TaxTMI 
TaxTMI 
2008 (12) TMI 429
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....er treating as the assessee in default and in levying interest under section 201(1A) of Income-tax Act, 1961." 3.1 Briefly stated facts are as under: The assessee-company is engaged in the business of providing internet access services to corporate clients and consumers. There was survey action under section 133A of the Act against the assessee-company on 29-10-2004 and it was found that the assessee had made huge payments for availing services of MTNL and VSNL for using bandwidth and net work operating. The Assessing Officer was of the opinion that in respect of the payments made to MTNL/VSNL for availing bandwidth services and port charges, the assessee should have deducted tax at source (TDS) as required under section 194J of the Income-tax Act. The Assessing Officer, therefore, treated the assessee as in default within the meaning of section 201(1) and passed the order, raising the demand against the assessee for failure to deduct the tax in respect of the payments made to VSNL/MTNL and also levied the interest as per the provisions of section 201(1A) of the Income-tax Act. 3.2 The assessee challenged the order passed by the Assessing Officer treating the assessee in defa....
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.... industrial science, which is admitted by the appellant also in its aforesaid submissions, as the popular meaning associated with the word 'technical'. It is also an admitted fact that for availing the facility through bandwidth and net work operation, payments have been made as consideration to the service providers viz., MTNL, VSNL and other parties. It is also an admitted fact that the appellant has no control of its own, on these facilities. The bandwidth and net work operating facilities are under the command and control of the service providers. By providing facility to the appellant through bandwidth and net work operating terminals of VSNL & MTNL, it has been allowed to operate the internet service providing facility to its clients. Therefore, a provision of section 194J is applicable. 6.1 The contention of the appellant that the payment made for availing facility of bandwidth and net work operation are not technical services as held by the Hon'ble High Court on Madras in Skycell Communications Ltd., is also not found to be having any merit as this decision is not applicable to the facts of the appellant's case. The Assessing Officer in his report has also differentiated....
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....is bound to be covered under section 194J." The ld. CIT(A) finally approved the view taken by the Assessing Officer, but gave some relief in respect of working of the interest under section 201(1A) of the Act. 4. We have heard the rival submissions of the parties. We have also carefully considered the facts which are available before us. We have also considered the different precedents relieved upon by the ld. counsel of the assessee. The arguments of the ld. counsel of the assessee is that as the assessee is providing internet services to its clients. The assessee needs bandwidth and net work operating infrastructure without which the assessee cannot run its business. At the same time, availing bandwidth and net work operating facilities from MTNL/VSNL etc., cannot be said to be availing technical services as contemplated under section 194J read with Explanation 2 to clause (vii) of section 9(1) of the Act. The ld. counsel of the assessee placed heavy reliance on the following precedents : (i) CIT v. Estel Communications (P.) Ltd. [2008] 217 CTR (Delhi) 102 . (ii) Wipro Ltd. v. ITO [2003] 86 ITD 407 (Bang.). (iii) HFCL Infotel Ltd. v. ITO [2006] 99 TTJ (Chd.) 440. ....
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....pees, in the case of fees for professional services referred to in clause (a), or ( ii)twenty thousand rupees, in the case of fees for technical services referred to in clause (b). Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct income-tax under this section : Provided also that no individual or a Hindu undivided family referred to in the second proviso shall be liable to deduct income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (2) Where the Assessing Officer is satisfied that the total income of any person in receipt of the sum referred to in sub-section (1) justifies the deduction of income-tax at any lower rate or no deduction of income-tax,....
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....t, the Hon'ble High Court has held as under : "Insofar as this is concerned, the Tribunal considered the agreement that had been entered into by the assessee with Teleglobe and came to the conclusion that there was no privity of contract between the customers of the assessee and Teleglobe. In fact, the assessee was merely paying for an internet bandwidth to Teleglobe and then selling it to its customers. The use of internet facility may require sophisticated equipment but that does not mean that technical services were rendered by Teleglobe to the assessee. It was a simple case of purchase of internet bandwidth by the assessee from Teleglobe." 9. In the case of Wipro Ltd. (supra), the issue was in respect of delay in deducting the tax at source of payment made to foreign companies as required under section 195 of the Act. In the said case also the assessee had availed the services of foreign companies like AT&T, Worldcom, British Telecom, Singtel etc. for downlink to transmit the data to its foreign customers located outside India by availing the technical services by those foreign companies. Most of the services were provided through customer based circuits (CBC) for transmi....