>Leased line charges not subject to TDS under sections 194J/195 following Supreme Court precedent</h1> <h3>CMA CGM Agencies (India) Private Limited Versus ITO, Ward-1 (2), Pune/ACIT, Circle-1 (1), Pune</h3> ITAT Pune ruled in favor of assessee regarding TDS on leased line/data link charges under sections 194J/195. Following SC precedent in CIT vs. Kotak ... TDS u/s 194J/195 - payment of leased line /data link charges paid by the assessee for non deduction of tax at source by invoking the provisions of section 40(a)(ia) - HELD THAT:- This issue is no more res integra as the same is settled in favour of the assessee in the case of CIT Vs. Kotak Securities Ltd. [2016 (3) TMI 1026 - SUPREME COURT] wherein it was held that the charges paid towards leased line are not in the nature of Technical services within the meaning of section 9(1)(vii). Thus, we hold that no TDS is required to be made on the payment towards leased line/data link charges. Therefore, the order of NFAC is hereby reversed. The grounds of appeal raised by the assessee stands allowed. Issues: Appeal against orders of NFAC for assessment years 2015-16 & 2017-18 regarding disallowance of payment for leased line/data link charges due to non-deduction of TDS under section 40(a)(ia) of the Act.Analysis:Issue 1: Disallowance of payment for leased line/data link chargesIn the case, the appellant, a domestic company engaged in shipping agency business, filed returns for AY 2015-16 and 2017-18. The Assessing Officer disallowed Rs. 50,73,949/- for leased line/data link charges due to non-deduction of TDS under section 40(a)(ia) of the Act. The CIT(A)/NFAC upheld the AO's decision. The Tribunal considered whether the lower authorities were justified in disallowing the payment. Referring to the Supreme Court's decision in CIT Vs. Kotak Securities Ltd., it was established that charges for leased lines are not technical services under the Act. The Tribunal held that no TDS was required on the payment for leased line/data link charges, reversing the NFAC's order and allowing the assessee's appeal.Issue 2: Common findings for AY 2017-18The Tribunal found that the facts and issues in the appeal for AY 2017-18 were identical to those in the AY 2015-16 appeal. Therefore, the decision taken in the AY 2015-16 appeal applied equally to the AY 2017-18 appeal. Consequently, the appeal for AY 2017-18 was also allowed.In conclusion, both appeals filed by the assessee were allowed by the Tribunal, setting aside the orders of NFAC for disallowance of payment for leased line/data link charges. The judgment was pronounced on July 1, 2024.
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