TDS on Mobile and Telephone Payments

[PAWAN KUMAR SHARMA]

Dear All,

 

It has come to notice that persuant to change in definition of Royality as per Finance Act 2012, the payment of Mobile Bills, Broadband Charges, internet charges etc and Telephone Payments shall be after deduction TDS under section 194-J.

 

Need you views on the same.

 

[Surender Gupta]

An amendment to section 9 has been made through Finance Act, 2012 raising certain doubts about TDS on use of Telephone Bills, Mobile Bills and Broadband (Internet Charges). There is no clarification from the Board (CBDT) in this regard. Since this amendment is retrospective in nature, and by way of explanation 5 to section 9(2) of the Income Tax Act, in my preliminary view, for the purpose of section 194J only explanation 2 is application which remains same as before. Therefore, there is no change as regard to TDS u/s 194J but the same has huge impact on TDS u/s 195.

[CAGOPALJI AGRAWAL]

I do agree with the views of Surenderji.But the biased taxmen would not accept this view since explanation 6 is added in the form of clarification only. Of course the unamended position u/s 194J might be hold good in litigation.

AI Summary

TDS on telephone and internet payments: amendment to royalty definition creates withholding uncertainty, potential revenue challenge. The Finance Act 2012 amendment to the definition of royalty creates uncertainty whether mobile, broadband and telephone payments are royalties or fees, but a preliminary view is that the withholding tax rule for fees for technical or professional services remains unchanged, while the amendment may affect withholding on cross-border payments and invite revenue challenges in the absence of board clarification.