TDS ON BANDIWIDTH NETWORK INFRASTRUCTURE AND LEASED LINES U/S 194I OF THE I.T. ACT

[SRINIVAS PALAKODETI]

CAN THE CHARGES PAYABLE TO INFORMATION SERVICE PROVIDERS FOR PROVIDING BANDIWIDTH NETWORK INFRASTRUCTURE SUBJECT TO TAX DEDUCTION AT SOURCE U/S 194I OF THE Income Tax Act, 1961. SIMILARLY ARE THE CHARGES PAYABLE TO TELECOM SERVICE PROVIDERS FOR PROVIDING LEASED LINES SUBJECT TO TAX DEDUCTION AT SOURCE U/S  194I OF Income Tax Act, 1961.

[Rama Krishana]

As long as the Network Infrastructure or Leased Lines are qualified as "machinery or plant or equipment" the answer to the query is Yes. TDS is required to be deducted from the payments made for the aforesaid purposes. Therefore, it is necessary to determine the nature of transaction. In my view merely having a telephone line can not be liable to TDS, the scope of section 194I is something more.

AI Summary

Tax deduction at source on bandwidth and leased line charges applies where assets qualify as machinery or plant. Payments for bandwidth network infrastructure and leased lines are subject to tax deduction at source when the infrastructure or leased lines qualify as machinery or plant or equipment; liability depends on characterising the transaction as supply or hire of such assets and does not ordinarily extend to simple telephone lines or purely consumptive telecom services.