TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 778
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.... services, etc. in various telecom circles in the country. A survey was conducted under Section 133A of the Income-tax Act, 1961 (in short 'the Act') at the Registered Office of the assessee during the financial year 2012-2013. Subsequently, the Assessing Officer passed an order under Section 201(1) and 201(1A) of the Act for the assessment years 2007-08 to 2011-12, holding that the assessee defaulted in deduction of tax in the following account:- (1) Provision for site restoration expenses (2) Year-end provisions (3) Roaming charges 3. The assessee challenged the correctness of the orders passed by the Assessing Officer treating the assessee as assessee in default for non-deduction of tax before the CIT(Appeals). However, the CIT(Appeals) upheld the orders of the Assessing Officer. Hence, the assessee preferred appeals before this Tribunal. 4. According to the Ld. Sr. counsel, the assessee was deducting tax regularly and filing quarterly statement within the time prescribed. Referring to the provision for site restoration expenses, the Ld. Sr. counsel pointed out that the nature of the business of the assessee requires to take premises from other landlords on long ter....
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....ntants of India. According to the Ld. Sr. counsel, the site restoration expenses creates an asset in the books of account in the name of "asset retirement obligation" and simultaneously a provision is created of the same amount. The Ld. Sr. counsel further pointed out that the said asset forms part of depreciation schedule as per the books of account. 6. The Ld. Sr. counsel for the assessee further submitted that the assessee at the time of preparation of return of income adds back the book depreciation, including the depreciation charged on "asset retirement obligation" debited to Profit & Loss account. The Ld. Sr. counsel further clarified that "asset retirement obligation" does not form part of block of asset. Therefore, the assessee does not claim any tax deduction for site restoration expenses / asset retirement obligation in its return of income either through depreciation chart or otherwise. 7. Shri N. Venkataraman, the Ld. Sr. counsel, further submitted that the expenditure on site restoration will be incurred only upon the expiry of the lease term and it is only at that point of time the various parties / contractors would be engaged for dismantling the towers installed ....
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....oks of a person liable to pay such amount. The primary intent of introducing Explanation to Section 194C was to nullify the practice prevailing at that point of time wherein the TDS provisions were being circumvented by the payers by adopting a device of crediting the sum payable to payee or any other account. The Ld. Sr. counsel further pointed out that even after introduction of Explanation to Section 194C of the Act, tax was required to be deducted only in such cases where there is a constructive credit to the account of the payee of a specified amount calculated in accordance with the terms and conditions of the arrangements entered into with the payee. Referring to the circular dated 8.11.1978 issued by CBDT, the highest administrative body under the Income-tax Act, the Ld. Sr. counsel pointed out that tax would be deducted at source in respect of the provision created under mercantile system of accounting only when the payee is identified and the sum payable is also ascertained. The credit should be a constructive credit to the account of the payee. In the case before us, according to the Ld. Sr. counsel, the payee is not identified and it is not known which contractor would ....
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....nd that no TDS is required to be deducted as the ultimate beneficiary or payee is not identifiable. The Ld. Sr. counsel filed a copy of the judgment of the Delhi High Court. 12. Shri N. Venkataraman, the Ld. Sr. counsel, invited our attention to Section 194A of the Act and submitted that the expression "payee" under Section 194A of the Act would only mean the recipient of the income whose account is maintained by the person paying the interest. In the present case, according to the Ld. Sr. counsel, although the FD is made in the name of the Registrar General, the account represents funds, which are in custody of the Court and the Registrar General is neither the recipient of the amount credited to that account nor the interest accruing thereon. Therefore, the Delhi High Court found that the Registrar General cannot be considered as a payee for the purpose of Section 194A of the Act. The credit by the petitioner bank in the name of Registrar General would not attract the provisions of Section 194A of the Act. The Ld. Sr. counsel further pointed out that there is no assessee to whom interest income from the deposits in question can be paid, no person can file a return claiming the i....
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.... assessee would not know as to how many customer verifications have been done with each service provider engaged by the assessee. Therefore, the assessee would not know the exact amount payable to the above said service providers. Therefore, the assessee by an overall basis, estimates the customer verifications expenditure in relation to expenditure incurred in the past and make necessary provision in the account. The Ld. Sr. counsel further clarified that the amount is not paid or credited in any particular account, only a provision was made in the account. According to the Ld. Sr. counsel, since the name of the payee and that the name of service providers are not identifiable in the month of March, the assessee was unable to deduct tax at source in the month of March. However, as and when the service providers raise an invoice, the assessee duly deducts the TDS at source and discharges the obligation cast upon it. 15. Now coming to roaming charges, Shri N. Venkataraman, the Ld. Sr. counsel for the assessee, submitted that roaming is a facility provided by the cellular provider to its customers automatically to connect and receive voice calls. The Ld. Sr. counsel clarified that w....
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....of BSNL in respect of the nature of service rendered by the telecom service providers. The Sub-Divisional Engineer of BSNL categorically stated that no human intervention is required while rendering roaming services. He clarified that human intervention is required for doing necessary configurations for providing roaming services. Once configuration is completed, it is not required. In view of the above clarification of an expert in the field, according to the Ld. Sr. counsel, since the roaming services are provided without human intervention, it cannot be considered for technical service. The human intervention is required, according to the Ld. Sr. counsel, whenever customers are facing problems during roaming. The Ld. Sr. counsel further pointed out there are millions of calls which flow from one network to another network every minute and connecting them manually is beyond human capability. According to the Ld. Sr. counsel, human intervention is required only at the time of maintenance or at the time certain technical defect that might have come into telecom network/equipments. According to the Ld. Sr. counsel, the customers pay for roaming charges and not for human intervention....
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.... the Act further provides that no order can be passed beyond six years from the end of the financial year in which the payment is made or credit is given, in any other case. According to the Ld. Sr. counsel, all the quarterly statements have been filed by the assessee within the time limit, hence, the first three years and three quarters of the fourth year, the orders passed by the TDS officer, in the month of March, 2003, are beyond prescribed time limit. Therefore, it is barred by time limit. The Ld. Sr. counsel further submitted that for the first two years, the orders are passed beyond the stipulated time limit of March, 201(1). Therefore, it was also barred by limitation. Referring to the amendment brought in by Finance Act, 2014, the Ld. Sr. counsel submitted that limitations for passing the order under Sections 201(1) and 201(1A) of the Act have been extended to seven years from the end of the financial year in which payment is made or credit is given. This provision is applicable prospectively with effect from 1.10.2014. Therefore, the amended provisions of Sections 201(1) and 201(1A) cannot be made applicable for the assessment years under consideration. 20. On the contra....
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.... to the issue of year-end of provisions, the Ld. D.R. pointed out the assessee made provision for address verifications, credit certification charges, ICU charges and lease line expenses. The contention of the assessee is that the payees are not identifiable. The Ld. D.R. pointed out that the assessee engaged services from outsource service providers. Therefore, the contention of the assessee that the service providers are not identifiable is not acceptable. 22. Referring to the roaming charges, the Ld. D.R. pointed out that the assessee had arrangement with other cellular service providers outside the home network. In case the subscriber of the service provider travels outside the jurisdiction of the home network operator, the subscriber would get service from both the hostoperator and home-operator. The host-operator charges the homeoperator for providing telecom service to the latter. Roaming facility is made available to subscribers by the host-operator by virtue of roaming arrangement entered into between the home-operator and host-operator. Therefore, according to the Ld. D.R., the roaming charges are nothing but the payments made by the assessee to other telecom service pro....
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....on expenses, however, TDS was not made. The purpose for which the provision was made is not in dispute. In other words, the admitted case of both the parties is that the assessee made the provision for dismantling the towers and restoration of site to its original position after termination of the lease period. The lease period is normally 20 years and above. The assessee by placing reliance on the Accounting Standard - 29 claims that a provision would be made in respect of an obligation. In other words, the assessee had an obligation to incur the expenditure after termination of the lease period. Revenue, however, contends that due to misconception and ignorance of law and with an intention to circumvent the statutory provisions, the assessee made the provision. The fact remains that the payment was not made to anyone and it is not credited to the account of any party or individual. The account does not disclose the person to whom the amount is to be paid. The contractor who is supposed to be engaged for dismantling the tower and restore the site in its original position is not identified. As contended by the assessee, the assessee by itself engaging its own labourers may dismantl....
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....enses, etc. From the order of the CIT(Appeals) it appears that the assessee also has to pay the various other service providers for providing value added service to its subscribers like daily horoscopes, astrology, songs, wall paper downloads, cricket scores, etc. Admittedly, the assessee made arrangement with other service provides for providing these kind of value added services. There may be justification with regard to the expenditure for availing the services of identification and verification for the last month of financial year, since the assessee may not have the exact details on verification done by the concerned persons and the amount required to be paid. However, in respect of the downloads and value added service, etc. the entire details may be available in the system. Therefore, this Tribunal is of the considered opinion that wherever the particulars and details available and amount payable could be quantified, the assessee has to necessarily deduct tax. In respect of value added services like daily horoscopes, astrology, customer acquisition forms are all from specific service providers and these value added services are monitored by system. Therefore, even on the las....
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....an intervention is not required, as found by the Apex Court, the service provided by the other service provider cannot be considered to be a technical service. It is common knowledge that when one of the subscribers in the assessee's circle travels to the jurisdiction of another circle, the call gets connected automatically without any human intervention. It is due to configuration of software system in the respective service provider's place. In fact, the Sub-Divisional Engineer of BSNL has explained as follows in response to Question No.23:- "Regarding roaming services as explained to question no.21. Regarding interconnectivity, initially human intervention is required for establishing the physical connectivity and also for doing the required configuration. Once it is working fine, no intervention is required. In case of any faults human intervention is required for taking necessary corrective actions." In view of the above, once configuration was made, no human intervention is required for connecting the roaming calls. The subscriber can make and receive calls, access and receive data and other service without any human intervention. Like any other machinery, whenever the sys....